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Veterans may participate in the general employment and training programs open to everyone seeking jobs, or in certain programs targeted specifically to veterans. In addition, the federal government has a policy of assisting veterans in employment through the use of preferences in federal employment, and requirements for affirmative action in the hiring of veterans by federal contractors. This report will provide an overview of these federal employment and training programs targeted to veterans, and federal policies to assist veterans in obtaining federal employment. Part of the Servicemen's Readjustment Act of 1944 (The GI Bill, P.L. 78-346) provided a cash allowance for returning unemployed veterans. This was provided because, at the time, veterans were not eligible for unemployment compensation. However, because of a combination of factors, including the strong economic growth shortly after World War II and the GI Bill's education and training benefits, few veterans took advantage of the cash assistance program. There is currently no system to provide a cash allowance to veterans seeking civilian employment although veterans are eligible for unemployment compensation, which provides partial replacement of lost cash wages. The federal government operates programs to assist veterans seeking civilian employment and provides preferences in federal employment for veterans. Outlined below are the major federal programs and policies to assist veterans seeking civilian jobs. The Department of Labor (DOL), in cooperation with the Department of Defense (DOD) and the Department of Veterans Affairs (VA), operates the Transition Assistance Program (TAP) and Disabled Transition Assistance Program (DTAP). Both programs are designed to provide information on employment and training for servicemembers within 180 days of separation from military service, or retirement. TAP is a three-day workshop conducted at military installations that includes sessions on how to look for jobs, current market conditions (both labor market and occupation-specific information is provided), preparation of job search materials (including resumes), and interview techniques. DTAP adds additional hours to the three-day program focused on the special needs of disabled servicemembers. In addition to the employment assistance sessions, information is provided on veterans benefits administered by the VA. P.L. 112-56 makes the following changes to TAP: mandatory participation in TAP by all members of the Armed Forces eligible for the program with the following two exceptions: (1) those that the Secretaries of Defense and Homeland Security, in consultation with the VA Secretary and the DOL Secretary, determine are unlikely to face major readjustment, health care, employment, or other transition challenges; and (2) those with specialized skills needed for an imminent deployment. the DOL Secretary, in consultation with the VA and the DOD Secretaries, is to enter into a contract for a study to identify equivalences between military training, military occupational specialties (MOS), military experience, and civilian private employment. The study is to be transmitted to Congress and made publicly available on the Internet. the DOD Secretary is to ensure that each servicemember participating in TAP receives an individualized assessment of civilian private sector employment positions for which the servicemember may be qualified based on the servicemember's military skills, training, MOS, and the results of the contracted study. the VA Secretary is required to enter, before November 21, 2013, into a contract to provide, at each TAP location, the following services to participants: counseling, identifying and applying for employment and training opportunities, assessment of academic preparation for enrollment in education and training programs, and other related or appropriate services (as identified by the VA Secretary). the VA, DOD, DOL, and Homeland Security Secretaries may enter into contracts with private entities that have experience in assisting members of the Armed Forces to provide TAP instruction on private sector culture (including resume writing, networking, and job search training), academic readiness, and other relevant topics. the DOD Secretary and the Secretary of Homeland Security may permit a member of the Armed Forces eligible for the TAP program to participate in an apprenticeship program. Before November 21, 2013, the comptroller general shall conduct a review of the TAP and report to Congress on the results of the review and any recommendations to improve TAP. The DOL Veterans' Employment and Training Service (VETS) offers assistance to veterans seeking jobs through the Jobs for Veterans State Grants (JVSG) Program. Under the program, grants are used to fund Disabled Veterans' Outreach Program (DVOP) specialists and Local Veterans' Employment Representatives (LVER). These are state positions, funded by the federal government, that provide outreach and assistance to veterans seeking employment. DVOP staff in a state are involved in outreach efforts to disabled veterans with greater barriers to employment, who therefore need more intensive services for employment or training. LVER staff help veterans find employment and are involved in outreach to the business community to encourage the hiring of veterans (including disabled veterans). P.L. 112-56 provides that the DOL Secretary shall award grants, to no more than three organizations, and for no more than two years, to provide training and mentoring for veterans seeking employment. The grant recipients must collaborate with disabled veterans' outreach specialists and local veterans' employment representatives. The DOL Secretary must report to Congress within six months on the process for awarding grants and within 18 months on an assessment of the grant results. The grant program is authorized for $4.5 million for the FY2012-FY2013 period. The VETS office also operates the Veterans' Workforce Investment Program (VWIP), a grant program authorized under the Workforce Investment Act (WIA, P.L. 105-220 ). Grants may be made to fund programs operated by eligible state and local workforce investment boards, state or local agencies, or private non-profit organizations. The grants are intended to help reintegrate veterans into the civilian labor force; develop service delivery systems that address the needs of veterans entering the civilian workforce; enhance workforce investment activities related to veterans; and perform outreach or public information activities to promote employment of veterans. In addition to the JVSG Program and the VWIP program, the VETS office in DOL also provides grants under the Homeless Veterans Reintegration Program, and information to veterans and employers on re-employment rights under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA, P.L. 103-353 ). All VETS activities are required partners in the One-Stop Career Center system established by WIA. Any workforce development, job training, or placement program funded in part by DOL must provide a priority in services for veterans and eligible spouses. In general, persons covered under the priority of service (veterans and spouses) receive access to services and resources before non-covered persons. The federal government has four policies that provide a preference to veterans: (1) a system of point preference for hiring; (2) special appointment (hiring) authority; (3) affirmative action requirements for federal agencies; and (4) affirmative action requirements for contractors and subcontractors. Veterans are given a federal preference in hiring to prevent an individual from being penalized for having spent time in military federal service. A five-point preference is given to veterans with an honorable or general discharge who served on active duty (not active duty for training): during any war; during the period April 28, 1952, through July 1, 1955; for more than 180 consecutive days, any part of which occurred after January 31, 1955, and before October 15, 1976; during the Gulf War period beginning August 2, 1990, and ending January 2, 1992; for more than 180 consecutive days, any part of which occurred during the period beginning September 11, 2001, and ending on the date prescribed by presidential proclamation or by law as the last day of Operation Iraqi Freedom; or in a campaign or expedition for which a campaign medal has been authorized, such as El Salvador, Lebanon, Grenada, Panama, Southwest Asia, Somalia, and Haiti. To qualify for a five-point preference, medal holders and Gulf War veterans who originally enlisted after September 7, 1980, or entered on active duty on or after October 14, 1982, without having previously completed 24 months of continuous active duty, must have served continuously for 24 months or the full period called or ordered to active duty. As of October 1, 1980, military retirees at or above the rank of major or equivalent are not entitled to preference unless they qualify as disabled veterans. A 10-point preference is given to honorably separated veterans who qualify as disabled veterans because they have served on active duty in the Armed Forces at any time and have a present service-connected disability or are receiving compensation, disability retirement benefits, or pension from the military or the Department of Veterans Affairs; honorably separated veterans who are Purple Heart recipients; the spouse of a veteran unable to work because of a service-connected disability; the unmarried widow of certain deceased veterans; and certain mothers of veterans who died in service or who are permanently and totally disabled. P.L. 112-56 provides that a servicemember may be certified as a preference eligible for federal employment if he or she is within 120 days of separation from military service. There are three special appointment authorities available to federal government agencies related to veterans: (1) Veterans Recruitment Appointment (VRA); (2) Veterans Employment Opportunity Acts (VEOA); and (3) 30% or More Disabled Veteran (30%). The use of a VRA allows agencies to appoint an eligible veteran without competition. The VRA is an excepted appointment to a position that is otherwise in the competitive service. After two years of satisfactory service, the veteran may be converted to a career-conditional appointment in the competitive service. Once in federal employment, VRAs are treated like any other competitive service employee and may be promoted, reassigned, or transferred. VRA appointees with less than 15 years of education must complete a training program established by the agency. Veterans eligible for a VRA appointment are disabled veterans; veterans who served on active duty in the Armed Forces during a war, or in a campaign or expedition for which a campaign badge has been authorized; veterans who, while serving on active duty in the Armed Forces, participated in a U.S. military operation for which an Armed Forces service medal was awarded; or recently separated veterans. In addition to meeting the criteria above, veterans must have been separated under honorable conditions (i.e., the individual must have received either an honorable or general discharge). Federal agencies can recruit outside their own workforce, to all competitive service employees, in filling permanent competitive service openings. Veterans are eligible to apply for this type of open position even if not a current competitive service employee if the veteran is a preference eligible or has completed three or more years of active service. The federal government agency can then appoint the veteran using the VEOA appointment authority. The 30% or more disabled veteran authority allows a federal government agency to non-competitively appoint any veteran with a 30% or more service-connected disability to a permanent, temporary (one year or less), or term (one to four years) position in the competitive service. For permanent appointments, the veteran is placed in a time limited (60 days maximum) appointment and then converted to permanent at management's discretion. Federal agencies must have a separate affirmative action program for disabled veterans as part of agency efforts to hire, place, and advance persons with disabilities under the Rehabilitation Act of 1973 ( P.L. 93-112 ). Agencies are required to provide placement consideration under special noncompetitive hiring authorities for VRAs and veterans with a disability rating of 30% or more; ensure that all veterans are considered for employment and advancement under merit system rules; and establish an affirmative action plan for the hiring, placement, and advancement of disabled veterans. Contractors and subcontractors with federal contracts in excess of $100,000 must report to the DOL on efforts to hire veterans in specific categories: disabled veterans, other protected veterans, Armed Forces service medal veterans, and recently separated veterans. Contractors and subcontractors are required to post job openings through state job services or one stop offices, and may post job openings on the federal online service (USAJOBS). On November 9, 2009, President Obama issued Executive Order 13518, which established a Veterans Hiring Initiative and established a Council on Veterans Employment co-chaired by the Secretaries of DOL and VA. As part of the initiative, the Office of Personnel Management (OPM) established a new website-- http://www.fedshirevets.gov --to provide information for veterans on federal government employment. One of the features of the website is an agency directory providing for each agency, the name, email address, and telephone number of the individual within each agency responsible for promoting veterans' employment within the agency. P.L. 112-56 provides that the OPM Director shall designate federal executive agencies that will be required to establish a program (coordinated with TAP) to provide employment assistance to separating servicemembers, including employment with the agency, and to promote the recruiting, hiring, training, development, and retention of servicemembers and veterans by the agency. The Department of Defense Appropriations Act, 2003 ( P.L. 107-248 ) authorized the DOD to transfer funds to the Center for Military Recruitment, Assessment, and Veterans Employment. The center is a 501(c)(6) organization supported by construction employers and building and trade organizations within the AFL-CIO to help veterans find employment in the construction industry, through operation of the "Helmets to Hardhats" program. The transfer of funds has been done each year since FY2003. The FY2010 transfer was $3.0 million as provided by the Department of Defense Appropriations Act ( P.L. 111-118 ). The Department of Education transfers funds to the DOD to provide funding for participants in the "Troops 2 Teachers" Program. The program can provide a stipend of up to $5,000 for eligible military personnel to obtain certification as an elementary, secondary, or vocational/technical teacher. Instead of the stipend for certification, the program may pay a bonus of up to $10,000 to participants who teach in a high-poverty school. For FY2010, the funding for the program was $14 million.

There are federal employment and training programs and policies specifically targeted to help veterans seeking employment in the civilian economy. Transition assistance programs are operated by the Department of Defense (DOD), the Department of Veterans Affairs (VA), and the Department of Labor (DOL) to assist servicemembers as they prepare to leave the military. DOL operates grant programs to states to provide outreach and assistance to veterans in finding civilian employment. In addition, the federal government has policies (including veterans preference) that assist veterans in obtaining jobs with the federal government and federal contractors. P.L. 112-56 makes several changes to the Transition Assistance Program (TAP) for separating servicemembers and permits a servicemember who is within 120 days of separation from military service to be certified as a preference eligible for federal employment. This report provides a brief overview of these federal programs and policies. This report will be updated as needed.

V ocational Rehabilitation and Employment for veterans (VR&E) is an entitlement program that provides job training and related services "to enable veterans with service-connected disabilities to achieve maximum independence in daily living and, to the maximum extent feasible, to become employable and to obtain and maintain suitable employment." The program is administered by the Department of Veterans Affairs (VA). The VR&E program provides comprehensive services to enable veterans with service-connected disabilities and employment handicaps to become employable and maintain suitable employment. For severely disabled veterans for whom employment is not possible, the program strives to help them achieve the highest quality of independent living possible with a future chance of employment, given medical and technological advances. This report provides an overview of the VR&E program. After a brief background section, it describes how the program establishes individual veterans' entitlements and the scope of benefits and services available to qualified veterans. The final section provides participation and outcome data. In 1918, Congress enacted P.L. 65-178, the Vocational Rehabilitation Act, to provide for the retraining of disabled persons who served in the U.S. military and naval forces. The rehabilitation program was administered by the Federal Board for Vocational Education. In 1921, control of veterans' rehabilitation was transferred to the newly created Veterans' Bureau. In 1930, Congress created the Veterans Administration by combining three bureaus: the Veterans' Bureau, the Bureau of Pensions, and the National Homes for Disabled Volunteer Veterans. In 1943, Congress enacted P.L. 78-16, which broadened eligibility and provided that any eligible veteran may receive up to four years of training specifically directed to restoring employability. In subsequent years, the scope of the veterans' rehabilitation program has been modified and expanded to better fulfill its mission. The program has undergone several name changes and has usually been housed with the education services in the Department of Veterans Affairs (VA). In 1999, the VR&E program acquired its current name with the intention of emphasizing employment services and job placement. In 2004, the Secretary of Veterans Affairs responded to continuing criticisms of VR&E's operations from congressional committees, the Government Accountability Office, and others by forming a task force to evaluate the program. The task force report found little evidence that the program's efforts to obtain jobs for rehabilitated veterans had been effective. Among its 110 recommendations, the task force emphasized that VR&E should focus on employment and place more emphasis on its clients' skills rather than their disabilities. In response to these recommendations, VR&E developed the five-track employment process discussed later in this report. The VR&E program is authorized by Chapter 31 of Title 38 of the U.S. Code. Veterans' benefits are often referred to by their authorizing chapter of Title 38. As such, VR&E benefits are often described as "Chapter 31" benefits. The VR&E program is administered by the Veterans Benefits Administration (VBA) within the VA. VR&E costs are divided between mandatory and discretionary spending. VR&E funds are appropriated with other VA-administered readjustment benefits in the Military Construction-Veterans Affairs appropriations bill. VR&E benefits and the subsistence allowances for VR&E beneficiaries are mandatory spending. Costs for these activities in FY2016 were $1.315 billion. This total consists of $741 million for VR&E benefits in the form of tuition, books, and other direct assistance as well as $573 million in subsistence allowances for individuals who were enrolled in an eligible training program. Table 1 presents benefit costs from FY2012 through FY2016. The VR&E program's discretionary costs, which cover VR&E staff, counseling from such staff, and other expenses, were $218 million for FY2016. In FY2016, the VR&E program reported that it employed 1,538 full-time equivalents. There are two determinations between a veteran's application for VR&E and his or her receipt of services: eligibility and entitlement . A veteran must apply to the VA to establish eligibility. To be eligible for VR&E services, a veteran must have served on or after September 16, 1940; have received, or will receive, a discharge under conditions other than dishonorable; and have a service-connected disability rating of 10% or more. Active duty servicemembers are eligible for VR&E services if their service-connected disabilities are reasonably expected to be rated at a minimum of at least 20% following their discharge. Veterans are eligible for VR&E services for 12 years after separation from active military duty. In cases where a veteran was notified of a service-connected disability rating after separation, eligibility extends 12 years from the date of notification. The period of eligibility may be extended if the VA determines that the veteran has a serious employment handicap, has not yet been rehabilitated to the point of employability, has been rehabilitated but still cannot perform the duties required, or needs more services because the occupational requirements have changed. An objective evaluation is required for these circumstances to be determined. For independent living services, if the medical condition is so severe that achievement of the vocational goal is not feasible and that goal is necessary to ensure that the veteran will achieve maximum independence, the period of eligibility may be extended. Once eligibility is established, an applicant completes a comprehensive evaluation with a Vocational Rehabilitation Counselor (VRC). The evaluation includes an assessment of the veteran's interests, aptitudes, and abilities; an assessment of whether service-connected disabilities impair the veteran's ability to secure and maintain suitable employment; and identification of services necessary to maintain a career or achieve maximum independence. An applicant is entitled to VR&E services if the evaluation finds that he or she has a service-connected disability rated at 20% or more and an employment handicap; or a service-connected disability rated at 10% and a serious employment handicap. An employment handicap is an impairment of a veteran's ability to prepare for, obtain, or retain employment consistent with his or her abilities, aptitudes, and interests. A serious employment handicap is a significant impairment of a veteran's ability to prepare for, obtain, or retain employment consistent with his or her abilities, aptitudes, and interests. To be entitled to VR&E services, the veteran's service-connected disability must contribute to the employment handicap and VR&E must be able to identify, observe, and measure it. A veteran who applies for VR&E services but is not found to be entitled to services is to be informed about appeal rights and the appeals process. The VA will also use the information gathered in the application process to recommend other services. After a veteran is found to be entitled to VR&E services, a case manager is assigned to work with the veteran. The case manager works in conjunction with a VRC and the veteran to determine an employment goal and assess obstacles to employment. A written rehabilitation plan is then developed, describing the goal of the VR&E program and the services required to achieve the goal. The required services may be provided by the VRC or the case manager may provide referrals for other services. The plan is reviewed with the participation of the client at least once a year. The most common services provided by VR&E agencies are funding for higher education, career counseling, and short-term employment services like job search assistance. The full range of services that VR&E agencies are required to make available to entitled clients, however, is much broader and includes a variety of specialized services for workers with disabilities. Each VR&E beneficiary is assigned to a service delivery track based on the veteran's objective and services needed. If necessary, a veteran may change tracks while enrolled in the VR&E program. The Reemployment Track is for veterans who wish to return to work with their previous employers. In addition to the case management and counseling that all VR&E beneficiaries receive, veterans on the reemployment track may receive assistance from the VA to make their workplace more accessible. They may also receive counseling on workplace rights for veterans. A veteran on this track is considered rehabilitated when he or she has completed the employment program and maintained suitable employment for 60 days. The Rapid Access to Employment Track emphasizes the goal of immediate employment and is available to separating veterans who already have the skills necessary to compete in the job market in suitable occupations. On this track, VR&E services may include job readiness preparation, resume development, or job search assistance. The VRC may also counsel veterans on this track in disability rights and assist an employer in providing accommodations to a disability. A veteran on this track is considered rehabilitated when he or she has completed the employment program and maintained suitable employment for 60 days. This track is for veterans who have limited access to traditional employment and need flexible work schedules and a more accommodating work environment because of their disabling conditions or other special circumstances. Veterans may be provided with assistance in the development of a business plan, training in the operation of small businesses, financial assistance, and guidance on obtaining adequate resources to implement the business plan. A veteran on this track is considered rehabilitated when he or she has completed the self-employment program and maintained a viable business for one year. This track targets veterans who need long-term employment training to prepare them for suitable employment. Formal classroom courses are the most common long-term service, though training may also include on-the-job training, apprenticeships, internships, or other workplace preparation programs. While counselors have the authority to approve a wide variety of programs, statute specifies that "to the maximum extent practicable," courses under the VR&E program should be courses that are approved for the GI Bill. Services last as long as is necessary for the beneficiary to attain the objectives set out in his or her employment plan, but may not exceed 48 months (or the equivalent when pursued on a part-time basis). In limited circumstances (such as a veteran's disability worsening during the rehabilitation process and the original employment objective becoming unviable), a rehabilitation program can be extended beyond 48 months. Extensions must be approved by a counseling psychologist and a VR&E officer. A veteran on the employment through long-term services track is considered rehabilitated when he or she has completed a training program and maintained employment for 60 days. The Independent Living (IL) Services Track is for veterans who may not be able to work immediately and need additional rehabilitation to enable them to live more independently. The short-term focus of the program is on allowing veterans to participate in family and community life, but it also aims to increase their ability to possibly return to work in the longer term. Veterans on this VR&E track may be provided with assistive technology, independent living skills training, and connections to community-based support services. Unlike the other VR&E tracks, the IL track is limited in the number of veterans it can serve. Currently, 2,700 veterans are permitted to begin an IL program each year. This limit is waived for veterans who have been adversely affected by a natural or other disaster, as determined by the VA. IL programs for veterans are typically limited to 24 months. This limit can be extended if the VA determines that an extension would substantially increase a veteran's level of independence in daily living. The limit may also be extended for veterans who served after September 11, 2011, and have a severe disability. In addition to training benefits and other employment services, veterans who are entitled to VR&E services are also eligible for certain financial benefits. Many veterans who are receiving benefits under the VR&E program are also eligible for a monthly subsistence allowance. Veterans who are only receiving (1) initial evaluation, (2) placement or postplacement services, and (3) counseling from the VR&E program are not eligible for a subsistence allowance, nor are veterans who are enrolled in a training program less than half-time. The VR&E subsistence allowance varies by the type of program the veteran is enrolled in and whether or not the veteran has dependents. As of October 1, 2017, the monthly allowance for a veteran enrolled full-time at an institute of higher learning with two dependents is $902. The subsistence allowance is increased each year proportionate to the rate of inflation. The subsistence allowance continues as long as the veteran is enrolled in an eligible program and continues for two months after the program of training has been completed. In cases where a veteran is displaced as the result of a natural or other disaster while receiving a subsistence allowance, the subsistence allowance is extended for an additional two months. Typically, veterans are not permitted to participate in both the VR&E program and another VA educational program (such as a G.I. Bill program). However, veterans who are eligible for both VR&E services and the Post-9/11 GI Bill (also known as Chapter 33 benefits) may collect the housing allowance offered under Chapter 33 while receiving training and other benefits under VR&E. This policy was instituted to eliminate the incentive for disabled veterans to choose the Post-9/11 G.I. Bill (which typically offers a higher cash allowance but fewer services) over the VR&E program (which offers a lower cash allowance but more supportive services). Unlike the VR&E subsistence allowances, which are the same for veterans nationwide, Chapter 33 housing allowances are determined by a veteran's geographic location. In many cases, Chapter 33 housing allowances are greater than VR&E subsistence allowances: as of October 1, 2017, the Chapter 33 housing allowance ranges from about $825 per month in lower-cost locations to more than $3,000 per month in some higher-cost locations. In FY2016, the VA reported that VR&E subsistence allowance benefits totaled $573 million. This estimate includes VR&E beneficiaries who collected the traditional subsistence allowance as well as VR&E beneficiaries who collected the Chapter 33 housing allowances in place of the VR&E subsistence allowance. Veterans who are entitled to VR&E benefits may also be eligible for interest-free loans. These loans are only available to veterans who have a plan of service with VR&E and "would otherwise be unable to begin, continue or reenter his or her rehabilitation program." The maximum loan amount is equal to twice the weekly subsistence allowance for a veteran with no dependents ($1,214 in FY2016). Repayment of the loan is made in monthly installments from future wages, pensions, subsistence allowances, educational assistance allowance, or retirement pay. The VA reported that 2,402 loans totaling approximately $2.4 million were made in FY2016 and that the default rate was "close to zero percent." The VR&E loan program cost $464,000 in FY2016, of which $367,000 was for administrative expenses. Table 2 shows participation data from FY2011 through FY2016. The categories for "applicants," "eligible," "completed evaluation," "entitled to services," and "new plans of service" trace the number of individuals who continued through each stage of the application process, and in many cases, a single veteran may be counted in multiple categories. The "rehabilitated" category includes veterans who secured and maintained suitable employment or completed an independent living program. "Participants" include veterans in any stage of the VR&E process after the applicant and evaluation phases have been completed. It includes veterans who began a VR&E plan in a prior year as well as those in interrupted rehabilitation plan status. Due to the multiyear nature of many rehabilitations and the complex and diverse nature of the VR&E population, the data in Table 2 cannot be used to calculate the share of program participants who have been rehabilitated. Historically, the most precise indicator of efficacy may have been the VR&E rehabilitation rate, which was based on the share of veterans exiting the program who were rehabilitated. The VA is in the process of replacing the rehabilitation rate with a more comprehensive "positive outcomes performance standard." Data using this new standard are not currently available. Table 3 shows the types of programs that beneficiaries participated in during FY2016. The table only includes individuals who were concurrently receiving a subsistence allowance while they completed an educational program. It does not include individuals who were receiving training without an accompanying subsistence allowance nor does it include individuals who received nonmonetary benefits from VR&E such as counseling or job search assistance. Table 4 presents more detail on VR&E participants who completed the rehabilitation process in FY2016. About 85% of veterans who were rehabilitated achieved an employment outcome. Among rehabilitated veterans who achieved an employment outcome, the average annual wage after rehabilitation was $46,208.

Vocational Rehabilitation and Employment for veterans (VR&E) is an entitlement program that provides job training and other employment-related services to veterans with service-connected disabilities. In cases where a disabled veteran is not able to work, the VR&E program provides independent living (IL) services to help the veteran achieve the highest possible quality of life. The VR&E program is administered by the Veterans Benefits Administration (VBA), part of the Department of Veterans Affairs (VA). To be entitled to VR&E services, a veteran must have been discharged under conditions other than dishonorable and be found to have either (1) a service-connected disability rated at 20% or more and an employment handicap, or (2) a service-connected disability rated at 10% and a serious employment handicap. After a veteran is found to be entitled to VR&E, a vocational rehabilitation counselor helps the veteran identify a suitable employment goal and determine what services will be necessary to achieve that goal. The veteran is then assigned to one of five reemployment tracks: Reemployment for veterans who wish to return to work they held prior to their military service; Rapid Access to Employment for veterans who already have the skills necessary to compete in the job market and only need short-term services such as job search assistance; Employment through Long-Term Services for veterans who require postsecondary or vocational training to reach their employment goals; Self-employment for veterans who have the skills to start businesses; or Independent Living for veterans for whom employment is not a viable goal. Veterans may change tracks if a disability worsens or if their employment objective changes. Services may be provided by the VA, though they are more frequently purchased from an outside provider. VR&E benefits are typically limited to 48 months, though the benefit period can be extended under certain circumstances. In most cases, veterans are entitled to a subsistence allowance while they are enrolled in an education or training program. In FY2016, approximately 29,340 veterans developed a new plan of service with VR&E and 11,531 veterans completed rehabilitation. In FY2016, costs for mandatory VR&E benefits were approximately $1.3 billion. Discretionary support services and other administrative costs were approximately $218 million.

The Bush Administration notified Congress on February 12, 2004, that it intends to begin free trade agreement (FTA) negotiations with Thailand. This notification, which follows an October 19, 2003 announcement by President Bush and former Thai Prime Minister Thaskin of their agreement to launch negotiations, allows for talks to begin within 90 days or by mid-May 2004, after required consultations with Congress. Two negotiating sessions took place in 2004, and a third was held April 4-8, 2005, in Thailand. The fourth and fifth sessions were held July 15, 2005, in Montana, and September 26-30, 2005, in Hawaii. The sixth was held in Thailand from January 10-13, 2006. But Thailand suspended negotiations on February 24, 2006, when it was decided that a new election would be held in April. Since the April election, no decision has been made yet to resume the negotiations due to ongoing political turmoil (the April election was invalidated by the constitutional court and a new general election is to take place this fall). In the notification letter sent to the Speaker of the House and the Senate Majority Leader, then-U.S. Trade Representative Robert Zoellick put forth an array of potential commercial and foreign policy gains that could be derived from the agreement. At the same time, Mr. Zoellick alluded to sensitive issues that require attention: trade in automobiles, protection of intellectual property rights, and labor and environmental standards. Zoellick's letter states that an FTA would be particularly beneficial to U.S. agricultural producers who have urged the administration to move forward, as well as to U.S. companies exporting industrial goods and services. For agricultural producers, by eliminating or reducing Thailand's high tariffs and other barriers, the FTA offers the opportunity to significantly increase export sales to Thailand. In 2005, Thailand was the 16 th largest market for U.S. farm exports. The administration also argued that an FTA would help boost U.S. exports of goods and services in sectors such as information technology, telecommunications, financial services, audiovisual, automotive, and medical equipment. In 2005, U.S. companies exported to Thailand $7.4 billion in goods and over $1 billion in services. Maintaining preferential access for U.S. investors in Thailand is also a top priority for U.S. business. Given that Thailand is a relatively small economy compared to the United States (1/100 th "the size"), the agreement by itself will have limited effects on the overall U.S. economy. From the standpoint of U.S. foreign policy interests, the Administration views the proposed FTA as strengthening cooperation with Thailand in bilateral, regional, and multilateral fora. Bilaterally, the FTA is seen as strengthening Thailand's position as a key military ally, particularly in the war on terrorism. Regionally, the FTA is viewed as advancing President Bush's Enterprise for ASEAN Initiative (EAI). The goal of the EAI is to negotiate a network of bilateral trade agreements with the 10 members of ASEAN. Multilaterally, Thailand plays a key leadership role in the World Trade Organization (WTO). An FTA could encourage Thailand to actively cooperate with the United States in supporting multilateral trade negotiations under the aegis of the Doha Development Agenda, particularly in the area of agricultural liberalization. As for Thailand, similar broad economic and political calculations explain its interest in an FTA. In economic terms, Thailand is very concerned that its exports to the United States have been losing market share in recent years to countries such as Mexico and China. By eliminating U.S. tariff and non-tariff barriers to Thai exports, an FTA could help increase the competitiveness and market share of Thai products in the U.S. market. Thailand also does not want to be excluded from FTA benefits the U.S. has negotiated with other countries, particularly the potential of an FTA to increase U.S. investment in Thailand. Modernization of the services economy and diffusion of higher levels of technology, know-how, and labor management skills are essential for the Thai economy to advance beyond the competition from lower-wage emerging market economies such as China, Vietnam, and Laos. In addition, a closer political and economic relationship with the United States could provide Thailand with more leverage to play a larger role in Southeast Asia. General opposition to the FTA in both countries is expected from workers and companies in import-competing industries that bear the brunt of the adjustment costs of a trade agreement. Despite the welfare gains to society as a whole (e.g. more efficient resource allocation, lower priced imports, and greater selection of goods), those industries subject to increased competition face additional pressure to cut costs, wages, and prices. Some companies may not be able to withstand these pressure and may be forced out of business, accompanied by a loss of jobs. Under these circumstances, certain stakeholders, as a matter of self-interest, may oppose trade agreements that accelerate competition and structural changes in an economy. Specific opposition in Thailand has arisen from stakeholders in the agricultural and services sectors. Given that close to 50 percent of the Thai labor force is employed in agriculture, liberalization of this sector has been contentious. Similarly, in a number of services sectors, Thai companies feel they are at a competitive disadvantage in opening up to U.S. competitors. Thailand's banking and financial services industry, in particular, is wary of further liberalization after the financial crisis of 1997. Thai stakeholders are also particularly wary, given the high incidence of AIDS infections, in U.S. efforts to secure data exclusivity for patented pharmaceuticals. In addition, a number of Thai business interests reportedly are concerned over potential U.S. investment in newly privatized companies such as the Electricity Generating Authority of Thailand and the Mass Rapid Transit Authority. Opposition in the United States may arise from groups concerned about the impact of the trade agreement on labor and environmental standards. Often joined by anti-globalization activists, these interest groups question whether trade agreements enhance the social welfare of participating countries. Other issues such as transparency in government decision-making, human rights, and freedom of the press could also be raised. Increased market access for Thai agricultural products such as rice and sugar, as well as a reduction of the 25% U.S. tariff on lightweight pick-up trucks, is already controversial. In addition, Thailand is a persistent opponent and critic of U.S. trade remedy laws, which many U.S. interests groups don't want to see weakened. In short, competing viewpoints have surfaced regarding the desirability of an FTA. As in most FTAs that the United States has negotiated, the distribution of gains and losses would depend on the details of the provisions. As background for congressional oversight, this report examines Thailand's economy and trade orientation, the scope and significance of the U.S.-Thai commercial relationship, and the likely top issues in the negotiations. The report concludes with a short summary of the Congressional role and interest in the FTA. Thailand was severely affected by the Asian Financial Crisis, which hit the Thai economy in July 1997 and subsequently affected several other East Asian economies. The economic crisis in Thailand was characterized by a significant depreciation of its currency (the baht), depletion of nearly all of Thailand's foreign exchange reserves, a decline in the stock market, bankruptcies among a number of major Thai banks and corporations, and a sharp deterioration of property prices. The combination of these shocks led to a sharp economic downturn. Ten years prior to the 1997 crisis, Thailand had been one of the world's fastest growing economies. Between 1990 and 1996, gross domestic product (GDP) averaged 8.6%, fueled in large part by rapid export growth. However, in 1998, GDP fell by 10.5% while, exports and imports dropped by 6.7% and 33.0%, respectively, over 1997 levels (see Table 1 ). In addition, the unemployment rate rose from 3.2% in 1997 to 7.3% in 1998, and living standards (measured according to per capita GDP measured on a purchasing power parity basis), plummeted by 11%. Thailand's economy was stabilized by a $17.2 billion loan from the International Monetary Fund. Real GDP grew by 4.4% in 1999 and by 4.8% in 2000, but slowed to 2.2% in 2001. Public dissatisfaction in Thailand with the way the government was handling economic restructuring brought about the election of a new coalition government in 2001 (headed by the Thai Rak Thai Party) with Thaksin Shinawatra as prime minister. He launched a series of economic initiatives designed to stabilize the economy, boost domestic demand, encourage the growth of small and medium-sized businesses, and improve rural incomes. Thailand's economy experienced relatively strong growth from 2002-2004; real GDP growth averaged 6.2%. Real GDP growth was more modest in 2005 at 4.5%, due to a number of factors, including the December 2004 tsunami, higher energy prices, rising inflation, concerns over the avian influenza (bird flu), and domestic insurgencies. Global Insight, an international economic forecasting firm, estimates Thailand's real GDP will rise by 4.6% in 2006 and 5.2% in 2007. Major economic challenges include reducing the high level of corporate debt and the amount of non-performing loans held by the banking sector. Thailand's economy is heavily dependent on international trade and foreign investment. In 2005, the value of Thailand's merchandise exports was equal to 63% of its GDP. Foreign direct investment (FDI) is an important source of exports, employment, and access to new technologies and processes. Thailand's top five trading partners in 2005 were ASEAN, Japan, the European Union, the United States, and China (see Table 2 ). The United States was Thailand's second largest export market and its fifth largest supplier of imports. Thailand's major exports (2004 data) included machinery and mechanical appliances (mainly computers and computer parts), electrical apparatus for electrical circuits, and electrical appliances. Major imports included mineral and metal products, electronic parts, and crude oil. Annual FDI flows to Thailand have been relatively flat over the past few years, averaging about $1.5 billion annually from 2002 to 2005. Some analysts contend that China may be drawing FDI away from Thailand and other East Asian countries. The United States and Thailand maintain extensive commercial ties. Thailand affords the United States preferential treatment vis-a-vis other countries for certain types of investment under the U.S.-Thai Treaty of Amity and Economic Relations of 1966. The American Chamber of Commerce in Thailand estimates that the United States is the second largest foreign investor in Thailand (after Japan), with cumulative investment at over $21 billion through 2004. U.S.-invested firms in Thailand employ over 200,000 Thai nationals. Major sectors for U.S. FDI in Thailand include petroleum, banking, electronics, and automotive. In recent years, U.S. auto companies have invested heavily in Thailand. In 2005, Thailand was the 23 rd largest U.S. export market ($7.4 billion) and its 16 th largest source of imports ($20.0 billion) (see Table 3 ). U.S. exports to, and imports from, Thailand expanded by 15.6% and 14.0%, respectively over the previous period in 2004. Major U.S. exports to Thailand include semiconductors and other electronic components; computer equipment; basic chemicals, navigational, measuring, electromedical, and control instruments; miscellaneous manufactured products ; and basic chemicals. Major U.S. imports from Thailand include computer equipment, semiconductors and other electronic components, communications equipment, apparel, and miscellaneous manufactured products (mainly jewelry). Thai-U.S. economic relations continue to deepen, as Thailand continues to reform its economy and lower its trade barriers. Still, a number of contentious issues persist. Thai officials have criticized U.S. agricultural subsidy programs, contending that they give U.S. farmers an unfair competitive advantage. In addition, Thailand has participated in two WTO dispute resolution cases against the United States: U.S. anti-dumping subsidy offsets (the "Byrd Amendment"), and U.S. restrictions on shrimp imports. While the United States has not filed any cases against Thailand in the WTO, it has pressed Thailand to liberalize its trade and investment regimes and to improve protection of U.S. intellectual property rights (IPR). Countries that form FTAs agree at a minimum to phase out tariff and non-tariff barriers (NTBs) on mutual trade in goods in order to enhance market access between trading partners. Most U.S. FTAs, including NAFTA and agreements with Chile and Singapore, are more comprehensive. Because the U.S.- Thailand FTA is being modeled on the Singapore FTA, no sector, product, or functional issue can expect to be excluded from the liberalization process. This approach is favored by many Members of Congress. As a result, the negotiation is covering trade in goods and services, agriculture, investment, and intellectual property rights, as well as other issues such as government procurement, competition policy, and customs procedures. Tariffs are the major barrier to liberalized trade in goods. Thailand's reliance on import licensing, opaque customs procedures, and excise taxes are also issues the U.S. is addressing. Thailand's simple average applied tariff rate of about 13% for non-agricultural imports provides a relatively high level of protection. Many Thai tariff rates are much higher than the average and tend to be applied to imports competing with locally produced products. These include tariffs on autos and auto parts, alcoholic beverages, fabrics, footwear and headgear, and some electrical appliances. For example, the tariff on passenger cars and sport utility vehicles is 80%, the tariff on motorcycles 60%, and the tariff on completely knocked down (CKD) auto kits 33%. Tariffs on fabrics range from 25%-40%. Beyond cuts in tariffs, market access for U.S. goods could be improved by reducing excessive paperwork and undue processing delays in Thai customs procedures. In addition, import licensing requirements on various items remains opaque and can sometimes serve as a quantitative restriction. U.S. tariffs imposed on Thai non-agricultural exports are relatively low, averaging around 2-3%, but U.S. tariffs on some items such as textiles and apparel and light trucks are much higher. Thai concerns may also focus on U.S. trade remedy measures, such as use of antidumping and countervailing duty procedures to protect U.S. industry. The United States and Thailand are important trading partners in agricultural products, but the U.S. market is more important for Thailand than the Thai market is for U.S. exporters. The United States is the second largest market for Thai agricultural exports and Thailand is the fourth largest supplier of U.S. agricultural imports. At the same time, even though the United States has been the largest supplier of Thailand's agricultural imports, Thailand ranks only as the 16 th largest market for U.S. agricultural exports. The total value of bilateral farm trade was about $1.2 billion in 2002 with the U.S. running a $377 million deficit. The major Thai exports to the United States are processed seafood, frozen shrimp, rubber, rice, tapioca, sugar, and fruits and vegetables. Major Thai imports from the U.S. are oil seeds, cotton, cereals (especially wheat), soybean oil and cake. Thai-U.S. agricultural trade is more restricted than trade in manufactured goods. Both countries impose higher tariffs on agricultural products than on manufactured goods. The Thai average MFN applied tariff on agricultural products is about 24 percent compared to about 7% for the United States. More than 43% of the Thai tariff lines for agricultural products have applied rates exceeding 20%, compared to only 1.3% of the U.S. tariff lines. Consumer-ready products, meats, fresh fruits and vegetables face tariffs ranging from 40-60%. Excise taxes and surcharges, licensing fees, and labeling and certification standards can further boost the tax burden considerably. U.S. fruit growers estimate lost sales of up to $25 million annually from the combined effect of Thailand's high tariffs and surcharge. Other U.S. exports that could benefit from liberalization include meat and dairy products, sugar, alcoholic beverages, and tobacco. U.S. tariff rates that Thailand may want to see reduced include vegetables and fruits with tariff rates exceeding 10%, pineapples with a tariff rate of 29%, and fish and fish products with a tariff rate of 26%. Thailand, which is the world's third largest producer of sugar, will also seek substantial liberalization of the U.S. sugar quotas. Since agricultural barriers are higher than non-agricultural barriers, liberalization could boost trade more in agricultural products than in manufactured goods. U.S. farm groups estimate that potential U.S. agricultural exports to Thailand could increase by around $300 million annually if Thailand's tariffs and other trade-distorting measures were substantially reduced. Similar large increases in Thai agricultural exports to the United States can be expected if substantial liberalization occurs. Deficiencies in Thai protection of U.S. IPR, such as patents, copyrights, and trademarks, have been a longstanding U.S. concern. The USTR's 2005 "Special 301" report acknowledged that Thailand had taken a number of measures in 2004 to improve IPR protection, such as conducting raids on illegal production facilities, but expressed concern over transshipments of illegal IPR products through Thailand and the continued high piracy rates of copyrighted materials (such as optical disks, software, and books). The International Intellectual Property Rights Alliance (IIPA) estimates that IPR piracy in Thailand cost U.S. firms $175 million in 2004. U.S. IPR stakeholders lobbied hard to see Thailand make more progress on IPR enforcement before the FTA negotiations were formally announced. In a March 2004 press release, IIPA president Eric Smith stated: "The Thai Government harbors dozens of CD plants capable of producing over 400 million discs per year--more than seven times any justifiable legitimate domestic demand. It is clear Thailand has become a major exporter of pirate discs." In deference to these concerns, then-U.S. Trade Representative Zoellick, in announcing the intention to begin negotiations, recognized their "... concerns about the deficiencies in Thailand's protection of intellectual property and in its customs regime. Addressing these issues, as well as other areas such as strengthening measures against the production of illegal optical discs, will be essential for the successful conclusion of these negotiations." In August 2005, the Thai government reportedly implemented new regulations that would enforce stringent restrictions on the sale and transfer of CD production equipment in order to combat piracy. All CDs will be required to display a "mark certifying manufacture" issued by the government. Services such as commerce (wholesale and retail trade), transportation, telecommunications, and finance account for a growing share of economic activity in Thailand. In 2002, services accounted for about 55% of GDP and about 40% of employment. A large share of foreign investment goes into services, especially in finance and retail trade. U.S. negotiating objectives are likely to include improvements in access for U.S. providers of financial, telecommunications, and professional services, and other sectors. Liberalization of these sectors is likely to be accompanied by improvements in Thailand's regulatory environment, as well as capacity to oversee and insure effective competition. In pursuing these objectives, U.S. negotiators are insisting on according greater market access across each other's entire services sector, subject to a few exceptions that must be in writing. This so-called negative list approach was used in the Singapore FTA and is supported by many Members of Congress. Exceptions in the Singapore agreement deal with sectors that usually require government certification or licenses (lawyers, accountants) involve government institutions (airports, provision of social security, public hospitals, government corporations), or involve national policy (atomic energy). Major financial institutions in Thailand include the central bank, commercial banks, finance companies, securities companies, and insurance companies. Following the 1997 Asian financial crisis, Thailand increasingly deregulated and liberalized access of foreign firms to its financial sector. For example, foreign equity limits were relaxed for ten years to allow foreign ownership of up to 100% (previously 25%) in commercial banks and finance companies. However, new capital invested in these companies after the ten-year period must be provided by domestic investors until foreign-held equity share falls to 49%. Other restrictions concerning the number branches foreign banks may operate, as well as limits on the number of expatriate professionals that can be employed, could also be raised in the negotiations. Similarly, in the area of brokerage services, foreign firms are allowed to own shares greater than 49% of Thai securities firms only on a case-by-case basis. Thailand's communications market is characterized by limited competition and relatively high prices. While Thailand has committed to open up telecommunications services to direct foreign competition by early 2006, the reform process has lagged. Although the Thai Government has allowed foreign participation in the telecommunications sector since 1989, the market is still dominated by two state-owned companies: the Communications Authority of Thailand, which controls international services, and the TOT Corporation and Public Company Limited, which controls domestic services. A few private sector companies have been awarded concessions by the Thai government to provide wireless and fixed-line services. Pending establishment of a National Telecommunications Commission to serve as an independent regulator, deregulation and full liberalization of the telecommunications market is likely to be difficult. Liberalization of other services such as legal, construction, architecture, engineering, and accounting are also U.S. negotiating objectives. Various Thai laws currently make it very difficult for foreign-owned companies and nationals to operate in these industries. The United States has an investment agreement with Thailand under the 1966 Treaty of Amity and Economic Relations (AER). The treaty accords the same rights to U.S. and Thai citizens and companies to own and operate in each other's territory with the exception of professional services and several sectors such as communications, transportation, and depository banking. Initially, the AER provided few benefits to U.S. investors because Thailand at the time had few laws and regulations restricting foreign investment. Over time, however, Thailand instituted new laws and regulations that limited foreign nationals' operations in Thailand. As a result, the legal treatment accorded by the 1966 treaty became preferences extended only to U.S. investors. Consequently, the AER came to violate Thailand's WTO obligations to accord equal treatment to all member states. Thailand received an exemption from the WTO for ten years, but the exemption expired in January 2005. The FTA negotiations may consider ways to construct a bilateral investment agreement that is WTO-consistent but still retains current privileges for U.S. companies and nationals. With over 1200 U.S. companies currently taking advantage of the rights protected by the AER, the issue is a top priority for the U.S. business community. U.S. negotiators may also make establishment of a special investor-state dispute mechanism a priority objective. Such a mechanism could ensure neutral and binding third-party resolution of disputes involving foreign investors and the host country. Thailand's plans for reforming and privatizing a number of state-owned companies continues to be a matter of great interest to foreign investors. The Thai government's plan to overhaul state-owned telecommunications, energy, and transport companies has encountered widespread opposition from labor unions, causing indefinite delays in planned share offerings of the Electricity Generating Authority of Thailand, Thailand's largest state-owned company. The two sides completed their sixth round of FTA negotiations in Chiang Mai, Thailand on January 10-13, 2006. While U.S. negotiators stated that some progress was made, they expressed disappointment over the lack of progress in the talks. Major stumbling blocks reportedly include U.S. proposals on IPR, and liberalization of the services sector, including distribution, financial services (such as banking, insurance, and securities brokerage), and telecommunications. Thai officials have sought to reduce high U.S. tariffs on light trucks (25%) and restrictions on sugar imports. In addition, the January 2006 FTA talks were reportedly temporarily disrupted by an estimated 10,000 Thai protesters. On January 19, 2006, Thailand's lead negotiator in the U.S.-Thailand FTA talks, Nitya Pibulsonggram resigned. Press reports stated that the resignation was induced in part by political opposition to the FTA by various groups. In March 2006 Thailand suspended the negotiations pending the outcome of the snap April general election (which was subsequently invalidated by a constitutional court). With a new general election scheduled for this fall, the FTA negotiations remain suspended. Thus, it appears that even if they were to restart unexpectedly before the election, it is unlikely an agreement could be completed in time to be considered under the current Trade Promotion Authority statute, which expires on July 1, 2007. The U.S.-Thailand FTA negotiations are of interest to Congress because (1) an agreement would require passage of implementing legislation to become operational; (2) an agreement could increase U.S. exports of goods, services, and investment; (3) an agreement could increase competition for U.S. import-competing industries such as textiles and apparel and pick-up trucks; and (4) if an agreement is implemented, Thailand would become the second Asian FTA partner (the first was Singapore) for the United States. Many Members of Congress support an aggressive FTA strategy because of the potential to open foreign markets further to U.S. exports and investment. While the Administration's policy of negotiating multiple FTAs has not been very controversial, some Members have expressed concerns that the Administration's criteria for deciding on FTA partners has relied too heavily on foreign policy considerations. In the case of Thailand, however, the same Members welcomed the announcement of the Thailand FTA because Thailand represents a relatively large market that offers significant commercial gains, particularly to U.S. agricultural producers. At the same time, some congressional concern has surfaced in regard to automotive trade, centered on the impact that a reduction of the current 25% U.S. tariff on pick-up trucks could have on imports and U.S. jobs. Auto companies based in Thailand produce more than 500,000 pick-ups a year, making the country the world's second largest producer. None of these vehicles, however, are exported to the United States, but the United Auto Workers argue that if the 25% tariff were removed, some 80,000 auto jobs would be jeopardized. (More than a million pick-ups are currently produced in the United States.) Senators George Voinovich (R-OH) and Carl Levin (D-MI), co-chairs of the Senate Auto Caucus, in a November 12, 2003 letter, urged the Bush Administration to retain the 25% tariff out of concern that its elimination would open the door for Japan to export trucks from Thailand to the United States. A similar letter was signed by the chairs of the House Auto Caucus, Representatives Dale Kildee (D-MI) and Fred Upton (R-MI). On the Senate side, a group of 40 Senators (36 Democrats and 4 Republicans) sent a similar letter to U.S. trade officials on March 18, 2005. A different approach to this concern is embodied in S.Con.Res. 90 introduced by Senators Levin and Voinovich on February 23, 2004, and H.Con.Res. 366 , introduced February 24, 2004, by Representatives Kildee, Quinn, and Levin. Because Japan and other countries could benefit from bilateral concessions agreed to between the United States and Thailand, the resolutions maintain that negotiations affecting access to the U.S. automotive market should only take place if all major automobile producing countries participate. One House Ways and Means Committee member Phil English announced on June 8, 2006 that he would not support the FTA if it were brought to Congress. English said that "Thailand continues to demonstrate that it does not share common views with the United States with respect to the World Trade Organization and a country's right to police its markets effectively from predatory or illegally traded imports." Other members of Congress may wish to consider how a U.S.-Thai FTA could affect U.S. commercial relations in Asia in general, particularly in light of the trend among Asian countries for bilateral trade agreements. China's growing economic role in Asia and its quest for new markets, materials, and trade deals is pushing almost every other major Asian country, including Japan and South Korea, to consider FTAs with each other. Given the increased competition, the U.S.-ASEAN Business Council has called for a vigorous timetable for the completion of the U.S.-Thai FTA talks and designation of the next ASEAN country with which the United States will seek an FTA. Accordingly, U.S. trade strategy toward the ten-nation ASEAN grouping, which is the third largest market for U.S. exports, could be an important congressional consideration.

President Bush and former Thai Prime Minister Thaskin on October 19, 2003, agreed to negotiate a bilateral free trade agreement (FTA). Six negotiating rounds took place, the most recent January 10-13, 2006 in Thailand. U.S. trade officials had hoped to conclude the negotiations by early 2006, but the negotiations were suspended by Thailand in February 2006 due to Bangkok's political crisis. After 18 months of negotiations the two sides were wide apart on a number of issues, such as financial services liberalization and a number of other sensitive issues. Combined with considerable public opposition to the FTA in Thailand, the Bush Administration may be hard pressed to complete the negotiation before trade promotion authority expires in mid-2007. While the Thai government appointed by the military after Thailand's September 2006 coup remains committed to concluding an FTA with the United States, it also plans to submit any agreement to the 242 National Legislative Assembly (NLA) for approval--a step that deposed Prime Minister Thaskin maintained was not required. At this date, however, there are no plans (date or venue) to resume the negotiations. In the notification letter sent to the congressional leadership, then-U.S. Trade Representative Robert Zoellick put forth an array of commercial and foreign policy gains that could be derived from the agreement. The letter stated that an FTA would be particularly beneficial to U.S. agricultural producers, as well as to U.S. companies exporting goods and services to Thailand and investing there. Mr. Zoellick also alluded to sensitive issues that would need to be addressed: trade in automobiles, protection of intellectual property rights, and labor and environmental standards. Thailand has been viewed as a strong candidate for an FTA with the United States. Its economy has shown relatively healthy growth in recent years, rising by 6.2% in 2004 and 4.5% in 2005. Yet, Thailand maintains relatively high tariff and non-tariff barriers on a number of products and services. Secondly, an FTA with Thailand would allow U.S. exporters to gain access to Thai markets similar to that obtained by other countries through bilateral and plurilateral agreements with Thailand. Third, a U.S.-Thailand FTA would likely induce other countries to seek a trade liberalization agreement with the United States. Countries that form FTAs agree at a minimum to phase out or reduce tariff and non-tariff barriers (NTBs) on mutual trade in order to enhance market access between the trading partners. The U.S.-Thailand FTA is expected to be comprehensive, seeking to liberalize trade in goods, agriculture, services, and investment, as well as intellectual property rights. Other issues such as government procurement, competition policy, environment and labor standards, and customs procedures are also on the negotiating table. The U.S.-Thailand FTA negotiations are of interest to Congress because (1) an agreement would require passage of implementing legislation to go into effect; (2) an agreement could increase U.S. exports of goods, services, and investment, with particular benefits for agricultural exports; and (3) an agreement could increase competition for U.S. import-competing industries such as textiles and apparel and light trucks, thereby raising the issue of job losses. This report will be updated if negotiations are resumed.

E ach year Congress provides funding for a variety of grant programs through the Department of Justice (DOJ). These programs provide support to state, local, and tribal governments and nonprofit organizations for a variety of criminal justice-related purposes, such as combatting violence against women, reducing backlogs of DNA evidence, supporting community policing, assisting crime victims, promoting prisoner reentry, and improving the functioning of the juvenile justice system. Congress funds these programs through five accounts in the annual Commerce, Justice, Science, and Related Agencies (CJS) appropriations act: Violence Against Women Programs; Research, Evaluation, and Statistics; State and Local Law Enforcement Assistance; Juvenile Justice Programs; and Community Oriented Policing Services. This report provides an overview of congressional actions to fund DOJ's grant programs through these accounts for FY2017. The report also provides information on FY2016 appropriations for DOJ's grant programs. The Office on Violence Against Women (OVW) was established to administer programs created under the Violence Against Women Act (VAWA) of 1994. These programs provide financial and technical assistance to communities around the country to facilitate the creation of programs, policies, and practices designed to improve criminal justice responses related to domestic violence, dating violence, sexual assault, and stalking. The Obama Administration's FY2017 request for OVW was $489 million, 1.9% more than the FY2016 appropriation of $480 million. The Obama Administration also proposed transferring $326 million from the Crime Victims Fund to the OVW. The Obama Administration's FY2017 request was mostly in line with the FY2016 appropriation, but it requested increases for grants to encourage arrests in domestic violence cases and enforce protection orders (+$11 million), civil legal assistance (+$8 million), grants to combat violence on college campuses (+$6 million), grants to combat abuse against the elderly (+$1 million), and grants to strengthen tribal justice systems' response to domestic violence on tribal lands (+$3 million). Additionally, the Obama Administration proposed funding two new initiatives through set-asides from other grant programs: reducing firearm lethality in domestic violence cases and enhancing colleges' and universities' responses to instances of campus sexual assault. Finally, the Obama Administration's request proposed reducing funding for the Service-Training-Officers-Prosecutors (STOP) Formula Grant program by $15 million. In the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), Congress adopted the Obama Administration's proposal to supplement direct appropriations for OVW with a $326 million transfer from the Crime Victims Fund. However, Congress largely declined to support the rest of the Obama Administration's proposals. The act increased funding for grants to encourage arrests in domestic violence cases and enforce protection orders and grants to strengthen tribal justice systems' response to domestic violence on tribal lands, but not at the level proposed by the Obama Administration. Congress also declined to support the Obama Administration's proposal to reduce funding for STOP grants. For FY2017, Congress funded STOP grants at an amount equal to the FY2016 appropriation. The Office of Justice Programs (OJP) manages and coordinates the National Institute of Justice; Bureau of Justice Statistics; Office of Juvenile Justice and Delinquency Prevention; Office of Victims of Crimes; Bureau of Justice Assistance; Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering, and Tracking; and related grant programs. The Research, Evaluation, and Statistics account (formerly the Justice Assistance account) funds the operations of the Bureau of Justice Statistics and the National Institute of Justice, among other things. The Obama Administration requested $154 million for this account for FY2017, a 32.8% increase over the FY2016 appropriation of $116 million. It requested increases in funding for the Bureau of Justice Statistics (+$17 million) and the National Institute of Justice (+$12 million) along with a $2 million increase for the forensic sciences improvement program. The Administration requested funding for two new initiatives: a clearinghouse for information on evidence-based programs ($3 million) and an incident-based crime statistics program ($10 million). The Administration also proposed funding for research on domestic radicalization under this account rather than the State and Local Law Enforcement Assistance account. Congress provided $89 million for the Research, Evaluation, and Statistics account for FY2017. The decrease in funding for FY2017 (-23.3%) is largely the result of Congress moving funding for the Regional Information Sharing System to the Community Oriented Policing Services account. The State and Local Law Enforcement Assistance account includes funding for a variety of grant programs to improve the functioning of state, local, and tribal criminal justice systems. Some examples of programs that have traditionally been funded under this account include the Edward Byrne Memorial Justice Assistance Grant (JAG) program, the Drug Courts program, the State Criminal Alien Assistance Program (SCAAP), and DNA backlog reduction grant programs. The Obama Administration's FY2017 request for the State and Local Law Enforcement Assistance account was $1.098 billion, which was 22.1% less than the FY2016 appropriation of $1.409 billion. The Administration proposed eliminating funding for the State Criminal Alien Assistance Program (SCAAP, -$210 million); the Paul Coverdell Forensic Sciences Improvement Program (-$14 million); grants to assist trafficking victims (-$45 million); the John R. Justice program, which helps with student loan forgiveness for attorneys in public service (-$2 million); and the tribal assistance program (-$30 million). However, it proposed to fund grants to assist trafficking victims with deposits to the Crime Victims Fund. The Obama Administration also proposed to use 7% of the funding under the State and Local Law Enforcement Assistance, Juvenile Justice Programs, and Research, Evaluation, and Statistics accounts to support tribal justice programs. In addition, it proposed reducing funding for the JAG program (-$93 million, though this is largely the result of eliminating the set-aside for security at the Presidential Nominating Conventions), the National Criminal History Improvement program (-$23 million), and DNA backlog reduction initiatives (-$20 million). While the Obama Administration proposed eliminating or reducing funding for several programs under the State and Local Law Enforcement Assistance account, it has also proposed increasing funding for reentry initiatives authorized under the Second Chance Act (+$32 million), programs for children exposed to violence (+$15 million), grants for residential substance abuse treatment (+$2 million), and programs to assist people with mental illness in the criminal justice system (+$4 million). In addition, the Obama Administration requested funding for several new programs under the State and Local Law Enforcement Assistance account, including $10 million for the Byrne Incentive Grant program, which would have made supplemental grants to JAG program grantees who choose to use a portion of their JAG funding to support programs or initiatives that are evidence-based, or are promising and will be coupled with rigorous evaluation to determine their effectiveness; $15 million for the Byrne Competitive Grant program to implement evidence-based and data-driven strategies on issues of national significance; $20 million for grants and technical assistance to state, local, and tribal courts and juvenile and criminal justice agencies to support efforts to improve the perception of fairness in the juvenile and criminal justice systems and to build community trust; $5 million for the Violence Reduction Network, which would allow cities to develop data-driven, evidence-based strategies to reduce violence by consulting directly with and receiving coordinated training and technical assistance from multiple DOJ components; and $6 million for grants to counter violent extremism. Congress reduced funding for the State and Local Law Enforcement Assistance account by 9.1%, or $128 million, for FY2017. Some of the reduction is due to Congress choosing to fund several programs--Project Safe Neighborhoods, the John R. Justice program, grants for capital litigation improvement and wrongful conviction review, and programs under the Prison Rape Elimination Act--as set-asides from the JAG program instead of funding them as individual line items under the State and Local Law Enforcement Assistance account. Congress also reduced top-line funding for JAG by $73 million. After accounting for set-asides, available funding for the JAG program decreased from $347 million for FY2016 to $335 million for FY2017. The Consolidated Appropriations Act eliminates funding for tribal assistance programs (-$30 million). However, Congress authorized DOJ to use up to 7% of the funding available under the State and Local Law Enforcement Assistance, Juvenile Justice Programs, and Community Oriented Policing Services account, with a few exceptions, for tribal justice assistance programs. Congress also provided $103 million under the State and Local Law Enforcement Assistance account for an opioid initiative. However, most of the funding for this initiative is not new. Rather, funding for the initiative comes from the following programs: Drug Courts ($43 million), Veterans Treatment Courts ($7 million), Residential Substance Abuse Treatment ($14 million), Prescription Drug Monitoring ($14 million), and programs to address individuals with mental illness in the criminal justice system ($12 million). All of these programs were funded through the State and Local Law Enforcement Assistance account in FY2016. In addition, Congress provided $13 million under the opioids initiative for programs authorized by the Comprehensive Addiction and Recovery Act of 2016 ( P.L. 114-198 ). The act directs DOJ to use funding for the programs under the opioid initiative to "address opioid abuse reduction consistent with underlying program authorities." Congress declined to fund any of the new programs proposed by the Obama Administration. The Juvenile Justice Programs account includes funding for grant programs to reduce juvenile delinquency and help state, local, and tribal governments improve the functioning of their juvenile justice systems. For FY2017, the Obama Administration requested $334 million for the Juvenile Justice Programs account, a 23.8% increase over the FY2016 appropriation of $270 million. The Administration's FY2017 request included proposals to increase funding for the Juvenile Justice and Delinquency Prevention Act (JJDPA) Part B formula grants program (+$17 million), Title V grants (+$24.5 million), and the Community-based Violence Prevention Initiative (+$10 million). The Obama Administration also requested that funding be restored to the Juvenile Accountability Block Grants ($30 million), which were eliminated in FY2014. In addition, the Administration requested $20 million for a Smart on Juvenile Justice Initiative, which would have provided supplemental incentive grant awards to foster better outcomes for system-involved youth. Finally, the Obama Administration proposed to reduce funding for youth mentoring grants (-$32 million), investigation and prosecution of child abuse programs (-$9 million), and the missing and exploited children program (-$5 million). Congress appropriated $247 million for the Juvenile Justice Programs account for FY2017, an 8.6% reduction compared to the FY2016 appropriation. Congress reduced funding for some programs under the Juvenile Justice Programs account: JJDPA Part B state formula grants (-$3 million), youth mentoring grants (-$10 million), and Title V grants (-$3 million). Congress also chose to fund the Community-based Violence Prevention Initiative, which was a separate line item in the Juvenile Justice Program account in FY2016, as a set-aside from the Title V grant program. Congress declined to fund any of the new programs proposed by the Obama Administration. The Community Oriented Policing Services (COPS) Office awards grants to state, local, and tribal law enforcement agencies throughout the United States so they can hire new officers, train them in community policing, purchase and deploy new crime-fighting technologies, and develop and test new and innovative policing strategies. The Obama Administration's FY2017 request for COPS was $74 million more than the FY2016 appropriation of $212 million. The Obama Administration requested a $42 million increase in funding for the COPS hiring program. The Administration's request would also have established the Tribal Resources Grant program and training and technical assistance on COPS's collaborative reform model as separate line items in the account rather than as set-asides from the funding for the hiring program. Congress appropriated $222 million for the COPS account for FY2017, a 4.5% increase in funding compared to the FY2016 appropriation. Congress increased funding for the COPS hiring program from $187 million to $195 million, but after set-asides are accounted for, actual funding for the hiring program remained unchanged ($137 million). Congress also provided a $3 million increase in funding for the Anti-heroin Task Forces program. For FY2017, Congress provided funding for the Regional Information Sharing System (RISS) under the COPS account. P.L. 115-31 requires this funding to be transferred to OJP. Congress also set-aside $8 million from the COPS hiring program for the POLICE Act of 2016 ( P.L. 114-199 ). The act allows COPS grants to be used for active shooter training. As a part of its FY2017 budget request for DOJ, the Administration requested $500 million for the 21 st Century Justice Initiative. This proposed initiative would have been a new mandatory program that would have invested $5 billion--$500 million a year for 10 years--in criminal justice reform efforts. The initiative would have used federal funding to promote innovative approaches to reducing both crime and unnecessary incarceration. The program would have focused on achieving three objectives: reducing crime, reversing practices that have led to unnecessarily long sentences and unnecessary incarceration, and building community trust. States would have been able to use this funding to focus on one or more of the following objectives for their adult and juvenile systems: (1) examining and changing state laws and policies that contribute to unnecessarily long sentences and unnecessary incarceration, without sacrificing public safety; (2) promoting critical advancements in community-oriented policing; and (3) providing comprehensive diversion and reentry services. In addition, this initiative would have dedicated 10% of the funding for reform efforts in the federal criminal justice system, including improving skills, education, mental health, addiction, and other recidivism-reduction programming in the Bureau of Prisons. Congress declined to provide funding for this program.

Each year Congress provides funding for a variety of grant programs through the Department of Justice (DOJ). These programs are used to fund state, local, and tribal governments and nonprofit organizations for a variety of criminal justice-related purposes, such as efforts to combat violence against women, reduce backlogs of DNA evidence, support community policing, assist crime victims, promote prisoner reentry, and improve the functioning of the juvenile justice system. Congress funds these programs through five accounts in the annual Commerce, Justice, Science, and Related Agencies (CJS) appropriations act: Violence Against Women Programs; Research, Evaluation, and Statistics; State and Local Law Enforcement Assistance; Juvenile Justice Programs; and Community Oriented Policing Services. For FY2017, the Obama Administration requested a total of $2.361 billion for these five accounts. The Obama Administration's FY2017 request for DOJ's grant accounts included proposals to change the funding levels of several DOJ grant programs. First, the Obama Administration proposed to transfer $326 million from the Crime Victims Fund to the Office on Violence Against Women (OVW). It also proposed to eliminate funding for the State Criminal Alien Assistance Program (-$210 million), and reduce funding for other programs, such as the National Criminal History Improvement program (-$23 million), and DNA backlog reduction initiatives (-$20 million). However, the Obama Administration proposed increases for grants to encourage arrests in domestic violence cases and enforcement of protection orders (+$11 million), grants authorized under the Second Chance Act (+$32 million), and programs for children exposed to violence (+$15 million). It also proposed funding a variety of new programs and initiatives, such as the Byrne Incentive Grant program ($10 million), the Byrne Competitive Grant program ($15 million), and the Violence Reduction Network ($5 million). Finally, it proposed restoring funding to the Juvenile Accountability Block Grant (+$30 million), which was eliminated in FY2014. Congress provided a total of $2.320 billion for DOJ's five grant accounts, an amount that is 6.7% less than the FY2016 appropriation and 1.8% less than the Administration's request. Funding for three of the five grant accounts decreased for FY2017, the exceptions being Violence Against Women Programs (+$2 million) and the Community Oriented Policing Services (+$10 million). However, the increase in funding for the Community Oriented Policing Services account is largely attributable to Congress moving funding for the Regional Information Sharing System from the Research, Evaluation, and Statistics account to the Community Oriented Policing Services account. Congress, by and large, did not support many of the Obama Administration's proposals that would have eliminated funding for particular programs, increased funding for existing programs, or provided funding for new programs. However, Congress did adopt the proposal to supplement direct appropriations for the Office on Violence Against Women with a $326 million transfer from the Crime Victims Fund.

During the first several months of 2008, a number of lenders curtailed or ceased their participation in the Federal Family Education Loan (FFEL) program, citing reasons that include difficulties in raising capital through the securitization of student loan debt and reductions in lender subsidies enacted under the College Cost Reduction and Access Act of 2007 (CCRAA; P.L. 110-84 ). Concerns were raised that if lender participation in the FFEL program decreased substantially or if a substantial portion of lenders ceased lending to students who attend certain institutions of higher education, large numbers of students might face difficulty in obtaining FFEL program loans. Concerns were also raised about access to borrowing opportunities for students who have come to rely on private (non-federal) student loans because they have exhausted their eligibility for federal student loans. Legislation pertaining to federal student loans was active in the 110 th Congress. On October 27, 2007, the CCRAA was enacted, which made numerous changes to the federal student loan programs. On April 14, 2008, in response to concerns about the continued availability of FFEL program loans, the House Committee on Education and Labor reported H.R. 5715 ( H.Rept. 110-583 ), the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA). On April 17, 2008, the bill was passed by the House of Representatives. Action on the House bill closely followed introduction of S. 2815 , the Strengthening Student Aid for All Act, in the Senate on April 3, 2008. Both bills would amend the HEA to address concerns about the continued availability of federal student loans. On April 30, 2008, the Senate amended and passed H.R. 5715 ; and on May 1, 2008, the House approved H.R. 5715 , as amended and passed by the Senate. On May 7, H.R. 5715 was enacted as P.L. 110-227 . The ECASLA grants temporary authority to the Secretary of Education (the Secretary), until July 1, 2009, to purchase student loans previously made under the FFEL program. It also makes other changes to the FFEL, William D. Ford Federal Direct Loan (DL), and American Competitiveness Grant programs (discussed below). Later in the 110 th Congress, the Higher Education Opportunity Act (HEOA; P.L. 110-315 ) was enacted to amend, extend, and establish new programs under the Higher Education Act. The HEOA includes several amendments to provisions that had been enacted under the ECASLA. Most recently, the temporary authority of the Secretary of Education to purchase FFEL program loans was extended through July 1, 2010, under P.L. 110-350 . The federal government operates two major student loan programs: the FFEL program, authorized under Title IV, Part B of the Higher Education Act (HEA), and the DL program, authorized under Title IV, Part D of the HEA. These programs make available loans to undergraduate, graduate and professional students, and the parents of undergraduate dependent students, to help them finance the costs of postsecondary education. Together, these programs constitute the largest source of direct aid supporting students' postsecondary educational pursuits. In award year (AY) 2008-2009, it is estimated that these programs will provide $72 billion in new loans to students and their parents. Under the FFEL program, loan capital is provided by private lenders, and the federal government guarantees lenders against loss through borrower default, death, permanent disability, or, in limited instances, bankruptcy. Under the DL program, the federal government provides the loans to students and their families, using federal capital (i.e., funds from the U.S. Treasury). The two programs rely on different sources of capital and different administrative structures, but essentially disburse the same set of loans: Subsidized Stafford Loans and Unsubsidized Stafford Loans for undergraduate, graduate and professional students; PLUS Loans for graduate and professional students and parents of undergraduate dependent students; and Consolidation Loans through which borrowers may combine their federal student loans into a single loan payable over a longer term, which varies according to the combined loan balance. The loans made through the FFEL and DL programs are low-interest loans, with maximum interest rates for each type of loan established by statute. Subsidized Stafford Loans are need-based loans and are only available to students demonstrating financial need. The Secretary pays the interest that accrues on Subsidized Stafford Loans while borrowers are in school, during a six-month grace period, and during authorized periods of deferment. Unsubsidized Stafford Loans and PLUS Loans are non-need-based loans and are available to borrowers without regard to their financial need. Borrowers are fully responsible for paying the interest that accrues on these loans. In the 110 th Congress, bills were introduced in the Senate ( S. 2815 ) and the House ( H.R. 5715 ) to amend the HEA to ensure the continued availability of federal student loans. These bills were designed to address a separate set of issues than bills that had been passed by the Senate ( S. 1642 ) and the House ( H.R. 4137 ) to reauthorize the HEA. In both S. 2815 and H.R. 5715 , a number of amendments would affect loans made under both the FFEL and DL programs, while other amendments would apply only to the FFEL program. As introduced, both S. 2815 and H.R. 5715 would have amended the HEA to increase borrowing limits for Unsubsidized Stafford Loans; delay the start of repayment for parent borrowers of PLUS Loans; update procedures for ensuring the availability of lender-of-last-resort (LLR) loans under the FFEL program; and authorize the Secretary to purchase loans previously made under the FFEL program. S. 2815 would have also amended the HEA to establish a negative expected family contribution (EFC) for use in need analysis, a change intended to broaden student eligibility for need-based federal student aid. In contrast, H.R. 5715 , as introduced in the House, contained language to amend the HEA to extend eligibility to borrow PLUS Loans, under extenuating circumstances, to individuals with adverse credit, if their adverse credit was the result of being no more than 180 days delinquent on home mortgage payments. Finally, H.R. 5715 also expressed a sense of Congress that institutions such as the Federal Financing Bank, the Federal Reserve, and Federal Home Loan Banks, in consultation with the Secretaries of Education and the Treasury, should consider using available authorities to assist in ensuring continued access to federal student loans. On May 7, 2008, H.R. 5715 , the Ensuring Continued Access to Student Loans Act of 2008, was enacted as P.L. 110-227 . It amends the HEA by increasing annual and aggregate borrowing limits for Unsubsidized Stafford Loans to undergraduate students; delaying the start of repayment for parent borrowers of PLUS Loans; extending eligibility for individuals with adverse credit to borrow PLUS Loans, under extenuating circumstances; revising procedures for ensuring the availability of lender-of-last-resort (LLR) loans under the FFEL program; temporarily authorizing the Secretary to purchase loans previously made under the FFEL program at no net cost to the federal government; and expanding eligibility for aid provided through American Competitiveness (AC) Grants and Science and Mathematics Access to Retain Talent (SMART) Grants. The Ensuring Continued Access to Student Loans Act of 2008 also expresses a sense of Congress that institutions such as the Federal Financing Bank, the Federal Reserve, and Federal Home Loan Banks, in consultation with the Secretaries of Education and the Treasury, should consider using available authorities to assist in ensuring continued access to federal student loans for students and their families; and that any action taken by these entities should not limit the Secretary's authority with regard to the LLR program, nor the Secretary's authority to purchase loans previously made under the FFEL program. The ECASLA also requires the Government Accountability Office (GAO) to evaluate the impact that increases in federal student loan limits may have on tuition, fees, room and board, and on the borrowing of private (non-federal) student loans. The remainder of this report provides a brief overview of amendments made to the HEA under the Ensuring Continued Access to Student Loans Act of 2008 to address the continued availability of access to federal student loans. The report also identifies instances in which ECASLA amendments were further amended by other laws (e.g., the HEOA). The amounts students may borrow in need-based Subsidized Stafford Loans and non-need-based Unsubsidized Stafford Loans are constrained by statutory loan limits. One set of limits applies to the annual and aggregate amounts students may borrow in Subsidized Stafford Loans. Another set of limits applies to the total annual and aggregate amounts students my borrow in combined Subsidized Stafford Loans and Unsubsidized Stafford Loans (hereafter, referred to as total Stafford Loans). The terms and conditions for Subsidized Stafford Loans are more favorable to students than for Unsubsidized Stafford Loans. As a form of need-based aid, the eligibility of students to borrow Subsidized Stafford Loans is contingent on their demonstrating financial need. In contrast, students may qualify to borrow Unsubsidized Stafford Loans without regard to their financial need. Both annual and aggregate loan limits vary by student dependency status and educational level. In any year, a student may borrow Subsidized Stafford Loans in amounts up to the lesser of (a) the applicable annual Subsidized Stafford Loan limits, or (b) the student's unmet financial need. In any year, a student may borrow total Stafford Loans in amounts up to the lesser of (a) the applicable annual total Stafford Loan limits, or (b) the amount remaining after subtracting other financial assistance the student is expected to receive, from the cost of attendance (COA) at the school the student attends. Aggregate loan limits constrain the amounts students may borrow in Subsidized Stafford Loans and total Stafford Loans, overall. Until the enactment of the ECASLA, the same annual Subsidized Stafford Loan limits and total Stafford Loan limits applied to dependent undergraduate students for each comparable educational level. However, annual total Stafford Loan limits that were higher than annual Subsidized Stafford Loan limits applied to independent undergraduate students, graduate and professional students, and dependent undergraduate students whose parents are unable to obtain PLUS Loans, for each comparable educational level. In most instances, loan limits were established by statute; however, aggregate total Stafford Loan limits for independent undergraduate students, graduate students and professional students had been set by the Secretary according to regulation. The ECASLA amended annual and aggregate borrowing limits for total Stafford Loans for dependent undergraduate students, independent undergraduate students, and dependent undergraduate students whose parents are unable to obtain a PLUS Loan, effective for loans first disbursed on or after July 1, 2008. Technical changes to these amended loan limits were made under the HEOA. Amended loan limits are presented in Table 1 . In general, effective July 1, 2008, annual total Stafford Loan limits were increased by $2,000 above previously applicable loan limits for undergraduate students enrolled in degree or certificate programs. With this change, annual total Stafford Loan limits were for the first time made greater than the corresponding annual Subsidized Stafford Loan limits for dependent undergraduate students enrolled in degree or certificate programs. Annual total Stafford Loan limits were also increased by $2,000 for independent undergraduate students enrolled in a preparatory coursework necessary for enrollment in an undergraduate degree or certificate program. Effective July 1, 2008, aggregate total Stafford Loan limits for undergraduate dependent students were increased by $8,000, from $23,000 to $31,000. For independent undergraduate students, and dependent undergraduate students whose parents are unable to obtain a PLUS Loan, the ECASLA established a statutory aggregate total Stafford Loan limit of $57,500, which is an increase of $11,500 above the previously applicable limit of $46,000, which had been specified by regulation. Finally, the ECASLA requires the Comptroller General to conduct a five-year study to evaluate the impact of increases in federal student loan limits on prices for tuition, fees, room and board; and on the borrowing of private (non-federal) student loans. Interim and follow-up reports on results of the study must be provided to the House Committee on Education and Labor and the Senate Committee on Health, Education, Labor, and Pensions. Prior to the enactment of the ECASLA, PLUS Loans made to parents, graduate students, and professional students entered repayment upon the loan being fully disbursed, with repayment commencing within 60 days. (In contrast, Stafford Loans enter repayment the day after six months following the borrower ceasing to be enrolled in school on at least a half-time basis, with the first payment being due within the next 60 days.) Nonetheless, borrowers of PLUS Loans have been eligible to defer repayment of their loans for a variety of reasons, to include while they are enrolled in school. However, deferments have not been available to parent borrowers of PLUS Loans for the period while the dependent student on whose behalf the loan was made is enrolled in school. The ECASLA amended the HEA to permit borrowers of parent PLUS Loans to extend the period between disbursement and the commencement of repayment. Effective July 1, 2008, parent borrowers of PLUS Loans were granted the option of delaying the commencement of repayment until six months after the date the dependent student on whose behalf the PLUS Loan was made ceases to carry at least a half-time workload. (In accordance with this amendment, deferments would remain available only during periods when the borrower, as opposed to the student on whose behalf the loan was made, meets the conditions required to qualify.) Under the HEOA, the terms and conditions of PLUS Loans were further amended to permit parent borrowers to request a deferment for any period during which the student on whose behalf the loan was borrowed would qualify for a deferment. This change applies to loans for which the first disbursement is made on or after July 1, 2008. Interest begins accruing on PLUS Loans when the loan is first disbursed. Parent borrowers who delay the commencement of repayment have the option of paying the interest as it accrues or having accrued interest capitalized (i.e., added to the principal balance of the loan) no more frequently than quarterly. Failure to pay the interest as it accrues may increase the principal balance of a loan above the amount initially borrowed. To be eligible to borrow PLUS Loans, individuals may not have an adverse credit history, as determined pursuant to regulations promulgated by the Department of Education (ED). Under regulations promulgated by ED prior to the enactment of the ECASLA, lenders were required to obtain at least one credit report on all applicants for PLUS Loans; and unless extenuating circumstances existed, lenders were required to consider an applicant to have an adverse credit history if the applicant was 90 days or more delinquent on a debt payment; or if, within the past five years, the applicant "has been the subject of a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of a Title IV debt." Regulations have also required lenders to retain a record of the basis for determining that extenuating circumstances existed for any borrower, such as an updated credit report, or documentation from the creditor that the borrower has made satisfactory arrangements to repay the debt. The ECASLA amended the HEA to specify certain extenuating circumstances under which eligible lenders may extend PLUS Loans to individuals who otherwise would have been determined to have adverse credit histories. This amendment permitted eligible lenders to determine that extenuating circumstances existed, if during the period from January 1, 2007, through December 31, 2009, an applicant was no more than 180 days delinquent on mortgage payments for a primary residence or medical bill payments; or if an applicant was no more than 89 days delinquent on any other debt payments. The HEOA further amended this provision, effective July 1, 2008, to specify that extenuating circumstances exist only if an applicant is no more than 180 days delinquent on mortgage payments for a primary residence or medical bills. Eligible borrowers have long been regarded as having an entitlement to obtain Stafford Loans; although they have not been regarded as having an entitlement to borrow PLUS Loans due to the requirement to be credit-worthy. State guaranty agencies must establish lender-of-last-resort programs through which loans must be made available to eligible students who are otherwise unable to obtain them from an eligible lender. In general, students become eligible to borrow LLR loans upon their receipt of no more than two rejected loan applications from eligible lenders. Students applying for LLR loans must not be subject to any additional eligibility requirements beyond what is otherwise required under the FFEL program and must receive a response from the LLR lender within 60 days of filing an application. A guaranty agency may designate an eligible lender as an LLR lender; or the guaranty agency itself may function as the lender-of-last-resort. An eligible lender serving as an LLR lender makes loans in the same manner it makes other FFEL program loans, using private capital. As an incentive for lenders to make LLR loans, the lender insurance percentage in the case of borrower default is 100% on LLR loans, as opposed to 97% in the case of other loans. A guaranty agency serving as an LLR lender may also make LLR loans using its available funds. If a guaranty agency becomes unable to ensure that LLR loans are made available to eligible students--either by an LLR lender, or by making the loans itself--the HEA provides the Secretary with authority to take a range of actions to restore the availability of LLR loans. Prior to the enactment of the ECASLA, the HEA authorized the Secretary to make emergency advances of federal funds to guaranty agencies for purposes of making available LLR loans, if the Secretary determined that (a) borrowers eligible for Subsidized Stafford Loans were unable to obtain such loans; (b) that the guaranty agency had the capability to provide LLR loans, but could not do so without an advance of federal capital; and (c) that it would be cost-effective to advance such funds. The HEA also specified that the Secretary was authorized to make emergency advances of federal capital funds to another guaranty agency for purposes of making LLR loans, if the Secretary determined that the designated guaranty agency for a state did not have the capacity to make available LLR loans. However, while the statute authorized the Secretary to advance funds to guaranty agencies for purposes of making LLR loans, it did not clearly provide, nor identify, a source of funds for the Secretary to draw upon to make such advances. This ambiguity in the statute led to deliberation over the extent of the Secretary's authority to advance funds to guaranty agencies for purposes of making LLR loans. Under the ECASLA, several amendments were made to the LLR program. These are briefly described below. Previously, the HEA specified that guaranty agencies had an obligation to ensure that LLR loans would be made available to students eligible to borrow Subsidized Stafford Loans, but who were unable to obtain them. In accordance with Department of Education regulations implementing the LLR program, a lender-of-last-resort would be required to make Subsidized Stafford Loans and Unsubsidized Stafford Loans available to students eligible to receive Subsidized Stafford Loans; and would be permitted to make Unsubsidized Stafford Loans and PLUS Loans available to other eligible borrowers. Under the ECASLA, the LLR program is amended to require guaranty agencies to make LLR loans available to students and parents who are eligible for, but unable to obtain, Subsidized Stafford Loans, Unsubsidized Stafford Loans, or PLUS Loans; or who attend an institution designated for institution-wide student qualification for LLR loans (described below). As noted above, under prior law, individual students became eligible to borrow LLR loans upon the receipt of two rejected loan applications. The ECASLA amended the LLR program to temporarily authorize the Secretary, through June 30, 2009, to also designate institutions for institution-wide participation in the LLR program, at an institution's request. P.L. 110-350 further extends this authority through June 30, 2010. In order to designate an IHE for institution-wide participation, the Secretary may require an IHE to demonstrate that, despite due diligence, it has been unable to secure the commitment of FFEL program lenders to make loans to students attending the institution; demonstrate that the number or percentage of students attending the institution who are unable to obtain FFEL program loans exceeds a minimum threshold; and meet other requirements as determined appropriate by the Secretary. Institution-wide student qualification makes all students who attend the institution, and the parents of dependent students who attend the institution, eligible to borrow LLR loans. In implementing this provision, ED is requiring institutions seeking designation for institution-wide student qualification for LLR loans to demonstrate that, through coordination with the guaranty agency designated for its state, the institution has made a minimum of three attempts to find eligible lenders willing to make conventional (non-LLR) FFEL program loans and that at least 80% of the students and parents of students at the institution have been unable to obtain conventional FFEL program loans. Institutions must provide documentation of this information to the guaranty agency. The guaranty agency will then forward this information, along with its opinion of the institution's eligibility, to ED, which will make a final determination. Statutory and regulatory provisions of the FFEL program establish the maximum interest rates and fees that may be paid by borrowers. Lenders in the FFEL program have often competed for borrowers by offering different packages of interest rate and fee discounts. To attract borrowers, lenders may pay origination fees or default fees without passing on the cost to students. Similarly, to attract loan business, guaranty agencies may opt to pay the default fee. In accordance with the ECASLA amendments, LLR lenders are prohibited from offering any borrower benefits on LLR loans (e.g., waiving or reducing origination or default fees, or reducing interest rates) that are more favorable to borrowers than the maximum interest rates, origination fees and default fees, and other terms and conditions applicable to FFEL program loans. Certain special requirements apply to guaranty agencies with respect to the operation of LLR program. Among these, guaranty agencies must ensure that information about the availability of LLR loans is provided to institutions of higher education in the states the guaranty agency serves. Also, under the LLR program, guaranty agencies are exempted from the otherwise applicable prohibition against providing inducements to FFEL program lenders to secure the designation of the guaranty agency as the insurer of its loans. The amendments to the LLR program enacted under the ECASLA make guaranty agencies and lenders subject to the prohibitions on inducements specified in the HEA at SSSS 428(b)(3) and 435(d)(5), respectively. The amendments also prohibit guaranty agencies and lenders that operate as lenders-of-last-resort from advertising, marketing or promoting LLR loans, other than the provision of required information about LLR loans, to IHEs. The ECASLA also requires the Secretary to review the Department's regulations on prohibited inducements by guaranty agencies to lenders; and, as necessary, to revise them to ensure that guaranty agencies do not engage in improper inducements with respect to the operation of the LLR program. The review was required to be completed within 90 days of enactment; and a report provided to House Committee on Education and Labor, and the Senate Committee on Health, Education, Labor, and Pensions within 180 days of enactment. As noted above, previously the Secretary was required to determine that certain conditions are met prior to advancing funds to guaranty agencies for purposes of making LLR loans. Under the ECASLA, provisions of the LLR program were revised to specify that the Secretary may advance funds to guaranty agencies for making LLR loans if (a) eligible borrowers are unable to obtain Subsidized Stafford Loans, Unsubsidized Stafford Loans, or PLUS Loans under the FFEL program, or an IHE has been designated for institution-wide qualification for LLR loans; (b) that the guaranty agency has the capability to provide LLR loans, but cannot do so without an advance of federal capital; and (c) that it would be cost-effective to advance such funds. Effective with enactment of the ECASLA, mandatory appropriations are provided for the Secretary to make emergency advances of federal funds to guaranty agencies for purposes of making loans as lenders-of-last-resort. The ECASLA amends the HEA to grant the Secretary temporary authority to purchase loans previously made under the FFEL program. The DL program is amended to authorize funding for the Secretary, in consultation with the Secretary of the Treasury, to purchase, or enter into forward commitments to purchase, Subsidized Stafford Loans, Unsubsidized Stafford Loans, and PLUS Loans (but not Consolidation Loans) first disbursed on or after October 1, 2003, and before July 1, 2009, upon arriving at a determination that there is an inadequate availability of capital to meet demand for new loans. P.L. 110-350 extends this temporary authority to apply to loans disbursed on or after October 1, 2003, and before July 1, 2010. The Secretary may purchase loans only if doing so is determined to be in the best interest of the United States. In addition, the purchase of FFEL program loans, and the cost of servicing such loans, must be determined jointly by the Secretaries of Education and the Treasury, and the Director of the Office of Management and Budget (OMB) to result in no net cost to the federal government. The Secretaries of Education and the Treasury, and the Director of OMB are required to jointly publish a notice in the Federal Register that establishes the terms and conditions for purchasing FFEL program loans, that outlines the methodology and factors considered in determining the purchase price of loans, and that describes how loans will be purchased at a price that will result in no net cost to the government. The HEOA further amends the terms of purchase to specify that upon the purchase of loans by the Secretary, guaranty agencies shall cease to have any obligations, responsibilities or rights with respect to such loans, and the federal guarantee shall cease to be in effect with respect to defaults that occur on such loans after the date of purchase. Lenders selling loans to the Secretary must use the proceeds from the sale to ensure their continued participation as lenders under the FFEL program and to originate new FFEL program loans. The Secretary may also enter into a contract with lenders to continue servicing loans purchased, if the cost of doing so would not exceed the cost to the government of otherwise servicing the loans, and if it is determined to be in the best interest of borrowers. On May 21, 2008, the Secretary of Education issued a "Dear Colleague" letter briefly outlining the Secretary's initial plans to implement the authority granted under the ECASLA to purchase loans made under the FFEL program. The Secretary initially identified two options. Under the first option, the Loan Purchase Commitment program, ED would enter into agreements by July 1, 2009, to purchase FFEL program loans originated for the 2008-2009 academic year. ED would purchase loans "at a price equal to the sum of (i) par value, (ii) accrued interest (net of Special Allowance Payments), (iii) the 1% origination fee paid to the Department, and (iv) a fixed amount of $75 per loan (used to defray the lender's estimated administrative costs)." Lenders entering into agreements with ED for the purchase of their loans would have until September 30, 2009, to complete the sale. Upon completion of the sale of loans, ED would obtain control over loan servicing. This option has also come to be referred to as the Loan Purchase ("Put") program. Under the second option, the Loan Participation Purchase program, ED would purchase "participation interests" in short-term trusts comprised of pools of FFEL program loans originated for the 2008-2009 academic year. The price of participation interests would be established at an amount determined to provide ED a yield equal to the commercial paper rate plus 50 basis points. ED would hold participation interests in short-term trusts of FFEL program loans until September 30, 2009, at the latest. Afterwards, trusts could refinance the loans in the private market, or sell the loans to ED under the first option. This option has also come to be referred to as the Purchase of Participation Interests (PPI) program. On July 1, 2008, the Department of Education, the Department of the Treasury, and OMB published a notice in the Federal Register outlining the terms and conditions of the Department's authority to purchase loans under the ECASLA. This notice presents summaries of the terms and conditions of the Loan Purchase Commitment program and the Loan Participation Purchase program as well as an explanation of the methodology used to determine that the programs will result in no net cost to the government. On November 10, 2008, the Secretary announced the continuation of the Put and PPI programs for the 2009-2010 academic year. Also on November 10, 2008, the Secretary announced plans to establish a program making all fully disbursed FFEL program loans made for the period between October 1, 2003, and July 1, 2009 (other than Consolidation Loans), eligible for transfer to Asset-Backed Commercial Paper (ABCP) Conduits. Under the ABCP Conduit program, an eligible lender trustee would create a pool of loans, called a conduit, into which other lenders would transfer ownership of their loans. Commercial paper, backed by the loans in the pool, would then be sold to private investors and the proceeds of the sale would be used to repay the lenders that had transferred their loans to the conduit. In order to ensure liquidity to the purchasers of the student loan ABCP, the Department of Education would enter into a forward purchase commitment, or "Put" option, with the eligible lender trustees that create ABCP Conduits. By entering into a forward purchase commitment, the Department would promise to purchase student loans held in the ABCP Conduit at a future date for a pre-arranged price. The terms and conditions, and pricing structure for the ABCP Conduit program are forthcoming and will be published by the Department in the Federal Register . On November 18, 2008, as an additional measure to assist in ensuring the continued availability of student loans, the Secretary announced the short-term extension of the Loan Purchase ("Put") program to loans made for the 2007-2008 academic year. Under the program, the Department will purchase certain fully disbursed FFEL program loans (other than Consolidation Loans) made for the 2007-2008 academic year. Details of the extension of the Loan Purchase program will be published in the Federal Register ; however, in general, the Department will purchase these loans for 97% of the amount of principal and interest owed by the borrower. The Department intends to purchase up to $500 million in eligible loans made for the 2007-2008 academic year each week until the earlier of the implementation of the ABCP Conduit, or February 28, 2009. The ECASLA expresses a sense of Congress that institutions such as the Federal Financing Bank, the Federal Reserve, and Federal Home Loan Banks, in consultation with the Secretaries of Education and the Treasury, should consider using available authorities to assist in ensuring continued access to federal student loans. It also states that any action taken by such entities should not limit nor delay the Secretary's authority to implement the LLR program or the authority to purchase loans previously made under the FFEL program. The ECASLA requires all savings generated by the act to be used for Academic Competitiveness Grants, which are provided to students who are eligible for Pell Grants and who meet certain academic requirements. These grants, first established by the Deficit Reduction Act of 2005 ( P.L. 109-171 ), are comprised of two award types: Academic Competitiveness (AC) Grants for first- and second- year undergraduates who have completed a rigorous secondary school program; and SMART Grants for third- and fourth- year undergraduates majoring in certain fields of science, mathematics, or a critical foreign language. Effective July 1, 2009, the AC Grant and SMART Grant programs are amended to expand eligibility. For both programs, students will no longer be required to be United States citizens as a condition for eligibility. Also, students enrolled at least half-time will become eligible for both AC Grants and SMART Grants. (Prior to July 1, 2009, students must be enrolled full-time). For both programs, grants will be required to be awarded in the same manner as Pell Grants, and eligibility for awards will be based on a student's grade level as opposed to academic year. The ECASLA amendments authorize AC Grants to be awarded to students enrolled in certificate programs at two-year and four-year degree-granting institutions. They also clarify eligibility requirements for awarding first-year AC Grants to students who attended private secondary schools or were home-schooled, as well as those who obtained college credit while in high school. The amendments make students eligible to receive SMART Grants for the fifth year of enrollment in five-year undergraduate programs. Finally, the amendments extend eligibility for SMART Grants to students who attend institutions that offer a single liberal arts curriculum leading to a baccalaureate degree under which students are not permitted by the institution to declare a major in a particular subject area, if their coursework and grade point average meet certain criteria.

Federal student loans are made available under two major loan programs authorized under the Higher Education Act (HEA) of 1965, as amended: the Federal Family Education Loan (FFEL) program, authorized by Title IV, Part B, of the HEA; and the William D. Ford Federal Direct Loan (DL) program, authorized by Title IV, Part D, of the HEA. Under the FFEL program, private lenders make loans and the federal government guarantees lenders against loss due to borrower default, death, permanent disability, or, in limited instances, bankruptcy. Under the DL program, the federal government lends directly to students and their families, using federal capital (i.e., funds from the U.S. Treasury). The FFEL program is the successor program to the guaranteed student loan (GSL) program, originally enacted under Title IV, Part B, of the HEA. It is the older and larger of the two major federal student loan programs. During the first several months of 2008, a number of FFEL program lenders curtailed or ceased their participation in the FFEL program, citing reasons that include difficulties in raising capital through the securitization of student loan debt and reductions in lender subsidies enacted under the College Cost Reduction and Access Act of 2007 (CCRAA; P.L. 110-84). Concerns were raised that if lender participation in the FFEL program decreased substantially or if a substantial portion of lenders ceased lending to students who attend certain institutions of higher education (IHEs), large numbers of students might face difficulty in obtaining FFEL program loans. In addition, concerns were raised about access to borrowing opportunities for students who have come to rely on private (non-federal) student loans because they had exhausted their eligibility for federal student loans. Legislation pertaining to federal student loans was active in the 110th Congress. On October 27, 2007, the CCRAA was enacted, which made numerous changes to the federal student loan programs. On May 6, 2008, H.R. 5715, the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA; P.L. 110-227) was enacted to grant the Secretary of Education temporary authority, through July 1, 2009, to purchase student loans made under the FFEL program and to make other programmatic changes. On August 14, 2008, the HEA was amended and extended under the Higher Education Opportunity Act (HEOA; P.L. 110-315). The HEOA amended certain provisions that had been enacted under the ECASLA. The temporary authority of the Secretary of Education to purchase FFEL program loans was extended through July 1, 2010, under P.L. 110-350. The Secretary of Education has established several loan purchase programs under the authority granted by the ECASLA, as amended. This report reviews changes to the federal student loan programs initiated under the ECASLA to address concerns about the continued availability of federal student loans. It will be updated as warranted.

Individuals and businesses lend their accumulated savings to borrowers. In exchange, borrowers give lenders a debt instrument. These debt instruments, typically called bonds, represent a promise by borrowers to pay interest income to lenders on the principal (the amount of money borrowed) until the principal is repaid to the lenders. When a municipal (state or local) government issues bonds, the principal (or proceeds) is typically used to finance the construction of capital facilities, but may also be used for cash management purposes when revenue collections do not match spending needs during the fiscal year. Since public capital facilities provide services over a long period of time, it makes financial and economic sense to pay for the facilities over a similarly long period of time. This is particularly true for state and local governments, whose taxpayers lay claim to the benefits from these facilities by dint of residency and relinquish their claim to benefits when they move. Given the demands a market-oriented society places on labor mobility, taxpayers are reluctant to pay today for state and local capital services to be received in the future. The state or local official concerned with satisfying the preferences of constituents may therefore elect to match the timing of the payments to the flow of services, precisely the function served by long-term bond financing. An attempt to pay for capital facilities "up front" is likely to result in a less than optimal rate of public capital formation. State and local governments are also faced with the necessity of planning their budget one to two years in advance. This requires a balancing of revenue forecasts against forecasts of the demand for services and spending. Not infrequently, unforeseen circumstances can undermine the forecast and cause a revenue shortfall, which must be financed with short-term borrowing, or "notes." In addition, even when the forecasts are met, the timing of expenditures may precede the arrival of revenues, creating the necessity to borrow within an otherwise balanced fiscal year. Finally, temporarily high interest rates that prevail at the time bonds are issued to finance a capital project may induce short-term borrowing in anticipation of a drop in rates. The federal government intervenes in the public capital market by granting the debt instruments of state and local governments a unique privilege--the exemption of interest income earned on these bonds from federal income tax. The tax exemption lowers the cost of capital for state and local governments, which should then induce an increase in state and local capital formation. The lower cost of capital arises because in most cases investors would be indifferent between taxable bonds (e.g., corporate bonds) that yield a 10% rate of return before taxes and tax-exempt bonds of equivalent risk that yield a 6.5% return. The taxable bond interest earnings carry a tax liability (35% of the interest income in most cases), making the after-tax return on the two bonds identical at 6.5%. Thus, state and local governments could raise capital from investors at an interest cost 3.5 percentage points (350 basis points) lower than a borrower issuing taxable debt. Generally, the degree to which tax-exempt debt is favored is measured in a variety of ways. Two are fairly common: the yield spread and the yield ratio. The yield spread is the difference between the interest rate on taxable bonds (corporate bonds or U.S. Treasury bonds) and the interest rate on tax-exempt municipal bonds of equivalent risk. In recent decades, the spread between tax-exempt and taxable bonds has declined as underlying interest rates have declined. The greater the yield spread, the greater are the nominal savings to state and local governments as measured by the interest rates they would have to pay if they financed with taxable debt. The yield ratio (which is an average rate on tax-exempt bonds divided by an average rate on a taxable bond of like term and risk) adjusts the spread for the level of interest rates. A lower ratio implies a greater savings to state and local governments relative to taxable debt. As the ratio approaches one, however, tax-exempt borrowing approaches that of taxable borrowing. Variation in the cost of state and local borrowing relative to the cost of taxable borrowing arises from changes in the demand for and supply of both tax-exempt and taxable bonds. Demand for tax-exempt bonds depends upon the number of investors, their wealth, statutory tax rates, and alternative investment opportunities. Supply depends upon the desire of the state and local sector for capital facilities and their ability to engage in conduit financing (issuing state or local government bonds and passing the proceeds through to businesses or individuals for their private use). Almost all of the factors which influence demand and supply are affected by federal tax policy and fiscal policy. The direct cost to the federal government of this interest exclusion is the individual and corporate income tax revenue forgone. Consider the aforementioned case where a 35% marginal tax rate corporate investor who purchases a 6.5% tax-exempt bond with principal of $1,000 that is to be repaid after 20 years. Each year for 20 years this taxpayer receives $65 in tax-exempt interest income. Each year the federal government forgoes collecting $35 of revenue because the revenue loss is based upon the yield the taxpayer forgoes. For example, if the investor had purchased a taxable bond carrying a 10% interest rate, he would have received $100 in interest income and paid $35 in income taxes on that income. The annual federal revenue loss (or tax expenditure) on the outstanding stock of tax-exempt bonds issued for public purposes is reported in the Analytical Perspectives section of the Budget every year. The estimates since 1994 are displayed in Table 1 . Because they are based upon the outstanding stock of public-purpose tax-exempt bonds, it takes time for some legislative changes to show up in these data. The amount of forgone tax revenue from the exclusion of interest income on public-purpose tax-exempt bonds is substantial; $20.5 billion in 2016. Over the 2017 to 2026 budget window, the estimated loss of revenue is expected to be $422.8 billion, or the 15 th -largest tax expenditure. When first introduced in 1913, the federal income tax excluded the interest income earned by holders of the debt obligations of states and their political subdivisions from taxable income. It was asserted by many that any taxation of this interest income would be unconstitutional because the exemption was protected by the Tenth Amendment and the doctrine of intergovernmental tax immunity. The U.S. Supreme Court rejected this claim of constitutional protection in 1988 in South Carolina v. Baker (485 U.S. 505). Although the legal basis for the subsidy is statutory rather than constitutional, the subsidy may be justified on economic grounds. Economic theory suggests that certain types of goods and services, such as a street light, will not be provided in the "optimal" amounts by the private sector because some of the benefits are consumed collectively. The nation's welfare can be increased by public provision of these goods and services, some of which are best provided by state or local governments. Certain goods and services provided by state or local governments, however, benefit both residents, who pay local taxes, and nonresidents, who pay minimal if any local taxes. Since state and local taxpayers are likely to be unwilling to provide these services to nonresidents without compensation, it is probable that state and local services will be under provided. In theory, the cost reduction provided by the exemption of interest income compensates state and local taxpayers for benefits provided to nonresidents. This encourages the governments to provide the optimal amount of public services. State and local governments were estimated to have $3.043 trillion in debt issuances outstanding at the end of the third quarter in 2017. Total debt issuances have slowly increased in the past few years, but have been relatively flat since 2008, when debt outstanding equaled $2.968 trillion. Municipal debt outstanding increased from 2008 to 2010, which may have represented issuances used to cover unexpected shortfalls due to reduced revenues and increased expenditure demands following the Great Recession. The lack of growth in debt outstanding in recent years could be explained by a hesitation to engage in new long-term capital projects given the budget challenges and economic uncertainties facing municipal governments. State and local debt can be classified based on (1) the maturity (or term), which is the length of time before the principal is repaid; (2) the type of security , which is the financial backing for the debt; (3) the use of the proceeds for either new facilities or to refinance previously issued bonds; and (4) whether the type of activity being financed has a public or a private purpose. The risk associated with a bond is also an important factor, as nearly every bond issued by a state or local government is rated based on the probability of default. The privately managed rating agencies incorporate all of the above factors as well as the financial health of the entity issuing the bonds when arriving upon a bond rating. The higher the default risk, the lower the rating. State and local governments must borrow money for long periods of time and for short periods of time. Long-term debt instruments are usually referred to as bonds, and carry maturities in excess of one year. Short-term debt instruments are usually referred to as notes, and carry maturities of 12 months or less. If the notes are to be paid from specific taxes due in the near future, they usually are called tax anticipation notes (TANs); if from anticipated intergovernmental revenue, they are called revenue anticipation notes (RANs). If the notes are to be paid from long-term borrowing (e.g., bonds), they are called bond anticipation notes (BANs). Tax anticipation notes and revenue anticipation notes are often grouped together and referred to as tax and revenue anticipation notes (TRANs). Table 1 displays the volume of long-term and short-term borrowing since 1992. Long-term borrowing dominates state and local debt activity in most years, with the long-term share peaking in 2016 at 92.5% of this market. Another important characteristic of tax-exempt bonds is the security provided to the bondholder. General obligation (GO) bonds pledge the full faith and credit of the issuing government. The issuing government makes an unconditional pledge to use its powers of taxation to honor its liability for interest and principal repayment. Revenue bonds, or non-guaranteed debt, pledge only the revenue from a specific tax or the earnings from the project financed with the bonds. Should these revenues or earnings prove to be inadequate to honor these commitments, the issuing government is under no obligation to use its taxing powers to finance the shortfall. Some revenue bonds are issued with credit enhancements provided by insurance or bank letters of credit that guarantee payment upon such a revenue shortfall. Figure 2 displays the breakdown between long-term GO and revenue bonds since 1992. The long-term market has been and continues to be dominated by revenue bonds. The revenue bond share has fluctuated between 60% and 72% from 1992 through 2016. All tax-exempt interest income attributable to state and local governments does not appear in the form of bonds. Governments may enter into installment purchase contracts and finance leases for which the portion of the installment or lease payment to a vendor is tax exempt. For example, computer equipment or road building equipment could be leased from a vendor using a rental agreement or an installment sales contract. Under this type of agreement, the monthly payments to the vendor are large enough to cover the vendor's interest expense on the funds borrowed to purchase the equipment which was leased to the government. The portion that is attributable to interest income is not included in the vendor's taxable income. Such transactions are often referred to as municipal leasing. Lease rental revenue bonds and certificates are variations on revenue bonds. An authority or nonprofit corporation issues bonds, builds a facility with the proceeds, and leases the facility to a municipality. Security for the bonds or certificates is based on the lease payments from the municipalities. When the bonds are retired, the facility belongs to the lessee (the municipality). An advantage to this type of arrangement is that many states' constitutional and statutory definitions do not consider this type of financing to be debt because the lease payments are annual operating expenses based upon appropriated monies. The leasing technique has also been used to provide tax-exempt funds to nonprofit organizations. A municipality issues the bonds for the construction of a facility that is leased to a nonprofit hospital or university. Again, security for the bonds is based on the lease payments. Long-term tax-exempt bond issues also can be characterized by their status as new issues or refunding issues (refundings). New issues represent bonds issued to finance new capital facilities. Refundings usually are made to replace outstanding bonds with bonds that carry lower interest rates or other favorable terms. As such, the refunding bonds usually do not add to the stock of outstanding bonds or the capital stock. The proceeds of the refunding bonds are used to pay off the remaining principal of the original bond issue, which is retired. Advance refunding bonds, however, do add to the outstanding stock of bonds without adding to the stock of capital. Advance refunding bonds are issued prior to the date on which the original bonds are refunded, so that for a period of time there are two bond issues outstanding to finance the same capital facilities. The 2017 tax revision ( P.L. 115-97 ) repealed the exclusion of interest income on advance refunding bonds issued after December 31, 2017. Figure 3 shows the changes in new-issue and refunding municipal bonds from 1992 through 2016. The volume of refunding shares varies widely, depending to a great extent on changes in the relative magnitudes of taxable and tax-exempt interest rates. Note that the 1993 increase in the top marginal individual income tax rates may have increased the demand for tax-exempt bonds (see Figure 2 ). Higher tax rates make tax-exempt bonds more attractive relative to taxable bonds, all other things being equal. The increased demand and accompanying lower interest rates may have prompted state and local governments to replace outstanding issues with refunding bonds that carried lower interest rates. In contrast, refundings dropped considerably in 1999 and 2000. The decline could have been in response to higher interest rates or to strong economic conditions in most states which minimized the need for debt finance generally. The story is reversed from 2001 to 2003 as the economy slowed and state budgets were strained by lower tax revenue collections. Refundings issues in 2003 were more than double the amount of new issues in 2000. In 2005, GO bonds and refunding bond volume peaked, likely reflecting the historically low interest rates on tax-exempt debt. The low rate environment since 2011 has also pushed up the share of refunding issues. An important characteristic of tax-exempt bonds is the purpose or activity for which the bonds are issued. Most of the tax legislation pertaining to tax-exempt bonds over the last 30 years reflects an effort to restrict tax preferences to bonds issued for activities that satisfy some broadly defined "public" purpose, that is, for which federal taxpayers are likely to receive substantial benefits. Bonds are considered to be for a public purpose if they satisfy either of two criteria: less than 10% of the proceeds are used directly or indirectly by a non-governmental entity; or less than 10% of the bond proceeds are secured directly or indirectly by property used in a trade or business. Bonds that satisfy either of these tests are termed "governmental" bonds and can be issued without federal limit. Bonds that fail both of these tests are termed "private-activity" bonds (PABs) because they provide significant benefits to private individuals or businesses. These projects are ineligible for tax-exempt financing. Activities which fail the two tests but are considered to provide both public and private benefits have been termed eligible or qualified PABs. These selected activities can be financed with tax-exempt bonds. Table 2 provides the dollar value of new issues of tax-exempt private-activity bonds and their share of total private-activity volume capacity for 2014 and 2015. Figure 4 provides historical data on the portion of PAB volume to total bond volume. All tax-exempt private-activity bonds are subject to restrictions that do not apply to governmental bonds, chief among them was the now-repealed ability to issue advance refundings and the inclusion of the interest income in the alternative minimum income tax base. In addition, the annual dollar value of all bonds issued for most of these activities by all governmental units within a state is limited to the greater of $105 per resident or $311.38 million in 2018. The cap has been adjusted for inflation since 2004. The annual volume cap applies to the total of bonds issued primarily for but not limited to multi- and single-family housing, industrial development, exempt facilities, student loans, and bond-financed takeovers of investor-owned utilities (usually electric utilities). Bonds issued for several activities classified as private are not subject to the volume cap if the facilities are governmentally owned. These activities are airports, docks, and wharves; nonprofit organization facilities; high-speed inter-urban rail facilities; and solid waste disposal facilities that produce electric energy. Table 3 below reports the estimated tax expenditure for selected private activities that qualify for financing with tax-exempt debt. Recently, Congress has further expanded the types of private activities eligible for tax-exempt financing and has increased the capacity for selected activities and issuers. A brief description of legislation that Congress has enacted since 2001 follows below. As part of the Economic Growth and Tax Relief Reconciliation Act of 2001 ( P.L. 107-16 ), a new type of tax-exempt private-activity bond was created beginning on January 1, 2002. The act expanded the definition of "an exempt facility bond" to include bonds issued for qualified public educational facilities. Bonds issued for qualified educational facilities are not counted against a state's private-activity volume cap. However, the qualified public educational facility bonds have their own volume capacity limit equal to the greater of $10 multiplied by the state population or $5 million. The Job Creation and Worker Assistance Act of 2002 (JCWA; P.L. 107-147 ) created the New York Liberty Zone (NYLZ) in the wake of the September 11, 2001, terrorist attacks. The legislation included several tax benefits for the NYLZ intended to foster economic revitalization within the NYLZ. Specifically, the so-called "Liberty Bond" program allows New York State (in conjunction and coordination with New York City) to issue up to $8 billion of tax-exempt private-activity bonds for qualified facilities in the NYLZ. Qualified facilities follow the exempt facility rules within Section 142 of the IRC. The original deadline to issue the bonds was January 1, 2005, but was extended to January 1, 2014, by the American Taxpayer Relief Act ( P.L. 112-240 ). In 2004, the American Jobs Creation Act ( P.L. 108-357 ) created bonds for "qualified green building and sustainable design projects." The bonds are exempt from the state volume cap and are instead limited to an aggregate of $2 billion for bonds issued between January 1, 2005, and October 1, 2009. This legislation created a new type of tax-exempt private activity bond for the construction of rail to highway (or highway to rail) transfer facilities. The national limit is $15 billion and the bonds are not subject to state volume caps for private activity bonds. The Secretary of Transportation allocates the bond authority on a project-by-project basis. The hurricanes that struck the Gulf region in late summer 2005 prompted Congress to create a tax-advantaged economic development zone intended to encourage investment and rebuilding in the Gulf region. The Gulf Opportunity Zone (GOZ) was comprised of the counties where the Federal Emergency Management Agency (FEMA) declared the inhabitants to be eligible for individual and public assistance. Based on proportion of state personal income, the Katrina-affected portion of the GOZ represents approximately 73% of Louisiana's economy, 69% of Mississippi's, and 18% of Alabama's. Specifically, the "Gulf Opportunity Zone Act of 2005" (GOZA 2005, P.L. 109-135 ) contained two provisions that expanded the amount of private-activity bonds outstanding and language to relax the eligibility rules for mortgage revenue bonds. The most significant is the provision that increased the volume cap for private-activity bonds issued for Hurricane Katrina recovery in Alabama, Louisiana, and Mississippi (identified as the Gulf Opportunity Zone, or "GO Zone"). GOZA 2005 added $2,500 per person in the federally declared Katrina disaster areas in which the residents qualified for individual and public assistance. The increased volume capacity added approximately $2.2 billion for Alabama, $7.8 billion for Louisiana, and $4.8 billion for Mississippi in aggregate over five years. The legislation defined "qualified project costs" that are eligible for bond financing as (1) the cost of any qualified residential rental project (26 SS142(d)); and (2) the cost of acquisition, construction, reconstruction, and renovation of (i) nonresidential real property (including fixed improvements associated with such property); and (ii) public utility property (26 SS168(i)(10)), in the GOZ. The additional capacity was to have been issued before January 1, 2011. The second provision allowed for advance refunding of certain tax-exempt bonds. Under GOZA 2005, governmental bonds issued by Alabama, Louisiana, and Mississippi could be advance refunded an additional time and exempt facility private-activity bonds for airports, docks, and wharves once. Private-activity bonds are otherwise not eligible for advance refunding (see earlier discussion of advance refunding). In response to the housing crisis of 2008, Congress included two provisions in the Housing and Economic Recovery Act of 2008 (HERA; P.L. 110-289 ) that were intended to assist the housing sector. First, HERA provided that interest on qualified private activity bonds issued for (1) qualified residential rental projects, (2) qualified mortgage bonds, and (3) qualified veterans' mortgage bonds would not be subject to the AMT. In addition, HERA also created an additional $11 billion of volume cap space for bonds issued for qualified mortgage bonds and qualified bonds for residential rental projects. The cap space was designated for 2008 but could have been carried forward through 2010. In response to the financial crisis and economic recession, Congress included several bond-related provisions in the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ). Three provisions were intended to make bond finance less expensive for the designated projects. One expanded the definition of qualified manufacturing facilities (under SS144(a)(12)(C)) to include the creation and production of intangible property including patents, copyrights, formulae, etc. Before ARRA, only tangible property was eligible. The second created a new category of private activity bond called "recovery zone facility bonds." The bonds were to be used for investment in infrastructure, job training, education, and economic development in economically distressed areas. The bonds, which were subject to a separate national cap of $15 billion, were allocated to the states based on the decline in employment in 2008. The bonds were eligible to be issued in 2009 and 2010. A third provision provided $2 billion for tribal governments to issue tax-exempt bonds for economic development purposes. The tax code currently allows tribal governments to issue debt for "essential government services" only. Many economic development projects would not have qualified absent this ARRA provision. Many individuals and businesses make money by engaging in arbitrage, borrowing money at one interest rate and lending that borrowed money to others at a higher interest rate. The difference between the rate at which one borrows and the rate at which one lends produces arbitrage earnings. At its most basic level, it is the primary activity of commercial banks--pay depositors an interest rate of "x" and use the deposits to make commercial, automobile, and home loans at "x + y" interest rate. In this context, arbitrage is a time-honored and appropriate financial market activity. That is not the case in the tax-exempt bond market. State and local governments do not pay federal income tax, and absent federal constraint, have unlimited capacity to issue debt at low interest rates and reinvest the bond proceeds in higher-yielding taxable debt instruments, thereby earning arbitrage profits. Unchecked, state and local governments could substitute arbitrage earnings for a substantial portion of their own citizens' tax effort. Congress has decided that such arbitrage should be limited, and that tax-exempt bond proceeds must be used as quickly as possible to pay contractors for the construction of the capital facilities for which the bonds were issued. Since it is impossible for bonds to be issued precisely when contractors must be paid for their expenses incurred in building public capital facilities, the tax law provides a three-year period to spend an increasing share of the bond proceeds. Bond issues that have unspent proceeds in excess of the allowed amounts during this three-year spend-down schedule must rebate any arbitrage earnings to the Department of the Treasury. Bond issues are considered to be taxable arbitrage bonds if a governmental unit, in violation of the arbitrage restriction in the tax code, invested a substantial portion of the proceeds "to acquire higher yielding investments, or to replace funds which were used directly or indirectly to acquire higher yielding investments." Tax Credit Bonds (TCBs) are an alternative to tax-exempt bonds that offer investors a federal tax credit or the issuer a direct payment proportional to the bond's value in lieu of a federal tax exemption. Most TCBs currently in circulation were designated for a specific purpose, location, or project. TCB issuers use the proceeds for public school construction and renovation; clean renewable energy projects; refinancing of outstanding government debt in regions affected by natural disasters; conservation of forest land; investment in energy conservation; and for economic development purposes. The 2017 tax revision ( P.L. 115-97 ) repealed the authority to issue new TCBs after December 31, 2017. TCBs that provided for new issuances in 2017 include Qualified Zone Academy Bonds (QZABs) and Qualified School Construction Bonds (QSCBs); the authority to issue other TCBs had expired prior to the 2017 tax revision. Bonds that are no longer issued may still be held by the public and thus receive a federal tax credit or direct payment. For more information on tax credit bonds, see CRS Report R40523, Tax Credit Bonds: Overview and Analysis . Legislative interest has typically focused on altering the tax treatment of state and local debt to provide a more economically efficient subsidy with a lower federal revenue cost. There are three primary types of proposals that include changes to state and local government bonds--capping the preference, eliminating the preference, and changing the preference to a direct issuer subsidy. These three types have each featured in legislative proposals from recent years. An early version of the 2017 tax revision ( H.R. 1 ) that was passed in the House included provisions that would repeal authority to issue PABs and eliminate the use of tax-exempt bonds to fund professional sports stadiums. P.L. 115-97 as enacted did not include those provisions, however. The Congressional Budget Office (CBO) "Revenue Options" report proposed eliminating the tax exemption for new qualified private activity bonds which would generate a budget savings of $28 billion over the 2017 to 2026 budget window. The direction of future changes to the federal tax code will likely dictate which modifications, if any, are made to the tax treatment of state and local government debt. Hilhouse, Albert M. Municipal Bonds: A Century of Experience (New York: Prentice-Hall, 1936). The classic history of the use and development of municipal bonds from their introduction in the 19 th century. U.S. Senate. Committee on the Budget. Tax Expenditures: Compendium of Background Material on Individual Provisions . S.Prt. 113-32. 113 th Congress, 2 nd session, December 2014. Provides description, revenue loss estimate, and economic analysis of the effects of governmental bonds and each major category of private-activity bond. Zimmerman, Dennis. The Private Use of Tax-Exempt Bonds: Controlling Public Subsidy of Private Activity (Washington: The Urban Institute Press, 1991). Provides institutional background: history, legal framework, and industry characteristics. Provides discussion of tax-exempt bonds as an economic policy tool affecting: intergovernmental fiscal relations, the federal budget deficit, efficient resource allocation, and tax equity. Provides a history and economic analysis of tax-exempt bond legislation from 1968 to 1989. Auction Rate Securities (ARSs) are long-term debt obligations with the unique feature of adjustable or variable interest rates. In contrast to long-term, fixed rate securities, issuers go to auction periodically (anywhere from every 7 to 35 days) to reset the interest rate on the debt outstanding. The auction mechanism and interest rate parameters vary by issuer (and issue), though most use what is termed a "Dutch auction" where each bidder submits a bid for the amount they are willing to purchase at a given interest rate. All bids are ordered from lowest interest rate to highest interest rate and the rate where the market clears, that is, where all bonds would be purchased, establishes the new ARS rate received by all bidders. ARSs typically have a "call option" where the issuer can buy the ARS back at par (face value) at any scheduled auction and then retire the debt. Most ARSs are insured by the issuer because they do not carry a "put" option that would allow bondholders to sell the bonds at a specified price to the issuer or a designated third party. The bond insurance reduces risk and thus interest rate, making the bonds less costly to issuers. For this reason, ARSs are heavily influenced by credit ratings, and typically require bond insurance to make them marketable. The existing holders of ARSs offer bids as well as new bidders. If all bids of both existing bond holders and new participants fail to clear the market, the auction is termed a "failed auction." In this scenario, the original agreement with the bondholder stipulates a "reservation" interest rate the issuer must pay in the event of a failed auction at least until the next successful auction. Because the reservation rate is typically higher than market interest rates, issuers of ARSs would prefer to avoid paying the reservation rate. The issuance of ARSs grew considerably from 1988 through 2007. In 1988, the Bond Buyer identified one ARS issue valued at $25 million; none were issued in 1987. In 2004, the peak year, 438 ARS bonds valued at $42.5 billion were issued. No ARSs have been issued since 2007, roughly corresponding to the beginning of the financial crisis, when 322 were sold for a total value of $38.7 billion.

This report provides information about state and local government debt. State and local governments issue debt instruments in exchange for the use of individuals' and businesses' savings. This debt obligates state and local governments to make interest payments for the use of these savings and to repay, at some time in the future, the amount borrowed. State and local governments may finance capital facilities with debt rather than out of current tax revenue to more closely align benefits and tax payments. There was just over $3 trillion in state and local debt outstanding in the third quarter of 2017. The federal government subsidizes the cost of most state and local debt by excluding the interest income from federal income taxation. This tax exemption is granted in part because it is believed that state and local capital facilities will be underprovided if state and local taxpayers have to pay the full cost. The federal government also provides a tax preference through tax credit bonds (TCBs), which either provide investors with a federal tax credit in lieu of interest payments or a direct payment to the issuer. P.L. 115-97, the 2017 tax revision, repealed the authority to issue TCBs beginning in 2018. For more on TCBs, see CRS Report R40523, Tax Credit Bonds: Overview and Analysis. State and local debt is issued as bonds, to be repaid over a period of time greater than one year and perhaps exceeding 20 years, and as notes, to be repaid within one year. General obligation bonds are secured by the promise to repay with general tax revenue, and revenue bonds are secured with the promise to use a specific stream of tax revenue. Most debt is issued to finance new capital facilities, but some is issued to refund a prior bond issue (usually to take advantage of lower interest rates). Tax-exempt bonds issued for some activities are classified as governmental bonds and can be issued without federal constraint because most of the benefits from the capital facilities are enjoyed by the general public. Many tax-exempt revenue bonds are issued for activities Congress has classified as private because most of the benefits from the activities appear to be enjoyed by private individuals and businesses. The annual volume of a subset of these tax-exempt private-activity bonds (PABs) is capped. For more on private activity bonds, see CRS Report RL31457, Private Activity Bonds: An Introduction. Arbitrage bonds devote a substantial share of the proceeds to the purchase of assets with higher interest rates than that being paid on the tax-exempt bonds. Such arbitrage bonds are not tax exempt because Congress does not want state and local governments to issue tax-exempt bonds and use the proceeds to earn arbitrage profits. The arbitrage profits could substitute for state and local taxes. A number of tax reform proposals have been introduced that would modify the tax treatment of state and local government bonds. Another policy issue is whether constraints should be relaxed on the types of activities, such as infrastructure spending, for which entities can issue tax-exempt debt. The list of activities that classify tax-exempt private-activity bonds--and whether they should be included in the volume cap--is another area of potential change or reform. The 2017 tax revision repealed authority to issue TCBs and advanced refunding bonds, but did not otherwise modify tax-exempt bonds or PABs.

The Runaway and Homeless Youth Act (RHYA) was enacted in 1974 as Title III of the Juvenile Justice and Delinquency Prevention Act ( P.L. 93-415 ). RHYA authorizes funding for grant programs that provide direct services to youth--the Basic Center Program (BCP), Transitional Living Program (TLP), and Street Outreach Program (SOP)--and related training, research, and other activities. These programs and activities are administered by the Family and Youth Services Bureau in the Department of Health and Human Services' (HHS) Administration for Children and Families. The Basic Center Program provides temporary shelter, counseling, and after care services to runaway and homeless youth under age 18 and their families, while the Transitional Living Program is targeted to older youth ages 16 to 21. Youth who use the TLP receive longer-term housing with supportive services. The Street Outreach Program provides education, treatment, counseling, and referrals for runaway, homeless, and street youth who have been subjected to or are at risk of being subjected to sexual abuse and exploitation. RHYA has been reauthorized approximately every five years since the 1970s. Most recently, in the second session of the 110 th Congress, the President signed into law the Reconnecting Homeless Youth Act ( P.L. 110-378 ) to extend existing programs and authorize new activities under RHYA for FY2009 through FY2013. P.L. 110-378 represents a compromise between provisions that were included in two bills-- H.R. 5524 and S. 2982 --to reauthorize RHYA. On March 4, 2008, Representative John Yarmuth introduced H.R. 5524 , the Reconnecting Homeless Youth Act of 2008. The bill was referred to the House Education and Labor Committee, but was not taken up by the committee. On June 9, 2008, the House approved the bill by voice vote under suspension of the rules. The version of the bill that was passed contained most of the same provisions as the original version. On May 6, 2008, Senator Patrick Leahy introduced S. 2982 , the Runaway and Homeless Youth Protection Act. On May 22, 2008, the Senate Judiciary Committee passed S. 2982 , which included an amendment that substituted the introduced version with a similar version of the bill. On September 25, 2008, S. 2982 was approved by the Senate. The Senate-passed version is different from the version that passed the Judiciary Committee and includes many of the same provisions as those in H.R. 5524 . The House approved S. 2982 on September 26, 2008, and the President signed it into law as P.L. 110-378 on October 8, 2008. This report first provides a broad overview of P.L. 110-378 , followed by a more detailed summary of the law's provisions. The second section discusses the issues that were raised during hearings in the 110 th Congress about runaway and homeless youth, and the provisions in P.L. 110-378 that, in part, address these issues. Table A-1 at the end of the report provides a side-by-side comparison of P.L. 110-378 with prior law, current regulation, and H.R. 5524 . As shown in the table, notable differences include funding authorization levels, the authorization for a national homeless youth awareness campaign (as proposed by H.R. 5524 ), length of stay at RHYA-funded programs, and the definitions of runaway youth and homeless youth. The Reconnecting Homeless Youth Act of 2008 ( P.L. 110-378 ) reauthorizes programs for runaway and homeless youth, expands congressional oversight of these programs, and establishes new activities. The major provisions of the law relate to funding for the Basic Center Program, Transitional Living Program, and Street Outreach Program; requirements for grantees that receive BCP and TLP grants; and accountability of programs and activities authorized under RHYA. Funding. P.L. 110-378 authorizes FY2009 appropriation levels for the BCP, TLP, and related activities that exceed the levels authorized for FY2004 by $35 million (these are the only recent years for which Congress has specified authorized appropriation levels). The law also increases the authorized annual minimum levels of BCP funding available for states and territories. It further requires HHS to reallocate unused BCP funds from one state to another. The amount allocated to states for FY2009 and FY2010 may not be lower than the amount appropriated to the states in FY2008. Requirements. P.L. 110-378 allows youth to remain in a program funded under the BCP and TLP longer they were able to under the prior law, although the law imposes additional criteria for youth who stay longer at TLP-funded programs. The law also changes the definition of "homeless youth" to permit youth older than age 18 and 22 to stay at BCP- and TLP-funded programs, respectively, but only under certain circumstances. Another change made by the law specifies that in funding grants for research and other projects related to runaway and homeless youth, HHS is to give priority to applicants that serve diverse youth and represent diverse geographic regions of the U.S. (The term "diverse" is not defined.) Other requirements pertain to BCP and TLP plans submitted by grant applicants. Accountability. P.L. 110-378 requires HHS to promulgate regulations that specify performance standards for public and non-profit entities that receive BCP, TLP, and SOP grants. The law further requires HHS to periodically submit to Congress an incidence and prevalence study of runaway and homeless youth ages 13 to 26, as well as the characteristics of a representative sample of these youth. HHS must consult with the U.S. Interagency Council on Homelessness in developing the study. The law also directs the Government Accountability Office (GAO) to evaluate the process by which organizations apply for BCP, TLP, and SOP, including HHS's response to these applicants. GAO is to submit a report on its findings to Congress. The discussion below provides more details of these provisions. The prior law ( P.L. 108-96 ) to reauthorize the Runaway and Homeless Youth Act authorized funding for all parts of the Runaway and Homeless Youth Act, except the Street Outreach Program, at $105 million for FY2004 and such sums as may be necessary for FY2005 through FY2008. The Street Outreach Program was authorized to receive such sums as may be necessary for FY2004 through FY2008. For all parts of RHYA, except the SOP and the new incidence and prevalence study provisions, the Reconnecting Homeless Youth Act of 2008 authorizes $140 million for FY2009 and such sums as may be necessary for FY2010 through FY2013. The law authorizes $25 million for the SOP for FY2009 and such sums as may be necessary for FY2010 through FY2013. Finally, the law authorizes such sums as may be necessary for the study for FY2009 through FY2013. Funding for the Basic Center Program and related training and other activities is allocated among states (including the District of Columbia) and the territories, and is distributed by HHS on a competitive basis to community-based organizations. As the law existed prior to the enactment of P.L. 110-378 , each state and territory received a minimum annual allotment of $100,000 and $45,000, respectively, in BCP funds. P.L. 110-378 increases the annual minimum funding available for each state to $200,000 and for each territory to $70,000. The law also provides that funding for each state in FY2009 and FY2010 is to be no less than the amount allotted to that state for FY2008 (the bill is silent on a minimum for territories in those years). Further, unlike prior law, P.L. 110-378 enables the HHS Secretary to reallot any funds that have not been obligated before the end of a fiscal year for a state to the other states. The law does not specify the criteria for re-allotting the funds. The new law does not change the funding structure for the Transitional Living Program and Street Outreach Program. Funds for these programs are allocated competitively by HHS to community-based organizations. P.L. 110-378 changes program requirements related to (1) the length of time that youth are eligible to stay in Basic Center Program and Transitional Living Program facilities; (2) the definition of homeless youth and runaway youth; (3) BCP and TLP plans submitted by applicants; and (4) applicants that are to be prioritized under the Street Outreach Program. The Reconnecting Homeless Youth Act of 2008 authorizes longer periods in which a youth may stay at a program funded by the BCP or TLP. Current regulation specifies that youth may remain at a BCP shelter for up to 15 days. However, P.L. 110-378 permits youth to stay at a shelter for up to 21 days. The new law continues to allow youth to remain at TLP projects for up to 540 days (18 months) or longer for youth under age 18 and adds that a youth may remain in the program for a continuous period of 635 days (approximately 21 months) under "exceptional circumstances." This term means circumstances in which a youth would benefit to an unusual extent from additional time in the program. The new law further authorizes that a youth in a TLP who has not reached age 18 on the last day of the 635-day period may, in exceptional circumstances and if otherwise qualified for the program, remain in the program until his or her 18 th birthday. Under the law as it existed prior to the enactment of the Reconnecting Homeless Youth Act of 2008, "homeless youth" for purposes of the BCP was defined as an individual younger than age 18 for whom it is not possible to live in a safe environment with a relative and for whom no other safe alternative living arrangement exists. P.L. 110-378 amends the first clause to define "homeless youth" as an individual younger than age 18, or an older maximum age if the BCP center is located in a state or locality with a law or regulation that permits this higher age. For purposes of the TLP, the prior law defined "homeless youth" as an individual age 16 through 21 for whom it is not possible to live in a safe environment with a relative and for whom no other safe alternative living arrangement exists. P.L. 110-378 changes the first clause of the definition to include an individual ages 16 through 22, or an age exceeding 22 years old on the last day the youth is permitted under law to be at the shelter, so long as the participant enters the TLP project prior to reaching age 22. (As mentioned above, P.L. 110-378 permits a stay of 540 days, or up to 635 days if the youth would greatly benefit from being in the program.) Finally, under current regulation, a "runaway youth" is defined as a person under age 18 who absents himself or herself from home or place of legal residence without the permission of his or her family . P.L. 110-378 enacts similar language that defines "runaway youth" as an individual who leaves home or place of residence without the permission of his or her parent or legal guardian. As required under the previous law, applicants for TLP funding were required to submit a plan to the HHS Secretary specifying that they would provide, directly or indirectly, shelter and services, among other types of assistance. The Reconnecting Homeless Youth Act of 2008 amends the law to require that applicants provide, by a grant, agreement, or contract, shelter, services, and other assistance. Also under P.L. 110-378 , applicants for TLP and BCP grants must develop an adequate emergency preparedness and management plan. Under the law as it existed prior to enactment of the Reconnecting Homeless Youth Act of 2008, HHS was to prioritize non-profit private agencies with experience in providing services to runaway and homeless youth, including youth living on the street, when awarding grants under the Street Outreach Program. P.L. 110-378 requires that HHS also give priority to public agencies with experience in serving runaway and homeless youth. P.L. 110-378 also makes changes to the priority areas for awarding grants for research, evaluation, demonstration, and service projects concerning runaway and homeless youth. Under the prior law, HHS could prioritize projects that addressed one of nine priority areas. P.L. 110-378 modifies the language regarding two of these priority areas. For one of the priority areas, regarding access to quality health care, the law changes the reference from projects addressing mental health care to projects addressing behavioral health care. For the other priority area, regarding access to education, the law adds that the projects should decrease high school dropout rates, increase rates of attaining a secondary school diploma or its recognized equivalent, or increase placement and retention in postsecondary education or advanced workforce training programs. The law also inserts as a tenth priority area projects that assist youth in obtaining and maintaining safe and stable housing. Finally, P.L. 110-378 makes a change pertaining to applicants that apply for grants to implement projects in one of the priority areas. Under the previous law, HHS was to give priority consideration to applicants with experience working with runaway and homeless youth. P.L. 110-378 adds that HHS is to ensure selected applicants represent diverse geographic regions of the U.S. and carry out projects that serve diverse youth. "Diverse" is not defined in the law. The Reconnecting Homeless Youth Act of 2008 includes provisions that seek to improve accountability of programs and activities authorized by RHYA, including requiring HHS to establish performance standards for BCP, TLP, and SOP grantees; directing GAO to evaluate the process by which grants are awarded under the three programs; and requiring HHS to periodically submit a report to Congress that contains estimates of runaway and homeless youth and certain characteristics of the population. The Reconnecting Homeless Youth Act of 2008 requires that within one year after its enactment (October 8, 2009), HHS is to issue rules that specify performance standards for public and non-profit entities that receive BCP, TLP, and SOP grants. In developing the regulations, HHS is to consult with stakeholders in the runaway and homeless youth policy community. The law further requires that HHS integrate the performance standards into the grantmaking, monitoring, and evaluations processes for the BCP, TLP, and SOP. As they existed prior to the enactment of P.L. 110-378 , the RHYA statute and accompanying regulations did not explicitly set forth performance standards for the grantees. However, grantees were (and are) collectively expected to meet certain performance measures established by the Office of Management and Budget's (OMB) Program Assessment Rating Tool (PART) process. The performance measures are as follows: achieve the proportion of youth served in the TLP entering safe and appropriate settings directly after exiting care at 85% by FY2008 and maintain this level through FY2010 (this is known as a long-term outcome measure); improve funding efficiency by increasing the percentage of youth who complete the TLP by graduating or who leave ahead of schedule because of other opportunities (this is known as a long-term efficiency measure); increase the percentage of TLP youth participants who are engaged in community service and service learning activities while in the program (this is known as a outcome measure); and increase the proportion of youth who are prevented from running away through BCP in-home or off-site services (this is known as an outcome measure). Data for these outcome measures are collected from each grantee through the NEO-RHYMIS (National Extranet Optimized Runaway and Homeless Youth Management Information System) reporting system, which includes a range of data elements on the characteristics and short-term outcomes of youth receiving services through the BCP, TLP, and SOP. Further, during the grant application process, described below, applicants must discuss the results or benefits expected from their programs. For example, applicants are advised to identify quantitative outcomes for their proposed projects that will fulfill the program purpose and scope of services, as described in RHYA and the grant announcement. The Reconnecting Homeless Youth Act of 2008 directs the Government Accountability Office to examine the process by which organizations apply for BCP, TLP, and SOP grants. Specifically, GAO is to submit to Congress findings and recommendations relating to (1) HHS's written responses to and other communications with unsuccessful applicants to determine if the information in the responses is conveyed clearly; (2) the content of the grant applications and other associated documents to determine if these materials are presented in a way that gives an applicant a clear understanding of the information that is to be provided and the terminology used in the materials; (c) the peer review process (if any) for the grants; (d) the typical time frame for responding to applicants and the efforts made by HHS to communicate about delayed funding decisions; and (e) the plans for implementation of technical assistance and training authorized under RHYA, and the effect of such programs on the application process for the grantees. Applicants for BCP, TLP, and SOP grants are currently evaluated and rated by an independent review panel made up of non-federal reviewers who are experts in the field of runaway and homeless youth issues. The review panel uses evaluation criteria to assign a score up to 100 for each applicant and to identify the application's strengths and weaknesses. The criteria are established in regulation and described in greater detail in the grant announcements. As set forth in the grant announcements, these criteria include the extent to which the application identifies the services that will be provided, as required by and consistent with RHYA, among other requirements; demonstrates the organizational capacity necessary to oversee federal grants through an explanation of the organization's fiscal controls and governance structure, among other requirements; identifies quantitative outcomes for the proposed project that will fulfill the program purpose and scope of services as described in RHYA and the grant announcement, among other requirements; describes clear and appropriate program objectives that will fulfill the program purpose, as well as a clear need for the proposed project through a discussion of the conditions of youth and families in the area to be served, among other requirements; includes an organizational chart that demonstrates the relationship between all positions, including consultants, sub-grants and/or contractors, to be funded through the grant, among other requirements; and includes a detailed line-item budget for the federal and non-federal share of project costs and demonstrates how cost estimates were derived. As further described in the grant announcements, the review panel's assigned scores assist the FYSB Associate Commissioner and program staff in considering applications. Applications are generally ranked in order of the average scores assigned by reviewers; however, the scores, in combination with other factors, determine whether an application is funded. These other factors include, but are not limited to, comments of reviewers and government officials, HHS staff evaluation and input, geographic distribution, previous program performance of applicants, compliance with grant terms under previous HHS grants, audit reports, investigative reports, and an applicant's progress in resolving any final audit disallowance on previous FYSB or other federal agency grants. According to HHS, because RHYA grants are highly competitive, well-qualified applicants may not receive funding. Further, in some years, applicants with scores in the 90s have not been awarded grants because such a large number of applicants receive scores of 100 or close to 100. HHS does not have an appeals process for unsuccessful applicants. However, in accordance with HHS's Awarding Agency Grants Administration Manual (AAGAM), unsuccessful applicants are notified by letter that they were not awarded funding, with a full explanation of the reasons the application was not funded. The letter contains a compilation of review comments outlining the strengths and weaknesses of their application as identified by the panel of non-federal reviewers. Compilations are also available for successful applications, however, they are only sent at the request of these applicants. Scores are not automatically sent to any applicants but are available upon request. The precise number of homeless and runaway youth is unknown due to their residential mobility and other factors, and RHYA, as authorized through FY2008, was silent on whether HHS or any other entity was to approximate this number. Runaway and homeless youth often eschew the shelter system for locations or areas that are not easily accessible to shelter workers and others who count the homeless and runaways. Determining the number of homeless and runaway youth is further complicated by the lack of a standardized methodology for counting the population and inconsistent definitions of what it means to be homeless or a runaway. In response to a 2002 congressional request through the appropriations process, HHS submitted a report to Congress in 2003 that discusses a plan for developing estimates of the incidences of runaway, throwaway, homeless, and street experiences among youth, as well as a plan for regularly monitoring incidence trends. The Reconnecting Homeless Youth Act of 2008 seeks to determine the number of youth who have run away or are homeless by requiring HHS to estimate at five year intervals, beginning within two years of the enactment of P.L. 110-378 (October 8, 2010), the incidence and prevalence of the runaway and homeless youth population ages 13 to 26. The law also directs HHS to assess the characteristics of these youth. HHS is required to conduct a survey of and direct interviews with a representative sample of homeless youth ages 13 to 26 to determine past and current socioeconomic characteristics; barriers to obtaining housing and other services; and other information HHS determines useful, in consultation with states and other entities concerned with youth homelessness. HHS is to consult with the federal Interagency Council on Homelessness about the studies overall. The new law does not specify the methodology for carrying out the studies, except to say that HHS should make the estimate based on the best quantitative and qualitative social science research methods available. Further, if HHS enters into an agreement with a non-federal entity to carry out the assessment, the entity is to be a non-governmental organization or individual determined by HHS to have expertise in this type of research. As mentioned above, the law authorized such sums as may be necessary for FY2009 through FY2013 to conduct the study. The studies must be submitted to the House Education and Labor Committee and Senate Judiciary Committee, and made available to the public. During the 110 th Congress, the House and Senate conducted hearings on the challenges facing runaway and homeless youth and the federally funded services to assist the population. The issues raised included inadequate levels of funding for RHYA grantees, limited information about the outcomes of runaway and homeless youth, and the need for greater education and workforce opportunities for these youth. The Reconnecting Homeless Youth Act of 2008 incorporates provisions that, in part, address the three issues. At a hearing conducted by the Senate Judiciary Committee on April 29, 2008, service providers and advocates for runaway and homeless youth raised concerns that funds appropriated under RHYA have not been adjusted for increases in the cost of living. A provider in Vermont explained that his RHYA-funded programs have been level-funded since 1994, while costs have risen significantly. These same concerns were highlighted at a July 24, 2007, hearing on runaway, homeless, and missing children, conducted by the House Education and Labor Committee Subcommittee on Healthy Families and Communities. Further, the Government Accountability Office described in its February 2008 report on disconnected youth that funding has remained stagnant for federal youth programs, including those funded by RHYA. The report states: "While overall Transitional Living Program funding increased in FY2002 to support a greater number of programs, the amount available to individual local programs--capped at $200,000--has not changed since 1992. One [runaway and homeless] program director explained that considering increases in the cost of operation, this amount funds only part of one staff rather than three as in previous years." An analysis of per grantee award amounts from FY2004 through FY2007 indicates that BCP and TLP funding has remained stable or has declined slightly. For example, $44.4 million in BCP funds was awarded to 345 grantees for FY2004, resulting in an average grant of $128,734. For FY2007, approximately $43.3 million was awarded to 336 grantees, with an average grant amount of about $128,821. Average TLP award amounts declined over the period from FY2004 through FY2007. For FY2004, 194 grantees shared $36,744,000 in TLP funds, resulting in an average grant of $189,402. The average grant award decreased to $181,558 for FY2007, when 190 grantees shared $34,496,000 in TLP funds. In response to concerns about funding, the Reconnecting Homeless Youth Act of 2008 increases the authorization of appropriations in at least one year (FY2009) for the BCP, TLP, and SOP, and increases the minimum BCP awards for states and territories. However, for most programs--including those authorized under the Runaway and Homeless Youth Act--Congress has passed, and the President has enacted, a continuing resolution for FY2009 ( P.L. 110-329 ), which in most cases, provides for the same level of funding as in FY2008. The resolution extends until March 9, 2009, and does not reflect final funding levels for FY2009. At the hearings held by the Senate Judiciary Committee and House Education and Labor Subcommittee on Healthy Families and Communities, former runaway and homeless youth discussed the challenges of living on the street, such as the inability to find work and connect to school. One witness at the Senate Judiciary hearing described the assistance he received at a TLP-funded program that now employs him as a manager for the program. He explained that through intensive case management, he was empowered to stop using drugs and to live independently. Yet little is known about the outcomes of runaway and homeless youth generally. Local grantee organizations have limited information about youth after they receive services, and research on whether youth experience homelessness as adults is dated. Some grantees may decide to follow up with youth who received services, but HHS does not require longitudinal data collection. HHS's 2007 report to Congress, Promising Strategies to End Youth Homelessness , states that longer-term studies of runaway and homeless youth are challenging because of the youth's transient nature. Further, knowledge about effective strategies for serving these youth is limited and few, if any, studies appear to have been conducted to determine the costs and benefits of these interventions. To glean more information about the runaway and homeless youth population, the Reconnecting Homeless Youth Act of 2008 requires HHS to determine the incidence and prevalence of runaway and homeless youth and to report on the socio-demographic and other characteristics of the population. Although not a specified goal of the act, this information may help practitioners and social science researchers develop effective interventions for the population. Efforts are currently underway at HHS to learn more about the youth who are served by the Transitional Living Program. In August 2007, HHS approved a sub-contract to Abt Associates to conduct an evaluation of the TLP at select grantee sites. The study seeks to describe the outcomes of youth who participate in the program and to isolate and describe factors that may have contributed to their successes or challenges, including service delivery approaches, personal characteristics, and local circumstances. HHS (through the Family and Youth Services Bureau) and Abt researchers have conducted three site visits to TLP grantees (in Dallas, Texas; Portland, Oregon; and Wichita, Kansas) and a series of consultations with HHS and outside experts to inform the design of the study. FYSB has not yet selected the TLP survey sites for the study itself; however, the sites will likely have extensive experience working with runaway and homeless youth and have been awarded continuous TLP funding for at least three years after the survey commences. These sites will work to ensure that after receiving training, staff will be sufficiently capable of administering the survey instruments. The sites will also need to be large enough to capture an adequate sample size. Youth participants will complete surveys at entry and while receiving services through a survey administered by their TLP programs. They will also complete surveys for up to one year after leaving the program. Youth will self-report the data to a website six months and twelve months after exiting. Evaluators will compare the individual outcomes of each youth to his or her benchmark data. The youth surveys are pending executive branch review, and FYSB expects to begin collecting the data by the end of calendar year 2008. FYSB anticipates making preliminary information available before the last surveys are completed. Further, FYSB expects to maintain the self-reporting website indefinitely as a means of tracking TLP graduates after the formal study is complete. HHS issued a proposed information collection request for public comment about the evaluation in the Federal Register on August 25, 2008. On June 19, 2007, the House Ways and Means Subcommittee on Income Security and Family Support held a hearing on disconnected and disadvantaged youth, with a focus on runaway youth. Witnesses described "disconnected youth" as those youth who have weak social networks of family, friends, and communities that can provide assistance such as employment connections, health insurance coverage, housing, tuition and other financial assistance, and emotional support. They also discussed measurable characteristics to indicate whether youth are disconnected, such as the lack of high school or college attendance coupled with not having a job over a specific period of time (e.g., one year). Runaway and homeless youth are vulnerable to becoming disconnected because of separation from their families, absence from school, and non-participation in the economy. Family conflict--rooted in abuse and neglect, school problems, and drug and alcohol abuse--can compel youth to leave home. Family disconnectedness is also evident among many runaway and homeless youth involved in the foster care system. These youth are brought to the attention of child welfare services because of incidents of abuse and neglect. Further, youth "aging out" of the foster care system experience homelessness at a greater rate than their counterparts in the general population due, in part, to family disconnectedness. Some gay and lesbian youth also experience family disassociation when they come out about their sexuality. Some runaway and homeless youth spend time out of school while they are away from a permanent home. The FY2007 NEO-RHYMIS survey indicated that about 20% of youth were not attending school regularly before entering the Basic Center Program. Of youth in the Transitional Living Program, 21% had dropped out of school. Some homeless youth face barriers to attending school because of transportation problems and the absence of parents and guardians who can provide records and permission for youth to participate in school activities. Finally, some runaway and homeless youth are removed from the formal economy and resort to illegal activity, including stealing and selling drugs in exchange for cash. Other such youth are too young to work legally or experience mental health and other challenges that make working difficult. The Reconnecting Homeless Youth Act of 2008 seeks to fund research projects that focus on connecting youth to work and school. The act amends RHYA to require HHS to give priority to research, evaluation, demonstration, and service projects that increase access to education and career pathways for runaway and homeless youth. These projects must be intended to help decrease high school dropout rates, increase rates of attaining a secondary school diploma or its equivalent, or increase placement and retention in postsecondary education or advanced workforce training programs.

The Runaway and Homeless Youth Act (RHYA) was signed into law in 1974 as Title III of the Juvenile Justice and Delinquency Prevention Act (P.L. 93-415). RHYA authorizes funding for programs to support runaway and homeless youth, as well as related training, research, and other activities. These programs and activities are administered by the Family and Youth Services Bureau (FYSB) in the Department of Health and Human Services' (HHS) Administration for Children and Families. In the second session of the 110th Congress, Congress passed and the President signed into law the Reconnecting Homeless Youth Act of 2008 (P.L. 110-378) to extend existing programs and establish new activities under RHYA for FY2009 through FY2013. The law represents a compromise between provisions that were included in two bills introduced in the 110th Congress: H.R. 5524 and S. 2982. On March 4, 2008, Representative John Yarmuth introduced H.R. 5524, the Reconnecting Homeless Youth Act of 2008, which passed the House on June 9, 2008. On May 6, 2008, Senator Patrick Leahy introduced S. 2982, the Runaway and Homeless Youth Protection Act, which passed the Senate on September 25, 2008. The House approved S. 2982 on September 26, and the President signed it into law as P.L. 110-378 on October 8, 2008. This report discusses P.L. 110-378 and includes a table with a side-by-side comparison of its provisions to those in H.R. 5524, as well as to the law and regulations as they existed prior to the enactment of S. 2982. The new law amends and adds provisions related to program funding, requirements, and accountability. It extends the authorization of appropriations for the three programs under RHYA that provide direct services to youth: the Basic Center Program (BCP), Transitional Living Program (TLP), and Street Outreach Program (SOP). Unlike prior law, P.L. 110-378 enables HHS to reallot any unused BCP funds from one state to other states and permits youth to remain in BCP and TLP shelters for a longer period. Another change made by the law requires HHS to regularly submit a report to Congress that describes the incidence and prevalence of runaway and homeless youth. The law also directs the Government Accountability Office to report to Congress on the process by which HHS awards BCP, TLP, and SOP grants. The provisions of P.L. 110-378 reflect issues raised by policymakers and advocates about RHYA during the reauthorization process. One issue was the amount of funding allocated to grantees under the three direct-service programs. Grantees expressed the concern that although Congress has periodically increased funding authorization for these programs, funding for individual grantees has remained relatively stable over time. A second issue was the lack of outcome data for youth who run away or experience homelessness. Finally, the bill addresses issues related to the educational and workforce needs of runaway and homeless youth. This report will not be updated.

This report discusses key base closure developments, beginning with the 105th Congress andcontinuing into the 107th Congress. The most recent notable development has been the December28, 2001 signing into law ( P.L. 107-107 ) of legislation, initially sponsored by Senator Carl Levin andSenator John McCain, to conduct one new base closure round in 2005. The legislation extends andamends the 1990 base closure and realignment Act ( P.L. 101-510 ) that expired after the 1995 round. All action on the 451 installations scheduled to be closed and realigned by the 1988, 1991, 1993, and 1995 BRAC commissions was completed by the end of FY2001, as scheduled. (2) Ninety-seven installations were major military bases. According to the most recent estimates, theseBRAC closures and realignments have produced net savings of about $16.7 billion, and annualrecurring savings thereafter of about $6.6 billion. (3) It was widely acknowledged, at the time of the 1995 round, that additional base closures wouldbe necessary, given the continuing downward trend in defense spending and force structure (unitsand personnel). Two years later, the Department of Defense began to press its case in earnest. OnMay 19, 1997, Secretary of Defense William Cohen released a long awaited report, the QuadrennialDefense Review (QDR). In the report, a major review of military strategy and capabilities, he calledfor two more rounds of closures, one in 1999 and the second in 2001. He explained that, despite fourprevious rounds, the downsizing of DOD's base structure had fallen behind the downsizing of itsforce structure. He pointed out that Since the first base closure round, force structure has come down by 33% and will have declined by a total of 36% when we finish the reductions underthe QDR. During the same period, we will have reduced domestic infrastructure by 21%.... We mustshed more weight. (4) He further explained that closing more bases was dictated not only by the need to achieve a proper balance between infrastructure and force structure, but also by the need to secure significantsavings that would allow DOD to fund adequately future readiness and weapons acquisitionprograms. He stated that without the savings from new rounds of closing, DOD would behard-pressed to fulfill its missions and responsibilities in the future. Secretary of Defense Cohen's plan to begin new rounds of closures within the next five yearswas met with a decided lack of enthusiasm on Capitol Hill. Many Members expressed deep concernover the likely economic and political fallout in their districts from any such new rounds. Bothdefense committees of the House and Senate, during their mark-ups of the FY1998 DODauthorization bills, declined to support new base closure legislation. On June 12, 1997, the SenateArmed Services Committee narrowly failed, on a 9-9 vote, to approve a proposal to authorize twomore rounds of base closing in 1999 and 2001. The next day, Senator Carl Levin, the committee'sranking Democrat, along with Senator John McCain, Senator Dan Coats, and Senator Charles Robb,pledged to push for more base closings when the DOD authorization bill went to the floor. SenatorLevin said that, if Congress was serious about having funds for new weapons, it was necessary toreduce excess infrastructure. On July 9, the full Senate voted 66-33 against the McCain-Levin initiative and in support of a substitute amendment that delayed any new base closings until DOD developed "accountingtechniques" to accurately measure the costs and savings from previous and future rounds. Under thesubstitute amendment, sponsored by Senator Byron Dorgan, Senator Trent Lott, and Senator TomDaschle, DOD was required to prepare and submit its cost/savings report to Congress "in a timelymanner." Although no specific date was set, the provision stipulated that the report must becompleted with adequate time for Congress to authorize another round of base closings in 2001. In the House National Security Committee, opposition to a new round of closures was considerably stronger. Representative Joel Hefley, chairman of the subcommittee on militaryinstallations, indicated that there should be no new base closure rounds for at least five years. He,as well as others, questioned DOD's estimate of actual savings, especially in the short- andmedium-term, given the substantial up-front costs of shutting down bases. Although DOD officialshave claimed net savings, beginning in FY1996 and increasing into the future, the CongressionalBudget Office, in a December 1996 report, stated that it was unable to confirm or assess thoseestimates. (5) Congressional opponents, further, objected to rushing into new rounds of closures without a complete and thorough understanding of the military implications of previous rounds. In this regard,they also questioned the validity of DOD's major premise that there should be a one-to-onecorrelation between the percentage of reduction in end-strength and in base closings. Despite the lack of broad support on Capitol Hill, senior DOD officials, as well as the President, continued to press for new rounds of base closures in the near future. Both Secretary of DefenseCohen and the retiring Chairman of the Joint Chiefs of Staff, Gen. John Shalikashvili, issuedstatements in September 1997 calling for more base closures as a way of making funds available fortop priority weapons programs. (6) On November 10,the Secretary of Defense and other seniorPentagon officials announced a series of reforms, titled "Defense Reform Initiative" (DRI), thatincluded two additional rounds of base closures in 2001 and 2005. These rounds, it was asserted,would eventually result in annual savings of about $1.4 billion each, or a total of $2.8 billion. (7) Thisfigure represented about half of the overall $6 billion annual savings anticipated from DRI actionsthat include, in addition to base closings, increased outsourcing to private industry, shifting topaperless contracting, administration, and publishing, and reducing the number of personnelemployed by the Office of the Secretary of Defense and other agencies, departments, and activities. Further support for two, or more, new rounds of base closures came from the December 1997 report entitled Transforming Defense: National Security in the 21st Century . (8) Members of theDOD-sponsored National Defense Panel that prepared the report strongly urged Congress and theDefense Department to "move quickly to restore the base realignment and closure process." Theycalled for closures to begin "earlier than the current 2001-2005 department proposal." In hisendorsement of the panel's findings, Secretary of Defense Cohen emphasized, as he had in the past,the importance of two additional BRAC rounds as a means of financing and accelerating thetransformation of U.S. military capabilities. (9) A highly contentious aspect of the base closure debate involved President Clinton's actionsconcerning the last of the four rounds. The 1995 base closure commission had recommended theclosing of two of the Air Force's five major maintenance depots: at McClellan Air Force Base (CA)and Kelly Air Force Base (TX). The recommendation had been justified on the grounds that all fivedepots were operating at under 50% capacity, and that significant savings could be achieved bytransferring McClellan's and Kelly's workloads to the three remaining depots in Utah, Oklahoma,and Georgia. (10) President Clinton vigorously opposed closing McClellan and Kelly depots, arguing that California and Texas had already suffered disproportionately from effects of the three previousclosure rounds. (11) He moved to prevent furtherloss of jobs in California and Texas by directing thatprivate firms be allowed to assume the work on site -- otherwise known as "privatization-in-place." Opponents of the President, however, were quick to charge him with unprecedented politicalmeddling in the base closing process. They accused him of trying to curry favor with the people ofvote-rich California and Texas, vital in his bid for reelection. (12) Legislators from Oklahoma, Georgia, and Utah opposed the privatization plan, believing that it deprived their local populations of jobs that would have been otherwise created under the initialrecommendation of the 1995 base closure commission. Also, they knew that the existingprivatization plan, if permitted to proceed, left their depots highly vulnerable to closure wheneverthe next round of base reductions occurred. (13) Resentment among some Members over President Clinton's 1995 intervention persisted until the end of his second term. His action was repeatedly cited by congressional opponents as reasonfor their opposition to any new base closure rounds. (14) Some Members sought to block DOD fromproceeding with plans to privatize depot maintenance work at McClellan and Kelly air force bases. On June 5, 1997, the House military readiness subcommittee approved an amendment to the FY1998defense authorization bill prohibiting privatization at the two depots unless the Secretary of Defensecertified that the three remaining depots were operating at an efficient 80% capacity. These otherdepots, as mentioned above, were operating at approximately 50% capacity. The full House NationalSecurity Committee approved the measure on June 16. Similar depot language was approved by thefull Senate Armed Services Committee on June 17. However, in the face of a threatened filibusterby the four Senators representing California and Texas, the depot-related provisions were removedfrom the DOD authorization bill prior to floor consideration. (15) In floor debate, on June 23, 1997, Representative Terry Everett led an effort to delete the depot-related restrictions in the House FY1998 defense authorization bill. His amendment wasdefeated by a vote of 145 to 278. In the other chamber, Senator Inhofe spearheaded an effort torestore depot-restrictions to the Senate bill. He and his co-sponsors, however, withdrew theiramendment on July 11, just before its floor consideration. In conference committee, the depot-related language in the House bill became a major bone of contention and obstacle to reaching final agreement on the FY1998 defense authorization bill. Asof early October, it was reportedly the only remaining issue to be resolved. Neither of the opposingcamps seemed willing to yield -- with one side threatening filibuster and/or veto if public-privatedepot competition at McClellan and Kelly air force bases were not allowed to go forward, and theother side insisting that without language prohibiting depot competition, there would be no bill. Aresolution was achieved by the Senate and House conferees and reported on October 23 ( H.Rept.105-340 ). Under the compromise agreement, the limit on depot work that could be done by privatecontractors was increased from 40% to 50%. On the other hand, a broadened definition of the "corework" that must be done by government depots served to offset the benefits to private contractorsof their percentage increase. On October 28, the House passed the conference report by a vote of 286 to 123. On the following day, the Senate debated the conference report's provisions regarding depot maintenanceoperations at length, but did not move to a final vote. A bid by Senator Kay Bailey Hutchison topostpone a final vote on the FY1998 defense authorization until January 18, 1998 was denied. OnNovember 6, the Senate reached final agreement, passing the conference report by a vote of 90 to10. President Clinton signed the bill into law on November 18 ( P.L. 105-85 ). In the FY1998 defense authorization act cited above, Congress included language (Section2824) that prohibited DOD from taking any concrete steps towards planning and implementing newbase closures until it had submitted a report on "costs and savings attributable to the first four roundsof closure and realignment; and on the need, if any, for additional rounds." The detailedrequirements set forth in the Dorgan Amendment included ten "Elements" and eight "Methods ofPresenting Information." The deadline for delivery of the report was set for "no later than thePresident's submission to Congress of the budget for FY2000" (January-February 1999). On April 2, 1998, far in advance of the deadline, the Department of Defense submitted its report to Congress. (16) Secretary of Defense Cohen, inhis introductory statements, stressed several keypoints in calling for new base closure and realignment legislation in the current year. He stated thatthe base structure was, currently, 23% in excess of what was needed, and that savings from two newrounds of closings would provide vital funding for modernization of weapons systems and improvedreadiness. He reminded Congress that while the defense budget was down 40% and force structure36%, base structure had declined only 21%. He cited several other examples of the significantimbalance between force and base structures. The number of Navy ships was scheduled to drop by46% between 1989 and 2003; while berthing space would decline by only 18%. The number ofArmy soldiers was slated to fall 43% in the same period, compared with only a 7% planned reductionin classroom space. The base closure report, in providing information requested by Congress in Section 2824, claimed that the closure costs of the 1988 and 1993 rounds were less than the Pentagon's originalestimate. It asserted that the costs of the 1991 and 1995 rounds, when completed, would be roughlyequal to the estimates. The report claimed that the resulting savings from the shutdown of bases andfacilities during BRAC's 1988-1995 rounds would exceed initial estimates. More specifically, DODexpected net total savings of about $14 billion through 2001. Annual savings, thereafter, wereestimated at $5.6 billion. These figures were later revised upward by the Department of Defense andGeneral Accounting Office. (17) The two new rounds of closures in 2001 and 2005 sought by the Pentagon were expected to produce, after implementation, additional savings of about $3 billion a year. As required byCongress in Section 2824, both CBO and GAO were to review and comment on the accuracy andreliability of the report's findings. Other significant features of the base closure report included (1)a recommendation by DOD to apply the model of previous independent base closure commissionsfor the two rounds proposed for 2001 and 2005; and (2) a statement touting the successful economicrecovery from base closures of many impacted communities. A subsequent Air Force memo (April 26) added fuel to the controversy over base closures. The memo reportedly cited John D. Podesta, the White House deputy chief of staff, as having triedthrough a DOD official, to encourage Lockheed Martin Corporation to go after some of the depotmaintenance work at McClellan Air Force Base and keep the work in Sacramento. (18) Membersadamantly opposed to keeping depot maintenance work at both McClellan AFB and Kelly AFBaccused the Administration of continuing to meddle in the base closure process. The level ofsuspicion increased, as did the level of rhetoric, with Members issuing forceful statements inopposition to new base closures, such as "dead on arrival,""smoking gun," and "over my deadbody." (19) Reaction on Capitol Hill to the April 2, 1998 report's call for two new base closure rounds was similar to that of the previous year -- strong and widespread resistance. The House NationalSecurity Committee remained broadly opposed to any closings in the near future. This degree ofopposition was mirrored also in the House as a whole. The Senate Armed Services Committee wasmore evenly divided on the issue than the House committee. In its mark-up session, the Senatecommittee defeated by a 10-8 margin a proposed new round of base closures in 2001 (press releasedated May 8, 1998). Senator John McCain and Senator Carl Levin, principal co-sponsors of newBRAC legislation the previous year (as well as in 1997), indicated that they were prepared, however,to seek support for passage of a floor amendment during Senate consideration of the FY1999 defenseauthorization bill ( S. 2057 / S. 2060 ). In the end, with sentiment of themajority clearly running against them, the Senators abandoned their initiative. (20) In floor action (June 25), the Senate voted 48-45 in support of an amendment to the FY1999 defense authorization bill that would have made it more difficult for the Pentagon to move aheadwith base closings. Amendment No. 2981, sponsored by Senator James Inhofe, would haverestricted the Administration from closing bases with 225 or more civilian personnel (a reductionfrom the current threshold of 300 set in law). It would also have restricted the Pentagon fromrealigning bases with 750 civilian personnel, or more than "40% of the total number of civilianpersonnel authorized to be employed at such military installation." Further, the amendment wouldhave prevented the Pentagon from closing a base within four years after completing a realignmentof such base. The intent of this provision was to delay, if not block, the Department of Defense fromquickly moving to close a particular base by reducing the number of civilian employees to less than225. In addition, the Inhofe amendment expressed congressional opposition to any new rounds ofclosures and realignments until all actions from previous rounds had been completed. The Inhofe amendment was dropped from the FY1999 defense authorization bill during conference. The Congressional Budget Office submitted its review of DOD's base realignment and closurereport on July 1, 1998. (21) It stated that the reportprovided most, but not all, of the information thatthe Congress had requested. It found DOD's estimates of savings from previous closure rounds, asfully implemented, consistent with its own estimates: $5.6 billion as compared to $5 billion. However, CBO explained that the firm measures of BRAC savings requested by the Congress "donot -- and cannot exist." It elaborated, as follows: BRAC savings are really avoided costs -- costs that DOD would have incurred if BRAC actions had not taken place. Because those avoided costs arenot actual expenditures, DOD cannot observe them and record them in its financial records. As aresult, DOD can only estimate savings rather than actually measurethem. In its review, CBO observed that DOD's report had provided a clear and coherent summary of why future base closure rounds would produce significant savings. It noted, however, that DODprovided "little analysis of those data or insight into the number and types of installations that mightbe closed in the event of future BRAC rounds." Other significant CBO findings included: An analysis of the likely impact of future base closures on local communities cannot be attempted until the specific communities are identified; even then,it would be very difficult to do. DOD was unable to locate some of the requested data, including the original cost and savings estimates that it gave to the BRACcommissions. Estimates of BRAC costs and savings would be more accurate if they included [DOD's] environmental and caretaker costs for some bases after thesix-year implementation period is over. The General Accounting Office submitted its review of DOD's report on November 13, 1998. (22) It was longer and provided more supporting detail than the CBO review. GAO gave DOD generallygood grades. It said that, overall, DOD had provided most of the information required by Section2824. GAO affirmed that the four previous BRAC closure rounds would result in substantial netsavings. It noted, however, that "DOD's report should be viewed as providing a roughapproximation of costs and savings rather than precise accounting." It pointed out that "DOD's datasystems do not capture all savings associated with BRAC actions, nor has DOD established aseparate system to track BRAC savings." Other significant GAO findings included DOD's analysis of operational and readiness indicators has shown no long-term problems affecting military capabilities that can be related to BRAC actions. This general conclusion is also consistent with our prior work. DOD's report emphasizes that communities affected by prior BRAC actions appear to be rebounding economically. We also have found this to be thecase, although our work also shows that some communities are faring better thanothers. DOD's report suggests that proposed BRAC rounds in 2001 and 2005 would be conducted like prior rounds. DOD's legislative proposal requestingauthority to conduct two additional BRAC rounds provides a good starting point for consideringfuture legislation, should the Congress decide to authorize additionalrounds. A "front-burner" issue for Congress at the outset of the 106th Congress was whether toauthorize a new round of base closings. At a November 1998 American Bar Association symposiumon national security, the general counsel of the Senate Armed Services Committee predicted that"There will be a significant attempt to put BRAC in the FY2000 authorization bill, which may wellsucceed." (23) On January 20, 1999, Senator JohnMcCain, along with Senator Carl Levin, sponsoreda bill ( S. 258 ) calling for two new rounds in 2001 and 2003. In support of the bill,Senator McCain pointed to the 23% excess capacity in infrastructure claimed by DOD, and said thatit was "unconscionable" for anyone to avoid looking at the billions of dollars to be saved by closingand realigning more bases. (24) In an effort to winsupport, he and his cosponsors offered twosignificant changes in the law. First, the whole BRAC selection process would begin and finish twomonths later in calendar year 2001 than in previous rounds. It would give a new President theopportunity to nominate members of a base closure commission. Second, privatization-in-placewould not be permitted in closing installations unless the new base closure commission explicitlyrecommended it. Secretary of Defense William Cohen stressed, at almost every opportunity during the early part of the year, the importance of further base closures. In speaking to the Illinois legislature on January28, 1999, he stated that the most politically challenging aspect of his effort to improve DODefficiency and save money was base closures. He said: I know that BRAC is now seen as a four-letter word, but I must tell you that the vast sums of money we waste on unneeded facilities is robbing our menand women in uniform of needed training, modern weapons, and a better quality of life. .... The twoadditional rounds we will fight for this year will ultimately save $20 billion [during implementation]and generate $3 billion annually [thereafter]. Despite such appeals, many Members of Congress remained opposed to new rounds, at least for the time-being, because of widespread fear among constituents over such closings. This wasunderscored in hearings on February 2 before the House Armed Services Committee (formerly,House National Security Committee), when Secretary of Defense Cohen's call for two more closurerounds reportedly received a cool response. More ominously, from the Pentagon's perspective, theSenate Armed Services Committee voted on May 12 and 13 against authorizing any new rounds ofclosings during its mark-up of the FY2000 defense authorization bill ( S. 1059 ). OnMay 26, the full Senate rejected a last-ditch effort by Senator John McCain and Senator Carl Levinto revive their base closure initiative during floor debate and passage of the defense bill. The 60 to40 vote marked the third year in a row that DOD's attempt to win support in the Senate to shut downmore bases had been blocked. With opposition to base closures even stronger in the House, mostobservers believed that DOD's high priority initiative had been effectively quashed for the remainderof the year -- if not longer. In the second session of the 106th Congress, the Administration's FY2000 DOD budget proposal sought authority to close more military bases in the years 2003 and 2005. Deputy Defense SecretaryJohn Hamre emphasized that it was a particularly opportune time for Congress to take the initiativesince the national economy was so strong. (25) Inan effort to win the support of Congress, Secretaryof Defense Cohen said that the base closing process needed to be improved -- that there were toomany bureaucratic obstacles in the transition to private use of a closed base. Also, he contended thatthe failure to close more bases would cost the Pentagon as much as $20 billion that could be betterspent on upgrading and building new weapon systems, as well as increasing the performance levelsof U.S. fighting forces. He also pledged that politics would not be permitted to intrude in any futurebase closure rounds. (26) Congress, however, chose not to authorize any new rounds of closures in the year 2000. In floor debate, on June 7, 2000, the Senate defeated an amendment to the FY2001 defense authorization bill,once again sponsored by Senator McCain and Senator Levin. The amendment, which would haveauthorized two new rounds in 2003 and 2005, was rejected by a vote of 63 to 35. The positions ofthe opposing sides in the debate reflected the same concerns expressed in previous years. In the early stages of the 107th Congress, one of DOD's top agenda items was securingauthority for additional military base closures and realignments. On February 27, 2001, Senator CarlLevin and Senator John McCain introduced a bill ( S. 397 ) to authorize two new roundsof base closures in 2003 and 2005. The Taxpayers for Common Sense (TCS), a national budgetwatchdog organization, immediately applauded the initiative and said in a February 27 press releasethat the initiative "would save billions for other important defense priorities." It estimated the costof maintaining excess military bases at about $3.6 billion each year and said that projected Pentagonsavings could amount to as much as $21 billion through 2015 if the military were allowed to closebases in 2003 and 2005. (27) Senator Kay Bailey Hutchison, however, expressed a different point of view in an Austin TX editorial article. (28) She noted a trend towardincreasing restrictions on U.S. military training inlocations abroad, such as Germany, Okinawa, Korea, and Puerto Rico, and she suggested that it "castinto doubt the wisdom of prematurely closing more domestic military bases." She also drewattention to the fact that some BRAC decisions, such as at Reese Air Force Base, TX, and Fort Hood,TX, are now regarded as having been mistakes. In the case of the latter installation, the BRACdecision has been essentially reversed. On June 27, 2001, the Department of Defense urged Congress to approve another round of base closures and realignments. It noted that the DOD's military infrastructure had an excess capacityof approximately 25%. (29) Later, on August 2,2001, the Pentagon outlined its proposal in greaterdetail. It called for a single, new round of base closings and consolidations, beginning in 2003. Theterm "BRAC" was dropped and replaced by a new title called the "Efficient Facilities Initiative of2001 (EFI)." (30) It also introduced a new approach for reducing excess infrastructure, based on the experience of Brooks Air Force Base, San Antonio, TX. As a demonstration project, approved by Congress,Brooks AFB was permitted to transfer its property to the local community. In turn, the city leasedback to the base commander property that the service needed to continue its mission. Other detailsof DOD's base closure and realignment proposal conformed, in most respects, to the base-closurelaws of past years. In the Senate Armed Services Committee, Members grappled with the two base closure proposals -- S. 397 and the Administration's plan. They ultimately agreed upon, and recommended, a series of provisions incorporating elements of both. Meeting in closed session onSeptember 6, 2001, the committee voted 17 to 8 for a new round. On September 25, 2001, the full Senate approved a new round of base closures and realignments in 2003 by a margin of 53 to 47 -- after an effort by Senator Jim Bunning to shelve theproposal failed. It was, for the Senate proponents of base closure, their first success in five years ofeffort. Immediately prior to the vote, General Henry H. Shelton had sent a letter to Senator JohnWarner, ranking Republican on the Armed Services Committee, stating that the country "cannotafford the costs associated with carrying this excess infrastructure." (31) In a separate letter, Secretaryof Defense Rumsfeld stressed that the current struggle with terrorist groups made it all the more"imperative to convert excess capacity into war-fighting ability." (32) Opponents of the proposal, however, argued that the current war on terrorism, coupled with an uncertain economy, made it the worst time to start closing bases. Minority Leader Trent Lott said:"At a time our reserves are being called up to support our military ... we're going to say, 'Oh, by theway, we're going to look at closing your base. I think the timing is not good.'" (33) Supporters of the initiative, on the other hand, emphasized the importance of putting aside home-state interest in favor of making certain the military enjoyed the full range of resources neededto combat terrorism. Senator John McCain asserted: "This is the time we should place our trust inthe Commander-in-Chief and the Secretary of Defense and the Chairman of the Joint Chiefs ofStaff." (34) No base-closing language was included in the House of Representatives FY2002 defense authorization bill. Indeed, shortly following passage of the Senate bill, Representative James Hansenreportedly stated that the House would oppose the Senate's provision: "We're going to hangtough." (35) In conference, the House and Senate leaders stood by their respective positions, while resolving most of the other issues on their agenda. The stalemate over base closures lasted for several weeks,holding up passage of S. 1438 . In the absence of a compromise, Senator John McCainreportedly warned that the President might veto the defense bill. (36) Senior negotiators finally agreedto a compromise on December 10, and unveiled it to the public on December 12, 2001. ThePresident signed the defense authorization bill ( P.L. 107-107 ) on December 28, 2001. The conference report retains most of the former 1990 BRAC Act language, but makes some important changes and modifications that are set forth below. (37) Congress (Sec. 3001) (1) Extend the authority of the 1990 base closure and realignment act to authorize one new round in 2005 Secretary of Defense (Sec. 3002) (1) Submit a force structure plan to include detailed information on end strength and force levels, etc. (2) Submit (at Sec/Def's discretion) revised force structure plan with FY2006 budget. (3) Review all types of installation and take into account anticipated need for, and availability of, overseas bases in future. Include: (a) inventory of military installations (b) description of categories of excess infrastructure (c) economic analysis of options for eliminating or reducing excess infrastructure,including efficiencies from joint use (4) Certify (after submitting force structure plan and infrastructure inventory) whether need exists for closure and realignment. If so, certify that it would provide annual net savings withinsix years. If Sec/Def fails to provide certification, the process is terminated. (5) Ensure that military value is the primary consideration in the making of recommendations for closing or realigning military installations. Commission (Sec. 3003-3004) (1) Increase number of members from 8 to 9. (2) Permit Sec/Def to testify before commission on any commission-proposed addition of a base. Decision to add a base must be supported by at least 7 commissioners. Also, Sec/Defmust also be given opportunity to testify on other changes proposed by commission. (3) Prohibit privatization-in-place of closed or realigned bases prohibited, unless specifically recommended by commission and determined to be the most cost-effective option. In May 1997, two years after the 1995 base closure commission completed its task, theDepartment of Defense announced that two further closure rounds were needed in 1999 and 2001in order to reduce its excess infrastructure. The proposal met with little enthusiasm on the part ofmost Members of Congress. Subsequent appeals by Secretary of Defense Cohen in 1998, 1999, and2000 fared no better. In 2001, however, Secretary of Defense Rumsfeld succeeded in winningapproval from Congress for a new round. He had to settle, however, for a round in 2005, rather thanhis preferred date of 2003. As a result of the new BRAC, many communities next to military bases are worried about the survival of their installations. Various strategies have been developed, both defensive and offensive.First, and foremost, community leaders are working diligently to keep their military units/functionsat home. On the other hand, they are not averse to acquiring units/functions from other parts of thecountry. In the latter case, success would almost certainly ensure a base's survival in the next round. A serious concern of many communities near military bases is the growing impact of "range encroachment" -- the process whereby bases are progressively hemmed in by urban growth,competition for air space, protection of endangered species, and other factors that may detract froma base's desirability to the Department of Defense or the BRAC commission. If allowed to continueunabated, such encroachment can have the effect of de-valuing installations to the point that theymay become prime candidates for closure in 2005. Table 1. 2005 BRAC Timeline Source: U.S. Congress. House of Representatives, National Defense Authorization Act for FiscalYear 2002, Conference Report ( H.Rept. 107-333 ), December 12, 2001, p. 331-341 and 792-795. a Also, Sec/Def publishes criteria in Federal Register . b If President does not send nominations by required date, process is terminated. c President prepares report containing approval or disapproval. d Congress has 45 days to pass motion of disapproval, or Commission's list becomes law.

Ninety-seven major military bases were recommended for closure and realignment by the 1988, 1991, 1993, and 1995 base realignment and closure (BRAC) commissions. Action on all 451installations (major and minor) from the first four rounds was completed by the end of FY2001, asscheduled. The U.S. General Accounting Office has estimated that these closures and realignmentsproduced net savings of about $16.7 billion as of the end of FY2001 and will continue to producean estimated annual recurring savings thereafter of about $6.6 billion. In mid-1997, Secretary of Defense William Cohen called for two new rounds of base closures and realignments. He explained that, while four previous rounds had achieved significant savings,it was important to continue the process of closing underutilized facilities. Despite DOD pressure,most Members of Congress were reluctant to support authorization of new base closure legislation,at least for the foreseeable future. The reasons given included, among others, grass-roots oppositionfrom communities likely to be affected and President Clinton's "intervention" in the 1995 baseclosure commission's recommendations regarding McClellan and Kelly air force bases. Of the twochambers, the House of Representatives expressed the stronger and more united opposition. In theSenate, proponents of new base closure rounds have attempted to attach amendments to each year'sdefense authorization bill since 1997, achieving success only toward the end of 2001. The principal advocates in Congress for new base closures have been Senator John McCain and Senator Carl Levin. On February 27, 2001, they introduced legislation ( S. 397 ) toauthorize two new closure rounds in 2003 and 2005. On August 3, 2001, the Secretary of Defensesubmitted his own proposal to Congress, calling for one additional round in 2003. On September6, 2001, the Senate's defense panel incorporated elements of both proposals and passed the measureby a vote of 17 to 8. Later, in Senate floor debate (September 24, 2001), the Levin/McCain initiativepassed by a margin of 53 to 47. However, many Members of the House were reluctant to support S. 397 , thus creating an impasse in the conference phase that delayed final passage of the FY2002 defenselegislation. Finally, on December 12, 2001, the conferees reached a compromise. They agreed toauthorize one new round of base closures in 2005. They also added language that revised variousaspects of previous base closure law -- the most notable of which, perhaps, will be the enhancedrole and influence of the Secretary of Defense in the base closure selection process. President Bushsigned the defense authorization bill into law ( P.L. 107-107 ) on December 28, 2001. This report will be updated as warranted.

RS21314 -- International Law and the Preemptive Use of Force Against Iraq Updated April 11, 2003 Until recent decades customary international law deemed the right to use force and even to go to war to be an essentialattribute of every state. As one scholar summarized: It always lies within the power of a State to endeavor to obtain redress for wrongs, or to gain political or other advantages over another, not merely by the employment of force, but also bydirectrecourse to war. (1) Within that framework customary international law also consistently recognized self-defense as a legitimate basis for theuse of force: An act of self-defense is that form of self-protection which is directed against an aggressor or contemplated aggressor. No act can be so described which is not occasioned by attack or fear ofattack. When acts of self-preservation on the part of a State are strictly acts of self-defense, they are permitted by the lawofnations, and are justified on principle, even though they may conflict with the ... rights of otherstates. (2) Moreover, the recognized right of a state to use force for purposes of self-defense traditionally included the preemptive useof force, i.e., the use of force in anticipation of an attack. Hugo Grotius, the father of international law,stated in theseventeenth century that "[i]t be lawful to kill him who is preparing to kill." (3) Emmerich de Vattel a century later similarlyasserted: The safest plan is to prevent evil, where that is possible. A Nation has the right to resist the injury another seeks to inflict upon it, and to use force ... against the aggressor. It may even anticipatetheother's design, being careful, however, not to act upon vague and doubtful suspicions, lest it should run the risk ofbecoming itself the aggressor. (4) The classic formulation of the right of preemptive attack was given by Secretary of State Daniel Webster in connection withthe famous Caroline incident. In 1837 British troops under the cover of night attacked and sank anAmerican ship, the Caroline , in U.S. waters because the ship was being used to provide supplies to insurrectionists againstBritish rule inCanada headquartered on an island on the Canadian side of the Niagara River. The U.S. immediately protested this"extraordinary outrage" and demanded an apology and reparations. The dispute dragged on for several years beforetheBritish conceded that they ought to have immediately offered "some explanation and apology." But in the courseof thediplomatic exchanges Secretary of State Daniel Webster articulated the two conditions essential to the legitimacyof thepreemptive use of force under customary international law. In one note he asserted that an intrusion into the territoryofanother state can be justified as an act of self-defense only in those "cases in which the necessity of that self-defenseisinstant, overwhelming, and leaving no choice of means and no moment for deliberation." (5) In another note he asserted thatthe force used in such circumstances has to be proportional to the threat: It will be for [Her Majesty's Government] to show, also, that the local authorities of Canada, even supposing the necessity of the moment authorized them to enter the territories of theUnitedStates at all, did nothing unreasonable or excessive; since the act, justified by the necessity of self-defence, mustbe limitedby that necessity, and kept clearly within it. (6) Both elements - necessity and proportionality - have been deemed essential to legitimate the preemptive use of force incustomary international law. (7) However, with the founding of the United Nations, the right of individual states to use force was purportedly curbed. TheCharter of the UN states in its Preamble that the UN was established "to save succeeding generations from thescourge ofwar"; and its substantive provisions obligate Member States of the UN to "settle their international disputes bypeacefulmeans" (Article 2(3)) and to "refrain in their international relations from the threat or use of force against theterritorialintegrity or political independence of any State, or in any manner inconsistent with the Purposes of the UnitedNations"(Article 2(4)). In place of the traditional right of states to use force, the Charter creates a system of collectivesecurity inwhich the Security Council is authorized to "determine the existence of any threat to the peace, breach of the peace,or actof aggression" and to "decide what measures shall be taken ... to maintain international peace and security" (Article39). Although nominally outlawing most uses of force in international relations by individual States, the UN Charter doesrecognize a right of nations to use force for the purpose of self-defense. Article 51 of the Charter provides: Nothing in the present Charter shall impair the inherent right of individual or collective self-defence if an armed attack occurs against a Member of the United Nations, until the Security Councilhastaken measures necessary to maintain international peace and security. (8) The exact scope of this right of self-defense, however, has been the subject of ongoing debate. Read literally, Article 51'sarticulation of the right seems to preclude the preemptive use of force by individual states or groupings of states andtoreserve such uses of force exclusively to the Security Council. Measures in self-defense, in this understanding, arelegitimate only after an armed attack has already occurred. (9) Others contend that Article 51 should not be construed so narrowly and that "it would be a travesty of thepurposes of theCharter to compel a defending state to allow its assailant to deliver the first, and perhaps fatal, blow ...." (11) To read Article51 literally, it is said, "is to protect the aggressor's right to the first strike." (12) Consequently, to avoid this result, someassert that Article 51 recognizes the "inherent right of individual or collective self-defence" as it developed incustomaryinternational law prior to adoption of the Charter and preserves it intact. The reference to that right not beingimpaired "ifan armed attack occurs against a Member of the United Nations," it is said, merely emphasizes one importantsituationwhere that right may be exercised but does not exclude or exhaust other possibilities. (13) In further support of this view, it is argued that the literal construction of Article 51 simply ignores the reality that the ColdWar and other political considerations have often paralyzed the Security Council and that, in practice, states havecontinuedto use force preemptively at times in the UN era and the international community has continued to evaluate thelegitimacyof those uses under Article 51 by the traditional constraints of necessity and proportionality. The followingexamplesillustrate several aspects of these contentions: In 1962 President Kennedy, in response to photographic evidence that the Soviet Union was installing medium range missiles in Cuba capable of hitting the United State, imposed a naval "quarantine" on Cuba in order"tointerdict ... the delivery of offensive weapons and associated material." (14) Although President Kennedy said that thepurpose of the quarantine was "to defend the security of the United States," the U.S. did not rely on the legal conceptofself-defense either as articulated in Article 51 or otherwise as a justification for its actions. Abram Chayes, theLegalAdviser to the State Department at that time, later explained the decision not to rely on that justification asfollows: In retrospect ... I think the central difficulty with the Article 51 argument was that it seemed to trivialize the whole effort at legal justification. No doubt the phrase "armed attack" must beconstruedbroadly enough to permit some anticipatory response. But it is a very different matter to expand it to includethreateningdeployments or demonstrations that do not have imminent attack as their purpose or probable outcome. To acceptthatreading is to make the occasion for forceful response essentially a question for unilateral national decision thatwould notonly be formally unreviewable, but not subject to intelligent criticism, either .... Whenever a nation believed thatinterests,which in the heat and pressure of a crisis it is prepared to characterize as vital, were threatened, its use of force inresponsewould become permissible .... In this sense, I believe that an Article 51 defence would have signalled that theUnited Statesdid not take the legal issues involved very seriously, that in its view the situation was to be governed by nationaldiscretion,not international law. (15) In 1967 Israel launched a preemptive attack on Egypt and other Arab states after President Nasser had moved his army across the Sinai toward Israel, forced the UN to withdraw its peacekeeping force from the Sinaiborder, andclosed the port of Aqaba to Israeli shipping, and after Syria, Iraq, Jordan, and Saudi Arabia all began moving troopsto theborders of Israel. In six days it routed Egypt and its Arab allies and had occupied the Sinai Peninsula, the WestBank, andthe Gaza Strip. Israel claimed its attack was defensive in nature and necessary to forestall an Arab invasion. BoththeSecurity Council and the General Assembly rejected proposals to condemn Israel for its "aggressive"actions. (16) On June 7, 1981, Israel bombed and destroyed a nuclear reactor under construction in Iraq. Assertingthat Iraq considered itself to be in a state of war with Israel, that it had participated in the three wars with Israel in1948,1967, and 1973, that it continued to deny that Israel has a right to exist, and that its nuclear program was for thepurpose ofdeveloping weapons capable of destroying Israel, Israel claimed that "in removing this terrible nuclear threat to itsexistence, Israel was only exercising its legitimate right of self-defense within the meaning of this term ininternational lawand as preserved also under the United Nations Charter." (17) Nonetheless, the Security Council unanimously "condemn[ed]the military attack by Israel in clear violation of the Charter of the United Nations and the norms of internationalconduct"and urged the payment of "appropriate redress." (18) Thus, in both theory and practice the preemptive use of force appears to have a home in current international law. Itsclearest legal foundation is in Chapter VII of the UN Charter. Under Article 39 the Security Council has theauthority todetermine the existence not only of breaches of the peace or acts of aggression that have already occurred but alsoof threatsto the peace; and under Article 42 it has the authority to "take such action by air, sea, or land forces as may benecessary tomaintain or restore international peace and security." These authorities clearly seem to encompass the possibilityof thepreemptive use of force. Less clear is whether international law currently allows the preemptive use of force by anation orgroup of nations without Security Council authorization. That would seem to be permissible only if Article 51 is read notliterally but as preserving the use of force in self-defense as traditionally allowed in customary international law. As noted,the construction of Article 51 remains a matter of debate. But so construed, Article 51 would not preclude thepreemptiveuse of force by the U.S. against Iraq or other sovereign nations. To be lawful, however, such uses of force wouldneed tomeet the traditional requirements of necessity and proportionality. As the examples listed above illustrate, the requirement of necessity is most easily met when an armed attack is clearlyimminent, as in the case of the Arab-Israeli War of 1967. But beyond such obvious situations, as Abram Chayesargued,the judgment of necessity becomes increasingly subjective; and there is at present no consensus either in theory orpracticeabout whether the possession or development of weapons of mass destruction (WMD) by a rogue state justifies thepreemptive use of force. Most analysts recognize that if overwhelmingly lethal weaponry is possessed by a nationwillingto use that weaponry directly or through surrogates (such as terrorists), some kind of anticipatory self-defense maybe amatter of national survival; and many - including the Bush Administration - contend that international law oughtto allow,if it does not already do so, for the preemptive use of force in that situation. (19) But many states and analysts are decidedlyreluctant to legitimate the preemptive use of force against threats that are only potential and not actual on thegrounds thejustification can easily be abused. Moreover, it remains a fact that the international community judged Israel'sdestructionof Iraq's nuclear reactor site in 1981 to be an aggressive act rather than an act of self-defense. Iraq has become an occasion to revisit the issue. Iraq had not attacked the U.S., nor did it appear to pose an imminent threatof attack in traditional military terms. As a consequence, it seems doubtful that the use of force against Iraq couldbedeemed to meet the traditional legal tests justifying preemptive attack. But Iraq may have possessed WMD, andit mayhave had ties to terrorist groups that seek to use such weapons against the U.S. If evidence is forthcoming on bothof thoseissues, then the situation necessarily raises the question that the Bush Administration articulated in its nationalsecuritystrategy, i.e. , whether the traditional law of preemption ought to be recast in light of the realities ofWMD, rogue states, andterrorism. Iraq likely will not resolve that question, but it is an occasion to crystallize the debate.

On March 19, 2003, the United States, aided by Great Britain and Australia,initiated a military invasion of Iraq. Both the U.S. and Great Britain contended that they had sufficient legalauthority touse force against Iraq pursuant to Security Council resolutions adopted in 1990 and 1991. But President Bush alsocontended that, given the "nature and type of threat posed by Iraq," the U.S. had a legal right to use force "in theexercise ofits inherent right of self defense, recognized in Article 51 of the UN Charter." Given that the U.S. had notpreviously beenattacked by Iraq, that contention raised questions about the permissible scope of the preemptive use of force underinternational law. This report examines that issue as it has developed in customary international law and under theUnitedNations Charter. It will be updated as events warrant. (For historical information on the preemptive use of forceby theU.S., see CRS Report RS21311, U.S. Use of Preemptive Military Force.)

The United States now has approximately 130,000 troops in Iraq and another 30,000 supporttroops in Kuwait, a force that some senior U.S. military officials believe stretches the country'scombat capabilities , especially in the event of a major crisis in Korea or elsewhere. The BushAdministration wishes NATO countries to send forces to Iraq to reduce the demands on U.S. forces,and to spread the costs of stabilization and reconstruction. Key allies acknowledge the possibilityof a NATO role, but first wish to see a new U.N. mandate and greater sharing of decision-makingwith both the U.N. and the allies. Some other allies appear to reject involvement in a U.S.-led force,as a NATO force would be, and prefer a force with a substantial U.N. role. In a broader context, unresolved issues from earlier disputes among the allies also intrude in the debate over possible NATO involvement. These issues include the causes of the war in Iraq, therole of the U.N. in NATO out-of-area operations, the military capabilities of the allies, and theeffects of Iraq's evolution on the Middle East as a whole. In addition, vestiges of a dispute overallied assistance to Turkey in February 2003 before the war with Iraq remain a cause for frictionbetween the United States and several allies. This section will first briefly review the debate in NATO over the last two years about alliedmissions outside Europe. It will then discuss several related issues, primarily those generated byallied disagreement over the reasons for war with Iraq, that affect any possible decision by Europeangovernments to contribute forces to stabilize Iraq. There follows a discussion of the evolution of theAdministration's position on its objectives for post-war Iraq and the necessary force levels to achievethose objectives. The section closes with an examination of how many European forces might beavailable for Iraq, and the relation of force levels to costs. NATO members agreed in principle in 2002 that allied forces might be sent beyond Europe to combat threats to member states' security. In May 2002, the allies agreed that "to carry out the fullrange of its missions, NATO must be able to field forces that can move quickly to wherever they areneeded, sustain operations over distance and time, and achieve their objectives." Several monthsearlier, Defense Secretary Donald Rumsfeld, when asked what NATO's area of operations shouldbe, responded, "The only way to deal with the terrorist network that's global is to go after it whereit is." On July 9, 2003, he told the Senate Foreign Relations Committee that the Administrationwould "certainly want assistance from NATO and from NATO countries" in stabilizing Iraq. (1) Thosewho favor a NATO role in Iraq cite the recent precedent of the allied force in Afghanistan. TheInternational Security Assistance Force (ISAF) in Afghanistan has 4,800 troops, including a smallU.S. contingent, that came under NATO command on August 11, 2003. Its commander on theground is a German general. Its objective is to bring stability to Kabul. (An additional 9,000 U.S.forces, not under NATO command, continue combat operations outside Kabul.) In early October2003, NATO agreed in principle to extend the NATO force to the town of Kunduz. Before the conflict in Iraq, some Administration officials made a case for NATO involvement in post-war Iraq. They contended that only NATO had the capability for force generation,intelligence, and planning for a peace operation. NATO has had experience in Bosnia, Kosovo, andAfghanistan in leading stabilization forces. The bombing of U.N. headquarters in Baghdad onAugust 19 may signal a continuation of violent resistance to any outside entity, whether military orcivilian, be it NATO or the U.N. (2) NATO's agreement in principle to send forces outside Europe and the precedent of ISAF mask a range of issues that must be resolved before the European allies might send troops to Iraq. Someallied governments believe that the Bush Administration should have involved NATO more closelyin the conflict in Afghanistan in late 2001 to build an international political base for using militaryforce against terrorism. A more narrow range of allied governments believes that the Administrationoverrode their preference for allowing U.N. WMD inspections to run their course in Iraq in late 2002and 2003, that the Administration pushed aside the U.N. as a centerpiece for building aninternational coalition against the government of Saddam Hussein, and that the Administration wentto war precipitately, without establishing firm evidence of WMD in or Al Qaeda links to Iraq. In February 2003, several allies resisted a U.S. effort to send NATO forces to defend Turkey in the event of an attack by Iraq. They opposed such a move because they viewed it as anAdministration maneuver to imply NATO endorsement of the impending conflict with Iraq. Theseexperiences have led the allies to demand a greater share of decision-making and more authority forthe U.N. in Iraq before committing military forces to that country, issues that will be discussed ina later section of this report. (3) Both President Bush and Secretary of Defense Rumsfeld have previously said that U.S. forces in Iraq are adequate to stabilize the country and to accomplish Administration objectives there. InJune 2003, President Bush said that the United States has in Iraq "the force necessary to deal withthe security situation." On August 20, Secretary Rumsfeld said, "At the moment, the conclusion ofthe responsible military officials is that the force levels are where they should be." (4) Deputy Secretary of Defense Paul Wolfowitz testified to Congress that the purpose of the U.S. occupation is to build "a free, democratic, peaceful Iraq" that will not threaten friends of the UnitedStates with "illegal weapons. A free Iraq that will not be a training ground for terrorists...[and] willnot destabilize the Middle East. A free Iraq can set a hopeful example to the entire region and leadother nations to choose freedom." He added that by bringing in military forces from other countries,U.S. forces could be drawn down. (5) On September23, 2003, in a speech at the U.N., President Bushsaid that "Iraq as a democracy will have great power to inspire the Middle East. The advance ofdemocratic institutions in Iraq is setting an example that others, including the Palestinian people,would be wise to follow." (6) There are views, some within the United States government, that contend that the force levels in Iraq cannot be maintained without severe stress on U.S. forces. The United States Army has 33active-duty combat brigades, of which only three are available today for new missions. Twenty-oneare overseas, including 16 in Iraq. A CBO study released September 3 found that the U.S. Armycould not maintain170,000-180,000 forces in Iraq and Kuwait past March 2004 without activatingmore National Guard and Reserve units, or calling upon foreign forces. General John Abizaid,CENTCOM commander, placed the figure at a lower level. He said that the United States could notsustain the current level of 130,000 troops without rotating active duty, reserve, and National Guardforces into Iraq by spring 2004, absent international forces to replace them. (7) Other estimates put the level of forces needed in Iraq at a higher figure than that given by the Administration. A Rand Corporation official has given an estimate of 300,000-500,000 troops.Former Army Chief of Staff General Eric Shinseki said that several hundred thousand troops wouldbe needed. Some of these estimates do not cite democracy and influence on regional governmentsto develop representative institutions as goals of the occupation; rather, they generally cite "stability"as the key objective. (8) One defense analyst providesa more sobering perspective, noting that the U.S.political as well as military strategy is deficient to bring stability to Iraq. In his view, the UnitedStates lacks properly trained forces, such as peacekeepers and military police, for the job; the essenceof Iraq's need is for civilian training for administrators and establishment of civil institutions, butIraq is now being administered by the Department of Defense, which is not prepared for such amission, according to this view. (9) NATO is providing a measure of assistance in Iraq to Poland, which has formed a multinational force that became operational in part of its originally assigned sector September 3. NATO's NorthAtlantic Council decided on May 21, 2003, to provide Poland allied assets for force planning,communications, logistics, and establishment of a headquarters. The operation is not technically aNATO operation. Poland leads a contingent of 9,000 troops from a variety of countries, some ofwhich are not NATO members, from north of Basra into the central part of the country. Thebombing of a major mosque in Najaf, which took the life of an important Shi'ite cleric, led the U.S.government to delay Poland's takeover of that city, which is in the Polish sector, for at least severalweeks. Some observers, while crediting Warsaw with a willingness to undertake a dangerousmission, believe that some of the forces are not trained to NATO standards. (10) The United States willpay Poland $250 million to cover primarily logistics and communication costs for its force. On August 26, 2003, NATO SACEUR (Supreme Allied Commander Europe) General James Jones floated the idea that the Polish-led force might eventually be expanded and transformed intoa NATO-led force, a step that would require the approval of all allies. (11) Several factors could limit the availability of forces from NATO countries. Several allies -- such as France, Italy, Britain, and Germany -- are already contributing to stability operations inBosnia, Kosovo, the Ivory Coast, and Afghanistan. NATO Secretary General George Robertson,who favors a NATO force for Iraq, has said that a maximum of 80,000 troops from European NATOcountries might be available. A more realistic figure might be in the range of 40,000-50,000, he said,given NATO governments' obligations in current operations. Another key factor that could affect contributions from NATO governments is the limited deployability and sustainability of most of their forces. Only Britain and France have a developedcapability for deploying and sustaining forces. Some allies, such as Germany, have large numbersof conscripts that serve short periods in the armed forces. Such troops are not suitable for servingin a stabilization force. (12) Cost is also a major factor in the effort both to stabilize Iraq and to involve allied governments there. If forces sent to Iraq could stabilize the country and allow the Iraqis to rebuild their economy,then an Iraqi government could eventually assume more of the expense of reconstruction over thelong term. Current operational costs for U.S. forces in Iraq are approximately $4 billion per month. Reconstruction costs would be in addition to this figure. For FY2004, the Administration has askedCongress for $20.3 billion for Iraq's reconstruction, and another for $51 billion for militaryoperations there. (13) Before the war, some Administration officials had predicted Iraq would stabilize quickly after the conflict, and have sufficient revenues to pay for its own rebuilding. On March 27, 2003, DeputyDefense Secretary Wolfowitz told Congress that "we are dealing with a country that can reallyfinance its own reconstruction, and relatively soon." (14) Such a situation might have produced anenvironment where a functioning Iraqi government could have borne more costs, sold industrialassets to private investors in and outside Iraq, and contracted to pay private companies to rebuild thecountry over time. The World Bank estimated in early October 2003 that Iraq would need $36billion through 2007, in addition to the $20.3 billion requested by the Administration, to rebuild. Iraqi oil revenues may reach an annual estimated figure of $14 billion in that period. (15) A donors'conference will be held in Madrid on October 23-24, where an estimated $2 billion will be pledged. European companies appear reluctant to enter Iraq until stability returns, and until a government viewed as "legitimate" is put into place. International oil executives, for example, are openlydoubtful of investing the $30-40 billion estimated to be necessary to rebuild Iraq's petroleumindustry unless there is a legitimate, popularly backed, government in Baghdad with which they cannegotiate contracts in a transparent process. (16) There is a gulf between Administration views and those of most allied governments on sendingEuropean forces to Iraq. There is also a range of views among allied governments. Key Europeangovernments, such as France and Germany, want a strong U.N. role in Iraq, and a new U.N.resolution to outline that role. Several important allies, including France, Germany, and Turkey,opposed the U.S. decision to use force against Iraq, and instead favored continuing the U.N. WMDinspections there. Some NATO governments do not want their forces to serve under U.S. command,especially under U.N. Security Council (UNSC) Resolution 1483, which gives the United States andBritain power as an "occupying" authority. Moreover, most European governments have objectivesthat differ from those of the Administration. In general, they do not believe that, in the currentcontext, building democratic institutions in Iraq and making Iraq a model for peaceful, representativegovernment that will inspire peace in the region, including settlement of the Arab-Israeli conflict,are attainable objectives. They also place strong emphasis on multilateralism, and wish to see thegeneral stature of the United Nations enhanced. On the other hand, some allies, particularlycountries that joined NATO recently, support Administration policy, and wish to forge a long-termstrategic partnership with the United States. Administration officials had previously said that UNSC 1483 was sufficient for introducing a NATO or broader multinational force into Iraq. They continue to oppose any resolution that woulddilute the Coalition Provisional Authority (CPA), established by UNSC 1483 as the "occupying"power, or weaken U.S. military authority. Deputy Secretary of Defense Wolfowitz has said that anew U.N. resolution would be acceptable "provided it doesn't put limitations on what AmbassadorBremer [the U.S. official who heads the CPA] and our people can do in Iraq that are crucial forspeeding up transition to normalcy and allow us to hand over power to Iraqis...." (17) TheAdministration has drafted a new resolution that is now before the UNSC. The draft resolutionreportedly calls for a U.S.-led U.N. stabilization force, and for Iraq's U.S.- appointed GoverningCouncil, working with Ambassador Bremer, to submit a timetable for writing a constitution andholding elections. Secretary Powell said that under the draft resolution, Bremer would continue toplay "a dominant political role." (18) SecretaryPowell has also said that the Governing Council couldoversee drafting of a constitution by spring 2004, with elections by the end of 2004. The U.N. Security Council, which includes France, Russia, and Britain as permanent members with veto powers, has endorsed the current Iraqi Governing Council as a step towards providing theIraqi people real power. Germany is now on the Security Council as a rotating member, having avote but not a veto. The CPA chose the members of the Governing Council. Three governments-- France, Germany, and Russia -- issued a joint statement on May 21, 2003, in which they praisedUNSC 1483 because it gave the U.N. a measure of involvement; placed the action of the CPA underinternational law and limited the CPA's actions; and allowed the U.N. to monitor Iraqi oil revenues. At the same time, they described the resolution as only a first step, asked that the U.N. be given anincreased role, and that a "calendar" be established for putting in place "a legitimate andinternationally recognized administration in Iraq." In addition, they asked that contracts for thereconstruction of Iraq be opened to competitive bidding. (19) The British government's perspective on governing Iraq is in evolution. British forces were actively engaged in Iraq during the conflict. Britain commands a force of approximately 11,000troops in the southern part of the country, and is an "occupying power" under UNSC 1483. At thesame time, Britain has reportedly been more open to a greater U.N. role in Iraq than theAdministration, and a more rapid turnover of power to the Iraqis. London has a keen interest inending European divisions over policy towards Iraq. Britain has reportedly proposed that somemembers of the Governing Council should quickly form a provisional government, then form acommittee to draft a constitution, and prepare for national elections. British Prime Minister TonyBlair is under political pressure for his possible role in creating a dossier that appears to haveprovided misleading information to the House of Commons about weapons of mass destruction inIraq, although Blair insists that this was not intentional. Public support for Blair and for Britain'sinvolvement in Iraq has plunged since the end of the conflict. (20) Among the allies, France has the most explicit requirements for supporting a new U.N. resolution, although French officials say that they will not veto a new U.S. resolution. AmongFrance's conditions for supporting a new resolution are: The U.N. should play the "primary role" in "supplying humanitarian aid, supporting the reconstruction of Iraq, and assisting in the creation of an interim Iraqi authority."Secretary General Annan should replace Ambassador Bremer as the principal outside politicalauthority for Iraq. Iraq must have "a precise calendar" for a process of securing a legitimate government, with no involvement of an outside government or entity in an "arbitrary choice ofleaders." Such a government must be "legitimate" and "pluralist,"with a new constitution writtenunder U.N. auspices. The Governing Council and the cabinet that it has chosen could represent"sovereignty"; within a month, the Governing Council and the cabinet could name a provisionalgovernment. A personal representative of Secretary General Annan would report regularly to the Security Council on conditions in Iraq, and would advise the provisional government on aphased transfer of authority to it. A constitution could be drafted by the end of 2003, under U.N.auspices, and elections could be held in spring 2004. The United States could continue to head an international military force, under U.N. auspices, to bring stability to Iraq. There should be international supervision within international law of Iraqi oil production, "with a transparent mechanism that assures the Iraqi people that they will not bedispossessed of their riches." (21) While the French government has not explicitly opposed a NATO operation, it is clear that France prefers a force mandated by the U.N. with a clear mission. French President Chirac and GermanChancellor Schroeder contend that the U.S. draft resolution gives insufficient authority to the U.N.and to the Iraqi people. France has offered to train the Iraqi military and police, but has indicatedthat it will not send forces to Iraq, nor make a contribution to the donors' conference until atransparent international mechanism for accepting donors' funds is established. A range of views is evident in other countries. The German government has said that it might send troops to Iraq, but that they would not serve under UNSC 1483 because the resolution embodiesthe idea of an "occupying power." Some German officials say, however, that Berlin is more likelyto seek involvement in civilian reconstruction rather than to supply forces; such projects as assistingin institution-building, including a court system, or developing infrastructure such as water and oilpipelines, might be attractive to Germany. Norway has a strong tradition of sending peacekeepingforces, but its government does not want to be associated with the occupying force outlined in UNSC1483. (22) On October 7, 2003, Turkey agreed in principle to send forces to Iraq. The Bush Administration has reportedly asked Ankara for 10,000 troops. However, the Governing Councilopposes a Turkish contingent on the grounds that no neighboring country should send forces, andbecause the Ottoman Empire's control of Iraq until 1919 left a bitter legacy. U.S.-Turkish relationshave been strained since March 2003, when the Turkish parliament refused to allow U.S. forces todeploy to Iraq from Turkish territory. Some Bush Administration officials, including DeputyDefense Secretary Wolfowitz, sharply criticized Turkey as a result. (23) Ankara already has 5,000 troops deployed in northern Iraq to act against Turkish Kurdish elements that have committed acts of terrorism against Turkish interests. These forces are underTurkish, and not U.S., command. There has been tension between Turkish and U.S. forces innorthern Iraq. Foreign Minister Gul has said that there must be "a separate sector under Turkishcommand and a separate chain of command" if more Turkish forces are sent to Iraq. (24) The Spanish government strongly supported the Bush Administration's decision to go to war against Iraq and is now contributing peacekeeping forces. At the same time, Spain has beenimplicitly critical of current Administration policy in Iraq, particularly the Governing Council chosenby U.S. officials. Foreign Minister Palacio has urged immediate efforts to begin a constitutionalprocess in Iraq. "The process cannot be sequestered by the local interests of a small number ofIraqis, nor can it be imposed from without. Iraqis must be the main protagonists throughout.... Animpartial third party, preferably with the intervention of the United Nations, should identify thesestakeholders." (25) A number of NATO members have already sent or will send forces to Iraq. The Italian government will send 3,000 troops to create security zones, serve as military police, and search forweapons of mass destruction. (26) Several European allies, and virtually all the NATO candidate states, place strategic relations with the United States above considerations for a stronger U.N. role. While these governments maydesire a new U.N. resolution that encourages a broader role for multilateral institutions in Iraq, theybelieve that their own future security lies with close relations with the United States. As alreadynoted, Poland may eventually lead a force of approximately 22 countries, some of which are sendingsmall contingents. Polish officials would welcome a general NATO force in Iraq. Hungary and theCzech Republic, among current NATO members, also place great importance on an enhancedstrategic partnership with the United States, and have committed to sending small numbers of troops. On July 10, 2003, the Senate passed an amendment, offered by Sen. Biden, to the ForeignRelations Authorization Act, S. 925 , urging the President to request that NATO "raisea force for deployment in post-war Iraq similar to what it has done in Afghanistan, Bosnia andKosovo...." It also calls upon the U.N. to provide military and police forces "to promote security andstability in Iraq and resources to help rebuild and administer Iraq." The bill is pending in the Senate. In the House, Mr. Bereuter, Mr. Wexler, and Mr. Lantos proposed an amendment identical to theBiden amendment to H.R. 1950 . It was adopted, and the bill was passed on July 16. Members in both houses and both parties have called upon the Administration to send more U.S.troops to Iraq as well. Senator Lugar said on July 29 that "overall the United States mission in Iraqcontinues to hang in the balance," and added that "coalition efforts in Iraq must undergo furtherinternationalization to be successful and affordable." (27) The debate between the United States and some of its European allies over an enhancedEuropean role in Iraq poses a range of problems with important implications. The Administrationdesires international troop contributions, but on terms that do not dilute U.S. political and militarycontrol over Iraq. Administration officials wish to preserve pre-war political objectives: thedemocratization of Iraq; elimination of weapons of mass destruction and terrorist operations; anda residual moderating effect upon the rest of the Middle East, including possible settlement of theArab-Israeli conflict. Key Europeans allies, to some extent including Britain, seek an international force with a strong U.N. voice. Some of these allies doubt, and even disparage as unrealistic, the Administration's goalsof a democratic Iraq and a consequent moderation of Middle Eastern politics by these means. Theyhave openly doubted the existence of an active Iraqi WMD program and any significant connectionbetween the Hussein regime and terrorists. In a broader perspective, virtually all European allieswish to see international problems solved in a multilateral framework, and believe that theAdministration damaged this goal when it cut short U.N. inspections in Iraq and went to war. Thesegovernments wish to restore a measure of credibility to the use of multilateral institutions ininternational affairs. (28) For these reasons, someNATO governments are hesitant to send their troopsto operate under U.S. leadership in Iraq. The conflicting positions of the Bush Administration andthese allies on these points raises the question whether the Administration would alter its positionas a compromise to obtain the 45,000-80,000 European troops that might be available. Some allies, such as Poland and Norway, and most of the seven candidate states for NATO membership, support key elements of Administration policy in Iraq in part because they wish toforge an enduring strategic partnership with the United States. They do not believe that either theEuropean Union or the U.N. can provide for their own security, although EU membership is a vitalinterest for them. Poland, for example, had bad experiences with French (and British) securityguarantees before World War II, and the Warsaw Treaty Organization was an alliance imposed uponcentral Europe that was solely for the benefit of its leader, the Soviet Union. With such recenthistory fresh in their minds, many central European leaders wish to tie themselves closely to theUnited States, although they still wish to see a measure of U.N. involvement in Iraq that will supplyinternational legitimacy to their tasks there. France, most vocally, and Germany are in the forefront of countries calling for a strong U.N. presence and guidance in Iraq. The current French government has aspirations to lead an EU thateventually develops a military capability suitable at least to provide a measure of defense forEuropean countries. President Chirac advocates a "multipolar" world, with the European Unionacting as a pole to balance U.S. power. Few, if any, European governments have expressedenthusiasm about such French leadership and ideas, and many have sharply opposed them. Beyondaspirations for such leadership, France, joined by Germany, has a strong belief that tying themselvesto U.S. leadership in Iraq augurs ill for their relations with a future sovereign Iraqi government, (29) andrisks alienating a broad range of Arab states hostile to the U.S. occupation. France's call for a"pluralistic" government in Iraq is at least a step removed from the U.S. objective of a "democratic"government. France's position on this point is shared in most European capitals, and is likely moreacceptable to Arab governments as well. At the same time, in France, Germany, and other allied states, there are influential voices that do not wish to see the United States fail to bring stability and at least a measure of representativegovernment to Iraq. Several possible gains for European governments are apparent should amoderate Iraq, close to the United States, emerge: a chastened Iran, more hesitant in the pursuit ofweapons of mass destruction and promotion of Islamic radicalism; an intimidated Syria, morecautious in its interference in regional affairs and support for terrorism; and a peace process free ofan Iraqi government adamantly opposed to a settlement of Arab-Israeli differences. Failure of theU.S. effort in Iraq has potentially great negative consequences: further disaffection with U.S.leadership of NATO; a renewal of radical Islam in the Middle East, with regimes hostile to westerngovernments; and exacerbation of tensions in the Arab-Israeli peace process. For these reasons,these observers believe that European governments criticizing the United States should seek anaccommodation over Iraq with the Bush Administration. (30) A wide range of European officials appears to be seeking a compromise. Several options have been suggested. Such a compromise might provide the United States with overall leadership of aU.N.-approved administration and military force in Iraq, but with individual allies in command ofdifferent geographic sectors, as is the case, for example, in Bosnia and Kosovo. It might containelements of the French position, particularly a timetable for elections and establishment of an Iraqigovernment chosen by the Iraqi people or representatives of various groups in Iraq. In addition, thecompromise might include a transparent economic development regime that provides companiesfrom a range of countries access to contracts for reconstruction. Such a compromise could free U.S.forces for availability elsewhere; provide European (and other) governments with a voice in Iraq'sfuture, and legitimacy through a U.N. imprimatur; and shift part of the financial burden forreconstruction from the U.S. government to other governments and to the international privatesector. A key disadvantage for the Bush Administration might be the surrender of some of itspolitical objectives in Iraq, such as the quest for a democratic government, that would be a modelfor the region.

Bush Administration officials have said that they wish to see NATO countries contribute forces to bring stability to Iraq, possibly as part of a U.S.-led NATO or U.N. force. Key European alliessuch as France and Germany would first like to see a new U.N. mandate that would includeobjectives, such as a timetable for turnover of authority to Iraqis and a transparent process forimproving Iraq's petroleum industry, that the Administration now opposes. Some European alliesdo not wish to serve under a U.S. command in Iraq; other European allies already have troops in Iraq. Administration officials are concerned that greater international involvement in governing Iraq could deflect the United States from achieving some of its stated goals for that country's future. Such goals include establishing a democracy there that would influence other Middle Easterngovernments to follow a similar course, and easing of the Arab-Israeli conflict. Some Europeansargue that these goals are unattainable in the framework established by the U.S.-led occupation. Atthe same time, involvement of European forces, if a common outlook could be worked out, couldfree some U.S. forces for other missions, dampen international criticism of U.S. management of Iraq,and spread costs for reconstructing Iraq to other countries and the private sector. See also CRS Report RL31339 , Iraq: U.S. Regime Change Efforts and Post-War Governance , CRS Report RL31701, Iraq: U.S. Military Operations, and CRS Report RL31843(pdf) , Iraq: ForeignContributions to Operation Iraqi Freedom, Peacekeeping Operations, and Reconstruction . This report will be periodically updated.

The Americans with Disabilities Act (ADA) is a broad civil rights act prohibiting discrimination against individuals with disabilities. As stated in the act, its purpose is "to provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities." In 2008, Congress enacted the ADA Amendments Act (ADAAA), P.L. 110-325 , to address Supreme Court decisions which interpreted the definition of disability narrowly. On September 23, 2009, the Equal Employment Opportunity Commission (EEOC) issued proposed regulations under the ADA Amendments Act. Comments on the proposed regulations must be submitted on or before November 23, 2009. Prior to a discussion of the proposed regulations, it is helpful to briefly examine the new statutory definition of disability. The ADAAA defines the term disability with respect to an individual as "(A) a physical or mental impairment that substantially limits one or more of the major life activities of such individual; (B) a record of such an impairment; or (C) being regarded as having such an impairment (as described in paragraph (3))." Although this is essentially the same statutory language as was in the original ADA, P.L. 110-325 contains new rules of construction regarding the definition of disability, which provide that the definition of disability shall be construed in favor of broad coverage to the maximum extent permitted by the terms of the act; the term "substantially limits" shall be interpreted consistently with the findings and purposes of the ADA Amendments Act; an impairment that substantially limits one major life activity need not limit other major life activities to be considered a disability; an impairment that is episodic or in remission is a disability if it would have substantially limited a major life activity when active; and the determination of whether an impairment substantially limits a major life activity shall be made without regard to the ameliorative effects of mitigating measures, except that the ameliorative effects of ordinary eyeglasses or contact lenses shall be considered. The ADA Amendments Act, which states that the definition of disability shall be construed broadly, and which specifically rejects portions of the EEOC's ADA regulations, necessitated regulatory changes. The major changes made to the regulations include specific examples of impairments that will consistently meet the definition of disability, changes in the definition of the term "substantially limits," and expansion of the definition of "major life activity" including changes to the concept of the major life activity of working. The EEOC also amended its interpretative guidance for Title I of the ADA. The ADA definition of disability is a functional definition, not a categorical definition. The EEOC's proposed regulatory definition reiterates the statutory definition and provides guidance on its interpretation. Noting that "disability is determined based on an individualized assessment," the EEOC provides examples of impairments that will consistently meet the definition of disability, and examples of impairments that may be disabling for some individuals but not for others. The EEOC notes that these lists are illustrative, and other types of impairments that are not listed may consistently meet the definition of disability. Examples are also provided of impairments that are usually not disabilities. EEOC states that the following listed impairments will consistently meet the definition of disability: autism, cancer, cerebral palsy, diabetes, epilepsy, HIV or AIDS, multiple sclerosis and muscular dystrophy, major depression, bipolar disorder, post-traumatic stress disorder, obsessive compulsive disorder, and schizophrenia. The EEOC examples of impairments that may be disabling for some individuals but not for others include the following: asthma, high blood pressure, learning disabilities, back or leg impairments, carpal tunnel syndrome, and hyperthyroidism. "Temporary, non-chronic impairments of short duration with little or no residual effects (such as the common cold, seasonal or common influenza, a sprained joint, minor and not-chronic gastrointestinal disorders, or a broken bone that is expected to heal completely) usually will not substantially limit a major life activity." EEOC's listing of specific impairments that "will consistently meet the definition of disability" could arguably be seen as contrary to the ADA's statutory definition. One commentator contends that this may mean that an employer would have no argument against coverage of the listed disabilities and, therefore, this approach is contrary to the ADA's individualized assessment approach. However, the EEOC appendix to the proposed regulations notes that, under the ADA, disability is determined based on an individualized assessment, and that the proposed regulation "recognizes, and offers examples to illustrate, that characteristics associated with some types of impairments allow an individualized assessment to be conducted quickly and easily, and will consistently render those impairments disabilities." It is also interesting to note that in its list of conditions that will usually not substantially limit a major life activity, the EEOC included seasonal or common influenza. It did not discuss whether pandemic influenza would be covered. However, in separate guidance, the EEOC found that H1N1, as currently experienced, would not be interpreted as a disability. The ADA Amendments Act states that the purposes of the legislation are to carry out the ADA's objectives of the elimination of discrimination and the provision of "'clear, strong, consistent, enforceable standards addressing discrimination' by reinstating a broad scope of protection available under the ADA." P.L. 110-325 rejects the Supreme Court's holdings that mitigating measures are to be used in making a determination of whether an impairment substantially limits a major life activity as well as holdings defining the "substantially limits" requirements. The substantially limits requirements of Toyot a Motor Manufacturing v. Williams , as well as the existing EEOC regulations defining substantially limits as "significantly restricted," are specifically rejected in the new law. The current EEOC regulations state that three factors should be considered in determining whether an individual is substantially limited in a major life activity: the nature and severity of the impairment, the duration or expected duration of the impairment, and the permanent or long-term impact of the impairment. The proposed regulations do not contain these factors. They state that an impairment is a disability "if it substantially limits the ability of an individual to perform a major life activity as compared to most people in the general population. An impairment need not prevent, or significantly or severely restrict, the individual from performing a major life activity in order to be considered a disability." The Senate Managers' Statement for the ADAAA discussed the meaning of substantially limited and, after quoting from the committee report for the original 1990 ADA, stated, "We particularly believe that this test, which articulated an analysis that considered whether a person's activities are limited in condition, duration and manner, is a useful one." It could be argued that the EEOC's proposed regulations do not conform with congressional intent. The EEOC, in its proposed appendix to the proposed regulations, notes that the Senate Managers' Report does make reference to the "condition, duration and manner" analysis, but argues that congressional intent to override the Supreme Court's Toyota decision is best served by an elimination of this analysis. The House debate contains a colloquy between Representatives Pete Stark and George Miller on the subject of the meaning of "substantially limits" in the context of learning, reading, writing, thinking, or speaking. The colloquy finds that an individual who has performed well academically may still be considered an individual with a disability. Representative Stark stated the following: Specific learning disabilities, such as dyslexia, are neurologically based impairments that substantially limit the way these individuals perform major life activities, like reading or learning, or the time it takes to perform such activities often referred to as the condition, manner, or duration. This legislation will reestablish coverage for these individuals by ensuring that the definition of this disability is broadly construed and the determination does not consider the use of mitigating measures. The EEOC's proposed regulations echo this colloquy, specifically stating the following: An individual with a learning disability who is substantially limited in reading, learning, thinking, or concentrating compared to most people, as indicated by the speed or ease with which he can read, the time and effort required for him to learn, or the difficulty he experiences in concentrating or thinking, is an individual with a disability, even if he has achieved a high level of academic success, such as graduating from college. The determination of whether an individual has a disability does not depend on what an individual is able to do in spite of an impairment. The ADA Amendments Act specifically lists examples of major life activities including caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, and working. The act also states that a major life activity includes the operation of a major bodily function. The House Judiciary Committee report indicates that "this clarification was needed to ensure that the impact of an impairment on the operation of major bodily functions is not overlooked or wrongly dismissed as falling outside the definition of 'major life activities' under the ADA." There had been judicial decisions which found that certain bodily functions had not been covered by the definition of disability. For example, in Furnish v. SVI Sys., Inc. the Seventh circuit held that an individual with cirrhosis of the liver due to infection with Hepatitis B was not an individual with a disability because liver function was not "integral to one's daily existence." The proposed EEOC regulations echo the statutory listing of major life activities and add sitting, reaching, and interacting with others, noting that this list is illustrative, not exhaustive. The House Education and Labor Committee report provided examples for major life activities that were not included in the statutory language, and included reaching and interacting with others. The House report also included examples not in the proposed regulations: writing, engaging in sexual activities, drinking, chewing, swallowing, and applying fine motor coordination. The ADA Amendments Act includes working as an example of a major life activity. What it means to be substantially limited in the major life activity of working is also addressed by the EEOC's proposed regulations. The EEOC notes that usually an individual with a disability will be substantially limited in another major life activity so that it would be unnecessary to determine whether the individual was substantially limited regarding working. However, where that is not the case, the EEOC proposes that "[a]n impairment substantially limits the major life activity of working if it substantially limits an individual's ability to perform, or to meet the qualifications for, the type of work at issue." The EEOC also states that this interpretation is to be construed broadly and should "not demand extensive analysis." "Type of work" is described in the EEOC's proposed appendix as including "the job the individual has been performing or for which he is applying, and jobs that have qualifications or job-related requirements which the individuals would be substantially limited in performing as a result of the impairment." Prior to the enactment of the ADAAA, some courts had required a statistical analysis of the availability of certain jobs in order to determine whether an individual was substantially limited in the major life activity of working. The EEOC states that this statistical analysis will no longer be needed. Using the proposed "type of work" standard, the EEOC envisions courts using evidence from the individual regarding his or her educational and vocational background and the limitations of the impairment. Generally, the EEOC would not consider necessary expert testimony concerning the types of jobs in which an individual is substantially limited. As discussed, the terms "class of jobs" and "broad range of jobs in various classes," which are in the existing regulations, are eliminated in the proposed regulation in favor of the term "type of work." The EEOC describes this change as "more straightforward and easier to understand" as well as being consistent with congressional intent for broad coverage. However, this change has been described as "the most problematic issue arising from the EEOC's proposed regulations" since it is not predicated on specific statutory language or legislative history. It could be argued, as EEOC notes, that the change is consistent with congressional intent that the focus of an ADA case should be on whether discrimination has occurred, not on whether the individual has met the definition of disability. Such a change in the regulations could have a significant effect on judicial determinations.

The Americans with Disabilities Act (ADA) is a broad civil rights act prohibiting discrimination against individuals with disabilities. As stated in the act, its purpose is "to provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities." In 2008, Congress enacted the ADA Amendments Act (ADAAA), P.L. 110-325, to address Supreme Court decisions which interpreted the definition of disability narrowly. On September 23, 2009, the Equal Employment Opportunity Commission (EEOC) issued proposed regulations under the ADA Amendments Act. Comments on the proposed regulations must be submitted on or before November 23, 2009. The ADA Amendments Act, which states that the definition of disability shall be construed broadly and which specifically rejects portions of the EEOC's ADA regulations, necessitated regulatory changes. The major changes made to the regulations include specific examples of impairments that will consistently meet the definition of disability, changes in the definition of the term "substantially limits," and expansion of the definition of "major life activity" including changes to the concept of the major life activity of working. The EEOC also amended its interpretative guidance for Title I of the ADA.

The purpose of contemporary, structured mentoring programs is to reduce risks by supplementing (but not supplanting) a youth's relationship with his or her parents. These programs are administered by mostly adult volunteers who are recruited by youth-serving organizations, faith-based organizations, schools, and after-school programs. Some of these programs have broad youth development goals, while others focus more narrowly on a particular outcome such as reducing gang activity or substance abuse, or improving grades. Research has shown that mentoring programs have been associated with some positive youth outcomes, but that the long-term ability of mentoring to produce particular outcomes and the ability for mentored youth to sustain gains over time are less certain. Since the mid-1990s, Congress supported mentoring programs for the most vulnerable youth. The Department of Justice's (DOJ's) Juvenile Mentoring Program (JUMP), the first such program, was implemented in 1994 to provide mentoring services for at-risk youth ages 5 to 20. Although there is no single overarching policy today on mentoring, the federal government has supported multiple mentoring efforts for vulnerable youth since JUMP was discontinued in FY2003. Previously, two mentoring programs--the Mentoring Children of Prisoners (MCP) program and Safe and Drug Free Schools (SDFS) Mentoring program--provided a significant source of federal funding for mentoring services. However, the programs were short-lived: the MCP was administered by the Department of Health and Human Services (HHS) from FY2003 through FY2011 and the SDFS program was administered by the Department of Education (ED) from FY2002 through FY2010. The federal government currently funds mentoring efforts through short-term grants and initiatives, primarily carried out by DOJ. DOJ has allocated funding for multiple initiatives through its Mentoring program, including mentoring for certain vulnerable youth and research on mentoring. In addition, the federal government has provided funding to programs with vulnerable youth that have a strong, but not exclusive, mentoring component. Youth ChalleNGe, an educational and leadership program for at-risk youth administered by the Department of Defense (DOD), helps to engage youth in work and school, and leadership opportunities. Adult mentors assist enrolled youth with their transition from the program for at least one year. Finally, federal agencies coordinate on mentoring issues. The Federal Mentoring Council was created in 2006 to address the ways agencies can combine resources and training and technical assistance to federally administered mentoring programs, and to serve as a clearinghouse on mentoring issues for the federal government. The council has been inactive since 2008. This report begins with an overview of the goals of mentoring, including a brief discussion on research of structured mentoring programs. The report then describes the evolution of federal policies on mentoring since the early 1990s. The report provides an overview of the federal mentoring initiatives that are currently funded. While additional federal programs and policies authorize funding for mentoring activities, among multiple other activities and services, such programs are not discussed in this report. The report concludes with an overview of issues that may be of interest to Congress. These issues include the limitations of research on outcomes for mentored youth, the quality of mentoring programs, and the potential need for additional mentors. Mentoring refers to a relationship between two or more individuals in which at least one of those individuals provides guidance to the other. In the context of this report, mentoring refers to the relationship between a youth and an adult who supports, guides, and assists the youth. Youth can receive mentoring through informal and formal relationships with adults. Informal relationships are those that develop from a young person's existing social network of teachers, coaches, and family friends. This report focuses on formal mentoring relationships for vulnerable youth. These relationships are cultivated through structured programs sponsored by youth-serving organizations, faith-based organizations, schools, and after-school programs. Approximately 4.5 million youth are in structured mentoring relationships. Volunteers in structured programs are recruited from communities, religious organizations, and the workplace, and undergo an intensive screening process. Youth eligible for services through structured mentoring programs are often identified as at "high risk" of certain negative outcomes. The goal of modern structured mentoring programs is to reduce risks by supplementing, but not replacing, a youth's relationship with his or her parents. Some programs have broad youth development goals, while others focus more narrowly on a particular outcome such as reducing gang activity or substance abuse, or improving grades. Structured mentoring programs are often community based , meaning that mentored youth and adults engage in community activities (e.g., going to the museum and the park, playing sports, playing a board game, and spending time together outside of work and school). Other programs are characterized as school based because they take place on school grounds or some other set location, like a community center. The co-location of mentoring programs in schools facilitates relationships with teachers, who can meet with mentors and refer youth to the programs. Mentors provide academic assistance and recreational opportunities and expose youth to opportunities that promote their cognitive and emotional development. The origin of today's structured mentoring programs is credited to the efforts of charity groups that formed during the Progressive Movement of the early 1900s. These groups sought adult volunteers for vulnerable youth--defined at the time as youth who were poor or had become involved in the juvenile court system. These early organizations provided practical assistance to youth, including help with finding employment, and created recreational outlets. The most prominent mentoring organization at the time, Big Brothers (now known as Big Brothers Big Sisters of America), continues today as the oldest mentoring organization in the country. The contemporary youth mentoring movement began in the late 1980s with the support of foundations and corporations, including Fannie Mae, Commonwealth Fund, United Way of America, Chrysler, Procter & Gamble, and the National Urban League. In addition, nongovernmental organizations such as One to One in Philadelphia and Project RAISE in Baltimore were established by entrepreneurs seeking to expand mentoring services to vulnerable youth. The federal government has supported structured mentoring programs and initiatives since the beginning of the contemporary mentoring movement. At that time, mentoring was becoming increasingly recognized by the government as a promising strategy to enrich the lives of youth, address the isolation of youth from adult contact, and provide one-to-one support for the most vulnerable youth, particularly those living in poverty. Among the first projects undertaken by the federal government was a youth mentoring initiative in the early 1990s implemented by the newly created Points of Light Foundation, a federally-funded nonprofit organization that promotes volunteering. Then-Secretary of Labor Elizabeth Dole made the case for mentoring as a way to improve the lives of youth and prepare them for the workforce. Other early initiatives included the Juvenile Mentoring Program, or JUMP. The federal government also signaled the importance of mentoring during the 1997 Presidents' Summit, which was convened by the living Presidents (at the time) to pledge their support for policies that assist youth. The Presidents and other national leaders called for adults to volunteer as mentors for over 2 million vulnerable youth. Studies of structured mentoring programs, including those that have received federal funding, indicate that the programs are most successful when they include a strong infrastructure and facilitate caring relationships. Infrastructure refers to a number of activities including identifying the youth population to be served and the activities to be undertaken, screening and training mentors, supporting and supervising mentoring relationships, collecting data on youth outcomes, and creating sustainability strategies. The mentor screening process provides programs with an opportunity to select those adults most likely to be successful as mentors by seeking volunteers who can keep their time commitments and value the importance of trust. Further, these studies assert that orientation and training ensure youth and mentors share a common understanding of the adult's role and help mentors develop realistic expectations of what they can accomplish. Ongoing support and supervision of the matches assist mentored pairs in negotiating challenges. Staff can help the pairs maintain a relationship over the desired period (generally a year or more), and assist them in bringing the match to a close in a way that affirms the contributions to the relationship of both the mentor and youth. According to the research literature, successful programs are known to employ strategies to retain the support of current funders and garner financial backing from new sources. Finally, the studies demonstrate that successful programs attempt to measure any effects of mentoring services on the participating youth. Programs can then disseminate these findings to potential funders and participants. Research on youth mentoring demonstrates that mentoring relationships are likely to promote positive outcomes for youth and avoid harm when they are close, consistent, and enduring. Closeness refers to a bond that forms between the youth and mentor, and has been found to have benefits for the youth. Mentor characteristics--such as prior experience in helping roles or occupations, an ability to appreciate salient socioeconomic and cultural influences, and a sense of efficacy for mentoring youth--appear to facilitate close mentoring relationships. Consistency refers to the amount of time mentors and youth spend together. Regular contact has been linked to positive youth outcomes, and relationships tend to be strong if they last one year or longer. Youth in relationships that lasted less than six months showed declines in functioning relative to their non-mentored peers. A 2011 analysis assessed findings from 73 mentoring evaluations to determine the effectiveness of mentoring generally. The analysis reviewed evaluations, published between 1999 and 2010, of mentoring programs that were intended to promote positive youth outcomes through relationships between children and youth under age 18 and adults (or older youth) serving as mentors. The analysis examined programs that used various formats and strategies--including those that used paid mentors, older mentors, and group formats--and took place for a relatively brief period (e.g., a few months) through a longer period. Each of the evaluations included a comparison group of youth who were not mentored. In some programs, the youth were randomly assigned to participate in the comparison group, while in other programs the comparison group consisted of youth who did not participate in the mentoring program. There is wide consensus that using random assignment allows researchers to best estimate the impact of an intervention such as mentoring. The researchers found that overall, the programs resulted in modest gains for youth. According to the analysis, the programs tended to have positive effects on outcomes across multiple categories, including academics and education, attitudes and motivation, social skills and interpersonal relationships, and psychological and emotional status, among other categories. Seven of the studies included follow-up assessment of youth outcomes after they had completed the program, with an average follow-up period of about two years. The studies showed an enduring positive effect of participating in the programs that were evaluated. Further, the analysis pointed to factors that influence the effectiveness of mentoring programs. These include whether (1) participating youth have preexisting difficulties, such as delinquent behavior, or are exposed to significant environmental risk (not defined, but presumably referring to the home and community in which the youth resides); (2) programs serve greater proportions of males; (3) mentors' educational or occupational backgrounds are well matched to the goals of the program; (4) mentors and youth are paired based on mutual interests, such as career interests; and (5) mentors serve as advocates and teachers to provide guidance to youth and to help ensure their overall welfare. The analysis ultimately found that a broad range of mentoring programs can benefit youth across a number of domains. At the same time, it raised other considerations. For example, few evaluations assessed key outcomes that are of interest to policymakers, such as educational attainment, juvenile offending, and obesity prevention. In addition, few evaluations addressed whether youth sustained the gains they made in the program at later points in their development. The researchers point out that despite the positive effect of the programs overall, the effect is small. Some studies have shown strong gains for youth who are mentored. A study in 1995 of the Big Brothers Big Sisters of America program compared outcomes of eligible youth who were randomly selected to receive mentoring services. The study found that 18 months after the youth were assigned to their groups, the mentored youth skipped half as many days of school. In addition, the mentored youth were 46% less likely than their control group counterparts to use drugs, 27% less likely to initiate alcohol use, and almost one-third less likely to hit someone. A 2002 review of studies of major community-based programs (the 1995 Big Brothers Big Sisters evaluation and evaluations of Across Ages, Project BELONG, and Buddy System, among others) with an experimental design found that certain outcomes for youth with a mentor were better than outcomes for their counterparts without a mentor. These outcomes included the following: Improved educational outcomes: Youth in the year-long Across Ages mentoring program showed a gain of more than a week of class attendance. Evaluations of the program also showed that mentored youth had better attitudes toward school than non-mentored youth. Reduction in some negative behaviors: All studies that examined delinquency showed evidence of reducing some, but not all, of the tracked negative behaviors. Mentored youth in the BELONG program committed fewer misdemeanors and felonies than non-mentored youth. In the Buddy System program, youth with a prior history of criminal behavior were less likely to commit a major offense compared to their non-mentored counterparts with a prior history. Improved social and emotional development: Youth in the Across Ages program had significantly more positive attitudes toward the elderly, the future, and helping behaviors than non-mentored youth. Participants in the Big Brothers Big Sisters program felt that they trusted their parents more and communicated better with them, compared to their non-mentored peers. Similarly, a 2007 study of Big Brothers Big Sisters school-based mentoring programs, with adults serving as mentors, demonstrated some positive results. This study--among the most rigorous scientific evaluations of a school-based mentoring program--found that mentored youth (randomly selected into the treatment group) made improvements in their first year in overall academic performance, feeling more competent about school, and skipping school less, among other areas, compared to their non-mentored counterparts (randomly selected into the control group). Although research has documented some benefits of mentoring, findings from some studies show that mentoring is limited in improving all youth outcomes. The 2002 review of mentoring program evaluations found that programs did not always make a strong improvement in grades and that some negative behaviors--stealing or damaging property within the last year--were unaffected by whether the youth was in a mentoring program. In the 2007 Big Brothers Big Sisters school-based mentoring evaluation, the non-school related outcomes, including substance use and self-worth, did not improve. Research has also indicated that mentored youth make small gains or do not sustain positive gains over time. The 2007 Big Brothers Big Sisters school-based mentoring evaluation found that, in the second year of the program, none of the academic gains were maintained (however, mentored youth were less likely to skip school, and more likely to feel that they would start and finish college). The evaluation also pointed to weaknesses in the program's design, such as high attrition (due likely to the transitioning for some youth to middle school, or high school), limited contact with mentors and youth over the summer, and delays in beginning the program at the start of the school year. A 2008 study of Big Brothers Big Sisters school-based mentoring that used high school students as mentors and drew on data used for the 2007 study, found that while the mentored students experienced gains on some outcomes, the improvements were not sustained for students who ended their involvement in the program after one school year (the minimum time commitment). Similarly, an evaluation of the discontinued federal school-based mentoring program (funded from FY2002 through FY2009) demonstrated that the program did not have an impact on students overall in terms of interpersonal relationships, academic outcomes, and delinquent behaviors. The remainder of this report provides an overview of federal efforts to support mentoring, as well as a discussion of mentoring issues. The federal government does not have an overarching strategy or coordinated approach to mentoring, and the major mentoring program is administered by DOJ. As noted previously, DOJ is the first federal department to have funded a structured mentoring program. The 1992 amendments ( P.L. 102-586 ) to the Juvenile Justice and Delinquency Prevention Act (JJDPA) added Part G to the act, authorizing the Office of Juvenile Justice and Delinquency Prevention (OJJDP) to establish a mentoring program, which came to be known as the Juvenile Mentoring Program (JUMP). The program was created in response to the perception that youth in high-crime areas would benefit from one-on-one adult relationships. The objectives of JUMP were to reduce juvenile delinquent behavior and improve scholastic performance, with an emphasis on reducing school dropout. From FY1994 through FY2003, Congress appropriated a total of $104 million to the program. Annual funding ranged from $4 million to $15.8 million. JUMP was repealed by the 21 st Century Department of Justice Appropriations Authorization Act ( P.L. 107-273 ). This law incorporated the Juvenile Justice and Delinquency Prevention Act of 2001 ( H.R. 1900 ) from the 107 th Congress, which eliminated several juvenile justice programs, including Part G (Mentoring), and replaced it with a block grant program under a new Part C (Juvenile Delinquency Prevention Block Grant Program, to be used for activities designed to prevent juvenile delinquency). The act also created a new Part E (Developing, Testing, and Demonstrating Promising New Initiatives and Programs). According to the accompanying report for H.R. 1900 , the relatively small amount of funding appropriated for JUMP may have been a factor in its elimination. The report states: "In creating this block grant, the [Senate Judiciary] Committee has eliminated separate categorical programs under current law.... Funding for the Part E--State Challenge Activities and Part G--Mentoring Program received minimal funding." The report goes on to say that the committee does not discourage mentoring activities under Part C. After the JUMP program was discontinued with the end of FY2003, the Bush Administration requested funding for mentoring under Part C and Part E of the JJDPA. However, in the years since JUMP's discontinuation, Congress has appropriated mentoring funds under a separate mentoring line item titled "Mentoring Part G," "Mentoring," or "Mentoring Grants"; the line item does not specify under which part of the JJDPA the funding is authorized. The JUMP Program ended in FY2003 and Congress resumed funding for DOJ mentoring in FY2005. Table 1 shows funding from FY2008 through FY2017; Congress has provided $70.0 million to $102.8 million annually in these years. The FY2017 appropriation for the DOJ Mentoring program totaled $80 million. Of this amount, $66.4 million was available for the program, and another $13.6 million was used for other purposes within the Office of Justice Programs (management and administration, peer review, research set-aside, and tribal set-aside). The program funds were used as follows: $61.7 million for grants to provide mentoring services to youth; $778,503 for research activities; and $4.0 million for training and technical assistance, including the Mentoring Resource Center. Table 2 summarizes the purpose, goals, and funding levels for the grants that totaled $61.7 million. The table includes funding for mentoring by organizations with programs that have a national presence (National Mentoring Programs), operate in multiple states (Multi-State Mentoring Initiative), operate locally in collaboration with other mentoring providers (Collaborative Mentoring Programs), or serve specific groups of youth who are at risk (Mentoring for Child Victims of Commercial Sexual Exploitation and Domestic Sex Trafficking Program and Practitioner-Researcher Partnership in Cognitive Behavioral Mentoring Program). The Corporation for National and Community Service (CNS) is an independent federal agency that administers programs to support volunteer services. CNS is authorized by two statutes: the National and Community Service Act (NCSA, P.L. 101-610 ) of 1990, as amended, and the Domestic Volunteer Service Act (DVSA, P.L. 93-113 ) of 1973, as amended. Though CNS does not administer a program explicitly for mentoring, the agency has provided funding for mentoring, among other purposes, through two of its volunteer organizations, AmeriCorps and SeniorCorps. AmeriCorps members serve directly as mentors (through the AmeriCorps State and National program) or focus their efforts on building the capacity of mentoring organizations to increase the number of children they serve (through the AmeriCorps Vista program). SeniorCorps, through its RSVP and Foster Grandparents programs, provides mentoring to children and youth from disadvantaged backgrounds, including children of prisoners. CNS also leads federal efforts to promote National Mentoring Month, which is intended to raise awareness of mentoring, recruit individuals to mentor, and promote the growth of mentoring by recruiting organizations to engage their constituents in mentoring. The Serve America Act ( P.L. 111-13 ), which amended NCSA and DVSA, authorizes funding for programs in which mentoring is a permissible activity, among several other activities. For example, the law provides that AmeriCorps can fund new programs--including the Education Corps, Clean Energy Services Corps, and Veterans Corps--that can be used for mentoring, among other activities. In addition, the law authorizes the program to fund initiatives that seek to expand the number of mentors for disadvantaged youth, as defined under the act. Separately, CNS hosts a website ( http://www.nationalservice.gov/mentor ) to connect potential mentors with mentoring programs. The website is operated by the nonprofit organization MENTOR: The National Mentoring Partnership. The Youth ChalleNGe Program is a quasi-military training program administered by the Army National Guard to improve outcomes for youth who have dropped out of school or have been expelled. Mentoring is a major and required component of the program. Youth ChalleNGe was established as a pilot program under the National Defense Authorization Act for FY1993 ( P.L. 102-484 ), and Congress permanently authorized the program under the National Defense Authorization Act for FY1998 ( P.L. 105-85 ). Congress has since provided an annual appropriation for the program as part of the Department of Defense authorization acts. Currently, 40 sites operate in 29 states, the District of Columbia, and Puerto Rico. See Table 3 for further funding information. Youth are eligible for the ChalleNGe program if they are ages 16 to 18 and enroll prior to their 19 th birthday; have dropped out of school or been expelled; are unemployed; are not currently on parole or probation for anything other than juvenile status offenses and not serving time or awaiting sentencing; and are drug free. In recent years, nearly 9,000 cadets (students) have graduated annually. The program consists of three phases: a two-week pre-program residential phase where applicants are assessed to determine their potential for completing the program; a 20-week residential phase; and a 12-month post-residential phase. During the residential phase, cadets work toward their high school diploma or General Equivalency Diploma (GED) and develop life-coping, job, and leadership skills. They also participate in activities to improve their physical well-being, and they engage in community service. Youth develop a "Post-Residential Action Plan (P-RAP)" that sets forth their goals, as well as the tasks and objectives to meet those goals. The post-residential phase begins when graduates return to their communities, continue in higher education, or enter the military. The goal of this phase is for graduates to build on the gains made during the residential phase and to continue to develop and implement their P-RAP. Within six months of graduation, nearly three-quarters of graduates in 2015 went on to additional education, work, military service, or a combination of these activities. A core component of the post-residential phase is mentoring in which a cadet works with a mentor to meet his or her goals set forth in the P-RAP. Parents and youth are asked to nominate at least one prospective mentor prior to acceptance into the program. They are advised to identify an individual who is respected by the youth and would be a good role model. Cadets tend to know their mentors before enrolling in the program; however, members of an applicant's immediate family or household and ChalleNGe staff members and their spouses are not eligible to become mentors. By week 13 of the residential phase, and prior to the formal matching of a cadet and a mentor, programs are required to use a National Guard-approved curriculum to train the mentors and the cadets for their roles and responsibilities during the formal mentoring relationship. Mentors must be at least 21 years old, of the same gender as the youth (unless otherwise approved by the director of the program), and within reasonable geographic proximity. Mentors must also undergo a background check that includes two reference checks, an interview, and a criminal background investigation. In some programs, the mentors are required to initiate the background investigation and have the results provided to the program prior to their acceptance as a mentor. Mentors and cadets begin weekly contact during the last two months of the residential phase and maintain monthly contacts during the post-residential phase. They are encouraged to participate in community service activities or job placement activities. Although the program prefers that the pair meet in person, contact may be made by telephone calls or letters. Mentors report each month during the post-residential phase about the cadets' placement activities, progress toward achieving their goals, and the activities associated with the mentoring relationship. Some programs also require the cadets to report monthly about their progress. At the end of the post-residential phase, an exit interview is conducted between program staff and the mentor, and the match is formally concluded. Youth ChalleNGe was evaluated by Manpower Development Research Corporation (MDRC), a social policy research organization. The evaluation began in 2005, when 12 state ChalleNGe sites agreed to participate in the evaluation. The evaluation used a random assignment research design, whereby youth were randomly selected to receive the treatment (i.e., to participate in the program) or to a control group that did not participate in the program. The results of the evaluation are based on a survey administered about nine months, 21 months, and three years after the members of the program and control groups entered the study. MDRC issued reports after each survey wave. The reports issued following the first two waves found that youth in the program group had higher education attainment and a stronger work history than the control group. The report issued following the third wave showed that these favorable outcomes persisted at the three-year mark. Those who enrolled in Youth ChalleNGe were significantly more likely to have earned a GED (but not necessarily a high school diploma), to have earned any college credit, to be employed, to have higher earnings, and to be working. Although the earlier reports found positive impacts on criminal justice involvement and health, these impacts faded over time. At the three-year survey, about half of youth in both the program and control groups reported ever having been arrested and about two-thirds of each group reported being in good or excellent health. Further, on some outcomes, there were few statistically significant differences between the treatment and control groups or the outcomes were worse for the treatment group, including that that they were more likely to not use birth control or had tried illegal drugs other than marijuana. The RAND Corporation, a nonprofit policy think tank, is examining the extent to which the ChalleNGe program can develop metrics to measure longer-term outcomes--beyond three years--to determine how the program impacts both individuals and communities. RAND separately conducted a cost-benefit analysis of the program between 2005 and 2008. This analysis looked at 10 ChalleNGe sites in 10 states. This report concluded that the program generates labor market earnings and other benefits of $2.66 for every dollar expended on the program and an estimated return on investment of 166%. Issues that may be relevant to any discussions around the federal role in mentoring include the limitations of research on outcomes for mentored youth and the potential need for additional mentors, particularly for vulnerable populations. A few positive evaluations of mentoring programs may provide justification for federal support of these programs. The study of community-based mentoring programs at select Big Brothers and Big Sisters chapters found that mentored youth were less likely than their non-mentored counterparts to use drugs and alcohol, hit someone, and skip school, among other outcomes. The evaluation of the Big Brothers Big Sisters school-based mentoring program found similar results for mentored youth. Nonetheless, findings from these and other studies show that mentoring did not improve some academic and other tracked outcomes. The long-term influence of mentoring for youth is unknown. The 1995 study tracked youth for 18 months, which is among the longest periods of time mentored youth have been studied. No study appears to address issues around how well youth transition to adulthood, such as whether they attend college or secure employment. Further, studies of mentoring programs have shown that some gains made by mentored youth, compared to their non-mentored counterparts, were short-lived and that mentored youth did not improve in certain areas. Still, these improvements, albeit temporary and limited to certain outcomes, may be a worthwhile public policy goal. A related issue is the design of mentoring evaluations. For example, concerns have been raised about the methodology used in the evaluation of the federal Safe and Drug-Free Schools mentoring program. One concern was that grantees were not randomly selected. As noted, random selection can help researchers determine whether an intervention, such as mentoring, leads to any differences in outcomes between those who receive the intervention and those who do not. Grantees involved in the study "reported being less focused on improving students' academic outcomes and on teaching risk avoidance" than grantees generally, even though these domains were the focus of the evaluation. The grantees selected for the evaluation were more likely to serve females and more Asian, Latino, and Pacific Islander students but fewer white students than grantees overall. The grantees were also more likely to be school districts, compared to nonprofit or community-based organizations. They also tended to have more years of experience running school mentoring and serving more students. These differences may in fact have led to outcomes that were not representative of the entire pool of grantees nationally. Further, some mentored youth in the SDFS mentoring program did not receive certain services that were tied to the outcomes of the study. For example, 43% of the mentored students reported working frequently with their mentors on academics while 21% never worked on academics. Still, it is unclear whether school-based mentoring programs should be tasked with improving both academic outcomes and certain other outcomes, like reducing involvement in gangs and other risky behaviors. Another possible limitation of the SDFS mentoring evaluation was its design. Although the SDFS mentoring evaluation used random assignment, whereby youth were randomly assigned to the treatment (i.e., SDFS mentoring) or the control group (no SDFS mentoring), over one-third of the control group received mentoring, either from the SDFS grantee or from other organizations in the community. This finding raises questions about the extent to which the evaluation could have assessed the true effects of the program, since the outcomes for the control group may have been influenced by the participation of some of the youth in mentoring programs. According to the study, this may have "led to some dilution of the impacts on students compared to expectations." The program delivery for the SDFS mentoring program also did not appear to have adhered to certain established best practices in mentoring, such as matches that lasted one year or more and ongoing training for mentoring. The average length of the mentoring relationship for students surveyed was 5.8 months, and on average, students were not assigned their mentor until about five weeks after they were randomly assigned to the treatment group. Ongoing training did not appear to be widely available. Approximately 41% of mentors reported that ongoing training was available after they begun meeting regularly with their students. This is in contrast to recommendations by researchers in mentoring that mentors receive support and ongoing training after matches have been established. Still, nearly all mentors received pre-match training or orientation and talked with their program supervisor about how things were going with their mentoring relationship. Most mentors (62.3%) reported having access to social workers or staff when they needed support. In a similar vein, one of the researchers of the SDFS mentoring evaluation raised questions about the extent of technical assistance available to grantees about implementing the program: "The legislation ... and the program guidance ... said to focus on the academic and social needs of students. Beyond that, there weren't any prescriptive protocols for how people were going to conduct their mentoring activities, or how they were going to supervise their mentors, or how they were going to train their mentors." Nonetheless, the Department of Education (ED) reported that training and technical assistance was provided by a contractor and ED staff. A 2010 analysis of three major school-based mentoring programs, including the SDFS mentoring program, suggests that the effects of these programs are small but are in a range that "makes their interpretation subject to underlying perspectives and priorities." Similarly, a 2011 analysis assessed findings from 73 mentoring programs and found that despite the positive effect of the programs overall, the effect is small. In other words, some stakeholders may have reason to be skeptical of the findings from the SDFS mentoring program and other mentoring programs, while others may argue that these findings are promising and should lead to further efforts to improve mentoring interventions. The number of mentoring programs appears to have grown in recent years, likely due to a variety of reasons, including federal attention to mentoring as an intervention for at-risk youth and promising associations between mentoring and multiple outcomes. These programs have different formats and serve specific populations of youth. For example, in FY2017, DOJ provided funding to mentoring organizations that serve youth who are victims of commercial sexual exploitation, or are at risk of such victimization. In light of this perceived expansion, researchers and other stakeholders caution that administrators should carefully implement mentoring programs while adhering to core practices of effective mentoring that have been informed by research. The Obama and Trump Administrations have allocated funding for grants to research on mentoring for at-risk youth. MENTOR: A National Mentoring Partnership, a national mentoring organization, estimated that 9.4 million young people who are at-risk youth need a mentor. Recruiting and retaining volunteers appears to be a major challenge for mentoring organizations, including those funded through federal mentoring programs. In its 2004 report of the Safe and Drug Free Schools Mentoring program, the Government Accountability Office (GAO) found that new grantees had more difficulty than established grantees in recruiting and supporting mentors. Similarly, HHS reports that some mentors in organizations that received Mentoring Children of Prisoners' funding (which was funded from FY2003 through FY2010) had dropped out before being matched with a youth because of the time and energy commitment mentoring entails. While research on mentor recruitment and retention is nascent, it reveals that mentoring organizations tend to attract individuals who are middle aged, educated, and have children in their household, and that word of mouth is among the top strategies for recruiting new volunteers. Further, individuals are likely to remain in formal mentoring programs if they feel adequately prepared to serve as mentors. According to the research on mentoring, retention may be high when programs continually monitor mentoring relationships for effectiveness and respond to the needs of mentors. A related issue is that the mentoring gap may be wider for special populations. Mentoring programs primarily serve youth ages 9 through 11 who come to the attention of a parent or teacher, rather than the most at-risk populations, which include, but are not limited to, older youth, runaway and homeless youth, and youth in foster care or the juvenile justice system. Recent efforts to recruit volunteers to mentor vulnerable populations have been under way, as evidenced by DOJ mentoring grants in recent years for selected youth populations. Nonetheless, potential mentors may still be discouraged from working with youth facing serious personal difficulties and challenges in their communities.

Youth mentoring refers to a relationship between youth--particularly those most at risk of experiencing negative outcomes in adolescence and adulthood--and the adults who support and guide them. The origin of the modern youth mentoring concept is credited to the efforts of charity groups that formed during the Progressive era of the early 1900s to provide practical assistance to poor and juvenile justice-involved youth, including help with finding employment. Approximately 4.5 million youth today are involved in formal mentoring relationships through organizations such as Big Brothers Big Sisters (BBBS) of America. Contemporary mentoring programs seek to improve outcomes and reduce risks among vulnerable youth by providing positive role models who regularly meet with the youth in community or school settings. Some programs have broad youth development goals, while others focus more narrowly on a particular outcome. Evaluations of the BBBS program and studies of other mentoring programs demonstrate an association between mentoring and some positive outcomes, but the impact of mentoring and the ability for mentored youth to sustain gains over time are less certain. There is no single overarching federal policy on mentoring or an entity that coordinates mentoring supports across the federal government. The Federal Mentoring Council had served as a resource on mentoring issues for the federal government from 2006 to 2008 and is no longer active. Currently, the federal government provides funding for mentoring primarily through a grant program with annual appropriations for the program of about $78 million to $90 million in recent years. This grant is administered by the Department of Justice's (DOJ) Office of Juvenile Justice and Delinquency Prevention (OJJDP) within the Office of Justice Programs. Program funding has been used for research and direct mentoring services to select populations of youth, such as those involved or at risk of being involved in the juvenile justice system. Other federal agencies provide or are authorized to support mentoring as one aspect of a larger program. For example, select programs carried out by the Corporation for National and Community Service (CNCS) can provide mentoring, among other services. Youth ChalleNGe, an educational and leadership program for at-risk youth administered by the Department of Defense's (DOD's) National Guard, includes mentoring as an aspect of its program. Federal agencies also coordinate on federal mentoring issues. Two other federal programs--the Mentoring Children of Prisoners (MCP) program and Safe and Drug-Free Schools (SDFS) Mentoring program--provided a significant source of federal funding for mentoring services. However, the programs were short-lived: funding for the MCP program was discontinued beginning with FY2011, and funding for the SDFS program was discontinued beginning with FY2010. The MCP program was created in response to the growing number of children under age 18 with at least one parent incarcerated in a federal or state correctional facility. The program was intended, in part, to reduce the chance that mentored youth would use drugs and skip school. Similarly, the SDFS Mentoring program provided school-based mentoring to reduce school dropout and improve relationships for youth at risk of educational failure and with other risk factors. As part of its FY2010 budget justifications, the Obama Administration had proposed eliminating the program because of an evaluation showing that it did not have an impact on students overall in terms of interpersonal relationships, academic outcomes, and delinquent behaviors. Issues relevant to the federal role in mentoring include the limitations of research on outcomes for mentored youth, the quality of mentoring programs, and the potential need for additional mentors.

The Berne Union represents a diverse group of public and private entities that are directly involved in international trade and foreign investment by providing financing and insurance to exporters and investors. The activities of Berne Union members are diversified across products, geographies, governance modes, and regulatory systems. In 2011, Berne Union members provided over $1.8 trillion in insurance coverage, representing more than 10% of total global trade. The Berne Union was formed in 1934 when private and state export credit insurers from France, Italy, Spain, and the United Kingdom met in Berne, Switzerland. As a result, the organization was named after the location of the first meeting, thus the name the Berne Union, although the organization has never been based in Berne. The Union was headquartered in Paris until the 1970s, when it was moved to London. Associated with the Berne Union is the Prague Club, which was established in 1993 by the Berne Union and the European Bank for Reconstruction and Development (EBRD) to support new and maturing export credit agencies that are setting up and developing export credit and investment insurance programs. Also named after the location where the first meeting was held, the Prague Club established an information exchange network for new agencies in Central and Eastern Europe that have not yet meet the entrance requirements for Berne Union members. When the Prague Club members have grown to the point where they can meet certain specified criteria, they can apply for full Berne Union membership. Membership in the Berne Union is open to new applicants but there are requirements that must be met to ensure that discussions among the members remain relevant and topical for as many members as possible. Membership requirements include Institutions applying for membership in the Berne Union should be underwriters actively conducting business in the areas of export credit financing and foreign investment as their core activity. Institutions must have been in operation in the field of export credit insurance or the insurance of outward investment for a period of at least three years. Institutions should meet certain thresholds for premium income or for the value of business covered. If the applicant is engaged in export credit insurance, its operations must include insurance of both commercial and political risks and it must underwrite political risks in a global and general sense. If the applicant is engaged in the insurance of outward investment, it must be providing direct insurance against the normal political risks, including expropriation and war, and issues associated with the transfer of funds. Applicants to the Berne Union are assigned observer status for two years, after which the membership of the Berne Union decides collectively if the applicant can become a full member. In the past five years, more than 10 new members have joined the Berne Union and 3 applicants are presently listed in the observer status. In 2007, the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) became the newest member of the Berne Union. The United States is represented within the Berne Union by two federal government agencies--the U.S. Export-Import Bank and the Overseas Private Investment Company --and five private sector corporations. The private-sector members are the American International Group insurance underwriters (AIG); the Chubb Corporation of Warren, New Jersey; the Foreign Credit Insurance Association Management Company, Inc. (FCIA); the Multilateral Investment Guarantee Agency (MIGA); and the Zurich Emerging Markets Solution. The Berne Union is led by a President, a Vice President, and a Management Committee. The President is elected each year and can be re-elected for one further year. The Vice President is elected each year and cannot be re-elected. The Management Committee consists of the President, the Vice President, Committee Chairs, and 12 representatives of member organizations. The standing committees represent three areas of specialization within the credit industry: short-term credit insurance represented by the Short Term (ST) Committee, medium- and long-term credit insurance and lending represented by the Medium Long Term (MLT) Committee, and investment insurance represented by the Investment (INV) Committee. Six of the members for the Management Committee represent the two largest organizations in each of the three committees. The remaining six members are elected on a rotating basis for a two-year term. To support the Berne Union leadership, the Berne Union has a staff of five people, known as the Secretariat, located in London. These five staff members are responsible for coordinating all Berne Union and Prague Club activities and for providing ways for the members to participate. In particular, the Secretariat is responsible for maintaining external relations and for promoting the Berne Union and its members within the export credit and insurance industry as a whole by supporting opportunities for members to meet and discuss professional matters and to exchange views and experiences. This interchange of information is achieved through three methods, annual general meetings and Committee meetings, annual seminars and workshops, and an intranet among the Berne Union members. Annual general meetings are hosted by a Berne Union member on a rotating basis and take place over four or five days. Discussions at these meetings reflect broad aspects of international trade, international finance, and developments in specific industry sectors. In particular, member discussions focus on developing and promoting the best available practices in the fields of international trade finance and foreign investment insurance. Recently, the members focused their attention on such issues as the impact of the global credit crunch and the effect it is having on global trade; the dynamic expansion of the Indian economy and the growing demand for credit insurance; and trends in social and corporate responsibility, green initiatives in project finance, and the expanding capacity for local currency finance. The Berne Union has developed long-standing relationships with the leading international and regional financial institutions in the credit and investment insurance industry. For instance, the Union has developed strong ties with such groups as the Organization for Economic Cooperation and Development (OECD), the International Monetary Fund (IMF), and the World Bank group, and has worked closely with these organizations to promote international financial stability and broad-based economic growth. The Berne Union is also in regular contact with such regional development banks as the European Bank of Reconstruction and Development (EBRD) and the Asian Development Bank, as agencies from both regions are active members of the Prague Club. The Berne Union has close relationships with the other major credit insurance associations including the International Credit Insurance and Surety Association (ICISA) and the Pan-American Surety Association (PASA). According to Berne Union President Johan Schrijver, the financial crisis has presented suppliers of exports and export insurance with severe challenges as liquidity has been tight and the volume of global trade fell sharply. In addition, risk concerns have shifted from focusing primarily on developing countries to developed economies and the sovereign debt crisis in Europe and the political instability in the Middle East. Berne Union members expect the rate of economic growth to slow down in 2012, which could place pressure on official export credit agencies to provide additional support. According to Johan Schrijver, Berne Union members "continue to express serious concerns about the ability of banks to fund trade and investment given the proposed regulatory changes and the on-going funding challenges that banks are facing. Any further deterioration in bank capacity for trade and export finance could have serious consequences for global trade and economic recovery." Berne Union members have participated in conferences and other forums where they have encouraged the continued availability of export credits and trade and investment insurance to support the positive effects of global trade and investment. At the same time, Berne Union members continue to support practices that emphasize ethical practices in international trade. Berne Union members have adopted operational guidelines in the three major business areas to support best practices among all of the members. Denmark's Eksport Kredit Fonden (EKF) adopted a set of principles known as the Equator Principles that comprise a voluntary set of guidelines associated with project finance that are based on the environmental and social procedures developed by the World Bank's International Finance Corporation and that have been adopted by various international banks. Berne Union members have also met with business leader throughout Asia to overcome concerns about doing business in Asia, particularly in China. Some members argue that there is a lack of available information concerning the nature and performance capability of many of the firms in China that are involved in trade or investment transactions with Berne Union members. The rapid growth of joint ventures with Chinese firms has created confusion at times for some of the public-sector Berne Union members, because many of them are charged by their respective governments with participating in transactions that support economic activity in their home countries. As a result of this confusion, membership in the Berne Union is growing fastest among firms from the private sector where those firms are not charged with promoting national content. Another key issue for Berne Union members is insurance against terrorist risks and how such risks should be defined and whether they should be included as a part of investment insurance. In November 2006, the Berne Union members adopted a set of 10 Guiding Principles, which represents a set of best practices commitments for Berne Union members to operate "in a professional manner that is financially responsible, respectful of the environment and which demonstrates high ethical values." In brief terms, the 10 Principles are commitments to: 1. Conduct business in a manner that contributes to the stability and expansion of global trade and investment in accordance with applicable laws and relevant international agreements. 2. Carefully review and manage the risks that are undertaken. 3. Promote export credit and investment insurance terms that reflect sound business practices. 4. Generate adequate revenues to sustain long-term operations that are reflective of the risks that are undertaken. 5. Manage claims and recoveries in a professional manner, while recognizing the rights of insurers and obligors. 6. Be sensitive about environmental issues and take such issues into account in the conduct of business. 7. Support international efforts to combat corruption and money laundering. 8. Promote best practices through exchange of information, policies, and procedures, and through the development of relevant agreements and standards, where these are deemed necessary. 9. Commit to furthering transparency amongst members and in the reporting of business practices. 10. Encourage cooperation and partnering with commercial, bilateral, multilateral, and other organization involved in export trade and investment business. Congress plays no direct role in the Berne Union, but its presence is felt indirectly through two U.S. government agencies that are members of the Union and over which it has oversight responsibility--the U.S. Export-Import Bank and the Overseas Private Investment Corporation. These agencies also provide information back to Congress and to the Administration about developments in the areas of export credit finance and foreign investment. U.S. private sector firms that are members of the Berne Union also often look to Congress for support and leadership in the areas of export credit finance and insurance, especially with the increased risks many firms now believe exist as a result of terrorist activities. As a result of its vast international economic and security interests, the United States is directly affected by, and therefore plays a leading role in, developments in the areas of international trade, international finance, and foreign investment. The vast U.S. international presence also means that U.S. national interests are tied to the successful operation and stability of the international trade and finance markets, which means that Congress is often involved in resolving issues that affect important U.S. interests that rely on stability in the international financial system and the successful operation of global trade and investment markets.

The Berne Union, or the International Union of Credit and Investment Insurers, is an international organization comprised of more than 70 public and private sector members that represent both public and private segments of the export credit and investment insurance industry. Members range from highly developed economies to emerging markets, from diverse geographical locations, and from a spectrum of viewpoints about approaches to export credit financing and investment insurance. Within the Berne Union, the United States is represented by the U.S. Export-Import Bank (Eximbank) and the Overseas Private Investment Corporation (OPIC) and four private-sector firms and by one observer. The main role of the Berne Union and its affiliated group, the Prague Club, is to work to facilitate cross-border trade by helping exporters mitigate risks through promoting internationally acceptable principles of export credit financing, strengthen the global financial structure, and facilitate foreign investments. Over the past decade, the growth and increased importance of global trade and financing have altered the agenda of the Berne Union from focusing primarily on concerns over country-specific political risk to concerns about global trade, international finance, global and regional security, and questions of business organization, civil society, transparency, and corporate responsibility. The 2008-2009 financial crisis and the economic recession that followed has altered export financing by making credit conditions tighter and by raising concerns over risks in the advanced economies. As a result, demands on official export credits have grown sharply. Congress, through its oversight of Eximbank and OPIC, as well as international trade and finance, has interests in the functioning of the Berne Union.

The Americans with Disabilities Act (ADA) is a broad civil rights act prohibiting discrimination against individuals with disabilities. Under title III of the ADA, discrimination against individuals with disabilities in public accommodations, including hospitals and doctor's offices, is prohibited. The Department of Justice (DOJ) promulgated regulations under title III requiring places of public accommodation to provide "auxiliary aids and services" to individuals with disabilities unless they are able to prove such services would be unduly burdensome. Auxiliary aids may include qualified interpreters as well as note takers, video remote interpreting (VRI) services, or real-time computer-aided transcription services. The new regulations issued under title III on July 26, 2010, address several issues including the application of rights to effective communication by companions who are individuals with disabilities, the use of video remote interpreting (VRI) services, and when an accompanying adult or child may be used as an interpreter. The auxiliary aid requirement articulated by the DOJ interprets the broad nondiscrimination language of the ADA and requires effective communication, but neither the statute nor the regulations explicitly state when doctors or hospitals must provide hearing impaired patients with interpreters. As a result, the answer as to whether doctors or hospitals must provide interpreters for hearing impaired individuals is dependent on the particular circumstances surrounding the patient's case. Judicial decisions give some guidance on when an interpreter must be provided in particular factual situations. Title III of the ADA provides that "[n]o individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation." Discrimination is further described as including "a failure to make reasonable modifications in policies, practices, or procedures when such modifications are necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities." Public accommodations are exempted from providing these special provisions when they "can demonstrate that making such modification would fundamentally alter the nature of such goods, services, facilities, privileges, advantages, or accommodations." The definition of public accommodation specifically includes the "professional office of a health care professional" and hospitals. On July 26, 2010, the 20 th anniversary of the passage of the ADA, the Department of Justice (DOJ) issued final rules amending the existing regulations under ADA title II (prohibiting discrimination against individuals with disabilities by state and local governments) and ADA title III (prohibiting discrimination against individuals with disabilities by places of public accommodations). These new regulations contain detailed sections on communications. Like the previous regulations, the new regulations require that public entities and public accommodations furnish appropriate aids and services when necessary to ensure effective communication with an exception regarding fundamental alterations or undue burdens. More specifically, the title III regulations state that public accommodations do not have to provide auxiliary aids if such measures would "fundamentally alter the nature of the goods, services, facilities, privileges, advantages, or accommodations being offered or would result in an undue burden, i.e., significant difficulty or expense." In determining whether an action poses an undue burden, the regulations require the consideration of several factors, including the nature and cost of the action, the overall financial resources of the site, the geographic separateness and the administrative or fiscal relationship of the site or sites in question to a parent corporation, the overall financial resources of the parent corporation, and the type of operation or operations of any parent corporation or entity. When a particular auxiliary aid would cause an undue burden, the public accommodation must provide alternative assistance so that the individual can take full advantage of the services and goods offered. Unlike the previous regulations, the new regulations specifically extend the requirement for effective communication to companions who are individuals with disabilities. DOJ noted in its comments on the new regulations that this was a particularly important issue. Effective communication with companions is particularly critical in health care settings where miscommunication may lead to misdiagnosis and improper or delayed medical treatment. The Department has encountered confusion and reluctance by medical care providers regarding the scope of their obligation with respect to such companions. Effective communication with a companion is necessary in a variety of circumstances. For example, a companion may be authorized to make health care decision on behalf of the patient or may need to help the patient with information or instructions given by hospital personnel. A companion may be the patient's next-of-kin or health care surrogate with whom the hospital must communicate about the patient's medical condition. The new regulations also indicate that the type of auxiliary aid or service necessary for effective communication varies depending on the circumstance. The new title III regulations specifically state that "[a] public accommodation should consult with individuals with disabilities whenever possible to determine what type of auxiliary aid is needed to ensure effective communication, but the ultimate decision as to what measure to take rests with the public accommodation, provided that the method chosen results in effective communication." The term "auxiliary aid" is defined to include "qualified interpreters on site or through video remote interpreting (VRI) services, notetakers, real-time computer-aided transcription services, written materials; exchange of written notes ... or other effective methods of making aurally delivered materials available to individuals who are deaf or hard of hearing." The new regulations added video remote services (VRI) as an example of an auxiliary aid that may provide effective communication. The new regulations specifically state that when VRI is used it must provide real-time, full-motion video and audio over a dedicated high-speed, wide-bandwidth video or wireless connection that does not produce lags, choppy, blurry or grainy images or irregular pauses in communications; a sharply delineated image that is large enough to display the interpreter's face, arms, hands, and fingers and the participating individual's face, arms, hands, and fingers; and a clear, audible transmission of voices. In addition, a public accommodation that uses VRI must provide adequate training to users of the technology and other involved individuals. The new regulations also discuss when a family member or a friend may be used as an interpreter. Generally, a public accommodation is not to rely on an adult who accompanies an individual with a disability to interpret for the individual. However, there are some exceptions including an emergency involving an imminent threat to safety or welfare, and where the individual with a disability specifically requests that the accompanying adult interpret and the accompanying adult agrees. A minor child may not be used to interpret except in an emergency situation. As the regulations indicate, there is no absolute requirement that an interpreter be provided in a particular situation. However, in order to comply with the ADA, auxiliary aids must provide effective doctor-patient communication. In Mayberry v. Van Valtier, the court held that a deaf Medicare patient was entitled to a trial on her claim that her doctor violated the ADA. In this case, the doctor had communicated with the patient for several years mostly by exchanging notes or using the patient's children as sign interpreters and on one occasion had noted in the patient's file that her back pain was higher than she had originally thought and that this misunderstanding was "probably due to poor communication." The patient, Mrs. Mayberry, requested that the doctor provide an interpreter for a physical examination. The doctor complied but following the examination wrote a letter to the interpreter, with a copy to the patient, stating that she would not be able to use the interpreter's services again and that "I really can't afford to take care of Mrs. Mayberry at all." The doctor characterized the letter as a protest against what was perceived as an unfair law. The court found that the allegations made by the patient were sufficient to reject a motion for summary judgment and ordered the case to proceed to trial. Subsequently, a judgment was rendered in favor of the doctor but there is no record of a written opinion. In Aikins v. St. Helena Hospital , another district court examined arguments concerning effective communication and denied summary judgment to the hospital and doctor. Elaine Aikins, a hearing impaired individual, and the California Association of the Deaf (CAD) alleged that St. Helena Hospital and Dr. James Lies failed to communicate effectively with Mrs. Aikins during her now deceased husband's medical treatment. Instead of an interpreter, the hospital provided Mrs. Aikins with an ineffective finger speller. Allegedly Mrs. Aikins was unable to effectively communicate with Dr. Lies or other hospital staff until her daughter became available to interpret, an argument that was supported by the doctor's mistaken impression concerning how long the patient had been without CPR. Mrs. Aikins and the CAD alleged that Dr. Lies and St. Helena Hospital violated both the ADA and the Rehabilitation Act. Dr. Lies maintained that the Rehabilitation Act was inapplicable and St. Helena asserted that it complied with both the ADA and Rehabilitation Act. Although the ADA claims were dismissed due to lack of standing, the court noted that adequate medical treatment is not a defense to a claim that a defendant failed to provide effective communication under the Rehabilitation Act of 1973. "Mrs. Aikins's claims relate to her exclusion from meaningful participation in the decisions affecting her husband's treatment, not to the appropriateness of the treatment itself." Citing Aikins , the court in Naiman v. New York University found that a physician's effectiveness in providing medical treatment to a hearing impaired patient does not negate an ineffective communication claim under the ADA. Mr. Alec Naiman, who is hearing impaired, was admitted on several occasions to New York University Medical Center, one of many medical facilities operated by New York University. On each occasion Mr. Naiman requested an interpreter in order to "effectively participate in his treatment" and communicate with hospital staff. With the exception of one visit, the center failed to provide one in a timely manner or did not provide an interpreter at all. New York University argued that Mr. Naiman failed to state a claim under the ADA because he received adequate medical care from the medical center. The court disagreed and ruled in favor of the plaintiff. The court noted that an effective communication claim under the ADA relates to the patient's exclusion from participation in his treatment rather than the treatment itself. Therefore, the effectiveness of the treatment is an insufficient defense to the general purpose and scope of the ADA. As DOJ discussed in its appendix to the ADA Title III regulations, although physicians and hospitals are strongly encouraged to confer with patients with disabilities about the type of auxiliary aid they prefer when communicating, deference to the patient's preferred method is not necessarily required. In Majocha v. Turner , the district court denied a motion for summary judgment in a case involving the lack of an interpreter for the father of a 15-month-old patient. The defendant doctors argued that they had offered to use note taking to communicate. The district court observed that an individual with a disability cannot insist on a particular auxiliary aid if the aid offered ensures effective communication. However, the court, relying on lay and expert testimony concerning the lack of effectiveness of note taking in this case, found that there was a genuine dispute regarding whether the note taking was an acceptable auxiliary aid and denied the doctors' motion for summary judgment. The law provides that an interpreter, or any suggested auxiliary aid, is not required if the doctor can demonstrate that doing so would "fundamentally alter the nature of the good, services, facility, privilege, advantage, or accommodation being offered or would result in an undue burden." This issue was discussed in Bravin v. Mount Sinai Medical Center, where the plaintiff sued a hospital for failure to provide a sign language interpreter during a Lamaze class. The court there found that while the hospital alluded to undue hardship, it did not address the issue explicitly. Therefore, because there was no issue of fact as to whether the hospital violated the ADA, the court awarded summary judgment to the plaintiff. The Senate report on the ADA noted that "technological advances can be expected to further enhance options for making meaningful and effective opportunities available to individuals with disabilities. Such advances may enable covered entities to provide auxiliary aids and services which today might be considered to impose undue burdens on such entities." Recently, videoconferencing technology, combined with high-speed internet connections, has been used to provide around-the-clock interpreting services for businesses. Additionally, the use of CART technology has been employed as a means to efficiently communicate with hearing impaired individuals. This may render successful undue burden arguments increasingly difficult. However, the use of technology must result in effective communication. Several cases have held that to establish a claim for damages, a plaintiff must show that a defendant is guilty of intentional discrimination or deliberate indifference. In Loeffler v. Staten Island University Hospital, a case brought under Section 504 of the Rehabilitation Act, the Second Circuit Court of Appeals held the factual situation could support a finding of deliberate indifference. Robert Loeffler and his wife were deaf but their two children, ages 13 and 17, had normal hearing. The Loefflers stated that prior to Mr. Loeffler's heart surgery, they requested an interpreter but one was never furnished and their children served as translators, even in the surgery recovery room and the critical care unit. Several plaintiffs have argued that defendant hospitals have shown deliberate indifference when a sign language interpreter was requested but not provided. In Freydel v. New York Hospital , the court of appeals found that the hospital had a policy to provide interpreter services and had attempted to secure an interpreter for a 78-year-old deaf woman who communicated in Russian sign language. The second circuit held that proving that staff members failed to respond to repeated requests for a Russian sign language interpreter "cannot by itself suffice to maintain a claim of deliberate indifference." Similarly, in Constance v. State University of New York Health Science Center, the court denied the plaintiffs' motion for damages finding that the hospital responded quickly to a request for an interpreter. Although the failure to follow up on the request may have been negligent, the court found it did not amount to deliberate indifference. In Alvarez v. New York City Health & Hospitals Corporation , the district court reached a similar conclusion, finding that the plaintiff did not make the required showing of deliberate indifference since the hospital has a policy of providing interpreters and provided an interpreter within a day of the request. One of the threshold issues a plaintiff must overcome before the merits of a case can be examined is whether the plaintiff has standing to bring an ADA claim. Several decisions have found that a plaintiff who alleges discrimination under the ADA due to lack of a sign language interpreter does not have standing because there is not a real and immediate threat of harm. However, other decisions have found standing. For example, in Gillespie v. Dimensions Health Corporation , the district court found standing for plaintiffs alleging "the existing and on-going policy and practice [of not providing interpreters] itself violates their rights under the ADA." In addition, because the plaintiffs had sought, and would likely continue to seek, medical care from the hospital, there was a sufficient threat of future ADA violations to grant the plaintiffs standing under the ADA. The ADA purposely adopted a flexible standard regarding nondiscrimination requirements. This flexibility was seen as a means to balance the rights of the patients with disabilities the interests of treating physicians and hospitals. Because of this flexibility, precise requirements are not readily enunciated. Therefore, whether or not a doctor or hospital must provide an interpreter for a hearing impaired individual depends on the particular circumstances surrounding the patient's care. Exactly when a sign language interpreter may be required has been discussed in several judicial decisions. However, the majority of the claims regarding the failure of a doctor to provide a hearing impaired patient with an interpreter appear to have been resolved through either an informal or formal settlement process. The DOJ has obtained a number of settlement agreements with hospitals in recent years. In addition, the new regulations promulgated under title III address several issues including the application of rights to effective communication by companions who are individuals with disabilities, a specific discussion of the use of video remote interpreting (VRI) services, and when an accompanying adult or child may be used as an interpreter.

The Americans with Disabilities Act (ADA) is a broad civil rights act prohibiting discrimination against individuals with disabilities. Title III of the Americans with Disabilities Act (ADA) prohibits places of public accommodation, including hospitals and doctors' offices, from discriminating against individuals with disabilities. The Department of Justice (DOJ) promulgated regulations under title III requiring the use of auxiliary aids, unless they would fundamentally alter the nature of the service or result in an undue burden. Auxiliary aids may include qualified interpreters as well as note takers, video remote interpreting (VRI) services, or real-time computer-aided transcription services. The new regulations issued under title III on July 26, 2010, address several issues including the application of rights to effective communication by companions who are individuals with disabilities, the use of video remote interpreting (VRI) services, and when an accompanying adult or child may be used as an interpreter. Attempting to address the myriad of disabilities and public accommodations, the ADA purposely adopted a flexible standard concerning when its nondiscrimination requirements are met. The law and DOJ regulations, then, do not explicitly state when hospitals or doctors are required to provide interpreter services to patients with disabilities and, as is illustrated by the judicial decisions in the area, this issue is largely fact dependent.

In the wake of the tragedy of September 11, 2001, the U.S. Congress decided that enhancing the security of the United States' borders was a vitally important component of preventing future terrorist attacks. Before September 11, 2001, border security fell piecemeal under the mandate of many diverse federal departments, including but not limited to the Department of Justice (the Immigration and Naturalization Service); the Department of the Treasury (the Customs Service); the Department of Agriculture (the Animal and Plant Health Inspection Service); and the Department of Transportation (the Coast Guard). The Homeland Security Act of 2002 ( P.L. 107-296 ) consolidated most federal agencies operating along the U.S. borders within the newly formed DHS. Most of these agencies were located in the Directorate of Border and Transportation Security (BTS), which was charged with securing the borders; territorial waters; terminals; waterways; and air, land, and sea transportation systems of the United States; and managing the nation's ports of entry. The lone exception is the U.S. Coast Guard, which remained a standalone division within DHS. The BTS was composed of three main agencies: (1) the CBP, which is charged with overseeing commercial operations, inspections, and land border patrol functions, (2) ICE, which oversees investigations, alien detentions and removals, air/marine drug interdiction operations, and federal protective services, and (3) the TSA, which is charged with protecting the nation's air, land, and rail transportation systems against all forms of attack to ensure freedom of movement for people and commerce. On July 13, 2005, the Secretary of DHS, Michael Chertoff, announced the results of the months-long Second Stage Review (2SR) that he undertook upon being confirmed as DHS Secretary. One of Secretary Chertoff's main recommendations, which was agreed to by the DHS Appropriations Conferees, was the elimination of the BTS Directorate. The Secretary announced the creation of a new Office of Policy, which, among other things, assumed the policy coordination responsibilities of the BTS Directorate. The operational agencies that comprised BTS (CBP, ICE, TSA) now report directly to the Secretary and Deputy Secretary of DHS. The goal of this reorganization was to streamline the policy creation process and ensure that DHS policies and regulations are consistent across the department. Additionally, the Federal Air Marshals program was moved out of ICE and back into TSA to increase operational coordination between all aviation security entities in the department. Conceptually speaking, CBP provides the front line responders to immigrations and customs violations and serves as the law enforcement arm of DHS, while ICE serves as the investigative branch. TSA is charged with securing the nation's transportation systems, whereas the U.S. Coast Guard also serves an important border security function by patrolling the nation's territorial and adjacent international waters against foreign threats. Combined FY2010 appropriations for the border security agencies of DHS equaled $30.96 billion, and the combined full time equivalent (FTE) manpower totaled approximately 180,142 employees. CBP combined portions of the previous border law enforcement agencies under one administrative umbrella. This involved absorbing employees from the Immigration and Naturalization Service (INS), the Border Patrol, the Customs Service, and the Department of Agriculture. CBP's mission is to prevent terrorists and terrorist weapons from entering the country, provide security at U.S. borders and ports of entry, apprehend illegal immigrants, stem the flow of illegal drugs, and protect American agricultural and economic interests from harmful pests and diseases. As it performs its official missions, CBP maintains two overarching and sometimes conflicting goals: increasing security while facilitating legitimate trade and travel. In FY2010, CBP's appropriated net budget authority totaled $10.13 billion and manpower totaled approximately 58,105 FTE. Between official ports of entry, the U.S. Border Patrol (USBP)--a component of CBP--enforces U.S. immigration law and other federal laws along the border. As currently comprised, the USBP is the uniformed law enforcement arm of the Department of Homeland Security. Its primary mission is to detect and prevent the entry of terrorists, weapons of mass destruction, and unauthorized aliens into the country, and to interdict drug smugglers and other criminals. In the course of discharging its duties the USBP patrols over 8,000 miles of our international borders with Mexico and Canada and the coastal waters around Florida and Puerto Rico. At official ports of entry, CBP officers are responsible for conducting immigrations, customs, and agricultural inspections on entering aliens. As a result of the "one face at the border" initiative, CBP inspectors are being cross-trained to perform all three types of inspections in order to streamline the border crossing process. This initiative unifies the prior inspections processes, providing entering aliens with one primary inspector who is trained to determine whether a more detailed secondary inspection is required. CBP inspectors enforce immigration law by examining and verifying the travel documents of incoming international travelers to ensure they have a legal right to enter the country. On the customs side, CBP inspectors ensure that all imports and exports comply with U.S. laws and regulations, collect and protect U.S. revenues, and guard against the smuggling of contraband. Additionally, CBP is responsible for conducting agricultural inspections at ports of entry in order to enforce a wide array of animal and plant protection laws. In order to carry out these varied functions, CBP inspectors have a broad range of powers to inspect all persons, vehicles, conveyances, merchandise, and baggage entering the United States from a foreign country. ICE merged the investigative functions of the former INS and the Customs Service, the INS detention and removal functions, most INS intelligence operations, and the Federal Protective Service (FPS). This makes ICE the principal investigative arm for DHS. ICE's mission is to detect and prevent terrorist and criminal acts by targeting the people, money, and materials that support terrorist and criminal networks. As such they are an important component of our nation's border security network even though their main focus is on interior enforcement. In FY2010, ICE appropriations totaled $5.44 billion, and the agency had approximately 20,134 FTE employees. Unlike CBP, whose jurisdiction is confined to law enforcement activities along the border, ICE special agents investigate immigrations and customs violations in the interior of the United States. ICE's mandate includes uncovering national security threats such as weapons of mass destruction or potential terrorists, identifying criminal aliens for removal, probing immigration-related document and benefit fraud, investigating work-site immigration violations, exposing alien and contraband smuggling operations, interdicting narcotics shipments, and detaining illegal immigrants and ensuring their departure (or removal) from the United States. ICE is also responsible for the collection, analysis and dissemination of strategic and tactical intelligence data pertaining to homeland security, infrastructure protection, and the illegal movement of people, money, and cargo within the United States. The Coast Guard was incorporated into DHS as a standalone agency by P.L. 107-296 . The Coast Guard's overall mission is to protect the public, the environment, and U.S. economic interests in maritime regions--at the nation's ports and waterways, along the coast, and in international waters. The Coast Guard is thus the nation's principal maritime law enforcement authority and the lead federal agency for the maritime component of homeland security, including port security. Among other things, the Coast Guard is responsible for evaluating, boarding, and inspecting commercial ships as they approach U.S. waters; countering terrorist threats in U.S. ports; and for helping to protect U.S. Navy ships in U.S. ports. A high-ranking Coast Guard officer in each port area serves as the Captain of the Port and is the lead federal official responsible for the security and safety of the vessels and waterways in their geographic zone. In FY2010, Coast Guard appropriated budget authority totaled $10.14 billion, and the agency had approximately 49,954 FTE military and civilian employees. As part of Operation Noble Eagle (military operations in homeland defense and civil support to U.S. federal, state and local agencies), the Coast Guard is at a heightened state of alert protecting more than 361 ports and 95,000 miles of coastline. The Coast Guard's homeland security role includes protecting ports, the flow of commerce, and the marine transportation system from terrorism; maintaining maritime border security against illegal drugs, illegal aliens, firearms, and weapons of mass destruction; ensuring that the U.S. can rapidly deploy and resupply military assets by maintaining the Coast Guard at a high state of readiness as well as by keeping marine transportation open for the other military services; protecting against illegal fishing and indiscriminate destruction of living marine resources; preventing and responding to oil and hazardous material spills; and coordinating efforts and intelligence with federal, state, and local agencies. The TSA was created as a direct result of the events of September 11 and is charged with protecting the United States' air, land, and rail transportation systems to ensure freedom of movement for people and commerce. The Aviation and Transportation Security Act (ATSA, P.L. 107-71 ) created the TSA and included provisions that established a federal baggage screener workforce, required checked baggage to be screened by explosive detection systems, and significantly expanded FAMS. In 2002, TSA was transferred to the newly formed DHS from the Department of Transportation; as previously noted, in 2003 the Federal Air Marshal program was taken out of TSA and transferred to ICE. In FY2006, the program was transferred back to TSA. In FY2010, TSA appropriations totaled $5.26 billion, and the agency had approximately 51,949 FTE employees. To achieve its mission of securing the nation's aviation, TSA assumed responsibility for screening air passengers and baggage--a function that had previously resided with the air carriers. TSA is also charged with ensuring the security of air cargo and overseeing security measures at airports to limit access to restricted areas, secure airport perimeters, and conduct background checks for airport personnel with access to secure areas, among other things. However, an opt out provision in ATSA will permit every airport with federal screeners to request a switch to private screeners commencing in November 2004. Additionally, as a result of the 2SR, the Federal Air Marshals program has been transferred back to TSA. FAMS is responsible for detecting, deterring and defeating hostile acts targeting U.S. air carriers, airports, passengers and crews by placing undercover armed agents in airports and on flights. This report has briefly outlined the roles and responsibilities of the four main agencies within the DHS charged with securing our nation's borders: the CBP, ICE, the U.S. Coast Guard, and the TSA. It should be noted, however, that although the Homeland Security Act of 2002 consolidated all the agencies with primary border security roles in DHS, many other federal agencies are involved in the difficult task of securing our nation's borders. Although border security may not be in their central mission, they nevertheless provide important border security functions. These agencies include, but are not limited to the U.S. Citizenship and Immigrations Services within DHS, which processes permanent residency and citizenship applications, as well as asylum and refugee processing; the Department of State, which is responsible for visa issuances overseas; the Department of Agriculture, which establishes the agricultural policies that CBP Inspectors execute; the Department of Justice, whose law enforcement branches (the Federal Bureau of Investigation and Drug Enforcement Agency) coordinate with CBP and ICE agents when their investigations involve border or customs violations; the Department of Health and Human Services, through the Food and Drug Administration and the Center for Disease Control; the Department of Transportation, whose Federal Aviation Administration monitors all airplanes entering American air space from abroad; the Treasury Department, whose Bureau of Alcohol, Tobacco, and Firearms investigates the smuggling of guns into the country; and lastly the Central Intelligence Agency, which is an important player in the efforts to keep terrorists and other foreign agents from entering the country. Additionally, due to their location, state and local responders from jurisdictions along the Canadian and Mexican borders also play a significant role in the efforts to secure our nation's borders.

After the massive reorganization of federal agencies precipitated by the creation of the Department of Homeland Security (DHS), there are now four main federal agencies charged with securing the United States' borders: the U.S. Customs and Border Protection (CBP), which patrols the border and conducts immigrations, customs, and agricultural inspections at ports of entry; the U.S. Immigrations and Customs Enforcement (ICE), which investigates immigrations and customs violations in the interior of the country; the United States Coast Guard, which provides maritime and port security; and the Transportation Security Administration (TSA), which is responsible for securing the nation's land, rail, and air transportation networks. This report is meant to serve as a primer on the key federal agencies charged with border security; as such it will briefly describe each agency's role in securing our nation's borders. This report will be updated as needed.

The Individuals with Disabilities Education Act (IDEA) is a grants and civil rights statute which provides federal funding to the states to help provide education for children with disabilities. If a state receives funds under IDEA, it must make available a free, appropriate public education (FAPE) for all children with disabilities in the state. Another key requirement of IDEA is "child find" which requires that all children with disabilities be located, identified, and evaluated. Education for children with disabilities in private schools is included in IDEA, but the requirements of the statute for children in private schools are not always the same as the requirements for children with disabilities in public schools. For example, there are specific requirements delineated regarding private schools. Issues concerning what services are required for children with disabilities placed in private schools, and who is to pay for these services, have been a continuing source of controversy under IDEA. Under the law prior to the enactment of P.L. 105-17 in 1997, states were required to set forth policies and procedures to ensure that provision was made for the participation of children with disabilities who are enrolled in private schools by their parents consistent with the number and location of these children. These requirements were further detailed in regulations which required that local education agencies (LEAs) provide private school students an opportunity for equitable participation in program benefits and that these benefits had to be "comparable in quality, scope, and opportunity for participation to the program benefits" provided to students in the public schools. The vagueness of the statute and the "equitable participation" standard led to differences among the states and localities and to differences among the courts. Prior to P.L. 105-17 , the courts of appeals that had considered these issues had sharply divergent views. Some courts gave local authorities broad discretion to decide whether to provide services for children with disabilities in private schools, which generally resulted in fewer services to such children, while others attempted to equalize the costs for public and private school children. The Supreme Court had granted certiorari in several of these cases, but when Congress rewrote the law in 1997, the Court vacated and remanded these cases. The IDEA Amendments of 1997 rejected the "equitable participation" standard and provided that to the extent consistent with the number and location of children with disabilities in the state who were enrolled in private schools by their parents, provision was made for the participation of these children in programs assisted by Part B by providing them with special education and related services. The amounts expended for these services by an LEA were to be equal to a proportionate amount of federal funds made available to the local educational agency under Part B of IDEA. These services could be provided to children with disabilities on the premises of private schools, including parochial, elementary, and secondary schools. There was also a requirement that the statutory provisions relating to "child find," identifying children with disabilities, are applicable to children enrolled in private schools, including parochial schools. Much of the 1997 language regarding private schools was kept in the 2004 reauthorization, but changes to these provisions were made, and these are discussed in more detail in the subsequent discussion of current law. Generally, the Senate report observed that "the intent of these changes is to clarify the responsibilities of LEAs to ensure that services to these children are provided in a fair and equitable manner." In addition, the Senate report stated that "many of the changes reflect current policy enumerated either in existing IDEA regulations or the No Child Left Behind Act." The House report noted that "the bill makes a number of changes to clarify the responsibilities of local educational agencies to children with disabilities who are placed by their parents in private schools. The Committee feels that these are important changes that will resolve a number of issues that have been the subject of an increasing amount of contention in the last few years." Under current law, there are several ways a child with a disability may be placed in a private school, and the LEA's responsibilities under IDEA vary depending on the type of placement. A child with a disability may be placed in a private school by the LEA or state educational agency (SEA) as a means of fulfilling the FAPE requirement for the child. In this situation, the full cost is paid for by the LEA or the SEA. A child with a disability may also be unilaterally placed in a private school by his or her parents. In this situation, the cost of the private school placement is not paid by the LEA unless a hearing officer or a court makes certain findings. IDEA states in part, (ii) REIMBURSEMENT FOR PRIVATE SCHOOL PLACEMENT.--If the parents of a child with a disability, who previously received special education and related services under the authority of a public agency, enroll the child in a private elementary school or secondary school without the consent of or referral by the public agency, a court or a hearing officer may require the agency to reimburse the parents for the cost of the enrollment if the court or hearing officer finds that the agency had not made a free appropriate public education available to the child in a timely manner prior to that enrollment. However, IDEA does require some services for children in private schools, even if they are unilaterally placed there by their parents, and there is no finding that FAPE was not made available to the child. In this situation, IDEA requires that a proportionate amount of the federal funds shall be made available. As noted previously, sometimes parents place their child in a private school when they disagree with the LEA concerning whether the LEA can provide FAPE. In School Committee of the Town of Burlington v. Department of Education of Massachusetts , the Supreme Court held that the statutory provision granting courts the right to grant such relief as the court deems appropriate includes the power to order school authorities to reimburse parents for private school expenditures. However, this reimbursement is permitted only if a court ultimately determines that the private school placement, rather than a proposed individualized education program (IEP), is proper under the act. The reimbursement may be reduced or denied if the child's parents did not give certain notice, if the parents did not make the child available for an evaluation by the LEA, or if a court finds the parents' actions unreasonable. The cost of reimbursement is not to be reduced or denied for the failure to provide notice if the school prevented the parent from providing such notice, the parents had not received notice of the notice requirement, or compliance would likely result in physical harm to the child. In addition, at the discretion of a court or hearing officer , the reimbursement may not be reduced or denied if the parent is illiterate or cannot write in English or compliance with the notice requirement would likely result in serious emotional harm to the child (SS612(a)(10)(C)(iv)). The issue of whether FAPE has been or will be provided is a complex one that has been at the crux of many judicial decisions, including those concerning reimbursement for parental private school placement. The first IDEA case to reach the Supreme Court, Board of Education of the Hendrick Hudson Central School District v. Rowley, remains a seminal decision on the requirements of FAPE. The Court held in Rowley that the requirement of FAPE is met when a child is provided with personalized instruction with sufficient support services to benefit educationally from that instruction. This instruction must be provided at public expense, meet the state's educational standards. approximate the grade levels used in the state's regular education, and comport with the child's IEP. Rowley's application to particular fact patterns remains a much-litigated issue. The Supreme Court has also addressed the issue of whether parents can receive reimbursement from an LEA for unilaterally placing their child in a private school even if the child has never received IDEA services. In the Supreme Court's most recent IDEA decision, Forest Grove School District v. T.A., the Court held that IDEA authorized reimbursement for private special education services when a public school fails to provide FAPE and the private school placement is appropriate, regardless of whether the child previously received special education services through the public school. The Court emphasized that "[i]t would be particularly strange for the Act to provide a remedy ... when a school district offers a child inadequate ... [special education] services but to leave parents without relief in the more egregious situation in which the school district unreasonably denies a child access to such services altogether." Recent lower court decisions have held that if the child is making some educational progress and the public school has provided an IEP calculated to provide for continued progress, the requirements of FAPE are met and the child is not entitled to a private school placement. For example, in M.H. and J.H. v. Monroe-Woodbury Central School District , the court found that the child's IEP was adequate and, therefore, the parents were not entitled to tuition reimbursement for a private school placement. These same standards have been applied when parents seek to place their child in a private school different from the private school where the school district has placed the child. In addition, if a private school does not adequately address the child's educational needs, the court may not require private school tuition reimbursement. Courts have held that reimbursement for private school tuition is barred if parents arrange for private school educational services without notifying the LEA of their problems with their child's IDEA services. Reimbursement is also barred if the parents act unreasonably in their relations with the school or if the allegation concerns procedural violations that do not rise to a level of substantive harm. Children with disabilities may be unilaterally placed in a private school by their parents in situations where the parents do not argue for tuition reimbursement. Generally, children with disabilities enrolled by their parents in private schools are to be provided special education and related services to the extent consistent with the number and location of such children in the school district served by a LEA pursuant to several requirements. This general provision was changed in 2004 from previous law by the addition of the requirement that the children be located in the school district served by the LEA. In other words, the LEA responsible for implementing IDEA is the LEA in the area where the private school is located. The Senate report described this change as protecting "LEAs from having to work with private schools located in multiple jurisdictions when students attend private schools across district lines." Although the intent was to protect LEAs from working with private schools in multiple jurisdictions, this provision has generated considerable controversy. A detailed discussion of this issue is beyond the scope of this report; however, several of the issues raised include the disproportional effect on LEAs with large concentrations of private schools, the lack of change in the funding formula to reflect the change, and potential conflicts with state laws. In addition to the general LEA responsibility discussed above, there are also five specific requirements regarding parentally placed children: Funds expended by the LEA, including direct services to parentally placed private school children, shall be equal to a proportionate amount of federal funds made available under part B of IDEA. The LEA, after timely and meaningful consultation with representatives of private schools, shall conduct a thorough and complete child find process to determine the number of children with disabilities who are parentally placed in private schools. Services may be provided to children on the premises of private, including religious, schools, to the extent consistent with law. State and local funds may supplement, but not supplant, the proportionate amount of federal funds required to be expended. Each LEA must maintain records and provide to the SEA the number of children evaluated, the number of children determined to have disabilities, and the number of children served under the private school provisions. However, although IDEA does require services to parentally placed children, it should be emphasized that no parentally placed child has an individual right to receive the services that child would receive if enrolled in the public school. IDEA contains requirements concerning LEA consultation with private school officials and representatives of the parents of parentally placed private school children with disabilities. This consultation is to include the child find process and how parentally placed private school children with disabilities can participate equitably; the determination of the proportionate amount of federal funds available to serve parentally placed private school children with disabilities, including how that amount was calculated; the consultation process among the LEA, private school officials, and representatives of parents of parentally placed private school children with disabilities, including how the process will operate; how, where, and by whom special education and related services will be provided for parentally placed private school children with disabilities, including a discussion of the types of services (including direct services and alternate service delivery mechanisms), how the services will be apportioned if there are insufficient funds to serve all children, and how and when these decisions will be made; and how the LEA shall provide a written explanation to private school officials of the reasons why the LEA chose not to provide services if the LEA and private school officials disagree. A written affirmation of the consultation signed by the representatives of the participating private schools is required by the law. If the private school representatives do not sign within a reasonable period of time, the LEA shall forward the documentation to the SEA. A private school official has the right to submit a complaint to the SEA alleging that the LEA did not engage in meaningful and timely consultation or did not give due consideration to the views of the private school official. If a private school official submits a complaint, he or she must provide the basis of the noncompliance to the SEA, and the LEA must forward the appropriate documentation. If the private school official is dissatisfied with the SEA's determination, he or she may submit a complaint to the Secretary of Education, and the SEA shall forward the appropriate documentation to the Secretary. The general IDEA due process procedures are not applicable for children parentally placed in private schools where FAPE is not an issue except where the complaint concerns child find.

The Individuals with Disabilities Education Act (IDEA) is a grants and civil rights statute which provides federal funding to the states to help provide education for children with disabilities. If a state receives funds under IDEA, it must make available a free, appropriate public education (FAPE) for all children with disabilities in the state. Education for children with disabilities in private schools is included in IDEA, but the requirements of the statute for children in private schools are not always the same as the requirements for children with disabilities in public schools. Under current law, there are several ways a child with a disability may be placed in a private school, and the LEA's responsibilities under IDEA vary depending on the type of placement. A child with a disability may be placed in a private school by the local education agency (LEA) or state educational agency (SEA) as a means of fulfilling the FAPE requirement for the child. In this situation, the full cost is paid for by the LEA or the SEA. A child with a disability may also be unilaterally placed in a private school by his or her parents. In this situation, the cost of the private school placement is not paid by the LEA unless a hearing officer or a court makes certain findings. However, IDEA does require some services for children in private schools, even if they are unilaterally placed there by their parents, and there is no finding that FAPE was not made available to the child. In this situation, IDEA requires that a proportionate amount of the federal funds shall be made available.

In January 2002, the Global Fund to Fight AIDS, Tuberculosis, and Malaria (Global Fund) was established as an independent foundation in Switzerland to support country efforts to curb the number of illnesses and deaths caused by HIV/AIDS, tuberculosis (TB), and malaria. Each year, the three diseases kill some 6 million people, mostly in Africa. The Fund's Board meets at least twice annually to discuss governance issues, such as grant approval. Nineteen Board seats are rotated among seven donor countries, seven developing countries, and one representative from each of a developed country non-governmental organization (NGO), a developing country NGO, the private sector, a foundation, and affected communities. The United States holds a permanent Board seat. In its first five years, the Fund aimed to support: treatment for 1.8 million HIV-positive people, 5 million people infected with TB, and 145 million malaria patients; the prevention of HIV transmission to 52 million people through voluntary HIV counseling and testing services (VCT); the purchase and distribution of 109 million insecticide-treated bed nets to prevent the spread of the malaria; and care for 1 million orphans. As of July 11, 2008, the Global Fund has approved proposals for 519 grants in 136 countries totaling $10.8 billion ( Table 1 ). About half of those funds have been disbursed. As of December 2007, the Fund-supported grants have been used to treat an estimated 1.4 million HIV-positive people and 3.3 million people infected with TB, and to distribute 46 million insecticide-treated bed nets to prevent malaria transmission. An estimated 58% of Global Fund grants support HIV/AIDS interventions, about 17% fund anti-TB programs; some 24% sustain anti-malaria projects, and 1% strengthen health systems. According to the Global Fund, in 2005, its support represented more than 20% of all global HIV/AIDS spending, some 67% of global TB funds and about 64% of all international support for malaria interventions. In 2005, the Fund approved Round 5 grants in two tranches, because there were no sufficient donor pledges to support all recommended proposals at the time of grant approval. Its Comprehensive Funding Policy (CFP) specifies that the Fund can only sign grant agreements if there are sufficient resources to support the first two years of grant activities. The policy is designed to avoid disruptions in funding that might interrupt project activities. Financial delays can cause people to miss treatments, potentially leading to drug-resistance, susceptibility to secondary diseases, or death. The Fund distributes grants through a performance-based funding system. Under this system, the Fund commits to financially support the first two years (Phase I) of approved grants, though it disburses the funds quarterly if grants meet their targets. As the end of Phase I approaches, the Fund reviews the progress of the grant to determine if it should support the third through fifth years (Phase II). In November 2006, the Board established the Rolling Continuation Channel (RCC). This funding channel, which began in March 2007, permits Country Coordinating Mechanisms (CCMs) to request additional funding for grants that are performing well but set to expire. The application process for the RCC is not as rigorous as the Round process. RCC-approved grants can receive support for up to an additional six years, with the funds being awarded in three-year intervals. The channel is intended only for those grants that have demonstrated a significant contribution "to a national effort that has had, or has the potential to have in the near future, a measurable impact on the burden of the relevant disease." The Fund uses a performance-based funding system that permits it to temporarily suspend support for grants if it finds significant problems with project performance, such as accounting inconsistencies. In some instances, the Fund restored support to grants once key concerns were resolved. For example, in November 2006, the Fund suspended support for grants in Chad. After undertaking audits of the grants, the Fund reportedly discovered evidence of "misuse of funds at several levels and the lack of satisfactory capacity by the Principal Recipient and sub-recipients to manage the Global Fund's resources." In August 2007, the Fund announced that it had lifted the suspension, "after a series of investigation and negotiations between the Global Fund and national authorities ... and after efforts and strong commitment of all relevant stakeholders which guaranteed that the issues have been addressed and better systems with clarified responsibilities will be put in place. As part of the [Global Fund's] mitigation--besides other measures--a fiduciary agent will guarantee for an interim period of 12 months adequate financial monitoring and accounting for our grants." The Fund might discontinue support for grants in Phase II if it finds that they did not sufficiently meet their targets. Countries whose grants have been discontinued can apply and have secured funding in subsequent Rounds (see Nigeria below). In extreme cases, the Fund will immediately cancel financial support. If funds are immediately revoked, the Fund might invoke its continuity of services policy, which ensures that life-extending treatment is continued for suspended or cancelled grants or for those whose terms have expired until other financial support is identified. To date, the Fund has only terminated grants in Burma. When the Fund decided to terminate support for grants in Burma, policy analysts debated how best to serve humanitarian needs in politically unstable countries. On January 30, 2004, the Global Fund announced that it had temporarily withdrawn its grant in Ukraine. Citing the slow progress of Fund-backed HIV/AIDS programs, the Fund stated that it would ask "a reliable organization to take over implementation of the programs for several months, to give Ukraine the opportunity to address concerns of slow implementation, management, and governance issues." Nearly a month later, on February 24, 2004, the Fund announced that the suspension had ended, and that a temporary principal recipient had been identified. The Fund hoped that if a new Principal Recipient (PR) were used, project performance would improve and related problems would be resolved. In July 2005, the Fund announced that the new PR was successfully implementing the grant and that it had approved additional funds for the grant's Phase II activities. In May 2006, at its 13 th board meeting, the Fund decided to discontinue support for Nigeria's HIV/AIDS programs awarded in Round 1. In previous board meetings, the Secretariat recommended that the Fund not award Nigeria additional support for Phase II. The Board disagreed. At the 12 th Board meeting, the Board and Secretariat agreed to create an Independent Review Panel to review the grants and report back to the Board. Following its investigation, the Panel presented similar findings and agreed with the Secretariat that the grants were performing poorly. The Board agreed not to fund Phase II of the grants, but committed to support procurement of HIV treatments for up to two years. Although those grants were discontinued, the Fund awarded Nigeria different HIV/AIDS grants in Round 5. Staff at the Global Fund report that the Fund discontinued support for Pakistan's malaria projects in Round 2 because of weak project implementation, slow procurement of health products, poor data quality, and slow spending of project funds. Specifically, the Secretariat found that 8 of the grant's 10 targets had not been reached and only 15% of the insecticide-treated nets (ITNs) had been distributed. On March 1, 2005, the Global Fund announced that it would not approve funding for the second phase of Senegal's malaria project, which was originally funded in Round 1. A Fund press release indicated that the project "was found to have systemic issues that resulted in poor performance." The release did not specify what issues it had with the project, though it indicated that "review of the Senegal grant raised serious concerns" about the effective use of Global Fund resources. Although the program was discontinued, Fund officials encouraged Senegal to address the issues that were raised and to apply for new funds in the future. Ultimately, the Fund approved a grant proposal that Senegal submitted for malaria projects in Round 4. In December 2005, the Global Fund Board voted to discontinue funding an HIV prevention grant in South Africa. The Board decided that the grant, implemented by an NGO named loveLife, had failed to sufficiently address weaknesses in its implementation. Press accounts quote a Global Fund representative explaining that it had become difficult to measure how the loveLife prevention campaign was contributing to the reduction of HIV/AIDS among young people in South Africa. Additionally, the representative reportedly stated that the Board had repeatedly requested that loveLife revise its proposals and address concerns regarding performance, financial and accounting procedures, and the need for an effective governance structure. A Global Fund spokesman was quoted as saying that "loveLife is extremely costly, there are programs that have been very effective, which cost a fraction of what loveLife costs. It would be irresponsible of the Global Fund to spend almost $40 million without seeing results." LoveLife officials were reportedly surprised that the Global Fund ultimately decided to discontinue funding the grant, particularly since there were some reported differences of opinion regarding the matter between the Fund's Technical Review Panel (TRP), Secretariat, and the Board. Additionally, loveLife officials reportedly argued that the decision was politically motivated and influenced by U.S. emphasis on abstinence in HIV prevention efforts. One press account quoted a loveLife official as saying, "Obviously the strength of conservative ideologies is spilling over into the field of HIV and HIV prevention and it has direct impact on programs like loveLife." According to a loveLife press release, the decision to discontinue support for the program will substantially curtail South Africa's efforts to prevent HIV infections among young people, because the Global Fund's grant supported one third of the program's budget. However, the South African government has reportedly provided additional funds to the program to close the funding gap, and other donors, such as the U.S.-based Kaiser Family Foundation, have continued funding loveLife HIV-prevention efforts. On August 24, 2005, the Global Fund announced that it had temporarily suspended all five of its grants in Uganda. Additionally, the Fund declared that the Ugandan Ministry of Finance would have to establish a new structure that would ensure effective management of the grants before it considered resuming support. In a press release, the Fund explained that a review undertaken by PricewaterhouseCoopers revealed serious mismanagement by the Project Management Unit (PMU) in the Ministry of Health, which was responsible for overseeing the implementation of Global Fund programs in Uganda. Examples of "serious mismanagement" included evidence of inappropriate, unexplained or improperly documented expenses. Up to that point the Fund had disbursed some $45.4 million of the $200 million approved. Three months later on November 10, 2005, the Fund announced that it had lifted the suspension on all five grants. The PR and the Ministry of Finance committed to restructure management of the grants and strengthen oversight and governance of Global Fund grants to Uganda. In spite of these actions, the Fund did not approve support for Phase II activities. After extensive consultation with the U.N. Development Program (UNDP), the Fund decided to terminate its grant agreements with Burma effective August 18, 2005. The Fund stated that while it was concerned about the extensive humanitarian needs in Burma, travel restrictions imposed by the country's government prevented the Fund from effectively implementing grants. According to the Fund, travel clearance procedures that the Burmese government instituted in July 2005 prevented the PR, implementing partners, and Global Fund staff from accessing grant implementation areas. The Fund indicated that the travel restrictions coupled with new procedures that the government established to review procurement of medical and other supplies "prevented implementation of performance-based and time-bound programs in the country, breached the government's commitment to provide unencumbered access, and frustrated the ability of the PR to carry out its obligations." The Global Fund's decision to discontinue those grants in Burma sparked a larger debate about providing humanitarian assistance in countries that are politically unstable or governed by dictatorial regimes. Some were disappointed that the Fund terminated its assistance, citing the significant humanitarian needs in the country. A Burmese official stated that, "the restrictions on aid workers were only temporary, and 'do not justify irreversible termination of grants.'" A U.N. official accused the United States of pressuring the Global Fund to withdraw its support in Burma. One U.N. official warned of impending death as a result of the situation, stating that, "without exaggeration, people are going to die because of this decision." Some, however, blamed the Burmese government for the Fund's decision to terminate the grants. One Washington-based observer stated that, "it needs to be recognized who causes suffering in that country. It's not the Global Fund...It's the regime." A Global Fund spokesperson stressed that the interrupted aid was not a political decision, rather one based on effective project implementation. Burma has garnered support from other countries and international organizations to continue programs terminated by the Fund. Australia is reportedly increasing its aid to Burma by 25%. Additionally, the European Union (EU) announced that it had pledged about $18 million to fight HIV/AIDS in the country. In January 2006, Australia, Britain, Sweden, the Netherlands, Norway, and the European Commission announced that they planned to establish a $100 million, five-year joint donor program that would replace some of the financial support the country lost after the Fund had withdrawn. The program, the Three Diseases Fund (3D Fund), was officially launched in October 2006. The donors contend that the funding system maintains the safeguards established by the Global Fund that ensures the money does not directly support the military regime. In September 2000, at the United Nations (U.N.) Millennium Summit, member states adopted the U.N. Millennium Declaration, which among other things, established a set of time-bound, measurable goals and targets for combating poverty, hunger, disease, illiteracy, environmental degradation and discrimination against women. This resolution contains what have become commonly known as the Millennium Development Goals (MDGs). World leaders who agreed to the MDGs pledged to provide sufficient financial and technical support to meet the goals. Of the eight goals, the one aimed at HIV/AIDS and malaria commits world leaders to reverse the spread of the two diseases by 2015. The World Health Organization (WHO) and the Joint United Nations Program on HIV/AIDS (UNAIDS) estimate that in order to meet the MDG goal related to HIV/AIDS and malaria, in each year from 2008 to 2010, donors would need to provide between $28 billion and $31 billion. The Global Fund estimates that during that time period, its annual share of this amount would range from $4 billion to $6 billion. The Fund estimates that it will need between $11.5 billion and $17.9 billion from 2008 to 2010. The range represents the rate at which grant approval could escalate in three different scenarios ( Table 2 ). In Scenario A, the Global Fund would continue to award new grants at the current rate of about $1 billion per year and would not experience significant growth. In Scenario B, the Fund would moderately increase new grant awards, with annual grant awards averaging $5 billion from 2008 to 2010. In Scenario C, the Fund projects that it would meet the MDGs and would need an average of $6 billion for each year from 2008 to 2010. The Global Fund does not advocate any scenario, because it bases its financial needs on the grant proposals that it receives. However, at a board meeting in April 2007, the Board estimated that it would need from $6 billion to $8 billion by 2010--reflecting Scenarios B and C. At the launching of PEPFAR, the Administration proposed that over the Plan's five-year term, $1 billion be contributed to the Global Fund. The Administration has requested $1.3 billion for the Fund from FY2004 through FY2008: $200 million in each of FY2004 and FY2005, and $300 million in each of FY2006 through 2008. Congress has consistently provided more to the Fund than the Administration has requested through PEPFAR, appropriating some $3 billion from FY2004 through FY2008 ( Table 3 ). In FY2008, Congress appropriated $840.3 million for a U.S. contribution to the Fund, the single largest U.S. contribution to date. Of those funds, $545.5 million would be funded through the State Department, and $294.8 million through the Department of Health and Human Services (HHS). The President requested $500 million for FY2009. Some critics of the Fund have expressed concern about particular aspects of the Fund's financial policies. Observers contend that the Fund's oversight mechanisms are not strong enough to protect against wasteful spending, particularly in countries that have a well documented history of corruption and poor financial management. Fund supporters counter that the organization's website provides an abundance of information related to its funding process, grant project proposals and budgets, grant spending trends, and results of board meetings, which include decisions regarding the suspension of grants. Fund advocates also argue that the Fund's decisions to suspend temporarily, and in some cases, discontinue poor performing grants demonstrate the effectiveness of the Fund's oversight and funding mechanisms. In June 2005, the U.S. Government Accountability Office (GAO) reported that the Fund had a limited capability to monitor and evaluate grants, raising questions about the accuracy of its reported results. GAO also indicated that the Fund's documents had not consistently explained why it provided additional funds for grants or why it denied disbursement requests. In October 2006, the Center for Global Development (CGD) Global Fund Working Group reported similar findings and made a number of recommendations, including strengthening the performance based funding system. In an effort to strengthen oversight of the Fund's grants, Congress included a provision in Section 525 of P.L. 109-102 , FY2006 Foreign Operations Appropriations, that required 20% of the U.S. contribution to the Global Fund be withheld until the Secretary of State certified to the Appropriations Committees that the Fund had undertaken a number of steps to strengthen oversight and spending practices. The act allows the Secretary to waive the requirement, however, if she determines that a waiver is important to the national interest. At a March 2007 hearing on TB held by the Subcommittee on Africa and Global Health, Representative Adam Smith expressed his reservations about the Fund's oversight capacity, stating that The information and accountability that Congress has come to take for granted through bilateral programs are not available through the Global Fund, and that many of the primary recipients of the Global Fund grants are governments with a history of corruption and fraud and/or limited capacity to properly manage large sums of money in their health sectors. One could argue that the absence in the Global Fund of a robust reporting and monitoring mechanism, at both the primary and sub- recipient levels, is an open invitation for waste in these countries and a tragic loss of opportunity to save lives. The implementation of a system that provides accountability and transparency would seem vital, absolutely necessary, in my view, to continue the expanded donor support of the Global Fund in the future. GAO re-evaluated the Fund and released a report in May 2007, which acknowledged that the Fund had improved its documentation of funding decisions, but also determined that the process needed improvement. The report indicated that while each grant that GAO reviewed included an explanation of associated funding decisions, the explanations did not detail what criteria the Fund used to determine whether to disburse funds or renew support, as it had found in 2005. GAO recommended that the Fund strengthen oversight of Local Fund Agents (LFAs) and standardize performance benchmarks to improve the quality of grant monitoring and reporting. In FY2008, Congress placed additional monitoring and oversight provisions to Global Fund appropriations. The FY2008 Consolidated Appropriations required that 20% of U.S. contributions to the Fund be withheld until the Secretary of State certifies to the Committees on Appropriations that the Global Fund releases incremental disbursements only if grantees demonstrate progress against clearly defined performance indicators; provides support and oversight to country-level entities; has a full-time, independent Office of Inspector General who is fully operational; requires LFAs to assess whether a principal recipient has the capacity to oversee the activities of sub-recipients; is making progress toward implementing a reporting system that breaks down grantee budget allocations by programmatic activity; makes the reports of the Inspector General publicly available; and tracks and encourages the involvement of civil society, including faith-based organizations, in country coordinating mechanisms and program implementation. The FY2008 Consolidated Appropriations also required the Secretary of State to submit a report within 120 days of enactment to the Appropriations Committees that details the involvement of faith-based organizations in Global Fund programs. Some in Congress have long advocated for stronger oversight of Global Fund spending. Supporters of this idea have welcomed the provisions. Some Global Fund supporters contend, however, that such action is unnecessary in light of the strides that the Fund continues to make in improving its reporting and monitoring practices. As Congress considers whether to continue supporting the Global Fund, Members might debate whether the Fund is sufficiently adhering to congressional mandates or if additional provisions are necessary. P.L. 108-25 , U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act, prohibits U.S. government contributions to the Fund from exceeding 33% of contributions from all donors. Congress instituted the contribution limit to encourage greater global support for the Fund. There is some debate about whether the 33% provision should be interpreted as the amount the United States should provide to the Fund or as the maximum amount the United States can contribute. Supporters of the Fund contend that Congress instituted the 33% mandate in recognition of the moral responsibility that the United States holds as one of the wealthiest countries in the world. Opponents of this idea assert that if U.S. contributions to the Fund were to reflect its share of the global economy, then U.S. contributions would and should range from 20% to 25% of all contributions. Some Global Fund advocates who disparage the 33% restriction argue that the differing fiscal cycles of the Fund and the United States complicate efforts to leverage support. Opponents to the 33% restriction contend that the requirement is harmful to the Fund, because the U.S. fiscal year concludes some three months before the Fund's. Critics most often point to FY2004 to substantiate their position. In that fiscal year, nearly $88 million of the U.S. contribution was withheld from the Fund to prevent the funds from exceeding 33%. Advocates of the restriction assert that the 33% cap was intended to suspend portions of U.S. contributions, where necessary. Proponents of the cap note that the Fund was not significantly affected, as the withheld portion was released at the end of the calendar year, when the Fund secured sufficient funds to match the U.S. contribution. Supporters of the provision contend that the Fund benefits from the policy, because it encourages other donors to increase their contributions, as happened in FY2004 ( Table 4 ). Debate on the 33% contribution cap has also focused on the limited amount of support that the private sector and others have provided to the Fund ( Table 5 ). Since its inception, the Fund has struggled to secure support from non-government donors. The Bill & Melinda Gates Foundation remains the largest single contributor among non-government donors. As of July 17, 2008, the foundation accounts for about 86% ($650.0 million) of all non-governmental pledges ($755.1 million) and more than 75% ($450.0 million) of all payments made to the Fund by non-governmental donors ($579.6 million). Some Fund supporters had hoped that the Product Red campaign, launched in January 2006 by co-founder Bono, would lead to significant increases in contributions made by the private sector. As of July 17, 2008, Product Red™️ has contributed $69.8 million to the Fund, comprising 12% of non-government contributions, double what it paid in April 2007. The Administration has argued that any amount that Congress provides to the Global Fund in excess of its request skews the appropriate balance of aid that the United States should provide to the Fund and other bilateral HIV/AIDS efforts. At a FY2005 Senate Appropriations Committee hearing in May 2004, then-Global AIDS Coordinator Ambassador Randall Tobias argued that the "incremental difference between what the Administration requested and what was appropriated to the Fund is money that might have been available" for U.S. bilateral programs. Although appropriations to the Fund have been increasing, the percentage of U.S. global HIV/AIDS, TB, and malaria appropriations provided for U.S. contributions have remained mostly level ( Table 6 , Figure 1 , and Figure 2 ). Fund supporters counter that appropriations made to the Fund in excess of requested levels better reflect what the United States should provide and complement U.S. bilateral HIV/AID programs, particularly since the Administration and the Fund have strengthened their coordination. U.S. officials acknowledge that though the Fund is a critical part of PEPFAR, when making appropriations, Congress should consider the pace at which the Fund can distribute funds. The Office of the Global AIDS Coordinator (OGAC) has cited an instance when PEFPAR used some of its funds to purchase anti-retroviral medication (ARVs) for a Global Fund project that faced financial delays. In FY2009, the Administration requested $500 million for U.S. contributions to the Global Fund through Foreign Operations and Labor/HHS Appropriations. This amount accounts for almost 8% of all HIV/AIDS, TB, and malaria proposed spending--about 5% less than FY2008 enacted levels.

The Global Fund to Fight AIDS, Tuberculosis, and Malaria, headquartered in Geneva, Switzerland, is an independent foundation that seeks to attract and rapidly disburse new resources in developing countries aimed at countering the three diseases. The Fund is a financing vehicle, not an implementing agency. The origins of the Fund as an independent entity to fight the three diseases lie partly in a French proposal made in 1998, in ideas developed in the 106th Congress, and in recommendations made by United Nations Secretary-General Kofi Annan in April 2001. Though the Global Fund was established in January 2002, President Bush pledged $200 million to such a fund in May 2001. As of July 17, 2008, donors have pledged more than $20.2 billion to the Fund, of which more than $10.2 billion has been paid. The fund has approved support for more than 500 grants totaling some $10 billion for projects in 136 countries. Each year, the Fund awards grants through Proposal Rounds. The Fund launched its eighth Round on March 3, 2008. In 2005, the Fund approved Round 5 grants in two tranches, because initially there were insufficient donor pledges to approve all the recommended proposals. The Fund approved the first group of Round 5 proposals in September 2005 and the second in December 2005, after donors pledged to make additional contributions. The Global Fund only approves proposals if it has sufficient resources on hand to support the first two years of a proposed project. This policy is designed to avoid disruptions to projects due to funding shortages. Funding lapses can cause interruptions in treatment regiments, which could lead to treatment-resistant strains of the diseases or death. The United States is the largest single contributor to the Global Fund. From FY2001 through FY2008, Congress has made available an estimated $3.6 billion to the Fund, including $840.3 million in FY2008, the single largest U.S. contribution to date. Of those funds, $545.5 million would come from the State Department, and $294.8 million from the Department of Health and Human Services (HHS). The President requested $500 million for a FY2009 contribution to the Global Fund. There has been some debate about the level of U.S. contributions to the Fund. Some critics argue that the United States should temper its support to the Fund, because the Fund has not demonstrated strong reporting and monitoring practices; because contributions made to the Fund in excess of the President's request are provided at the expense of U.S. bilateral HIV/AIDS, TB, and malaria programs; and because they maintain that the Fund needs to secure support from other sources, particularly the private sector. Supporters of current funding levels counter that the Fund has improved its reporting and monitoring practices, greater U.S. contributions to the Fund parallel increases in U.S. bilateral HIV/AIDS, TB, and malaria programs, and the Fund has attempted to raise participation of the private sector through the launching of Product Red™️. This report, which will be periodically updated, discusses the Fund's progress to date, describes U.S. contributions to the organization, and presents some issues Congress might consider.

Since becoming independent in 1991, Armenia has made unsteady progress toward democratization, according to many international observers. These observers--including international organizations such as the Council of Europe (COE), the Organization for Security and Cooperation in Europe (OSCE), and the European Union (EU), and some governments including the United States--had viewed Armenia's previous legislative and presidential elections in 2003 as not free and fair. These observers cautioned the Armenian government that the conduct of the May 2007 legislative election would be taken into account in future relations. Significant events in the run-up to the May 2007 legislative race included constitutional amendments approved in November 2005 which strengthened the role of the legislature, including giving it responsibility for appointing some judicial and media regulatory personnel and a voice in appointing a prime minister. Amendments to the election law increased the legislative term from four to five years and restricted voting by citizens who were outside the country at the time of elections. In May 2006, the Rule of Law Party left the ruling government coalition and joined the opposition, leaving the remaining coalition members--the Republican Party of Armenia and the Armenian Revolutionary Federation--in a strengthened position. A new party formed in 2004, the Prosperous Armenia Party, led by businessman Gagik Tsarukyan, seemed to gain substantial popularity. In March 2007, Prime Minister Margoyan died, and President Kocharyan appointed then-Defense Minister Serzh Sargisyan as the new prime minister. Sargisyan's leadership of the Republican Party of Armenia placed him at the forefront of the party's campaign for seats. The Central Electoral Commission (CEC) of Armenia followed an inclusive policy and registered 23 parties and one electoral bloc (Impeachment) on April 4 for the proportional part of the legislative election. In the constituency races, the CEC registered 119 candidates. In seven constituencies, candidates ran unopposed. Campaigning began on April 8 and ended on May 10. The Pan-Armenian National Movement (the party of former president Levon Ter-Petrossyan) dropped out in late April and called for other opposition parties to follow suit to reduce the number of such parties competing for votes. Another formerly prominent party, the National Democratic Union headed by Vazgen Manukyan, refused to take part in what it claimed would be a fraudulent election. The political campaign was mostly calm. Exceptions included explosions at offices of the Prosperous Armenia Party on April 11, the arrest of two members of the opposition Civic Disobedience Movement on money laundering charges on May 7, and the use of police force against marchers from the Impeachment bloc on May 9, which resulted in some injuries. Armenian media reported that Kocharyan accused Artur Baghdasaryan, the head of the Rule of Law Party, of "betrayal" for allegedly discussing with a British diplomat how the West might critique the election. Under the electoral law, the parties and candidates received free air time for campaign messages. Except for these opportunities, the main public and private television channels mostly covered pro-government party campaigning, and private billboard companies mostly sold space to these parties. The public radio station appeared editorially balanced. Positive or neutral reports dominated in the media, according to OSCE/COE/EU election observers. Most campaigning appeared to stress personalities rather than programs, according to many observers. To the extent issues were discussed, the focus was largely on domestic concerns such as rural development, pensions, education, jobs, and healthcare. The CEC reported that almost 1.4 million of 2.3 million eligible voters turned out (about 60%). The Republican Party of Armenia gained more seats than it won in the last legislative election. The Prosperous Armenia Party failed to get as many votes as expected. It also was surprising that the United Labor Party failed to gain seats. The opposition parties (Rule of Law and Heritage) won 16 seats, fewer than the opposition held in the previous legislature, although parties considered oppositionist received about one-fourth of the total popular vote. While hailing the election as "free, fair, and transparent," Kocharyan on May 14 reportedly pledged that "shortcomings and violations, which took place during the elections, will be thoroughly studied in order to take necessary measures and re-establish legality," a pledge reiterated to the OSCE by Sarkisyan on May 22. According to the preliminary conclusions made by observers from the OSCE, COE, and the EU, the legislative elections "demonstrated improvement and were conducted largely in accordance with ... international standards for democratic elections." They praised an inclusive candidate registration process, dynamic campaigning in a permissive environment, extensive media coverage, and a calm atmosphere in polling places. However, they raised some concerns over pro-government party domination of electoral commissions, the low number of candidates in constituency races, and inaccurate campaign finance disclosures. Observers also reported a few instances of voters apparently using fraudulent passports for identification, of vote-buying, and of individuals voting more than once. In a follow-on assessment, the OSCE/COE/EU observers raised more concerns that vote-counting problems could harm public confidence in the results. The inability of opposition parties to form a coalition like the former Justice Bloc in 2003 harmed their chances by splitting the vote. The failure of some formerly prominent opposition parties to win seats raises questions of their future viability. These include the People's Party of Armenia (led by Demirchyan, the runner-up in the 2003 presidential election), the National Unity Party (led by Artashes Geghamyan), and the Republic Party (led by Aram Sargisyan). While the pro-government Republican Party of Armenia and Prosperous Armenia Party argued that the losing parties sealed their own marginalization because they were not attractive to the electorate, the losing parties responded that they were outspent and hurt by voter apathy and electoral fraud. At a rally on May 18, the two opposition parties that won seats in the legislature (Rule of Law and Heritage) joined the Impeachment bloc and other opposition parties to call on the Constitutional Court to void the election. The Pan-Armenian National Movement, which had dropped out the race, issued a statement alleging that sophisticated methods had been used to rig the vote. Addressing such accusations, CEC spokesperson Tsovinar Khachatrian reportedly gave assurances that the vote count and results were "normal." She stated that the CEC had received only seven complaints, and that recounts had resulted in "no essential changes in the results." Armenian media reported on May 21 that four cases had resulted in criminal charges, but only one involved the falsification of the election results by polling place workers. The Impeachment bloc and other opposition parties held more rallies on May 25 and June 1 to demand a new election. Since President Kocharyan is constitutionally limited to two terms, the parties showing well in the legislative election are expected to be best poised to put forth their candidates for a presidential election in 2008. The Republican Party of Armenia's strong showing places Prime Minister Sargisyan as the front runner for president if he chooses to run. According to analyst Emil Danielyan, opposition parties may counter by appealing to the cynicism of many Armenians about the electoral results and by urging them to support alternative presidential candidates. Some observers suggest that the opposition parties may again fail to cooperate and instead put forward multiple presidential candidates, fracturing the opposition vote. The election also may be more significant than previous ones because the legislature has been given enhanced constitutional powers, according to some observers. In calling for the election of pro-government legislators, Kocharyan warned on May 10 that "it is important that the new parliament and the president cooperate and that these two state institutions do not confront each other," or otherwise the country's citizens will suffer. Since the Republican Party of Armenia increased its number of seats to a near-majority in the legislature and the opposition parties lost seats, it is unlikely that the domestic and foreign policies of the government will change greatly, according to many observers. There conceivably could be some changes in some policies, however, as the Republican Party of Armenia seeks to form a coalition government. Reasons for the Republican Party of Armenia to seek a coalition rather than form a one-party government include increasing its legislative support and influence in the run-up to the presidential race. Other spurs to forming such a coalition may include the plans by the Rule of Law and Heritage parties to use their presence in the legislature to challenge government policies, rather than to repeat the failed past opposition strategy of boycotting the legislature. Such plans may reinforce Kocharyan's reported view that these parties are not "constructive" opposition parties and that they need to be countered by a legislative coalition. Some observers warn that Kocharyan, as a lame-duck president, may become less influential in Armenian politics and that he and Sargisyan could come to clash on personnel and policy issues in coming months. Other observers suggest that both leaders--who are comrades-in-arms of the conflict over Azerbaijan's breakaway region of Nagorno Karabakh--will cooperate to achieve their future political goals, which conceivably might include a position for Kocharyan in a political party or a potential Sargisyan administration. Kocharyan and Sargisyan may cooperate in negotiations with Azerbaijan to settle the Nagorno Karabakh conflict, possibly because a Sargisyan administration might have responsibility for implementing a potential settlement. Another possible clash between Sargisyan and Tsarukyan may be mitigated to some degree through power-sharing negotiations on forming a coalition government. Russia appeared interested in the outcome of the election by stressing its good relations with the existing Armenian government. During the height of campaigning in April, the Russian Minister of Foreign Affairs, the First Deputy Prime Minister, and other high-level officials visited Armenia. A group of election observers from the Commonwealth of Independent States judged the election as "free and fair." European institutions such as the OSCE, COE and the EU appeared poised to accept the electoral outcome as being sufficiently progressive to bolster their assistance and other ties to Armenia, according to some initial statements. The EU Council President, German Chancellor Anela Merkel, seemed to typify this stance when she stated that the elections were "on the whole, conducted fairly, freely and largely in accordance with the international commitments which Armenia had entered into," and that she was "very much in favor of intensifying cooperation with Armenia. This would breathe new life into the European Neighborhood Policy and the Action Plan agreed under it." The Bush Administration generally viewed the Armenian legislative election as marking progress in democratization. The U.S. State Department reported on May 14 that "all and all, [the Armenian election was] an improvement over past elections; though certainly if you look at what the observers said, it did not fully meet international standards." While praising the electoral progress, the State Department also urged the Armenian government to "aggressively investigate allegations that are there of electoral wrongdoing and prosecute people in accordance with Armenian law." Armenia's election may rank it with Georgia as making progress in democratization in the South Caucasus region, according to some observers. Under this view, democratization facilitates cooperation, so a more democratic Armenia might be able to deepen ties with nearby NATO members in the wider Black Sea region. In the Caspian Sea region, it might serve as an exemplar to local democracy advocates. Progress in elections is one condition for continued Millennium Challenge Account assistance (MCA; set up in 2004 to support countries that are dedicated to democratization and the creation of market economies). When Armenia and the United States concluded a "compact" for $235.65 million in MCA assistance in March 2006, Armenia's low standing on "political rights" as scored by the MCA was raised as a problem that needed to be addressed. Following the latest election, Armenia's previous "failing" score on political rights may be higher (if initial election assessments do not fundamentally change), bolstering its qualifications as an MCA "co-partner in development," according to some observers. Many in Congress have supported democratization efforts in Armenia as indicated by hearings and legislation, including by backing $225 million in cumulative budgeted foreign assistance for democratization (about 13 percent of all aid to Armenia) from FY1992 through FY2006. After the most recent election, Representatives Frank Pallone and Joe Knollenberg--co-chairs of the Congressional Armenia Caucus--sent a letter on May 18, 2007, to President Kocharyan and Prime Minister Sargisyan congratulating Armenia on its "free and fair election cycle." On the House floor, Representative Pallone hailed the "first positive assessment of an election" in Armenia since its independence and stated that it would enhance U.S.-Armenia ties and Armenia's international reputation. He also stated that the election demonstrated the effectiveness of U.S. democratization aid and called on Millennium Challenge to "fully fund its compact with Armenia in an expeditious manner."

This report discusses the campaign and results of Armenia's May 12, 2007, legislative election and examines implications for Armenian and U.S. interests. Many observers viewed the election as marking some democratization progress. The Republican Party of Armenia increased its number of seats to a near-majority and termed the results as a mandate on its policies. The party leader, Prime Minister Serzh Sargisyan, was widely seen as gaining stature as a possible candidate in the upcoming 2008 presidential election. This report may be updated. Related reports include CRS Report RL33453, Armenia, Azerbaijan, and Georgia: Political Developments and Implications for U.S. Interests , by [author name scrubbed].

Haiti has had a long, difficult history highlighted by prolonged poverty, political instability, and underdevelopment resulting in a politically fragile state with the lowest standard of living in the Western Hemisphere. With the assistance of the United Nations Stabilization Mission in Haiti (MINUSTAH) and large amounts of international aid, Haiti has been attempting to establish a foundation for longer-term economic development. Security issues have presented the primary risk to stability, while restoring economic growth, investment, employment, and access to basic social services have been the major and equally formidable challenges to sustainable development. Since assuming his second non-consecutive term of office in May 2006, President Rene Preval has emphasized the importance of rebuilding democratic institutions and establishing conditions for private investment to create jobs. The success of his government will depend largely on its ability to improve security and socioeconomic conditions in Haiti, a country in which 76% of the population lives on less than $2 a day. During his first two years in office, security conditions have improved, but Haitians have seen their already substandard living conditions deteriorate further with the rise in global food prices and recent devastation by a series of hurricanes. In a country where more than half of the working age population is unemployed, even many of those who have jobs do not earn enough to provide their families with more than one meal a day. Steeply rising food prices and resulting riots in Haiti were a catalyst for action by Congress and the Bush Administration. The 110 th Congress responded directly to Haiti's immediate food needs, but has also taken the opportunity to advance legislation on other fronts it deems critical for Haiti's longer term development. In April 2008, the House unanimously passed an amendment to the Jubilee Act ( H.Amdt. 993 to H.R. 2634 ) that recommends immediate cancellation of Haiti's outstanding multilateral debts. In June 2008, the House and Senate passed the Food, Conservation, and Energy Act of 2008 ( H.R. 6124 / P.L. 110-246 ), the Farm Bill. Title XV includes the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act of 2008, which gives trade preferences to U.S. imports of Haitian apparel. In late June 2008, Congress amended the Merida Initiative, an aid package for Mexico and Central America that was part of the FY2008 Supplemental Appropriations Act, H.R. 2642 ( P.L. 110-252 ), to include counternarcotics funds for Haiti. Some Members of Congress have also urged the Administration to grant temporary protected status (TPS) for Haitian immigrants living in the United States ( H.R. 522 ). Collectively, these efforts form the basis for a multifaceted congressional response to Haiti's stability and development challenges. Rising food prices are having economic and political effects around the world, but especially among poor people in low-income developing countries like Haiti. Prices for basic food commodities in Haiti, the vast majority of which are imported, have risen by an average of 30-40% over the last year. In early April 2008, weeks of protests against rising food prices turned violent, with at least six people killed, including one U.N. peacekeeper. Haitians were reportedly frustrated by the Preval government's lack of action and protests continued until the President announced a plan to partially subsidize the cost of rice. On April 12, Haiti's Prime Minister resigned after the Haitian Parliament accused him of mishandling the government's response to the food crisis. Since then, the Haitian Parliament rejected two Preval nominees for Prime Minister on technical grounds, before ratifying Michele Pierre-Louis, who was sworn in on September 6, 2008. Nonetheless, the parliament, comprising 19 political parties, continues to be a fractious body, creating a serious governance challenge. Some observers have warned that, should conditions not improve, supporters of ousted President Jean Bertrand Aristide may push for his return. Aristide's last government (2001-2004) was marred by tension and violence, and his departure from office led to the introduction of U.N. forces to stabilize the country's security situation. To overcome the current crisis, observers maintain that President Preval will have to solidify his governing coalition, a formidable task, and secure significant support from the international community. The World Bank is providing $10 million in grant funding, and the IDB is reportedly providing a $24.5 million grant to Haiti. Emergency assistance from individual donor countries has increased significantly in recent weeks, particularly since the U.S. and Canadian governments announced major pledges to the World Food Program (WFP) for its efforts in Haiti. The WFP has received 49% of the support estimated to be needed over the next two years to support the Haitian government's efforts to strengthen social safety nets and create food price stabilization programs. The Bush Administration initially responded to the food crisis in Haiti by redirecting $6.5 million in development assistance funds to support President Preval's plan to subsidize the cost of rice ($1 million) and to create short-term employment programs ($5.5 million). Haiti had already been allocated a regular appropriation of approximately $234 million in U.S. assistance in FY2008, including some $34 million in P.L. 480 Title II food aid. The FY2009 request for Haiti was for roughly $246 million, including $35.5 million in P.L. 480 food assistance. On April 14, 2008, President Bush directed the Secretary of Agriculture to draw down the Bill Emerson Humanitarian Trust by $200 million to help meet global emergency food needs. USAID has indicated that it will use that $200 million worth of commodities plus an additional $40 million in emergency P.L. 480 Title II food aid to assist 10 priority countries in FY2008, including Haiti. The food aid will be distributed by the WFP and private voluntary organizations. On May 16, 2008, USAID announced that it would provide $20 million worth of emergency food aid to Haiti, and on May 23, 2008, USAID pledged an additional $25 million to support the WFP's programs in Haiti. In late June 2008, Congress appropriated $1.2 billion in FY2008 and FY2009 supplemental assistance for P.L. 480 food aid in the FY2008 Supplemental Appropriations Act, H.R. 2642 ( P.L. 110-252 ). Members from both the House and Senate have asked the Administration to provide Haiti with no less than $60 million in emergency supplemental food assistance. The additional food aid could be used to support the Preval government's effort to subsidize the cost of rice and WFP programs in Haiti, including communal kitchens and school feeding programs. Haiti, however, will have to compete for food aid allocations with other larger countries that also have pressing needs, such as Afghanistan and Sudan. While responding to Haiti's emergency food needs is the immediate priority, some advocates have urged Congress to consider funding programs to promote agricultural development in Haiti as a long-term solution to the country's food insecurity. They have recommended U.S. support for new initiatives aimed at diversifying food production and supporting agricultural, conservation, and infrastructure projects. Many analysts also point to the large Haitian diaspora as a possible avenue to promote rural development projects, possibly through short-term consultancies with the Haitian government. To assist Haiti with rebuilding its economy by encouraging investment and job creation in the once vibrant apparel sector, the 109 th Congress passed the Haitian Hemispheric Opportunity through Partnership Encouragement in December 2006 (HOPE I). The act provided duty-free treatment for select apparel imports from Haiti that are made in part from less expensive third country (e.g. Asian) yarns and fabrics, provided Haiti meets eligibility criteria related to labor, human rights, and anti-poverty policies. Early assessments of HOPE I were disappointed in the progress made. To enhance the effectiveness of these provisions, the 110 th Congress expanded them in June 2008 when it passed the Food, Conservation, and Energy Act of 2008 ( H.R. 6124 / P.L. 110-246 )--the Farm Bill, Title XV of which includes the Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2008 (HOPE II). Support for the duty preferences recognizes the dominant role of the U.S. market as the main destination for Haitian apparel exports. Apparel assembly is also Haiti's core export sector and essential for its economic well-being because it generates up to 80% of the country's foreign exchange used to finance Haiti's large food import bill, among other needs. In 2007, apparel constituted over 80% of Haiti's total exports and 93% of exports to the United States (81% knit, 12% woven articles), so the sector provides one potential avenue for employment growth. The preferences also support textile firms in the Dominican Republic, which have an expanding co-production arrangement with Haiti. The HOPE Acts differ from other trade arrangements with the Caribbean that emphasize apparel benefits. Unlike apparel provisions in the Caribbean Basin Trade Partnership Act (CBTPA), of which Haiti is a beneficiary country, and the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), which does not include Haiti, those in the HOPE Acts permit duty-free treatment for apparel imports in limited quantities assembled or knit-to-shape in Haiti with inputs from third-party countries, or those outside the region that are not in a trade arrangement or agreement with the United States. The competitive advantage to Haitian firms derives from their ability to use less expensive Asian inputs and still receive duty-free treatment. To the extent that this advantage is in place for an extended period of time, it is intended to encourage increased investment in the apparel assembly business in Haiti, contributing to growth in output, employment, and exports. HOPE I provided three major tariff preferences for limited amounts of articles imported directly from Haiti: (1) quotas for the duty-free treatment of apparel articles that meet the regional value-added content rule (50% rising to 60%), effectively allowing the remaining portion of inputs to be sourced from outside the region; (2) additional quotas for duty-free treatment of a limited amount of woven apparel that cannot meet the 50%-60% value-added rule (allowing all inputs for these articles to be sourced from anywhere in the world); and (3) a single transformation rule of origin that allows for duty-free treatment of brassieres made from components sourced anywhere in the world, provided the garments are cut and sewn or otherwise assembled completely in Haiti, the United States, or both. HOPE I, however, did not result in dramatic growth in Haitian textile exports to the United States, inhibited by the limited time frame and complicated rules of origin. Further, U.S. textile producers objected to the rules, contending that because they permit use of third-party fabrics and other inputs, they effectively displace jobs in the United States and the Caribbean with those in Asia. As an alternative, the industry suggested allowing preferences only for goods no longer produced in the Western Hemisphere. U.S. textile producers also found the rules of origin to be vague and difficult to enforce, and raised concern that the tariff preferences could divert apparel production to Haiti from countries in the region that are partners to U.S. reciprocal trade agreements. Proponents of the HOPE II responded that it would clarify rules of origin and simplify other implementation problems. They further argued that the preferences are quantitatively limited, apply to a very small portion of U.S. apparel imports, and are in place for only a specified period of time, presenting little threat to larger U.S. and regional textile producers. Support for enhancements in HOPE II rested on arguments that these benefits outweighed potential costs and therefore would be a constructive part of an ongoing multifaceted response to Haiti's development needs. The HOPE II Act enhances the tariff preferences by extending them for 10 years through September 30, 2018, making the rules more flexible and simpler, and expanding duty free treatment for U.S. apparel imports wholly assembled or knit-to-shape in Haiti. Specifically, HOPE II: (1) maintains the value-added rule in HOPE I, freezing the cap on total apparel imports and keeping the original five-year sunset provision because the rule was little used and is highly complicated; (2) increases the cap for select woven apparel imports; (3) provides a new cap for select imports of knit apparel, with significant exclusions; (4) adds a new uncapped "3 for 1" earned import allowance (EIA) that allows duty-free treatment of imports made from qualifying inputs (e.g. fabrics made from U.S. or countries a party to U.S. trade agreements) and articles made from non-qualifying inputs (e.g. from Asian fabrics) in a 3 for 1 ratio; (5) includes a new uncapped benefit for apparel using non-U.S. fabrics deemed to be in "short supply," (6) expands the single transformation rule from brassieres to apparel articles covered under CAFTA-DR, headgear, and select sleepwear, luggage, and handbags; and, (7) allows for direct shipment of apparel articles sent from Haiti to the Dominican Republic for finishing, reducing transportation costs and lead times incurred under the HOPE I requirement that articles be returned to Haiti for direct shipment to the United States. HOPE II also requires that Haiti create a new apparel sector monitoring program (Labor Ombudsman) to ensure compliance with internationally recognized core labor standards. Some Members of Congress also pushed to provide immediate debt relief to Haiti to help the Preval government free up limited fiscal resources to address the food crisis. According to the Haitian Central Bank, Haiti's foreign public debt totals roughly $1.7 billion, a large portion of which is owed to multilateral institutions such as the World Bank, IDB, and International Monetary Fund (IMF). A March 2008 IMF report projects that the Haitian government will make debt service payments of roughly $71.7 million in 2008. On April 16, 2008, the House unanimously passed an amendment to the Jubilee Act ( H.Amdt. 993 to H.R. 2634 ) that recommends immediate cancellation of Haiti's outstanding debts to the international financial institutions. A companion bill ( S. 2166 ) has been introduced in the Senate. Hearings were held, but the bill is still in committee. The Jubilee Act seeks to change multilateral lending practices and cancel debt for many low-income countries. Critics charge that providing immediate cancellation of Haiti's debt is probably unnecessary because Haiti is already advancing through the Heavily Indebted Poor Countries (HIPC) debt relief process. They assert that Haiti, similar to other heavily indebted countries, should be encouraged to adopt sound reforms and policy changes that will (hopefully) help it avoid future excessive indebtedness. Providing Haiti with unconditional debt relief, they argue, would encourage the Haitian government to increase borrowing. In November 2007, the Haitian government published a Poverty Reduction Strategy in line with IMF and World Bank recommendations. Many observers had predicted that Haiti would be able to meet the so-called "completion point" required for debt relief by late 2008 or early 2009, but the current crisis could delay this outcome. Proponents counter that given Haiti's immediate food crisis, the Secretary of the Treasury should urge the multilateral donors to cancel Haiti's foreign debt immediately because Haitian public finances could be better used to subsidize food purchases that are desperately needed right away. Immediate assistance would also accelerate debt relief anticipated under the HIPC program, but which may not be forthcoming soon because Haiti is unlikely to meet the remaining conditions for debt relief in the near future.

Haiti faces several interrelated challenges, the most immediate being a lingering food crisis that in April 2008 led to deadly protests and the ouster of Haiti's prime minister. Haiti also suffers from a legacy of poverty, unemployment, and under-development that is compounding security problems for its new and fragile democracy. On May 23, 2008, the Bush Administration announced that it would send an additional $25 million in emergency food aid to Haiti, bringing its total emergency contribution to $45 million. In late June 2008, Congress appropriated $1.2 billion in FY2008 and FY2009 supplemental assistance for P.L. 480 food aid in the FY2008 Supplemental Appropriations Act, H.R. 2642 ( P.L. 110-252 ). Haiti is one of ten priority countries likely to receive a portion of that assistance. In June 2008, the House and Senate also passed the Food, Conservation, and Energy Act of 2008 ( H.R. 6124 / P.L. 110-246 ), the Farm Bill. Title XV includes the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act of 2008, which provides tariff preferences for U.S. imports of Haitian apparel, its largest export sector. This report will not be updated.

Morning hour debates have been a part of House floor procedure only since the 103 rd Congress. They began on February 23, 1994, for a 90-day trial period under procedures outlined in a joint leadership unanimous consent agreement (formally, "a standing order of the House"). Morning hour debates were created, in part, to offset the new restrictions on special order speeches that took effect the same day. These restrictions, such as a ban on special orders after midnight and a four-hour limitation on longer special orders, scaled back opportunities for non-legislative debate available through special orders. The 1994 agreement establishing morning hour debates for a 90-day trial period was later extended to cover the remainder of the 103 rd Congress. Morning hour debates continued in the 104 th Congress under a slightly modified unanimous consent agreement. The modification concerned the length and starting time of morning hour debates on Tuesdays "after the first Tuesday in May" (see the " Days and Meeting Times " section for more information). An identical unanimous consent agreement (agreed to on January 6, 2009) governs morning hour speeches in the 111 th Congress. Morning hour debates are not provided for in the rules of the House. Instead, they are a unanimous consent practice of the chamber. The House gives unanimous consent to holding morning hour debates when it agrees to the joint leadership unanimous consent agreement governing these debates. In the 111 th Congress, the chair refers to this agreement at the start of the morning hour debate period when he announces, "[p]ursuant to the order of the House of January 6, 2009, the Chair will now recognize ..." The unanimous consent agreement governs recognition for morning hour debates and establishes the days and meeting times for these debates (for more information, see later sections of this report). During morning hour debates, Members must abide not only by the unanimous consent agreement but also by the rules of the House, the chamber's precedents, and the Speaker's announced policies. Relevant House rules include those governing debate, decorum, and the Speaker's power of recognition. House precedents discuss how the chamber has interpreted and applied its rules. There is not an established body of precedents for morning hour debates because these debates are a relatively new feature of House floor procedure. The term "Speaker's announced policies" refers to the Speaker's policies on certain aspects of House procedure such as decorum in debate, the conduct of electronic votes, and recognition for one-minute and special order speeches. While the Speaker's announced policies do not govern recognition for morning hour debates (the unanimous consent agreement governs recognition), they do regulate television coverage of morning hour debates. The Speaker's policies prohibit House-controlled television cameras from panning the chamber during the morning hour debate period. Instead, a caption (also called a "crawl") appears at the bottom of the television screen indicating that the House is conducting morning hour debates. Morning hour debates are in order only on Mondays and Tuesdays. They take place infrequently on Mondays because the House is not always in session that day. The starting time and length of morning hour debates are established by the joint leadership unanimous consent agreement. The House convenes for Monday morning hour debates 90 minutes earlier than the time established for that day's session. For example, if the House is scheduled to meet at noon, the morning hour debate period begins at 10:30 a.m. The Monday morning hour debate period can last up to one hour, with a maximum of 30 minutes of debate on each side. The full hour is rarely used. Tuesday morning hour speeches on or before May 18, 2009, take place in the same manner as Monday morning hour debates. The agreement provides, however, that Tuesday morning hour debates after May 18, 2009, begin 60 minutes before the chamber's meeting hour for a maximum duration of 50 minutes, with 25 minutes allocated to each side. The different procedures for Tuesday morning debates after early May were first established in the joint leadership unanimous consent agreement of May 12, 1995. These procedures, which are included in the agreement for the 111 th Congress, are designed to accommodate the chamber's practice of convening earlier for legislative business after early May. In the 105 th Congress, the procedures were only on those Tuesdays after early May when the House was scheduled to meet at 10:00 a.m. On Tuesdays after early May when the chamber's appointed meeting hour was a later time (e.g., 12:00 noon), the Tuesday morning debates took place in the same manner as Monday morning hour debates. When Monday and Tuesday morning hour debates are completed, the House recesses until the meeting hour established for that day's session. The daily prayer, the pledge of allegiance, and approval of the previous day's Journal take place when the House meets after this recess. The joint leadership unanimous consent agreement requires that the majority and minority leaders give the Speaker a list showing how each party's time for morning hour debates will be allocated among its Members. The chair follows this list in recognizing Members for morning hour debates. A majority party Representative appointed as "Speaker pro tempore " often presides in the chair during morning hour debates. During each morning hour debate period, he alternates recognition between the majority and minority for both the initial morning hour speech (i.e., if a majority Member is recognized for the first speech on Monday, a minority Member is recognized for first speech on Tuesday) and subsequent ones. Individual Members must limit their morning hour debate speech to five minutes or less. Only the majority leader, minority leader, or the minority whip may deliver a morning hour debate speech longer than five minutes. Members reserve time for morning hour debates through their party leadership: Democratic Representatives reserve time through the Office of the Minority Leader, and Republican Members do so through the Republican cloakroom or the party leadership desk on the House floor. Reservations can be made no earlier than one week before the speech date. While most Members reserve five minutes for their morning hour speech, some Representatives reserve as little as one minute. Individual Members often use the morning hour debate period to deliver speeches on subjects unrelated to legislation before the House. They deliver eulogies and tributes to individuals and organizations from their congressional district. They also use the period to deliver speeches on broad policy issues and to present their views on local, national, and international events. Because morning hour debates take place early in the day, they are sometimes used by individual Members and the party leadership to share information relevant to that day's session. For example, Members deliver morning hour speeches to explain a bill they are introducing that day and to invite cosponsors. The chairman of the Rules Committee has spoken during morning hour debates to announce an emergency meeting of the committee. This use of morning hour debates to disseminate information among colleagues parallels how Members often employ one-minute speeches as a visual form of the "Dear Colleague" letter. On occasion, Members of the same party use the morning hour debate period to deliver a series of speeches about the party's views on a particular bill or policy issue. For example, on February 11, 1997, four minority party Members delivered morning hour debate speeches on campaign finance reform. This coordinated use of morning hour debates by party Members is similar to how the parties sometimes use "leadership special orders" (i.e., the first hour of longer special orders that is usually reserved for the party's leadership or a designee) to focus on a specific theme with participation from other party Members.

On Mondays and Tuesdays, the House of Representatives meets earlier than the hour established for that day's session for a period called "morning hour debates" (also known as "morning hour speeches"). This period provides a rare opportunity for non-legislative debate in the House; remarks in the House are usually limited to pending legislative business. During morning hour debates, individual Members deliver speeches on topics of their choice for up to five minutes. The majority and minority leaders give the Speaker a list showing how each party's time for morning hour debates will be allocated among its Members. The chair follows this list in recognizing Members for morning hour debates. At the conclusion of morning hour debates, the House recesses until the starting time for that day's session. This report examines current House practices for morning hour debates and how these debates are used. It will be updated if rules and procedures change.

Over the past several decades, U.S. household indebtedness has generally risen regardless of macroeconomic or financial conditions. In light of the 2007-2009 recession, however, households are reducing their debt burdens. Household debt balances fell in the third quarter of 2008 and continued to do so until the second quarter of 2011 when they rose by 0.55% before resuming their downward trend. Simultaneous declines in household income and net worth made it difficult for some households to support previous debt levels, thus encouraging them to reduce debt service obligations and work toward restoring the health of their balance sheets. Household debt reduction (or deleveraging) may have important implications for job creation and economic recovery. Deleveraging may translate into a reduction in near-term consumption, which typically accounts for approximately 70% of gross domestic product and likely an important source of economic recovery. Deleveraging may also manifest itself in the form of above normal loan defaults that weaken the banking system and discourage new lending, which can be the source of job creation. Moreover, when consumer spending and bank lending are curtailed, fiscal policy initiatives (e.g., tax cuts or spending increases) become less effective at stimulating the economy. For example, academic experts have proposed large-scale mortgage refinancing efforts to propel economic stimulus. In light of these recommendations, the purpose of policy initiatives (e.g., the Home Affordable Refinance Program [HARP], H.R. 363 and its companion S. 170 , the Housing Opportunity and Mortgage Equity Act of 2011) is to facilitate the refinancing of mortgages. In addition, the Obama Administration announced an initiative to assist qualified homeowners, whose mortgages are not owned or guaranteed by any institution affiliated with the federal government, in lowering their mortgage rates. If refinancing activity results in lower mortgage payments, then households may have more discretionary income to spend and, therefore, spur economic stimulus. Some households, however, are choosing to pay down current debt obligations, which means any additional income that would have gone toward mortgage interest still may not be applied to new spending. Hence, policies aimed at stimulating near-term consumption may instead enhance future borrowing capacity and longer-term consumption if households continue to strengthen their balance sheets via near-term deleveraging. This report presents data illustrating household deleveraging since 2008 in comparison to previous trends in household credit use. It also presents various explanations for deleveraging--in particular, changes in both consumer demand and lending supply. On the demand side, job losses and declining wealth particularly associated with declining real estate values are factors that made it difficult for households to repay old loans or secure new ones. On the supply side, rising loan losses caused lenders to write off more obligations, which put a strain on lenders' (regulatory) capital reserves. Consequently, lending standards are higher and likely to remain until lenders feel more confident that borrowers have the ability to repay. Figure 1 illustrates the Federal Reserve's aggregate household debt service burden ratio (DSR). The DSR is the percentage of disposable personal income required to make minimum repayments on outstanding mortgage and consumer debt. Beginning in the mid-1990s, the DSR rose but then declined after 2008. The DSR movements are affected by changes in the amount of household debt, changes in household income, and changes in interest rates (debt costs). Rising incomes and falling interest rates would cause the DSR to fall over time. Given the rise in real disposable income prior to the financial crisis coupled with falling interest rates, the rise in the DSR reflects household debt usage rising at a faster pace than household income growth. Conversely, the DSR might be expected to rise during recessions when incomes tend to fall. During the 2007-2009 recession, however, the DSR began to decline in 2008, which reflects a shift toward deleveraging by households as well as the refinancing of some debt at lower interest rates. Figure 2 illustrates the quarterly percentage change in total household debt balances since 1968, and the shaded areas indicate U.S. recessions. Household debt balances consist of home mortgages, revolving or credit card debt, and nonrevolving credit, which consists primarily of automobile and student loans. Note that the growth rate of household debt declined during the 1981-1982, 1990-1991, and 2001 recessions but still remained positive. Beginning in the second quarter of 2008 through the first quarter of 2011, however, the rate of change in debt usage became negative and was sustained. Post-2008 household deleveraging, therefore, appears to be atypical compared with previous economic contractions occurring over the past few decades. Table 1 illustrates the percentage changes in household debt usage from the second quarter of 2008 through the third quarter of 2011 by loan type. Mortgage debt represents the largest share of all household debt. A significant share of the decline in mortgage debt outstanding can be attributed to declining home equity loan balances, which can be used as a substitute for other types of consumer credit. Revolving or credit card debt use also declined, but growth in nonrevolving credit remained positive over this period. Household deleveraging may be explained by factors influencing both the demand for and supply of credit. Beginning with demand-side explanations, the spike in unemployment and a decline in household net worth, which occurred during the recession of 2007-2009 and has continued along with declining home values, can lead to debt reduction either by inducing households to curtail credit use (and pay down existing debt) or in the form of defaults. On the supply side, lenders experiencing large volumes of loan losses may have also grown more reluctant to make loans. This section explains these factors in more detail. "Trigger events" are defined as sudden changes in circumstances that can lead to greater loan defaults. A steep rise in unemployment is an example of a trigger event. During the 2007-2009 recession, the unemployment rate soared to 10.0%, which was the highest it has climbed since 1982. Job losses can translate into income disruptions that make it difficult to repay existing credit obligations or seek new loans. A sharp, unanticipated decline in household net worth is another example of a trigger event. During the 2007-2009 recession, households saw a decline in household net worth that had not occurred in previous recessions over the past three decades ( Figure 3 ). Net worth (i.e., the difference between the value of assets and liabilities) fell for seven consecutive quarters beginning in the third quarter of 2007. The most recent decline in net worth was larger and persisted for more successive quarters than did the steep decline in the stock market of the late 1990s, which lasted until approximately 2002. Much of the decline in net worth is attributable to real estate assets that many households financed through borrowing. The Federal Housing Finance Agency and Case-Shiller house price indices show that U.S. house prices began declining in 2007, and homeowners were increasingly likely to find themselves "underwater" or "upside-down" as the amount of their outstanding mortgage balances exceeded current home values. Academic research suggests that changes in real estate values generate a greater response in consumer spending and borrowing decisions than do changes to stock values. For one reason, most households purchase stocks with cash, which means there are no debt obligations to repay based upon the original purchase prices should their stock assets fall in value. Second, stock market declines are often short-lived in comparison to declines in real estate values, which means volatile short-term fluctuations are less likely to prompt investors to reassess longer term financial decisions. Housing assets are also typically a much larger component of household balance sheets. Hence, stock market declines tend to have a smaller impact on household consumption and borrowing decisions relative to declines in real estate prices. Given that declining real estate asset values may lead to permanent wealth reductions that would prevent existing (mortgage) debt obligations from being repaid, two possible reasons for household deleveraging are worth considering. Households may have a precautionary savings motive that influences them to reduce borrowing when household wealth drops. If households wish to maintain a certain level of wealth to protect against unexpected economic reversals, their consumption behavior is likely to change if those balances fall below desired thresholds. Households may reduce spending (and borrowing) and increase saving until net wealth has been restored to more desirable levels. For example, Figure 4 shows that "cash-in" mortgage refinancings became more common relative to "cash-out" refinancings by 2008. During the mid-2000s housing boom, many borrowers pulled equity out of their homes to finance expenditures. Freddie Mac refers to this type of transaction as a "cash-out" refinance when the outstanding mortgage balance increases by more than 5%. Conversely, a "cash-in" refinance occurs when borrowers refinance and pay down some mortgage principal, which reduces outstanding balances. The percentage of cash-in mortgage refinances began to exceed cash-out refinances in mid-2010. A corresponding reduction of home equity loan balances can represent an array of borrowing given that this type of mortgage product was used to consolidate existing debt obligations, finance new consumption, and even finance the acquisition of new (real estate) assets. Moreover, the soaring unemployment rate may have influenced many households to reduce debt obligations just in case their continued employment prospects seemed at risk. Hence, such a marked increase in cash-in refinances arguably may reflect an increase in precautionary savings behavior by households in response to an adverse trigger event, which generates greater economic and financial uncertainty. A negative trigger event in the form of job losses (or shifts to part-time status) is likely to disrupt income streams. A severe and persistent disruption, when coupled with circumstances that prevent, for example, the sale of housing assets for amounts necessary to pay off outstanding mortgage balances, may cause households to default on existing loans. Moreover, risky mortgage underwriting practices prior to the 2007-2009 recession made it possible for some borrowers to receive mortgages that could only be repaid assuming continued house price growth rather than income growth. The combination of relaxed underwriting standards, which allowed for rapid debt accumulation, and the unexpected trigger event, which was the large and pronounced downturn in U.S. house prices, resulted in greater household defaults on all types of loans. Figure 5 shows charge-off rates for commercial bank loans in three categories: single-family residential mortgages, credit card debt, and other consumer loans. Charge-offs occur when lenders conclude that a debt will not be repaid and charge it against their loss reserves. During the past few years, all three major categories of household debt experienced rising loss rates. The previous explanations involved factors influencing the demand for credit, but household deleveraging may also be affected by a reduction in credit supply. Rising loan losses may cause lenders to be more skeptical about extending new credit without greater assurances of repayment. Many banks may be unable to make new loans if they are still struggling to rebuild their required loan loss reserves and capital reserves, which have been diminished by loan defaults. The observed household deleveraging, therefore, may reflect both decreasing supply and demand for credit given the extent to which lenders tightened underwriting standards, lowered existing lines of credit, and restricted new lending to stabilize profitability and satisfy regulatory capital requirements. The Federal Reserve's Senior Loan Officer Opinion Survey on Bank Lending Practices, which is conducted quarterly, asks bankers about changes in the standards and terms of bank lending as well as changes in the demand for loans. Figure 6 presents a graphical illustration of the responses collected between 1996 and 2011. The two dotted lines represent the net percentage of loan officers reporting that they expect to tighten standards for credit card and other consumer loans. The greatest tightening of loan standards over the period began in 2007.

Since the third quarter of 2008, U.S. household debt has steadily fallen. Household debt reduction is known as deleveraging, and such substantial and persistent deleveraging (reflected in Federal Reserve data) has been uncommon over the past several decades. Given that much household debt is used to finance consumption, which accounts for about 70% of gross domestic product, continued deleveraging implies slower consumption growth and economic recovery. Beginning in the third quarter of 2007, household net worth (i.e., the difference between the value of assets and liabilities) preceded the fall in household debt. The recent drop in household net worth has also been substantial and persistent relative to previous decades and, therefore, may arguably have precipitated such pronounced household deleveraging. Household deleveraging may dampen the immediate effectiveness of legislative efforts to generate economic stimulus. For example, H.R. 363 and its companion S. 170, the Housing Opportunity and Mortgage Equity Act of 2011, were introduced to facilitate the refinancing of mortgages held by the government-sponsored enterprises. In addition, the Obama Administration announced an initiative to assist qualified homeowners with privately held mortgages refinance into lower rate loans. If refinancing activity results in lower mortgage payments, then households may have more discretionary income to spend and, therefore, spur economic stimulus. Given the trend of household debt reduction, the additional income that would have gone toward paying mortgage interest still may not be applied to new spending. Households may prefer using the additional income to pay down current debt obligations. Hence, such legislative efforts may enhance future borrowing capacity and long-term consumption if households continue to strengthen their balance sheets via deleveraging, but the effect on near-term consumption activity may be modest. This report presents information on recent household debt usage patterns. It also discusses possible reasons for the reduction in household credit use. Consumers have reduced their indebtedness by accelerating repayment of outstanding debts and defaulting on loan obligations. Lenders have also tightened lending standards. Hence, both demand and supply factors can explain the decline in household credit usage.

Since 1973, 84 Members of Congress--69 Representatives and 15 Senators--have died in office. When a sitting Member dies, the House and Senate carry out a number of actions based on chamber rules, statutes, and long-standing practices. Some congressional practices related to the death of a sitting Member predate the national legislature established by the Constitution. On October 23, 1775, the Continental Congress, sitting in Philadelphia, was informed that Peyton Randolph, a Delegate from Virginia and president of the Continental Congress, "suddenly departed this life" the day before, and resolved that its members would "attend his funeral as mourners, with a crape round their left arm," and "continue in Mourning for the space of one month." A committee of three Delegates was appointed to "superintend the funeral," and the Reverend Jacob Duche, rector of St. Peter's Episcopal and Christ Churches was requested to "prepare a proper discourse to be delivered at the funeral." During the First Congress (1789-1791), the first instances of the death of a sitting Senator and Representative occurred. Senator William Grayson of Virginia died on March 12, 1790. No direct mention of the event is recorded in the Senate Journal or the Annals of Congress . On June 1, 1790, the House was informed of the death of Representative Theodorick Bland of Virginia. The House ordered the Virginia delegation to "be a committee to superintend the funeral, and that the House attend the same." The next day, it was ordered that the House Members go into mourning for one month, "by the usual method of wearing crape around the left arm." In the 19 th century, Congress adopted the practice of paying some of the expenses of funeral services for sitting Members. Services were sometimes held in the House or Senate chamber. On February 27, 1838, for example, funeral services for Representative Jonathan Cilley of Maine were held in the Hall of the House, with the House and Senate in attendance. When services or interment were not held in Washington, DC, it was the practice of both chambers to appoint a committee of Members to escort the remains of a deceased colleague to their final destination. On June 28, 1847, the House and Senate each voted to accompany the remains of Senator John Fairfield of Maine "from his house to the depot, where they were to be delivered to" Representative Franklin Clark, who accompanied them to Maine. By the 41 st Congress (1869-1871), it had "for a long time been a custom to appoint a joint committee to attend the remains of a deceased Senator or Member to his home, as in the instance of Senator Daniel S. Morton, of Minnesota, on July 14, 1870." In contemporary times, chamber rules and statutes set out some of the congressional response to the death of a sitting Member, and former Members who served as Speaker. Evidence from the Senate Journal , House precedents, and other historical documents shows that some long-standing observances, such as adjourning briefly as a mark of respect to the deceased, appointing Member delegations to attend funerals of deceased colleagues, or paying the costs of a funeral from public funds, may be employed. Other customs, such as wearing crape, holding services in the House or Senate chambers, or appointing Members to escort the body back to the home state, have not been observed for at least several decades. In addition to some evolutionary changes in institutional patterns, it appears that contemporary congressional response is affected by a number of external factors including the following: circumstances of the Member's death; preferences of the deceased Member, or the Member's family, regarding funeral services; whether Congress is in session when the Member dies; pending congressional business at the time of the Member's death; and events external to Congress. Consequently, it appears that congressional response to the death of a sitting Member could be characterized as a set of actions that are determined in detail at or around the time of the death, in response to an array of factors. Generally, these actions fall into five categories: Floor Announcement or Acknowledgment; Resolution of Condolence; Funeral; Deceased Member's Office, Staff, and Survivor Benefits; and Publication of Memorials. Congressional recognition of the death of a sitting Member occurs principally on the floor of the chamber in which the deceased served. Specific actions are contingent on whether Congress is in session, the business pending before the chamber, and the circumstances of the Member's death. If the House is in session, the death of a sitting Member is typically announced on the floor. No specific protocol has been identified, but notices of death have typically been made by the Speaker, by a Member who indicates that they have been informed by House leaders of the death of a colleague, or by a Member from the decedent's state delegation. Depending on floor business, the House may continue with pending matters, suspend business for special order speeches and other memorials to the deceased Member, or immediately adjourn for the day in honor of the decedent. The death of Representative Julia May Carson of Indiana, who died on December 15, 2007, was acknowledged when the House met on December 17. In his opening prayer, the Reverend Daniel P. Coughlin, chaplain of the House, noted Representative Carson's demise. A short time later, Representative Dan Burton, dean of the Indiana delegation, was recognized to speak, and yielded to Representative Peter Visclosky of Indiana, who informed the House of Representative Carson's passing, and announced a special order for tributes to her. Following brief remarks by Representative Burton, Representative Visclosky asked for and was granted a moment of silence in Representative Carson's memory. Other contemporary examples of the House acknowledging the death of a sitting Member include the following: No formal announcement regarding the death of Representative Jo Ann Davis of Virginia, who died Saturday, October 6, 2007, was made in the House when the chamber next met on October 9, and no moment of silence was observed. During the prayer at the beginning of the session, the chaplain mentioned Representative Davis, and some Members commented through one minute speeches. A resolution of condolence was considered and adopted later in the day. Following the death of Representative Paul E. Gillmor of Ohio on September 5, 2007, Representative John Boehner, the Republican leader, received unanimous consent to speak out of order to inform the chamber. Later in the day, Representative Ralph Regula of Ohio rose to announce his intention to introduce a "resolution of bereavement" and asked that the House rise for a moment of silence. The death of Representative Juanita Millender-McDonald of California, on April 22, 2007, was announced the next day by Representative Pete Stark of California, who asked for a moment of silence. Following brief consideration of other matters, the House moved to consideration and adoption of a resolution of condolence before adjourning. An announcement of the death of Representative Charles W. Norwood Jr. of Georgia, who died on February 13, 2007, after a long illness, was made to the House in the middle of debate on H.Con.Res. 63 , regarding President George W. Bush's decision to send additional military personnel to Iraq. On February 13, debate on the concurrent resolution was briefly interrupted twice to acknowledge Representative Norwood's death. Representative Ileana Ros-Lehtinen of Florida, who was recognized to speak on the pending resolution, announced Representative Norwood's death. A short time later, Representative John Nathan Deal of Georgia came to the floor on behalf of the Georgia delegation to announce Representative Norwood's death and to ask for a moment of silence. Pursuant to House Rule XX, clause 5(d), the Speaker or Speaker pro tempore typically announces a revised whole number of the House in light of the passing of a Representative soon after the House acknowledges the Member's passing. When a Member of the House dies during an extended period of congressional recess or adjournment, it has been the practice of the House since at least 1826 to make an announcement on the next day the chamber convened. This approach was taken when Representative Floyd Spence of South Carolina died on August 16, 2001. When the House reconvened on September 5, Speaker Dennis Hastert addressed the House to announce Representative Spence's death, that a funeral had been held, that Representative John Spratt would later offer a resolution of condolence, and that a special order in tribute to Representative Spence would be held in the future. Representatives-elect who died between their election and the convening of Congress have been acknowledged by the House. In 1833, news of the death of Representative-elect Thomas D. Singleton of South Carolina, while traveling to take his seat in Washington, DC, was announced. Representative Henry L. Pinckney of South Carolina, noting that while Mr. Singleton had not appeared and qualified, "it was fitting, and according to the usages of the House, to pay him the usual observances of respect." Following the adoption of a resolution of condolence, Representative Pinckney "moved an adjournment of the House, saying that he believed such to be the custom in these cases." According to House precedents and more recent practice, recognizing deceased Representatives-elect in a manner similar to that of sitting Members also occurred in the 20 th century. On the first day of the 98 th Congress (1983-1984), the House took official notice of the death of Representative-elect Jack Swigert through an announcement of his passing by the Sergeant at Arms. Later in the day, the House adopted a resolution of condolence and appointed five Members to attend Mr. Swigert's funeral. In addition to a resolution of condolence, discussed below, there may be other tributes to the deceased Member offered on the floor of the House. These may include one minute speeches by individual Members, or special orders dedicated to the memory of the deceased Member. Either of these approaches would be subject to House rules regarding non-legislative debate in the House. When the Senate is in session, news of the passing of a sitting Senator is often widely known when the chamber meets. Consequently, a formal floor announcement is generally not made. The death of a sitting Senator is typically acknowledged on the Senate floor in prayers offered by the chaplain, through tributes offered by other Senators, and consideration of a resolution of condolence. The Senate may continue with other business, or adjourn after acknowledging a Senator's demise. When it does adjourn, the chamber typically does so as a mark of further respect to the late Senator. Exceptions to this practice arise when news of the death of a Senator reaches the Senate while it is meeting. In those circumstances, including the deaths of Senator Paul Coverdell of Georgia on July 18, 2000, and Senator Quentin Burdick of North Dakota on September 8, 1992, the majority leader made an announcement. Senator Craig Thomas of Wyoming died on June 4, 2007. No formal announcement of his passing was made in the Senate. When the Senate met the next day, the chaplain mentioned Senator Thomas in the opening prayer. Senator Mitch McConnell, the Republican leader, subsequently offered a tribute, followed by Majority Leader Harry Reid, who also offered a tribute, and who asked for unanimous consent to postpone previously scheduled Senate activity to later in the day so "people have the opportunity to come and speak about" Senator Thomas. Senator Reid then asked for a moment of silence in recognition of Senator Thomas. After several Senators offered tributes, the Senate resumed planned business before adopting a resolution of condolence and adjourning "as a mark of further respect to the memory of" Senator Thomas. Similar exercises were carried out to honor Senator Paul Wellstone of Minnesota, who died in an aircraft accident while campaigning for reelection on October 27, 2002. When the Senate met October 28, it observed a moment of silence, adopted a resolution of condolence, and adjourned as a further mark of respect to Senator Wellstone's memory. On November 12, several Senators offered tributes. Since 1807, Senators who have died during periods of recess or adjournment have been acknowledged when the Senate reconvened. The most recent sitting Senator to die during a recess was Senator Edward Moore (Ted) Kennedy of Massachusetts, who died on August 25, 2009, after an illness. When the Senate met on September 8, Senator Harry Reid of Nevada, the majority leader, asked for a moment of silence in honor of Senator Kennedy. Other Senators also offered tributes, and the Senate adopted a resolution of condolence. The Senate also set aside a period for memorial statements on September 10. The first resolution of mourning for a sitting Senator appears to have been adopted in 1806. Although the House had taken other, ad hoc actions in the early years of the nation, formal resolutions adopted in response to the death of a sitting Member date back at least to 1827. House precedents and the Senate Journal typically refer to resolutions designating the use of crape or other badges of mourning, and authorizing Members to attend funeral services. In the House it was typical to adjourn as a mark of respect for the deceased Member. House resolutions that included expressions of condolences to the family of the deceased Member appear to have been considered in some cases dating to 1864, before becoming more routine beginning around 1899. In current practice, the House considers a resolution expressing its condolences to the family of a deceased Member. If the House is in session, a resolution is typically introduced within a day of the Member's passing by the senior Member of the state delegation in which the deceased Member served. One hour of debate is allotted for consideration of the measure, equally divided between majority and minority, although in some cases, that time is not used if another memorial is planned under special orders at a later date. At the conclusion of debate the resolution of condolence is typically adopted by voice vote or unanimous consent. In the text of the resolution, the House notes the following: "The House has heard with profound sorrow of the death of the Honorable ________, a Representative/Delegate/Resident Commissioner from ______" the Clerk of the House communicates these Resolutions to the Senate and transmits a copy to the family of the deceased; and upon adjournment, the House "adjourn as a further mark of respect to the memory of the deceased." In addition, the House sometimes authorizes and directs the House Sergeant at Arms to "take such steps as may be necessary for carrying out the provisions of these resolutions and that the necessary expenses in connection therewith be paid out of the contingent fund of the House," or to appoint "a committee of such Members of the House as the Speaker may designate, together with such Members of the Senate as may be joined, be appointed to attend the funeral." When a Representative dies, the Senate sometimes adopts a resolution of condolence. Table 1 summarizes House and Senate resolutions adopted to mark the passing of a sitting Representative since 1973. In current practice, the Senate typically considers a resolution expressing its condolences to the family of a deceased Senator and to the citizens of the state the Senator represented. The measure may be introduced by the majority leader, the minority leader, or the surviving Senator from the state the deceased Senator represented. All living, sitting Senators are listed as cosponsors. There may follow a period of debate, particularly if other tributes have not already been offered or a future tribute is scheduled. At the conclusion of debate, the resolution of condolence is typically adopted by unanimous consent. In the text of the resolution, the Senate typically includes a preamble containing various milestones of the late Senator's public career, and resolves that "The United States Senate has heard with profound sorrow and deep regret the announcement of the death of the Honorable _____, a Senator from the State of _____"; "the Secretary of the Senate shall communicate this resolution to the House of Representatives and transmit an enrolled copy thereof to the family of Senator _____"; and "when the Senate adjourns today, it shall stand adjourned as a further mark of respect to the memory of Senator _____." In addition to observances of record, a deceased Senator's desk in the Senate chamber may be draped in black for a brief period. Additionally, upon the death of a sitting Senator, the majority leader and minority leader may permit a display of flowers to be placed upon the desk of a deceased Senator on the day set aside for eulogies. When a Senator dies, the House sometimes adopts a resolution of condolence. Table 2 summarizes Senate and House resolutions adopted to mark the passing of a sitting Senator since 1978. Since the earliest days of the republic, some of the expenses of holding funerals of sitting Members, or the procurement of cemetery monuments, have been defrayed in part from public funds. From 1789-1801, it appears that the travel allowances of deceased Members of the House were applied to funeral costs. When Delegate Narsworthy Hunter of Mississippi Territory died on March 11, 1802, a week after the Seventh Congress (1801-1803) convened, the practice of providing a funeral at public expense was first adopted by the House. On June 5, 1809, the Senate adopted a resolution "that a sum not exceeding one hundred and fifty dollars be applied out of the contingent fund for placing a neat slab or monument with a suitable inscription" over the tomb of Senator Francis Malbone of Rhode Island, who died on March 4. On June 15, 1809, the Senate authorized the secretary of the Senate to pay the expenses of Senator Malbone's funeral, upon allowance and certification "by the committee of arrangement." Paying for Member funerals with public funds has not been without controversy. In an 1820 remembrance of Delegate Hunter's funeral, Representative John Randolph of Virginia noted that since 1802, the practice of funding Member funerals had been "observed and abused." In 1848, the subject came up twice within a few weeks. Contrary to precedent, the tenor of those discussions was that it was unusual to pay the expenses of a Member's funeral except when it was held in Washington, DC, and that the cost of such ceremonies amounted to an average of $1,500. In 1895, the Senate considered S. 236, to provide for disposition of the remains of deceased Members of the House and Senate who died at the Capitol during sessions. Upon the death of a sitting Member in the District of Columbia, the measure would have provided for a committee of Members from the chamber in which the deceased served to prepare the body for transport to family or friends. The measure provided for a specially appointed sergeant at arms to accompany the body to its final destination. S. 236 would have authorized payment for the preparation and transport of a deceased Member and prohibited payment on any other related expenses. In introductory remarks, the bill's sponsor, Senator William Alfred Peffer of Kansas, noted that the costs associated with Member funerals were rising and that the services themselves were "not usually conducted reverently and with that outward deportment which ... ought to characterize the bearing of eminent persons who accompany the remains of a public man." S. 236 was reported by the Committee on Civil Service, but the Senate took no further action. Finally, some concern was expressed in 1906 after Representative Robert Adams Jr. of Pennsylvania committed suicide and left a letter for Speaker Joseph Cannon indicating that he would accept payment of his funeral expenses, but asked that the House not appoint a committee or hold memorial services. In contemporary practice, as described below, both chambers may pay for funeral services for Members who die in office. Further, if a deceased Member is buried in the so-called Congressional Cemetery in Washington, DC, the Sergeant at Arms of the House or Senate, as appropriate, is authorized to pay for a granite monument with suitable inscriptions for the grave site. Subject to any rules and regulations the Committee on House Administration may prescribe, the House Sergeant at Arms is authorized and directed to make necessary arrangements for any committee of Representatives and Senators appointed by their chambers to attend the funeral of a deceased Member of the House. An official congressional delegation does not attend if the family of the deceased Member arranges for private services. The Sergeant at Arms defrays the funeral expenses of the deceased Member and the expenses of duly appointed congressional participants, the widow or widower, and minor children incurred in attending the funeral rites and burial of the deceased Member. Published, publicly available House procedures for the remains of a sitting Member of the House to lie in state in the Capitol have not been identified. While the location of any funeral service is chosen by a deceased Senator's widow, widower, or heirs, the responsibility for official arrangements, including funeral or other services, and for any committee appointed to attend services, rests with the Senate Sergeant at Arms. Costs of arrangements made by the office of Sergeant at Arms for the transportation, preparation, and disposition of the remains are paid from the contingent fund of the Senate, subject to regulations of the Committee on Rules and Administration. If there is a request for the remains to lie in state in the Capitol Rotunda, the Senate Handbook indicates that a decision is made by the leadership of the Senate and the House, and the Architect of the Capitol. Since 1953, Congress has typically adopted a concurrent resolution authorizing the use of the Capitol Rotunda for services or for the remains of a government official or prominent citizen to lie in the Capitol. If Congress is not in session, the use of Capitol facilities has in the past been authorized by the Speaker of the House and the majority leader of the Senate. If the deceased does lie in state, the Senate Handbook notes that the Architect of the Capitol makes arrangements with the Department of Defense for an honor guard. If there is to be a ceremony at the Capitol, the Senate Sergeant at Arms makes the necessary arrangements. On the first business day after the death of a Member of the House, his or her office is renamed the Office of the ___ Congressional District of State/Territory. Pursuant to House Rule II, cl.2(i)(1), staff on payroll of the congressional office at the time of the Member's death remain employed by the House, and carry out their duties under the supervision of the Clerk of the House until a successor is elected. By law, any unpaid balance of salary or other sums due to a deceased Representative or Resident Commissioner are to be paid to their beneficiaries. In addition, it has been the typical practice of the House to provide a death gratuity, equal to the Member's annual salary, payable to the deceased Member's widow or widower, or children, either in the annual legislative branch appropriations act or a measure providing supplemental funds for the legislative branch. By statute, a death gratuity is considered a gift. Employees in the personal office of a deceased sitting Senator are continued on the Senate payroll at their respective salaries for up to 60 days after the Senator's death, unless the Senator's term of office expires sooner. The Committee on Rules and Administration may extend this period in cases where it will take longer to close a deceased Senator's office. Employee duties are performed under the direction of the Secretary of the Senate. An amount equal to one-tenth of the official office expense account portion of the Senator's Official Personnel and Office Expense Account is available to the Secretary of the Senate to defray those expenses directly related to closing a Senator's office. Expenses are paid from the Contingent Fund of the Senate as Miscellaneous Items. The Senate Financial Clerk provides information concerning allowances for the operation of the deceased Senator's office during the 60-day period. A deceased Senator is removed from the Senate payroll as of the date of death. The Employee Benefits Section of the Senate Disbursing Office ascertains any benefits due to a beneficiary previously identified by the Senator, or the widow or widower or other relevant survivors. The Senate Handbook indicates that "[i]n the next Appropriation Bill, an item will be inserted for a gratuity to be paid to the widow(er) or other next-of-kin, in the amount of one year's compensation." By statute, a death gratuity is considered a gift. At the conclusion of a Congress in which a sitting Member of the House, or former Member who served as Speaker, dies, the Government Printing Office (GPO), subject to the direction of the Joint Committee on Printing, compiles, prepares, and prints, with illustrations, a tribute book. The book contains the legislative proceedings of Congress, and the exercises at the general memorial services held in the House in tribute to the deceased Member or former Speaker, together with all relevant memorial addresses and eulogies published in the Congressional Record during the same session of Congress, and any other matter the Joint Committee considers relevant. Under the law, 50 copies, bound in full morocco, with gilt edges, and suitably lettered as may be requested, may be delivered to the family of the deceased. Further copies may be distributed to Members of Congress. The Senate may adopt a resolution ordering the printing of tributes to a deceased Senator be printed as a Senate document. Table 3 provides examples of Senate observances held to mark the passing of 28 Senators who died during their Senate service. Each Senator listed meets one or more of the following criteria: service as President Pro Tempore of the Senate at the time of their death; laid in state in the Rotunda of the United States Capitol; inclusion as one of the "Famous Nine" Senators designated by the Senate at various times, and who died in office; or 14 of the sitting Senators whose passing was observed with services on the Senate floor during the 20 th century. Table 3 also provides a selection of actions approved by Congress or adopted by the Senate to honor the deceased Senators. Observances held soon after a Senator's death were sometimes held pursuant to Senate resolution in the case of services in the Senate, and concurrent resolution or bicameral agreement in the case of lying in state in the Capitol Rotunda. In other instances, observances were held in the Senate or Capitol without formal legislative action. Regardless of the formal authorization processes, it is not possible to ascertain how those decisions were made; in each case, however, it is arguable that some of the Senators expressed advanced interest in various observances to mark their deaths, or their families or staff expressed interest or approval of Senate actions after their deaths. It appears likely that any future Senate observances could be based on the following: past Senate practices; the wishes a Senator expressed prior to his or her demise; family considerations; the intended locations of any observances; pending congressional business at the time of the Member's death; and events external to Congress. Where procedures for observances in the Capitol Rotunda appear to be well established, the Senate floor has not been used for observances related to the death of a sitting Senator in more than 50 years. Questions related to security, crowd control, and the preservation of furniture, artwork, and other fixtures may arise if proposed observances include exercises in the Senate chamber. In addition to any observances that might be held in Washington, DC, services may be held in the state a deceased Senator represented, and might include the following activities: public or private viewing or calling hours; lying in honor in the state capitol, land grant university, or significant federal facility created during the Senator's term of office; public or private funeral or memorial services; funeral procession; and interment or inurnment. As with Washington, DC-based observances, Senate participation will likely be determined in consultation with the family of the deceased.

Since 1973, 84 Members of Congress--69 Representatives and 15 Senators--have died in office. When a sitting Member dies, the House and Senate carry out a number of actions based on chamber rules, statutes, and long-standing practices. Some observances, such as adjourning briefly as a mark of respect to the deceased, appointing Member delegations to attend funerals of deceased colleagues, or paying the costs of a funeral from public funds, were initially observed in the earliest Congresses, or predate the national legislature established under the Constitution. It appears that contemporary congressional response to the death of a sitting Member is affected by a number of external factors including the following: circumstances of the Member's death, preferences of the deceased Member or the Member's family regarding funeral services, whether Congress is in session when the Member dies, pending congressional business at the time of the Member's death, and events external to Congress at the time. Congressional response to the death of a sitting Member could be characterized as a broad set of actions that are determined in detail at or around the time of the death, in response to a wide array of factors. Broadly, these actions fall into five categories, including announcement or acknowledgment on the House or Senate floor; consideration of resolutions of condolence; a funeral or other rites; issues related to the deceased Member's office, staff, and survivor benefits; and publication of memorials. This report, which will be updated as events warrant, is one of several CRS products focusing on various aspects of the operations and administration of Congress and the legislative branch. Others include CRS Report RL30064, Congressional Salaries and Allowances, by [author name scrubbed]; CRS Report R42072, Legislative Branch Agency Appointments: History, Processes, and Recent Proposals, by [author name scrubbed]; CRS Report RL34619, Use of the Capitol Rotunda, Capitol Grounds, and Emancipation Hall: Concurrent Resolutions, 101st to 112th Congress, by Matthew Eric Glassman and [author name scrubbed]; and CRS Report R42365, Representatives and Senators: Trends in Member Characteristics Since 1945, coordinated by [author name scrubbed].

Broadband--also referred to as high-speed Internet service--has been deployed in the United States since the late 1990s, primarily by private sector providers. These providers include telephone companies, cable companies, wireless providers, and other entities that provide commercial telecommunications services to residential, business, and institutional customers. While broadband deployment has been rapid and robust overall, there are parts of the nation where broadband is less deployed (primarily rural areas) and there remain regions and communities that are dissatisfied with the level of broadband service currently offered by private sector providers. These communities point to problems ranging from low download and upload speeds, obsolete technology, poor reliability, high prices, and/or a lack of choice in providers. With the Federal Communications Commission (FCC) moving to define the minimum speed of broadband at 25 Mbps, more communities may perceive a lack of adequate broadband service, especially those communities in rural areas. As a solution, some communities have turned to public entities as possible broadband providers. These communities anticipate that public entities may be able to provide municipal broadband at superior levels of speed, performance, and affordability than what is currently offered by private providers. Public entities that provide broadband service can be local governments or public utilities, for example, and may construct and manage broadband networks either solely or in partnership with private companies. There are a number of municipal broadband models that have been implemented across the nation. Since each community is different and each faces unique challenges, there is no one size that fits all. Municipal broadband (also sometimes referred to as "community broadband") is a somewhat amorphous term that can signify many different ways that a local government might participate--either directly or indirectly--in the provision of broadband service to the local community. Municipal broadband models can include public ownership, public-private partnership, and a cooperative model. With public ownership , the local government is the principal entity building, financing, and operating the broadband network. The network can be run by the local municipal electric utility (Chattanooga, TN, and Lafayette, LA, are examples), or it can be run by a city department such as the information technology (IT) department (as in Santa Monica, CA). There are also instances where a publicly owned and built network might be opened to private providers to provide retail Internet access or other services to the public. Public-private partnerships can come in many different forms, from public and private sector entities sharing capital and operations costs, to governments providing access to public rights-of-way or other city infrastructure (e.g., conduits, pole attachments) for privately funded and operated networks, to government-funded projects contracting with private providers to build, operate, and/or maintain the network. Partners can include private for-profit companies, local nonprofits, and even local residents. Finally, there is a cooperative model , which refers to electric and telephone cooperatives, many of which were originally created during rural electrification in the 1930s. These cooperatives, in rural areas, have begun in some instances to provide broadband service. Many of the cooperatives providing broadband service have received or are eligible for federal loan and grant support from the Rural Utilities Service (RUS) of the U.S. Department of Agriculture (USDA). There are also a few cooperatives that have been recently formed specifically for providing broadband service. These typically rely on support from local governments and include the East Central Vermont Community Fiber Network (ECFiber) and the WiredWest project in western Massachusetts. Aside from the models of how municipal broadband networks are governed, the nature of broadband service offered by municipal broadband networks can vary. Municipal networks may provide wholesale service ("middle-mile" infrastructure, where retail providers connect into the municipal network), "last mile" retail service directly to customers, or both; may provide service solely to anchor institutions or also include businesses and residences; may serve solely within municipal boundaries or may be extended to surrounding municipalities and counties; may provide data or data bundled with video and/or voice, or may include smart grid capacity; and while most recent and proposed municipal broadband projects utilize fiber infrastructure, other broadband technologies such as wireless or cable have also been deployed. Municipal broadband networks tend to be established in small and mid-sized communities, often located in rural areas. With some exceptions, municipal broadband networks are typically not located in major metropolitan areas, where many private providers already offer broadband service. The Institute for Local Self-Reliance (ILSR) lists 492 U.S. municipalities with broadband networks. The complete list is included in the appendix of the January 2015 White House report Community-Based Broadband Solutions: The Benefits of Competition and Choice for Community Development and Highspeed Internet Access . This includes 89 communities with a publicly owned fiber to the home (FTTH) network reaching most or all of the community, 76 communities with a publicly owned cable network reaching most or all of the community, over 180 communities with some publicly owned fiber service available to parts of the community, over 110 communities with publicly owned dark fiber available, and over 40 communities in 13 states with a publicly owned network offering at least 1 gigabit services. The magazine Broadband Communities lists 143 public and public-private fiber to the premises (FTTP) network projects. This list identifies community fiber systems in 37 states and in American Samoa. The largest numbers of deployments are in Washington (13), Kentucky (11), Minnesota (10), Tennessee (8), Iowa (8), Illinois (7), and Florida (7). The virtues and drawbacks of municipal broadband have been vigorously debated by policymakers and other stakeholders. Advocates for municipal broadband include groups aligned with local communities, while opponents include private sector incumbent broadband providers and state governmental entities. The primary argument in favor of municipal broadband is rooted in the dissatisfaction of some communities with existing broadband service that is offered by private providers. Many local communities cite low speeds, high prices, a lack of competition, or even an absence of any broadband service in particularly sparsely populated areas, and argue that they should be able to provide this service to meet their citizens' needs and to support the community's economic development. Pro-municipal broadband arguments include Municipal broadband can enable small and mid-sized municipalities, often in rural areas, to offer higher download and upload speeds. This is especially important given that the FCC continues to identify a persistent "digital divide" between rural areas (where 53% of Americans do not have broadband speeds of at least 25 Mbps download/3 Mbps upload) and urban areas (where only 8% do not have access to those speeds). Overall, 16% of American households are in areas without a single provider of 25 Mbps/3 Mbps fixed services. Municipal networks can inject competition in markets where there may be a limited number of providers. According to the FCC, 45% of households have only a single provider of broadband offering 25 Mbps/3 Mbps. A lack of competition can lead to high prices, poor customer service, limited and restrictive service packages, and delayed or no investment in advanced technologies such as ultra-fast gigabit networks. A municipal broadband network, in some cases, can induce private providers to lower prices and increase speeds in order to compete. Municipal broadband can address unmet public interest needs. Private providers tend to favor middle- to upper-income households which will generate adequate revenue. Municipal broadband entities that are publicly owned may be more likely to offer broadband to low-income households at affordable prices. Municipal broadband follows the tradition of municipal utilities, which have been providing basic utilities such as water, natural gas, and electricity for many years. The main argument against municipal broadband (typically referred to by some opponents as "government-owned broadband") is that it is inappropriate for government-sponsored, -owned, or -supported networks to compete with private providers. Municipal networks have unfair inherent advantages over existing private networks, including preferential treatment with respect to rights of way and other local regulatory barriers, and financing by direct taxpayer subsidies or government bonds with below-market interest rates. This advantage can result in market-distorting effects that can unfairly skew the competitive playing field between private and public providers. Anti-municipal broadband arguments include Deploying broadband systems is inherently high-risk, because unlike basic utilities like water or electricity, there are typically competing providers and not all customers will necessarily sign up for service. Governments can be ill-equipped to plan, operate, and maintain efficient commercial broadband systems, and if they fail, the taxpayers will be liable for the cost of that failure. Taxpayer money should more appropriately be directed toward basic infrastructure needs--such as roads, bridges, and water systems--that are traditionally under the purview of government. In the United States, broadband is primarily provided by the private sector. Public money that is directed toward municipal broadband is money that is taken away from other, more critical infrastructure needs. According to the FCC, "private industry continues to invest billions of dollars to expand America's broadband networks." Because of the market-distorting effects of municipal broadband, continued private sector investment in broadband networks might be discouraged in some cases. The broadband market is subject to rapid technological change and intense competition. The bureaucracy of government is not well suited to making policy decisions in a dynamic and rapidly changing environment. This poses the risk of municipal broadband networks being reliant on soon-to-be obsolete technologies. While all agree that there is risk in municipal broadband, supporters and opponents argue over the significance of "successes" and "failures" among existing municipal broadband projects. With hundreds of municipal broadband projects to choose from, there will always be examples to fit whichever definition of "success" or "failure" that observers choose to apply. In general, municipal broadband supporters point to projects that have provided improved services, lower prices, increased competition, and an improved climate for private-sector investment in the local economy. Municipal broadband opponents cite examples where government-owned networks have not been profitable, have discouraged private competition, and have been subject to managerial inefficiency or technological obsolescence. In some cases, both proponents and opponents of municipal broadband have cited the same municipal broadband project to bolster their arguments. For example, in 2005, the community of Lafayette, LA, voted to build a municipal fiber network called LUS Fiber. LUS Fiber, financed by bond revenues, was built in 2008 and connected to its first customers in 2009. According to the White House report Community-Based Broadband Solutions: The Benefits of Competition and Choice for Community Development and Highspeed Internet Acces s , LUS Fiber's network has increased customer savings and strengthened local anchor institutions: As competing firms adjusted their plans to account for LUS Fiber's market entry, residents who weren't customers of the network started to see lower prices. Cox Communications, a major regional provider which had raised rates six times in four years, kept its rates stable from 2004 to 2007 to account for LUS's possible market entry. Still, LUS's prices have been consistently lower than those offered by Cox. Terry Huval, the director of LUS, estimates that the community saved $4 million from these deferred rate increases. Using estimates of Cox's average competing discounts and LUS Fiber's lower rates, LUS projects the fiber system will create total savings of between $90 and $100 million over its first 10 years. The fiber network has brought in companies eager to obtain fast service at lower prices. Pixel Magic brought 100 to 200 jobs when it built an office in Lafayette to accomplish work on the movie "Secretariat." The high speed capability of the broadband network was a big factor in their eventual decision to maintain their office in Louisiana permanently. The tech startup firm Skyscraper Holding moved from Los Angeles to Lafayette to obtain 100 Mb/s speeds at a fraction of the cost the company was charged on the west coast. Municipal broadband opponents have a different take on LUS Fiber, stating the network is 30% short of its revenue projection as set out in its business plan, more than $160 million in debt, and struggling to compete with cable, telephone, wireless, and satellite service providers in terms of price, performance, and service options. The think tank R Street noted that LUS Fiber received a warning from city auditors about low revenues and stated: Lafayette's auditors voiced similar concerns in their reports the last two years. In 2012, they punctuated it with a calculation that the $140-million system was costing the city $45,000 a day. Now, after six years of operation, prospects aren't much better. The city's financial reports, provided by a source in Lafayette, show that for the fiscal year ended Oct. 31, 2013, LUS Fiber reported $23 million in operating revenues, compared to $36.7 million that was forecast in its feasibility study. The system incurred a $2.5 million operating loss for the year. According to the original plan, this was to be the point where the operation swung to a profit of $902,000. The most staggering number, however, is LUS Fiber's deficit, which stood at $47 million at the end of October, up from $37.1 million the year before. The FCC, an independent federal agency charged with regulating interstate and international communications, has taken an active role in promoting the deployment of broadband services and broadband infrastructure. The FCC has adopted numerous proceedings to facilitate access to and the adoption of advanced services including the following: the transition of the Universal Service Fund from a mechanism that supports voice service to one that supports the deployment and adoption of both fixed and mobile broadband; the modernization of the Schools and Libraries Program to incorporate high speed broadband and Wi-Fi connections; and the expansion of the Lifeline Program to provide support for broadband as well as voice services, to name a few. Then-FCC Chairman Wheeler also stated on numerous occasions his support for the development of community-based broadband service options and expressed his opinion that the FCC has the authority to preempt state laws that ban competition from community broadband. On July 24, 2014, two local municipally owned broadband providers, the City of Wilson (Wilson), a North Carolina municipal corporation, and the Electric Power Board of Chattanooga (EPB), an independent board of the City of Chattanooga, TN, separately petitioned the FCC to preempt certain provisions of their respective states' laws which they claimed restricted the further deployment of their networks. Both Wilson and EPB operate electric utilities that also offer gigabit speed broadband networks that provide data, video, and voice services. Wilson provides electric service in six counties in eastern North Carolina and broadband service solely in Wilson County. Wilson claims that despite "... numerous requests for these services ... in the other five counties.... " and a willingness to expand broadband services to these counties, it cannot, due to what it stated are overly burdensome provisions in state law that in effect have "... the purpose and effect of prohibiting it from doing so." As in the case of Wilson, EPB states that it regularly receives requests from citizens and businesses, located outside of EPB's electric service territory, to provide advanced telecommunications services (e.g., broadband Internet access and services). EPB states that it is willing to provide these services and expand its service footprint, but is restricted by Tennessee state law that permits authorized municipal electric systems to provide Internet service (as well as cable service and video), but only within the boundaries of their (electric) service areas. Both petitioners allege that existing provisions in their respective states' laws restricted their ability to expand their broadband services to surrounding areas where customers have expressed interest in these services and both request that the FCC use its authority pursuant to Section 706 of the Telecommunications Act of 1996 to preempt these laws. The FCC's Wireline Competition Bureau released a public notice on July 28, 2014, establishing a pleading cycle for the petitions setting comment and reply dates of August 29, 2014, and September 29, 2014, respectively. After consideration of record the FCC, in a February 26, 2015, action, granted the petitions to preempt state laws in North Carolina and Tennessee that restricted the expansion of community broadband services. In a Memorandum Opinion and Order (Order), which became effective upon its release on March 12, 2015, the FCC stated that selected provisions of the laws in North Carolina and Tennessee are barriers to broadband deployment, investment, and competition, and conflict with the FCC's mandate to promote these goals. The FCC relied upon its authority under Section 706 of the 1996 Telecommunications Act (Section 706), which directs the FCC to "... encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans ... by utilizing ... measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment." According to the Order the FCC concludes that "... preemption meets the standard for action under Section 706 because it will remove barriers to overall broadband infrastructure investment and promote overall competition in the telecommunications market in Tennessee and North Carolina." Furthermore, the Order stated that "... preemption of these restrictions will expand broadband investment and deployment, increase competition, and serve the public interest, as Section 706 intended." The FCC preempted the geographic restrictions of both the Tennessee and North Carolina laws stating that they are barriers to broadband infrastructure investment and competition and preempted additional provisions of the North Carolina law containing other limitations, stating that the cumulative effect of those provisions collectively amounts to a barrier to broadband investment and competition. These barriers are in clear conflict, the Order states, with Section 706, which directs the FCC to take action to remove such barriers. More specifically the Order concludes that in the case of the EPB petition "the territorial restriction in Tennessee Code Section 601 is a barrier to broadband deployment and infrastructure investment and limits competition." With regard to the Wilson petition, the Order concludes that the geographic restrictions and other, but not all of the remaining provisions of North Carolina law cited in the petition, when considered holistically, represent a barrier to broadband infrastructure investment or thwart competition. Therefore the Wilson petition is granted in part to the extent discussed in the Order and otherwise denied. The FCC stated that while it believes it cannot preempt state laws that outright ban municipal broadband networks, it can intervene (under the authority contained in Section 706) if a state allows municipal broadband networks, but imposes restrictions that create barriers to a timely and reasonable deployment of advanced telecommunications services to all Americans. That is, the FCC cannot require a state to allow municipal broadband networks, but it can preempt laws that impose restrictions on an existing network if they are creating barriers to deployment of such networks. While the Order states that this ruling only applies to provisions of the laws of the two states (North Carolina and Tennessee) of the two petitioners, the FCC noted that "... the Commission [FCC] will not hesitate to preempt similar statutory provisions in factual situations where they function as barriers to broadband investment and competition." Whether the FCC does, or does not, have the legal authority under Section 706 to preempt state laws that restrict municipal broadband deployment remains controversial. While the majority of the FCC commissioners (Chairman Wheeler and Commissioners Clyburn and Rosenworcel) voted in favor of this decision, it was not unanimous. Both Commissioner Pai and Commissioner O'Rielly dissented, stating that the FCC lacked the authority to grant the petitions. Both the state of Tennessee and the state of North Carolina filed lawsuits (petitions for review) challenging the FCC's authority to preempt these restrictions. The state of Tennessee filed its petition on March 20, 2015, with the U.S. Court of Appeals 6 th Circuit, Cincinnati. The state of North Carolina filed its petition on May 11, 2015, with the U.S. Court of Appeals 4 th Circuit, Richmond. These petitions were consolidated on August 3, 2015, in the U.S. Court of Appeals 6 th Circuit, Cincinnati. The U.S. Court of Appeals, in an August 10, 2016, decision reversed the FCC's Order. According to the court, "The FCC order essentially serves to re-allocate decision-making power between the states and their municipalities. This preemption by the FCC of the allocation of power between a state and its subdivisions requires at least a clear statement in the authorizing federal legislation. The FCC relies upon sec. 706 of the Telecommunications Act of 1996 for the authority to preempt in this case, but that statute falls far short of such a clear statement. The preemption order must accordingly be reversed." The FCC chose not to appeal the ruling. In January 2015, President Obama announced steps "to help more Americans, in more communities around the country, get access to fast and affordable broadband." In addition to supporting the FCC Order (discussed above), the Administration plan contained initiatives directly relevant to municipal broadband, including the following. Establishment of the Broadband Opportunity Council . On March 23, 2015, the President signed a Presidential Memorandum, "Expanding Broadband Deployment and Adoption by Addressing Regulatory Barriers and Encouraging Investment and Training." The memorandum established an interagency Broadband Opportunity Council chaired by the Department of Commerce (DOC) and the USDA, and consisting of 25 other member agencies. The Council's objectives were to engage with industry and other stakeholders to understand ways the government can better support the needs of communities seeking to expand broadband access and adoption; identify regulatory barriers unduly impeding broadband deployment, adoption, or competition; survey and report back on existing programs that currently support or could be modified to support broadband competition, deployment, or adoption; and take all necessary actions to remove these barriers and realign existing programs to increase broadband competition, deployment, and adoption. On September 21, 2015, the Administration released the Broadband Opportunity Council Report and Recommendations . In its report, the Council issued nine recommendations encompassing 36 immediate actions that federal agencies committed to undertake. In January 2017, NTIA released the Broadband Opportunity Council Agencies' Progress Report , which provided a snapshot of agency progress towards meeting the recommendations and action items. BroadbandUSA. Based on the expertise acquired from administering the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) broadband stimulus program (specifically the Broadband Technology Opportunities Program), the National Telecommunications and Information Administration (NTIA) established an information and best-practices resource available to communities seeking to develop broadband public-private partnerships. BroadbandUSA offers online and in-person technical assistance to communities; hosts a series of regional workshops around the country; and publishes guides and tools intended to help communities address problems in broadband infrastructure planning, financing, construction, and operations across many types of business models. BroadbandUSA is also developing a Community Connectivity Initiative, an online tool that provides a planning and assessment framework that can be used by local communities seeking to accelerate broadband access. The federal government has also affected municipal broadband through broadband funding programs. While municipal broadband projects are locally directed and funded, the federal government has supported these efforts by helping to finance some of the middle-mile fiber networks that municipal networks can interconnect with. A major funding vehicle for middle-mile fiber networks was the $7 billion broadband stimulus program established by the ARRA. ARRA Awards were made in FY2009 and FY2010, and projects are completed or in the final stages of completion. Going forward, the ARRA broadband programs have concluded and no more funding will be awarded. Currently, there are three ongoing programs at the RUS that provide funding for broadband infrastructure (although at funding levels significantly less than what was provided in the ARRA broadband programs). These are Farm Bill Broadband Loans and Loan Guarantees ($20.6 million loan level in FY2016), Telecommunications Infrastructure Loans and Loan Guarantees ($690 million loan level yearly), and Community Connect Grants ($10.4 million in FY2016). While local governmental entities are eligible to apply for these programs, funding has tended to go to private providers. The other major existing federal vehicle for funding broadband infrastructure is the Connect America Fund (CAF). While RUS grants and loans are used as up-front capital to invest in broadband infrastructure, the CAF provides ongoing subsidies to keep the operation of broadband networks in high-cost areas economically viable for providers. Four bills ( S. 240 , S. 597 , H.R. 1106 , and H.R. 6013 ) were introduced, and one draft measure (H.R.__) was released, in the 114 th Congress that addressed the municipal broadband debate. Provisions in these measures range from those that restrict states and localities from enacting laws that prohibit public (municipal) broadband ( S. 240 , H.R. 6013 ) to those that prevent the FCC from preempting current or future state and local laws that prohibit municipal broadband ( S. 597 , H.R. 1106 ) and in the case of the discussion draft (H.R. __), preempt the FCC and/or any state regulatory authority from using Section 706 as a source of authority to preempt state laws (e.g., those that prohibit municipally owned broadband networks). None of these measures were enacted. The Community Broadband Act of 2015 ( S. 240 ), introduced by Senator Booker on January 22, 2015, seeks to remove state barriers for constructing municipal broadband networks and encourages public-private partnerships. S. 240 provides that no state or local statute may prohibit, or have the effect of prohibiting or substantially prohibiting, any public entities from providing either telecommunications services (e.g., telephone services) or advanced telecommunications capability or services (e.g., broadband Internet access services). With respect to the private provider that a municipality regulates, S. 240 requires a public provider not to discriminate in favor of its own public network with respect to how it applies municipal ordinances, rules, policies, and fees related to requirements such as rights of way and permitting. S. 240 encourages public-private partnerships and requires extensive public notice of proposed municipal broadband projects, including an opportunity for private providers to bid on that proposed project. The anti-discrimination and public notice requirements in the bill would not apply where a public provider does not provide telecommunications or broadband services to the public "or to such classes of users as to make the capability or services effectively available to the public," or during an emergency. S. 240 prohibits the use of federal funds to assist a public provider in reviving or renewing a project that has failed due to bankruptcy or termination. The bill was referred to the Senate Committee on Commerce, Science, and Transportation. The Community Broadband Act of 2016 ( H.R. 6013 ), introduced on September 13, 2016, by Representative Eshoo, is similar to S. 240 in that it prohibits states from enacting laws or regulations that prohibit public providers (e.g., states, localities or municipalities) from providing "advanced telecommunications capability" or services utilizing that capability and contains public provider antidiscrimination safeguards. The State's Rights Municipal Broadband Act of 2015 ( S. 597 and H.R. 1106 ), introduced on February 26, 2015, by Senator Tillis and Representative Blackburn, respectively, states that the FCC cannot preempt states with municipal broadband laws already in place, or any other states that subsequently adopt such municipal broadband laws. The bill also includes a Sense of Congress stating that the FCC does not have the legal authority under Section 706 to prohibit states from implementing any law of such state with respect to the provision of broadband Internet access service (e.g., municipal broadband restrictions). The bills were referred to the Senate Committee on Commerce, Science, and Transportation and the House Subcommittee on Communications and Technology, respectively. Draft legislation released on January 16, 2015, by Republican leaders of the House Energy and Commerce Committee and the Senate Committee on Commerce, Science, and Transportation includes a provision that prohibits the FCC, or any state commission with regulatory authority over telecommunications services, from relying on Section 706 as a grant of authority. If enacted this would be in direct conflict with the FCC's final Order, which rests on its Section 706 authority to preempt selected provisions of North Carolina and Tennessee law that restrict municipal broadband deployment. Since the private sector began deploying broadband infrastructure in the late 1990s, Congress and the FCC have sought to enact policies and programs that address the directive of Section 706 to "encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans." With respect to municipal broadband, the issue for Congress is whether locally owned and/or supported networks should be encouraged or restricted. The debate is complicated by the diversity of municipal broadband projects. Each community and project is unique and subject to different factors that can lead to its ultimate success or failure. Abundant examples of successes and failures are available to support arguments made by both supporters and opponents alike. In addressing municipal broadband, Congress and the FCC have sought to balance two competing public policy interests. On the one hand, with hundreds of municipal broadband projects underway in communities across the country, with other communities exploring various kinds of municipal networks that might offer higher speeds at affordable prices, and with 20 state laws that ban or restrict municipal broadband projects, many have argued that state restrictions be overridden either by congressional legislation or by FCC rule. Ultimately, as discussed above, on March 12, 2015, the FCC released an order lifting restrictions on municipal broadband networks in Wilson, NC, and Chattanooga, TN. On the other hand, counterbalancing arguments point to the primacy of private sector providers in deploying the nation's broadband. Municipal broadband opponents argue that public entities are ill-equipped to efficiently develop, operate, and maintain commercial broadband networks, and that municipally owned and supported broadband networks constitute unfair competition to private sector providers, and may ultimately impede private investment in broadband infrastructure. One way that Congress has addressed the debate is through its oversight and authorization of the FCC. Committees with jurisdiction over telecommunications policy--such as the House Energy and Commerce Committee and the Senate Commerce, Science and Transportation Committee--are considering measures reflecting both sides of the issue: from preventing the FCC from overruling state municipal broadband restrictions on the one hand, to overriding those state-imposed restrictions on the other. Congress can also have an impact through the appropriations process. For example, in the 113 th Congress, H.R. 5016 (Financial Services and General Government Appropriations Act, 2015), as passed by the House on July 16, 2014, would have provided that none of the funds made available in the FY2015 FCC appropriation could be used to prevent 20 states from implementing their own laws with respect to the provision of broadband by the state or a municipality or other political subdivision of the state. Another way Congress could support municipal broadband is through funding broadband infrastructure, although funding initiatives are often balanced against fiscal considerations and against concerns over whether federally funded networks unfairly compete against private sector broadband deployment. Ultimately, whether municipal broadband should be encouraged or restricted is one of many policies that Congress continues to consider for promoting broadband deployment. These include loans and grants for broadband infrastructure deployment; universal service reform; tax incentives to encourage private sector deployment; regulatory and deregulatory measures; and spectrum policy to spur roll-out of wireless broadband services. Some of these policies may be considered in the context of efforts to rewrite the Communications Act of 1934. To the extent that Congress may consider the various options for promoting broadband, a central issue is how to strike a balance between providing government support for broadband in areas where the private sector may not be providing acceptable levels of broadband service, while at the same time minimizing any deleterious effects that government intervention in the marketplace may have on competition and private sector investment.

Since the late 1990s, broadband Internet service has been deployed in the United States, primarily by private sector providers. While broadband deployment has been rapid and robust overall, there remain communities that are dissatisfied with their broadband service. Some of these communities have turned to public entities as possible broadband providers, with the expectation that municipal broadband networks (also referred to as "community broadband") can deliver superior levels of speed, performance, and/or affordability than what is currently offered by private providers. Public entities that provide broadband service can be local governments or public utilities, for example, and may construct and manage broadband networks either solely or in partnership with private companies. There are a number of municipal broadband models that have been implemented across the nation. Since each community is different and each faces unique challenges, there is no one size that fits all. Municipal broadband is controversial, because it involves governmental entities entering a commercial telecommunications marketplace that had previously been the exclusive domain of private sector providers. Supporters of municipal broadband argue that in view of substandard broadband service, communities and local governments should be able to provide this service to meet their citizens' needs and to support the community's economic development. Municipal broadband opponents argue that public entities are ill-equipped to efficiently develop, operate, and maintain commercial broadband networks, and that municipally owned and supported broadband networks constitute unfair competition to private sector providers, which may ultimately impede private investment in broadband infrastructure. With under 500 municipalities across the nation embarking on some form of municipal broadband, 20 states have passed laws placing restrictions (or in some cases, bans) on local broadband networks. The issue for Congress is whether municipal broadband should be promoted or discouraged, and more specifically, whether those state restrictions on municipal broadband should be overridden or affirmed. On March 12, 2015, the Federal Communications Commission (FCC) released a Memorandum Opinion and Order granting the petitions filed by two municipal broadband providers in Wilson, NC, and Chattanooga, TN, to preempt state laws in their respective states that restricted the expansion of community broadband services. The Order and the decision by the FCC to rely on Section 706 of the 1996 Telecommunications Act for its authority remain controversial. Both states filed petitions for review consolidated in the U.S. Court of Appeals, 6th Circuit, Cincinnati, challenging the FCC's authority to preempt these restrictions. The court, in an August 10, 2016, decision, reversed the FCC's Order. Four bills (S. 240, S. 597, H.R. 1106, and H.R. 6013) were introduced and one draft measure was released in the 114th Congress addressing the municipal broadband debate, but none of these measures were enacted. The role of municipal broadband and the appropriate role of the states and the FCC to address the relationship between the public and private sector is just one facet in the overall debate regarding broadband deployment. Whether municipal broadband should be encouraged or restricted is one of the many policies that Congress continues to consider.

The location and permitting of facilities used to transmit electricity to residential and commercial customers have been the province of the states (with limited exceptions) for virtually the entire history of the electricity industry. State and local governments are well positioned to weigh the local factors that go into siting decisions, including environmental and scenery concerns, zoning issues, development plans, and safety concerns. Because the grid formerly consisted of many localized transmission and distribution networks, federal interest in siting of the transmission system was limited. Although the federal government has increasingly exercised its authority over transmission reliability, it has, for the most part, left transmission siting decisions to states. However, as concerns over grid congestion and its impact on reliability have grown, the federal government has carved out a role in transmission siting as a "backstop" siting authority in designated transmission corridors. Although this new role has met some resistance from those who oppose expanding federal authority over siting, other policymakers and commentators have advocated an increased federal role in order to encourage development of renewable energy, which is often located in remote areas that are not easily connected with the interstate grid. The courts have also thwarted the federal government's efforts to create transmission corridors. In 2011, the Ninth Circuit vacated the Department of Energy's congestion study underlying the designation of national interest electric transmission corridors, and as a result, there are presently no such corridors in effect. Moreover, the Fourth Circuit reversed FERC's interpretation of its siting authority with respect to electric transmission facility applications that have been rejected by a state agency. The increased federal role in transmission siting decisions raises a number of legal and policy issues. Foremost among these are the concerns over loss of local and regional input and control that often accompany an expansion of federal power into a process traditionally reserved for the states. Indeed, the Federal Power Act specifically reserves certain aspects of governance over the electricity industry to the states, and efforts to expand the federal role in the past have met with resistance from state public utility commissions and advocates of federalism. This report provides a review of the history of transmission siting; a summary and analysis federal authority to designate transmission corridors and provide backstop siting authority for transmission facilities in those corridors; a discussion of the legal issues associated with this expansion of federal authority and any future expansions of federal transmission siting authority; and a look at recent developments concerning transmission siting on federal lands. In order to understand the issues that arise from federal involvement in electricity transmission siting decisions, it is necessary to briefly review the history of the power industry and the development of the transmission grid. Transmission lines connect power generation facilities to distribution systems that make final delivery of electricity to commercial and residential customers. For most of the 20 th century, these lines were generally constructed and operated by "vertically integrated" electric utilities; that is, state-authorized and state-regulated monopolies that owned power generation plants, transmission facilities, and local distribution systems, and ultimately sold electricity to retail customers. While these transmission lines were almost exclusively intrastate in nature at first, the transmission system expanded rapidly to include interstate transmission lines. The Federal Power Act (FPA), first enacted in 1920 as the Federal Water Power Act and amended to include interstate electricity transmission in 1935, granted the Federal Power Commission jurisdiction over wholesale electric power transactions and the interstate transmission of electric power. The states, for the most part, retained jurisdiction over the siting of generation and transmission facilities as well as the pricing of most retail electric power transactions. Over the next several decades, this mostly local electric power system began to interconnect into larger regional grids. Interconnections were motivated by the reliability benefits of connecting a utility to its neighbors, opportunities for power sales, and joint ownership of increasingly large and expensive power plants. The development of higher voltage transmission lines--which made it possible to transmit electricity long distances with relatively small losses--also spurred interconnection. Throughout this expansion, the states continued to be the sole authority for most decisions about where to site electric power transmission facilities. Federal transmission systems, such as the Tennessee Valley Authority and some municipal and cooperative utility systems, were able to site transmission lines independent of state authority. However, the vast majority of transmission facilities were constructed by investor-owned utilities under state jurisdiction. Difficulty in constructing new transmission led Congress to include federal transmission siting authority as part of the Energy Policy Act of 2005 (EPAct). One section of EPAct authorized the Department of Energy (DOE) to designate "National Interest Electric Transmission Corridors" based on DOE's findings after conducting a study of congestion as directed by EPAct. EPAct authorized FERC to permit the construction and operation of electricity transmission facilities within the boundaries of the National Interest Electric Transmission Corridors. This authority may not be exercised by FERC unless the state where the facility would be sited lacks the authority to issue the permit, the applicant does not qualify for the permit in the state, or the state has "withheld approval" of the permit for more than one year. The federal transmission siting authority created in EPAct is a "backstop" authority that is exercised only if the state cannot authorize the facility or if it has "withheld approval." This authority, which is discussed in detail infra , was adopted after the blackouts in August of 2003 that interrupted service, in some cases for days, to many customers across the northeastern United States and in Canada. EPAct directed the Secretary of Energy to designate the corridors only in areas in which it finds "electric energy transmission capacity constraints or congestion that adversely affects consumers." In addition, FERC was authorized to permit transmission facilities only upon a finding that the proposed construction or modifications would "significantly reduce transmission congestion in interstate commerce and protects or benefits consumers." Recent events, however, have led some legislators and commentators to push to expand the federal role in transmission siting. Some have advocated an expanded federal role as a means to encourage development of green energy technology. Others have suggested that a recent ruling by the U.S. Court of Appeals for the Fourth Circuit interpreting the transmission siting section of EPAct has limited federal siting authority too severely, and that legislation is needed to expand FERC's siting authority to guard against future congestion problems. These concerns, and some of the proposals that address them, are explored further below. Congressional authority for legislation affecting the transmission of electric power, including the siting of transmission facilities, would likely be dependent upon Congress's constitutional authority to "regulate commerce ... among the several states." This constitutional authority to legislate pursuant to the power to regulate interstate commerce has expanded significantly in the last 75 years. The plain meaning of this language might indicate a limited power to regulate commercial trade between persons in one state and persons outside of that state. During the early 1900s, the Supreme Court was confronted with statutes which went beyond regulation of trade and addressed other related economic activities. At that time, the Court struck down a series of federal statutes which attempted to extend commerce regulation to activities such as "production," "manufacturing," or "mining." Starting in 1937, however, with the decision in NLRB v. Jones & Laughlin Steel Corporation , the Supreme Court held that Congress has the ability to protect interstate commerce from burdens and obstructions which "affect" commercial transactions. Subsequent Supreme Court decisions found that Congress had considerable discretion in regulating activities which "affect" interstate commerce, as long as the legislation was "reasonably" related to achieving its goals of regulating interstate commerce. Thus the Court found that in some cases, events of purely local commerce (such as local working conditions) might, because of market forces, negatively affect interstate commerce, and thus would be susceptible to federal regulation. The Court has also held that an activity which in itself does not affect interstate commerce could be regulated if all such activities taken together did affect interstate commerce. In the 1995 case of United States v. Lopez , however, the Supreme Court identified three categories of laws which are authorized by the Commerce Clause: (1) laws which regulate channels of commerce; (2) laws which regulate instrumentalities of commerce; and (3) laws which regulate economic activities which affect commerce. Within the third category of activities which affect commerce, the Lopez Court determined that the power to regulate commerce applies to intrastate activities only when they "substantially" affect commerce. Given the Court's broad application of these three acceptable categories of legislation, it seems likely that congressional action expanding the federal role in siting of electric transmission facilities would be found to fall into at least one of the categories. Although an argument can be made that the contemplated legislation could fall under any of the three categories, it seems particularly likely that legislation impacting the interstate electricity grid could be considered to be affecting an "instrumentality" of interstate commerce. The interstate electricity grid has characteristics similar to other interstate systems previously found to be instrumentalities of commerce, such as the railroads, the mail delivery, or the telephone network. In order to rely upon this prong of the "interstate commerce" test, there likely would need to be a demonstration that the legislation in question is intended to provide for the safety, efficiency, and accessibility of the electricity grid. Such a demonstration seems plausible with respect to legislation that could enhance the reliability of electricity service by easing the regulatory path to obtaining a permit for construction of transmission facilities. Also, the broadest of the three categories, legislation "affecting" interstate commerce, may be applicable to legislation. As noted supra , even local activity can be legislated under this category if the legislation "exerts a substantial economic effect on interstate commerce." There is an argument that the ability to site electric power transmission facilities in accordance with national interest and with less pressure from local interests would exert such a substantial economic effect on interstate commerce. Such an argument would likely be bolstered by any information that may be available about the aggregate effect of transmission siting denials by state regulatory agencies on the reliability and efficiency of the interstate grid. In those instances in which the courts have evaluated legislation impacting the electricity industry in areas previously considered the province of state regulatory agencies, the courts have found such legislation to be within Congress's Commerce Clause authority. One relevant Supreme Court decision on this issue is FERC v. Mississippi . In that case, the Court heard challenges to provisions in the Public Utility Regulatory Policies Act of 1978 (PURPA) that directed state utility commissions to consider adoption of certain retail rate designs and regulatory standards affecting retail rates, and to implement rules designed to encourage development of certain kinds of generation facilities, known as "qualifying facilities." The State of Mississippi alleged that these PURPA requirements for state action exceeded congressional power under the Commerce Clause. The Court rejected the state's challenge, deferring to the congressional findings that "the protection of the public health, safety and welfare, the preservation of national security, and the proper exercise of congressional authority under the Constitution to regulate interstate commerce require," ... a program for increased conservation of electric energy, increased efficiency in the use of facilities and resources by electricity utilities, and equitable retail rates for electricity consumers ... The Court noted that in accordance with Commerce Clause precedent, it was tasked only with determining if the congressional findings had a rational basis. Citing committee hearings and their findings, the Court found that the congressional findings were supported. In fact, the Court went further, noting that it "agree[s] with appellants that it is difficult to conceive of a more basic element of interstate commerce than electric energy, a product that is used in virtually every home and every commercial or manufacturing facility. No state relies solely on its own resources in this respect." The Court reached a similar conclusion with respect to the electricity transmission in New York v. U.S . In that case, the Court reviewed FERC Order No. 888, in which FERC mandated that utilities offer access to their electricity transmission facilities to other companies generating electric power. This open access transmission mandate included a requirement for open access for retail electricity transmission. According to FERC, it was "irrelevant to the Commission's jurisdiction whether the customer receiving the unbundled transmission service in interstate commerce is a wholesale or retail customer." This exercise of FERC's jurisdiction was challenged as beyond the scope of the FPA, which grants FERC jurisdiction over "the transmission of electric energy in interstate commerce and the sale of such energy at wholesale." The petitioners claimed that FERC's jurisdiction should be limited to wholesale transmissions pursuant to the FPA. The Court rejected these challenges, finding that "[t]he unbundled retail transmissions targeted by FERC are indeed transmissions 'of electric energy in interstate commerce,' because of the nature of the interstate grid." It is important to note that the Court's analysis focused on the meaning of "interstate commerce" as the term is used in the FPA, and not the Constitution. However, the Court's findings may be a useful predictive tool in determining how the Court might view a congressional exercise of the Commerce power in the electricity marketplace. Interpreting the impact of the decision, one observer said that "[i]n practical terms, this means the federal government could assert jurisdiction all the way to a consumer's toaster if it so chose, excepting such exclusively intrastate matters as the siting of power plants." This precedent seems to reflect a consistent determination by the Court that legislation that impacts electricity transmission, even if the direct impact of the legislation is local, necessarily affects interstate commerce. The Court has, on multiple occasions, acknowledged that the changing and evolving electricity grid has resulted in an interdependent interstate system. Any legislation that impacts that system or the commodity that it transmits would likely be considered legislation pursuant to Congress's authority to regulate interstate commerce. As discussed supra , decisions about where to site electricity transmission facilities have historically been made almost exclusively by state regulatory agencies. In 2005, EPAct established for the first time a significant federal role in transmission siting decisions. Section 1221 of EPAct established what is commonly called a "backstop" siting authority for FERC. It authorized FERC to issue permits for the construction or modification of transmission facilities in certain circumstances in areas designated by the Secretary of Energy as "National Interest Electric Transmission Corridors." EPAct directed the Secretary of Energy to "conduct a study of electric transmission and congestion" and subsequently "issue a report, based on the study, which may designate any geographic area experiencing electric energy transmission capacity constraints or congestion that adversely affects consumers as a national interest electric transmission corridor." In making this determination, EPAct provided that the Secretary might consider whether (A) the economic vitality and development of the corridor, or the end markets served by the corridor, may be constrained by lack of adequate or reasonably priced electricity; (B)(i) economic growth in the corridor, or the end markets served by the corridor, may be jeopardized by reliance on limited sources of energy; and (ii) a diversification of supply is warranted; (C) the energy independence of the United States would be served by the designation; (D) the designation would be in the interest of national energy policy; and (E) the designation would enhance national defense and homeland security. The establishment of these National Interest Electric Transmission Corridors paves the way for the first significant federal role in electric transmission facility siting. EPAct gives FERC the authority to issue permits for the construction or modification of electric transmission facilities that are located in a National Interest Electric Transmission Corridor. The permit application must also satisfy the following criteria to be eligible for FERC authorization: (1) (A) a State in which the transmission facilities are to be constructed or modified does not have authority to: (i) approve the siting of the facilities; or (ii) consider the interstate benefits expected to be achieved by the proposed construction or modification of transmission facilities in the State; (B) the applicant for a permit is a transmitting utility under this Act but does not qualify to apply for a permit or siting approval for the proposed project in a State because the applicant does not serve end-use customers in the State; or (C) a State commission or other entity that has authority to approve the siting of the facilities has--(i) withheld approval for more than 1 year after the filing of an application seeking approval pursuant to applicable law or 1 year after the designation of the relevant national interest electric transmission corridor, whichever is later; or (ii) conditioned its approval in such a manner that the proposed construction or modification will not significantly reduce transmission congestion in interstate commerce or is not economically feasible; (2) the facilities to be authorized by the permit will be used for the transmission of electric energy in interstate commerce; (3) the proposed construction or modification is consistent with the public interest; (4) the proposed construction or modification will significantly reduce transmission congestion in interstate commerce and protects or benefits consumers (5) the proposed construction or modification is consistent with sound national energy policy and will enhance energy independence; and (6) the proposed modification will maximize, to the extent reasonable and economical, the transmission capabilities of existing towers or structures. The American Recovery and Reinvestment Act of 2009 (ARRA) later modified DOE's mission for NIETCs, directing DOE to include areas where renewable energy may be hampered by lack of access to the grid. In most instances, FERC's authority would arise only on those projects for which the state has "withheld approval for more than one year," because the other categories listed above in subsection (1) are rarely applicable. Thus, the FERC transmission siting authority under EPAct functions as a backstop authority, allowing FERC to permit transmission facilities only when there is no state authority to do so, or when the relevant state agency has "withheld approval for more than one year." An important step in creating a process to administer the national interest electric transmission corridors was a FERC rulemaking proceeding intended to outline the process for application for a federal transmission facility construction and operation permit in the corridors. FERC initiated the rulemaking on June 16, 2006, and issued a final rule on November 16, 2006, that established the applicable regulations. For the most part, the rule was not controversial, simply establishing filing requirements and procedures for parties seeking to construct electric transmission facilities in the national interest electric transmission corridors that the Department of Energy would later establish. However, there was one controversial interpretation of Section 1221 of EPAct. As mentioned supra , Section 1221 limited federal electric transmission facility permit applications to, among other criteria, projects for which the state has "withheld approval for more than one year." There is no dispute that this criterion includes projects for which the state regulatory agency has failed to take any action on a properly submitted application. However, it is less clear if a project for which a permit is rejected or denied by the state regulatory agency would be considered a project for which the state has "withheld approval for more than one year." That is to say, does saying "no" to a project amount to withholding approval of a project? In Order No. 689, FERC found that rejection was equivalent to "withholding approval," that therefore a project would be eligible for a federal permit if the state agency had rejected an application, so long as more than a year had passed since the permit request was submitted. FERC found that [t]he statute does not explicitly define the full range of State actions that are deemed to be withholding approval. Nonetheless, to promote regulatory certainty, we believe it is our responsibility to interpret the statutory language in this proceeding and to give all parties notice of such interpretation. To this end, we believe that a reasonable interpretation of the language in the context of the legislation supports a finding that withholding approval includes denial of an application. Because the statutory language was not clear on this point, and because FERC's decision resulted in an expansion of FERC permitting authority, the decision was a topic of considerable debate. One of the FERC commissioners, Suedeen Kelly, felt so strongly that this interpretation of EPAct was incorrect that she dissented in part from the Order, stating that she "believe[s] the majority's interpretation flies in the face of the plain language of the statute, the purposes of the statute, well established principles of statutory interpretation and supporting case law, and inappropriately preempts the States in the process." Commissioner Kelly argued that [t]he authority to lawfully deny a permit is critically important to the States for ensuring that the interests of local communities and their citizens are protected. What the Commission does today is a significant inroad into traditional state transmission siting authority. It gives states two options: either issue a permit, or we'll do it for them. Obviously this is no choice. This is preemption. Courts "have long presumed that Congress does not cavalierly pre-empt" state law. Indeed, courts should not find federal pre-emption "in the absence of persuasive reasons--either that the nature of the regulated subject matter permits no other conclusion, or that the Congress has unmistakably so ordained." In short, courts must start with the "basic assumption that Congress did not intend to displace state law." There is no evidence to counter this "presumption against pre-emption." To the contrary, I find it inconceivable that Congress would have specifically listed ... a number of circumstances that will trigger Commission jurisdiction, yet fail to include on that list denial of a permit. If Congress had intended to take away the States' authority to lawfully deny a permit, surely it would have said so in unmistakable terms. FERC received a number of requests for rehearing of Order No. 689, many of which challenged FERC's interpretation of the "withholding approval" language from Section 1221 of EPAct. FERC, however, denied rehearing of the Order in Order No. 689-A, finding that the word "withheld," as used in this EPAct, is "inclusive, comprising 'denying' approval as well as 'refraining' or 'holding back' from granting approval." FERC concluded that "the most common sense reading of 'withheld approval for more than one year' encompasses any action--whether it is a failure to act or an outright denial--that results in an applicant not having received state approval at the end of one year." Commissioner Kelly continued to dissent from this finding, citing for the most part her reasoning from her previous dissent as reasoning for her continued rejection of the majority's interpretation of the statutory language. In Piedmont Environmental Council v. FERC , several organizations petitioned the U.S. Court of Appeals for the Fourth Circuit for review of Order No. 689 and Order No. 689-A. The petitioners challenged FERC's interpretation of the language in EPAct regarding FERC's transmission siting authority in circumstances where a state has "withheld approval for more than 1 year." The petitioners alleged that FERC had improperly classified a denial of an application as "withholding approval." The court agreed and reversed FERC's interpretation of the EPAct language, remanding the case back to the agency. The court held that FERC's interpretation was contrary to the plain meaning of the statutory language. The court found that the statutory phrase "without approval for more than one year," when read as a whole, "means that action has been held back continuously over a period of time (over one year)." The court stated that "[t]he continuous act of withholding approval for more than a year cannot include the finite act of denying an application within the one-year deadline. The denial of an application is a final act that stops the running of time during which approval was withheld on a pending application." The decision was appealed to the U.S. Supreme Court, and the Court denied certiorari in January of 2010. FERC has not taken any action to amend its interpretation of EPAct in the wake of the Fourth Circuit's decision in Piedmont Environmental Council v. FERC . That decision impacts the approval of permits only in states within the Fourth Circuit. Accordingly, FERC's interpretation of the phrase "withheld approval for more than 1 year" in Order No. 689 and Order No. 689-A is reversed in Maryland, Virginia, West Virginia, North Carolina, and South Carolina; in other states, FERC could theoretically approve a permit for an electric transmission facility when a state has denied a permit application. In any case, as discussed infra , FERC does not presently have the authority to issue any permits under EPAct, because there are currently no National Interest Electric Transmission Corridors in effect. Not surprisingly, the federal permitting authority in an area previously reserved for state regulatory agencies has been the source of further controversy. Another controversial action after the legislation was enacted was the Department of Energy's creation of the Mid-Atlantic Area and Southwest Area National Interest Electric Transmission Corridors. Some commentators began protesting the designation soon after the Department of Energy issued its draft proposal for the corridors in May 2007. One of the more common criticisms was that the corridors were drawn too broadly, resulting in too significant a role for the federal government in what had been local decisions. The Mid-Atlantic Corridor, for example, covers the entire states of New Jersey and Delaware and large parts of New York, Pennsylvania, Maryland, Virginia, and West Virginia. It even reaches into parts of Ohio. Despite these concerns, the Department of Energy approved these corridors in October 2007. However, in February 2011, the Ninth Circuit vacated the Congestion Study that led to the designation of the two National Interest Electric Transmission Corridors, and, as a result, there are no National Interest Electric Transmission Corridors presently in existence. In California Wilderness Coalition v. U.S. Department of Energy, 13 petitions alleged that the Department of Energy failed to consult with affected states in undertaking its Congestion Study as required by EPAct. The Ninth Circuit found that the Department's actions, which included giving an opportunity for comments on the ongoing study and the designation of the National Interest Electric Transmission Corridors, did not amount to consultation, because Congress intended for the Department to confer with the affected states. Additionally, the court determined that the Department's failure to provide affected states with certain modeling data interfered with their own ability to consult with the government, and that these failures to consult did not constitute a harmless error. While the scope of the federal government's ability to site electricity transmission facilities under Section 1221 of EPAct was being debated in the FERC rulemaking proceedings and before the U.S. Court of Appeals for the Fourth Circuit, a number of prominent policymakers have opined on expanding the federal role beyond the "backstop" authority contemplated in EPAct. Some of these policymakers advocated further expanding the federal role in order to ease grid congestion, address reliability concerns, and encourage development of "clean" energy resources. One of the most prominent commentators on transmission siting policy has been former FERC Chair Joseph Kelliher. Kelliher served as a FERC commissioner for five years and as FERC chair for three years. In a letter written to Senator Bingaman dated January of 2009, Kelliher, in the midst of his departure as FERC chair, wrote that Congress should grant FERC "exclusive and preemptive federal siting for transmission facilities used in interstate commerce." Kelliher stressed the importance of expanding transmission facilities in order to address reliability concerns, encourage competitive wholesale markets, and respond to climate change concerns (by allowing "green" energy sources increased access to the grid). Kelliher was critical of the existing framework for electric transmission facility siting, including the EPAct transmission corridor scheme, saying that it "promises years of litigation, while diffusing responsibility for siting electric transmission facilities." FERC chair, Jon Wellinghoff, has also voiced his opinion that the federal government should have a more prominent and active role in electricity transmission facility siting. In March 2009 testimony before the Senate Committee on Energy and Natural Resources, Wellinghoff testified that in order to meet certain renewable goals outlined by the Obama administration, "there must be a mechanism to invoke federal authority to site the transmission facilities necessary to interconnect renewable power to the electric transmission grid and move that power to customer load." Wellinghoff highlighted FERC's expertise in making siting decisions, pointing specifically to FERC's long-standing authority to authorize construction of natural gas pipelines. Wellinghoff noted that FERC "has developed comprehensive, efficient processes that provide for public notice and extensive public participation, including participation by affected states." Wellinghoff suggested that Congress give FERC a similar role in electric transmission facility siting, concluding that "[w]ithout broader Federal siting authority to accommodate high levels of renewable electric energy--authority similar to that which exists for interstate natural gas pipelines ... it is unlikely that the Nation will be able to achieve energy security and economic stability." These commentators and others who share their views face opposition from representatives of state regulatory agencies. The National Association of Regulatory Utility Commissioners (NARUC) issued a resolution in March 2009 arguing that Congress should limit FERC's siting authority under any new legislation. The resolution recommended that any legislation allow for primary siting jurisdiction by the states and that FERC not have any additional authority over intrastate transmission lines. To the extent that Congress might grant FERC additional siting authority, NARUC recommended that such authorization of interstate transmission require an agreement concerning regulatory structure be in place to govern cost allocation among the states where the facilities are to be sited. While the federal government's role in the transmission siting process on private land has been limited as discussed in this report, the federal government will likely have a more extensive role in siting transmission facilities on federal lands. Under Section 216(h) of the Federal Power Act, DOE is authorized to act as "lead agency for purposes of coordinating all applicable Federal authorizations and related environmental reviews of [electricity transmission facilities]." This authority was granted as part of EPAct 2005's provisions addressing transmission siting. DOE delegated this authority to FERC for transmission facilities on federal lands located in National Interest Electric Transmission Corridors. For other transmission facilities on federal lands, DOE retains the lead agency authority. On October 23, 2009, nine agencies, including DOE, issued a Memorandum of Understanding Regarding Coordination in Federal Agency Review of Electric Transmission Facilities on Federal Land (MOU). The goal of the MOU, according to its terms, is to improve "coordination among project applicants, federal agencies, and states and tribes involved in the permitting process." The MOU also notes that the agreement will provide "a single point of contact ... for coordinating all federal authorizations required to site electric transmission facilities on federal lands." That point of contact is DOE. According to the terms of the MOU, DOE will designate a lead agency for all proposed transmission projects for which all or part of the proposed transmission line crosses into areas administered by more than one agency. The lead agency's duties as set forth in the MOU include coordination of pre-application activities, consultation among relevant agencies, establishing a schedule for the project, conducting environmental review in accordance with the requirements of the National Environmental Policy Act, maintaining an administrative record and making data available electronically, and establishing necessary procedures to implement responsibilities. Traditionally, the federal government has had a limited role in electric facility transmission siting, as siting decisions have in large part been made by state agencies. However, in recent years there has been a push to expand the federal role in transmission siting. The Energy Policy Act of 2005 created a "backstop" siting authority for FERC in certain instances where grid congestion was a concern. Recently there have been suggestions and legislative proposals that would further expand the federal role in electric facility transmission siting. Legal precedent suggests that federal involvement with transmission siting would likely pass constitutional muster, assuming a connection to interstate commerce is shown. However, federal courts of appeals have impeded the government's attempts to create transmission corridors and issue electric transmission facility permits in the absence of state approval.

The location and permitting of electricity transmission lines and facilities have traditionally been the exclusive province of the states, with only limited exceptions. However, the inability to get transmission lines built due to local interests, as well as competition in generation, has resulted in calls for an increased role for the federal government in transmission siting. The Energy Policy Act of 2005 (EPAct; P.L. 109-58) established a role for the Department of Energy (DOE) and the Federal Energy Regulatory Commission (FERC) in transmission siting. The act directed DOE to create "transmission corridors" in locations with adequate transmission capacity. The act also granted FERC secondary authority over transmission siting in the corridors. This new federal role in a decision-making process that had previously been the province of state governments was predictably met with resistance from those seeking to protect local and regional interests. Although the process of creating "transmission corridors" and increasing the federal role in transmission siting has moved forward, the Ninth Circuit recently vacated the congestion study that led to the designation of two such corridors. Nonetheless, there have been calls for further expansion of the federal role in transmission siting by some policymakers and commentators. This report looks at the history of transmission siting and the reason for an increased federal role in siting decisions, explains the new federal role in transmission siting pursuant to EPAct, and discusses legal issues related to this and any potential future expansions of the federal role.

On May 24, 2010, the Supreme Court issued its decision in Lewis v. City of Chicago , a case involving questions regarding the timeliness of disparate impact discrimination claims filed under Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination on the basis of race, color, national origin, sex, or religion. In Lewis , a group of aspiring black firefighters sued the City of Chicago over its repeated use of an employment test with racially disproportionate results to hire several new groups of firefighters over a six-year period. The city argued that the applicants, who filed their claim almost two years after the employment examination was administered, had exceeded the statutory deadline for filing claims under Title VII, while the applicants claimed that the city committed a fresh act of discrimination each time it relied upon the test to hire a new class of firefighters, thus repeatedly restarting the clock on the filing deadline. In a unanimous decision, the Supreme Court ruled in favor of the applicants for the firefighting positions, holding that such disparate impact claims may be brought each time an employer uses the results of a discriminatory test to hire. In 1995, over 26,000 applicants seeking to join the Chicago Fire Department took an employment examination administered by the city. Based on the scores of the examination, the city established three groups of applicants: those who were "well-qualified," "qualified," or "not qualified." On nine occasions, the city selected new hires from the pool of well-qualified candidates, although on the last occasion the city also hired applicants from the qualified group once it had exhausted the pool of well-qualified candidates. These nine hirings occurred over a six-year period. In 1997, a group of black applicants who scored in the qualified range filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC) claiming that the city's practice of initially hiring only from the well-qualified group, which was 75.8% white and only 11.5% black, had an unlawful disparate impact on the basis of race. Subsequently, they filed a Title VII suit in federal court, and the district court certified a class of more than 6,000 black applicants who had scored in the qualified range but had not been hired. Although the city stipulated that its classification of applicants as either well-qualified or qualified had had a disparate racial impact, it sought summary judgment on the ground that the applicants had failed to file their EEOC claim within the statutorily mandated deadline. The district court rejected this argument and later ruled in favor of the applicants, ordering the city to hire 132 members of the class and awarding back pay to the rest. The U.S. Court of Appeals for the Seventh Circuit reversed the district court's decision, holding that the applicants had failed to meet the statutory filing deadline because "[t]he hiring only of applicants classified 'well qualified' was the automatic consequence of the test scores rather than the product of a fresh act of discrimination." The Supreme Court granted review in order to determine "whether a plaintiff who does not file a timely charge challenging the adoption of a practice--here, an employer's decision to exclude employment applicants who did not achieve a certain score on an examination--may assert a disparate-impact claim in a timely charge challenging the employer's later application of that practice." Under Title VII, two different types of discrimination are prohibited. The first is disparate treatment, which involves intentional discrimination, such as treating an individual differently because of his or her race. The second type of prohibited discrimination--at issue in Lewis --is disparate impact, which involves a neutral employment practice that is not intended to discriminate but that nonetheless has a disproportionate effect on protected individuals. An employer may defend against a disparate impact claim by showing that the challenged practice is "job related for the position in question and consistent with business necessity," although a plaintiff may still succeed by demonstrating that the employer refused to adopt an available alternative employment practice that has less disparate impact and serves the employer's legitimate needs. Regardless of whether they allege disparate impact or disparate treatment, individuals who want to challenge an employment practice as unlawful are required to file a charge with the EEOC within a specified period--either 180 days or 300 days, depending on the state--"after the alleged unlawful employment practice occurred." The question that arose for the Supreme Court in Lewis was whether the city's subsequent use, rather than its initial adoption, of a discriminatorily tiered hiring system constituted an unlawful employment practice for purposes of starting the clock on the filing deadline. Ultimately, the Court ruled unanimously in favor of the applicants, holding that such disparate impact claims may be brought when a plaintiff challenges an employer's subsequent application of an earlier-adopted discriminatory practice. In its brief opinion, the Court relied on the text of Title VII to determine that the city's refusal to hire those applicants whose scores fell below the well-qualified range constituted an "employment practice," and thus concluded that the applicants could proceed with their suit because they had established a prima facie disparate impact claim by showing, as Title VII requires, that the employer "uses a particular employment practice that causes a disparate impact." In rejecting the city's contention that the only actionable discrimination occurred when it first established cutoff scores for the well-qualified and qualified groups of applicants, the Court distinguished its rulings in several earlier cases, including Ledbetter v. Goodyear Tire & Rubber Co. , a 2007 case in which the Court held that a plaintiff's Title VII claim was untimely, rejecting her argument that each paycheck she received reflected a lower salary due to past discrimination and thus constituted a new violation of the statute. According to the Court, its previous cases "establish only that a Title VII plaintiff must show a 'present violation' within the limitations period." In Ledbetter , which involved a disparate treatment claim and therefore required a showing of discriminatory intent, the plaintiff failed to demonstrate that such intentional discrimination had occurred within the filing period. In a disparate impact case such as Lewis , however, no such showing of discriminatory intent is required, and the Court therefore concluded that the applicants' claim was cognizable. Finally, the Court addressed the practical implications of its decision. According to the city, the Court's decision will cause numerous problems for employers, including new disparate impact lawsuits that challenge employment practices that have been used for years and difficulty defending against such suits after many years have passed. The Court noted, however, that a different reading of the statute would produce equally puzzling results: under the city's interpretation, "if an employer adopts an unlawful practice and no timely charge is brought, it can continue using the practice indefinitely, with impunity, despite ongoing disparate impact." Likewise, litigation could increase if employees who are afraid of missing the filing deadline decide to challenge new employment practices before it is clear whether such practices have a disparate impact. Ultimately, the Court noted that its task is not to address the practical implications of its decision but rather to give effect to the statute. In enacting Title VII, "Congress allowed claims to be brought against an employer who uses a practice that causes disparate impact, whatever the employer's motives and whether or not he has employed the same practice in the past. If the effect was unintended, it is a problem for Congress, not one that the federal courts can fix."

This report discusses Lewis v. City of Chicago, a recent case in which the Supreme Court considered questions regarding the timeliness of disparate impact discrimination claims filed under Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination on the basis of race, color, national origin, sex, or religion. In Lewis, a group of aspiring black firefighters sued the City of Chicago over its repeated use of an employment test with racially disproportionate results to hire several new groups of firefighters over a six-year period. The city argued that the applicants, who filed their claim almost two years after the employment examination was administered, had exceeded the statutory deadline for filing claims under Title VII, while the applicants claimed that the city committed a fresh act of discrimination each time it relied upon the test to hire a new class of firefighters, thus repeatedly restarting the clock on the filing deadline. In a unanimous decision, the Supreme Court ruled in favor of the applicants for the firefighting positions, holding that such disparate impact claims may be brought each time an employer uses the results of a discriminatory test to hire.

In late October 2012, Hurricane Sandy developed into a large weather system affecting both coastal and interior portions of the East Coast, including major population centers like New York City and smaller centers like Atlantic City, NJ. In addition to the wind damage and electricity disruptions to 8 million customers in the Northeast, the storm's surge damaged public and private property and infrastructure in coastal and inlet areas, while the storm's precipitation swelled rivers and creeks. Although the storm was not notable for its wind intensity, the storm's significant size, its unusually low atmospheric pressure, and the astronomic high tide combined with other weather systems to amplify coastal, river, stream, and local flooding. This flooding disrupted transportation, business, and government operations and created public safety concerns that necessitated voluntary and emergency evacuations. The Federal Emergency Management Agency (FEMA) has extensive authorities to assist with emergency actions and recovery efforts from hurricane and flood damage. In implementing the federal response FEMA can assign missions to numerous other federal agencies. The U.S. Army Corps of Engineers (hereinafter referred to as the Corps) has been actively working on emergency engineering missions related to infrastructure using its power engineering and dewatering expertise. In addition to its FEMA assignments, the Corps has its own emergency response authority and a program to assist with repairs of eligible hurricane protection and flood control projects. While availability of funding is unlikely to interfere with near-term emergency response activities in the case of federal response and recovery programs without significant existing balances, federal funding for these programs may become an issue. This is the case for the Corps' flood and hurricane project repair program. As recovery proceeds, Congress may be faced with questions about the efficacy of current federal approaches and participation in hurricane protection (and the relationship of these issues to mandatory flood insurance) and a reevaluation of how federal programs and policies influence coastal development. As decision makers evaluate options for how to manage the Atlantic Coast's coastal flood hazard, it is important to distinguish between the frequency of a storm with particular characteristics and the frequency of a storm surge height or other coastal flood hazard for a specific location. That is, while probability of another storm just like Sandy is unlikely, the likelihood of coastal communities seeing storm surges and flooding hazards like those experiences with Hurricane Sandy is much higher. This report first provides a primer on federal flood policy. The remainder of the report describes the federal role in emergency flood response and post-disaster repair and rehabilitation of flood protection measures. This report will help answer the following questions: Which federal programs can assist with floodfighting? Which federal programs can assist with repairing damaged dunes, levees, and flood control works? What are the flood policy and funding issues that may arise during recovery from Hurricane Sandy? In the United States, flood-related responsibilities are shared: local governments are responsible for land use and zoning decisions that shape floodplain and coastal development, while state and federal activities influence community and individual decisions on managing flood risk. State and local governments largely are responsible for making decisions (e.g., zoning decisions) that allow or prohibit development in flood-prone areas. Local and some state entities construct, operate, and maintain most flood control measures such as levees, floodwalls, coastal dunes, and seawalls. While local and state entities maintain primary flood responsibilities, the federal role is significant. The federal government constructs many levees, floodwalls, and coastal dunes in partnership with local project sponsors; local entities, however, are fully responsible for operation and maintenance. The federal government also supports hazard mitigation, offers flood and crop insurance, and provides emergency response and disaster aid for significant floods. Dams that can serve flood control purposes have a wider variation in their ownership and operational responsibilities, with the federal government having a primary role in many of the larger dams. The principal federal agency involved in federal flood management investments and activities and flood-fighting is the U.S. Army Corps of Engineers. The Federal Emergency Management Agency (FEMA) has primary responsibilities for federal hazard mitigation, the National Flood Insurance Program (NFIP), and disaster assistance. In addition to the Corps floodfighting authorities, the Corps has a program to repair damaged levees, dams, berms, and other flood control works. Post-Sandy demand for such repairs is likely to be extensive. A near-term issue for actions under the Corps authorities is that their funding is often appropriated through emergency supplementals. Other federal agencies also are involved with flood-related activities, such as the U.S. Department of Agriculture's Natural Resources Conservation Service (NRCS), the Department of the Interior's Bureau of Reclamation, the Tennessee Valley Authority, and the International Boundary and Water Commission. Also, crop insurance and agricultural disaster assistance for flood damages is administered by the U.S. Department of Agriculture. Other agencies, such as the U.S. Geological Survey and the National Weather Service, provide data used in assessing flood risk. Since Hurricane Katrina in 2005 and compounded by concerns over the federal debt, interest has increased in reducing the federal flood response's reliance on emergency supplementals, reevaluating the roles and divisions of flood responsibilities, addressing gaps in investments and poorly addressed flood risk, and improving the incentives influencing decisions in flood-prone areas. In July 2012, the 112 th Congress enacted, as part of MAP-21 ( P.L. 112-141 ), an extension and a number of modifications to FEMA's National Flood Insurance Program through September 30, 2017. Beyond the NFIP reauthorization, Congress has changed little in the federal flood policies and programs since 2005. Hurricane Sandy was a reminder that, although forecasting and emergency response have improved over time and investments have been made in flood and hurricane risk reduction measures, significant flood risk remains. Significant storms can cause flooding in areas that are outside the 100-year floodplain (i.e., the area with a 1% probability of flooding annually) or cause storm surges that have a low probability of occurring but cause extensive damages. Significant storms can produce flooding that exceeds the ability of levees, floodwalls, seawalls, and dunes to protect the lives and investments behind them. Hurricane Sandy, like Hurricane Katrina, demonstrated that not only property damage but also significant risks to life, economic disruption, and other social hardships occur during floodwaters and storm surge. Flood risk is a composite of three factors: threat of an event (e.g., probability of a 10-foot storm surge in New York City); vulnerability , which allows a threat to cause consequences (e.g., level of protection provided by levees and dams, their reliability, and location within a floodplain or on a coast); consequence of an event (e.g., property damage, loss of life, economic loss, environmental damage, reduced health and safety, and social disruption). Generally, flood risk grows with more development and population in flood-prone areas. A range of options are available for reducing this risk, but some level of flood risk will always remain. Ex-post analysis of Hurricane Sandy will help inform understanding of how the storm's surge and flood hazard compared to previous storms and how they compare to models of future conditions, including under climate change scenarios. Significant debate continues about whether hurricane threats to the United States are changing; treatment of this topic is beyond the scope of this report. The two principle agencies involved in flood control projects, repair of those projects, and flood fighting are FEMA and the Corps, as shown in Table 1 . The Corps performs considerable flood control construction and damage repair. In contrast, FEMA's role in flood control projects is more limited, but its role is significantly broader in coordinating overall federal activities that assist states, communities and individuals with emergency flood response and recovery. The Stafford Act (42 U.S.C. 5170b) authorizes FEMA to direct the Department of the Defense (including the Corps) and other federal agencies to use its resources to provide assistance in the event of a major disaster or emergency declaration by the President. When a disaster occurs and a state is granted federal disaster assistance under the Stafford Act, funding under the Public Assistance program may be available to reimburse communities for flood-fighting activities and emergency repairs made to eligible infrastructure. Generally, Public Assistance program funds are limited to restoring a structure to its pre-disaster condition; projects to construct new flood control measures or enhance existing measures are not eligible. Because of Hurricane Sandy's significant damage to hurricane protection projects that use dunes and other sand-based measures and other types of beach damage and shore erosion, FEMA's policies regarding which activities are eligible for some types of disaster and recovery assistance is receiving particular attention. In P.L. 84-99 (33 U.S.C. SS701n), Congress gave the Corps emergency response authority that allows the agency to fight floods and other natural disasters. In this same law, Congress also gave the Corps the authority for a program to repair damaged flood control works. Both of these activities are discussed below in more detail. Limited appropriations for these Corps activities generally are included in the annual Energy and Water Development appropriations acts as part of the agency's civil works budget (e.g., $0 in FY2011 appropriations, $27 million in FY2012 appropriations) in the Corps' Flood Control and Coastal Emergencies (FCCE) account. Congress generally appropriates the majority of FCCE funds through emergency supplemental appropriations, ranging from significant funding following Katrina to no funds in some years. In the last decade, these activities have received $12 billion; the vast majority of these funds went to congressionally directed work on reengineering and reconfiguration of Hurricane Katrina-damaged floodwalls and levees in Southeast Louisiana. After flood disasters, it is often not only the Corps' FCCE account that receives supplemental funding; Congress also has appropriated funds for the agency's construction and operations and maintenance accounts to construct new works (e.g., new levee projects) or repair other works (e.g., navigation channels) after major flood disasters. In total, the Corps has received roughly $25 billion in supplemental funding since 2001. The reliance on significant supplemental funding for Corps work is raising questions about alternative ways to fund these activities and whether there are opportunities through the annual appropriations process. As previously noted, Congress gave the Corps specific emergency flood authorities in P.L. 84-99. Congress authorized the Corps to conduct disaster preparedness, advance measures, and emergency operations (disaster response and post-flood response), emergency dredging, and flood-related rescue operations. These activities are limited to actions to save lives and protect improved property (i.e., public facilities and services, and residential or commercial developments). Congress has also authorized the Corps to provide this emergency response assistance for up to 10 days following an emergency and before a presidential declaration of an emergency. The Corps is the principal agency that assists with repairs to damaged flood control works, like dams, levees, and dunes. These repair and rehabilitation activities are undertaken after the peak of a flood event has occurred and the extent of damage from the flood event can be determined. Through its Rehabilitation and Inspection Program (RIP), the Corps provides for rehabilitation of damage to flood control projects and federally constructed hurricane or shore protection projects and related inspections. The program's repair of damaged facilities following large flood events has historically been funded largely through emergency supplementals. For smaller RIP repairs, the Corps often attempts to fund repairs within its existing funding. For example, in December 2011, the program received $388 million for repairs mainly associated with 2011 Midwest flooding as part of the Disaster Relief Appropriations Act, 2012 ( P.L. 112-77 ), and in 2008, the program received $740 million largely for repairs in response to Midwest flooding through the Supplemental Appropriations Act, 2008 ( P.L. 110-252 ). At times, some eligible repairs have been delayed due to limitations on the availability of funds. To be eligible for rehabilitation assistance, the flood control project must be in active status with the RIP program at the time of the damage by wind, wave, or water action that is beyond ordinary. The following types of works are eligible for inclusion in RIP: non-federally or federally constructed, locally maintained levees and floodwalls; and federally authorized and constructed hurricane and shore protective measures (e.g., dunes, berms, and sacrificial beaches). For locally constructed projects, the cost to repair the damage is paid 80% by the Corps and 20% by the nonfederal entity. For federally constructed projects, the repair cost is entirely a federal responsibility (except for the costs of obtaining the sand or other material used in the repair). Many of the hurricane protection projects damage by Hurricane Sandy were federally constructed. For RIP assistance, the repair must have a favorable benefit-cost ratio; this calculation does not include recreation benefits, which may be significant for some coastal projects. Rehabilitation assistance is limited to repair or restoration of the project to its pre-disaster level of protection; no betterments or levee setbacks are allowed. Nonfederal entities are required to assume any rehabilitation cost of damage to an active project that is attributable to deficient maintenance. For hurricane storm damage reduction projects, actions eligible for RIP must address an issue critical to the functioning of the project. Depending on the condition of the measure and the timing, nourishment may be planned for immediately as part of a RIP effort or it may occur later as part of the regular nourishment of the project. A common issue that arises under RIP (as well as for FEMA mitigation programs discussed later) is interest in not only repairing levees but also improving them. Congress expressly restricted RIP funds to repair. The program is not designed to evaluate the federal interest in investments to further reduce the flood risk at a location. If federal participation is sought to increase protection, the typical route would be to pursue a study by the Corps to initiate a separate flood damage reduction project. Historically, Congress often has authorized Corps studies and at times construction projects for flood-damaged communities soon after significant storms; at times, these authorizations have been included in appropriations bills. Standard procedure, however, is for Congress to authorize Corps studies in a resolution of the authorizing committee or a Water Resources Development Act (WRDA). Since 2010, congressional action on committee resolutions for Corps studies, WRDA bills, and Corps appropriations have been complicated by earmark moratoriums. Developing and investing in flood-prone areas represents a tradeoff between the location's economic and other benefits and the exposure to a flood hazard. Hurricane Sandy in 2012, Midwest flooding in 2011 and 2008, Hurricane Ike in 2008, and Hurricanes Katrina and Rita renewed interest in the suite of tools available to improve flood resiliency. In addition to oversight and funding of emergency response activities, at issue for Congress is deciding on whether and how to enact and implement feasible and affordable flood policies and programs to reduce flood risk. The challenge is how to structure federal actions and programs so they provide incentives to reduce flood risk without unduly infringing on private property rights or usurping local decision making. Tackling this challenge would require adjustments in the flood insurance program, disaster aid policies and practices, and programs for structural and nonstructural flood risk reduction measures and actions.

Hurricane Sandy was a reminder that the United States is vulnerable to significant weather hazards, and that infrequent but intense flood events can cause significant damage and disruption. In addition to wind damages and electricity disruptions, the storm's surge damaged property and infrastructure in coastal and inlet areas, while the storm's rains and snowmelt swelled rivers and creeks. These impacts contributed to public safety concerns and private and public property loss. Although the storm was not notable for its wind intensity, Sandy's significant size, its unusually low atmospheric pressure, and the astronomic high tide combined with other weather systems to amplify flooding consequences and economic and transportation disruptions. With events like Hurricane Sandy, common questions for Congress include: Which federal programs can assist with flood-fighting? Which federal programs can assist with repairing damaged dunes, levees, and other flood protection? What are the policy and funding issues that may arise during recovery? While state and local entities have significant flood-related responsibilities, federal resources are called in as these entities are overwhelmed and as presidential disasters are declared. Several agencies, including the Federal Emergency Management Agency (FEMA) and the U.S. Army Corps of Engineers, have authorities to respond to flood emergencies and to assist with recovery efforts. FEMA has primary responsibilities for federal flood insurance, disaster assistance, and hazard mitigation programs. In addition to its floodfighting authorities, the Corps has a program to repair damaged levees, dams, berms, and other flood control works. Post-Sandy demand for such repairs is likely to be extensive. For work performed under some of the Corps authorities, a near-term issue may be that Congress typically funds these actions using emergency supplementals. While current funding levels are not likely to interfere with emergency response activities, federal funds may become an issue in proceeding with post-disaster repair and recovery investments. After the emergency has passed and recovery has been initiated, local and federal decision makers will be faced with questions of how to rebuild and what types of flood protection investments to make. Federal policy makers will be faced with the recurring questions of whether current flood policies and projects are effective at reducing flood risk and are financially sustainable. Hurricane Sandy in 2012, Midwest flooding in 2011 and 2008, Hurricane Ike in 2008, and Hurricanes Katrina and Rita in 2005 renewed congressional interest in the suite of tools available to improve flood resiliency. A challenge is how to structure federal actions and programs so they provide incentives to reduce flood risk without unduly infringing on private property rights or usurping local decision making. Tackling this challenge would require adjustments to flood insurance, disaster aid policies and practices, and programs for structural and nonstructural flood risk reduction measures and actions. In July 2012, the 112th Congress enacted, as part of MAP-21 (P.L. 112-141), an extension and some revisions of FEMA's National Flood Insurance Program through September 30, 2017. Otherwise, legislative action in recent years has done little to alter the broad federal approach to the nation's flood risk management.

In February 2012, the Senate Homeland Security and Governmental Affairs Committee's Subcommittee on Contracting Oversight began a wide-ranging investigation of executive agencies' public communications activities. The subcommittee is seeking to determine whether any of the agency expenditures were wasteful or propagandistic. The subcommittee has asked 11 federal agencies to provide it with records of their public communications contracts since 2008. Since 2010, congressional committees have examined agency public communications at least twice before. In March 2011, the Senate Homeland Security and Governmental Affairs' Subcommittee on Contracting Oversight held a hearing on the General Services Administration's (GSA's) hiring of a private consulting firm. GSA sought assistance in rebutting criticisms that environmental contamination at one of its facilities had sickened and killed GSA employees. On August 16, 2010, the minority staff of the House Oversight and Government Reform Committee released a report faulting seven agencies for engaging in inappropriate public relations and propaganda activities. Among the incidents that drew criticism was a Department of Health and Human Services commercial that spoke well of the Patient Protection and Affordable Care Act ( P.L. 111-148 , as amended). As noted in a related CRS report, public communications activities of the Department of Education, Federal Communications Commission, Internal Revenue Service, and other federal agencies have drawn congressional scrutiny during the past decade. In part, Congress's interest in agency communications flows from its general duty to oversee the agencies it has created and ensure the appropriate use of the funds it appropriates. But there is a broader context: control. Congressional apprehension about agencies promoting policies and taking political sides is long-standing. This concern is rooted at least partially in the perspective that agencies should be apolitical and play little if any independent role in policy formulation. Thus, from this perspective, agencies have a duty to inform and educate the public, but they should not attempt to persuade it or to engage in political or policy advocacy or elections. Additionally, agencies have incentives to promote themselves to the public. The author of a 1939 study of government communications activities noted, "It has long been the habit of officials to place the best possible light upon their accomplishments." Agencies frequently seek operational autonomy, that is, they try to distance and insulate themselves from legislative direction. One means for an agency to do this is to develop positive relationships with the public or interest groups through public communications, thereby creating stakeholders who may pressure Congress. Collectively, then, the statutory restrictions on publicity experts, publicity and propaganda, and lobbying with appropriated funds are tools for congressional control. When enforced, these statutes can serve to counteract agencies' incentives to promote themselves or political causes with public revenue, and to remind agencies that the misuse of agency resources or funds invites a congressional response. Federal agencies often speak to the public because doing so generally is considered essential to the functioning of representative democracy. If government is to serve the people, then the people must be kept well-informed of the government's activities so that they may judge its work and alter its policies through elections or other means (e.g., advocacy). Thus, many, and perhaps most, federal agencies routinely communicate with the public in the course of their daily work. Agencies do so for many purposes, including informing the public of its rights and entitlements; telling the public of the agency's activities; inviting public comment on proposed rules; warning the public of perils; and discouraging harmful or dangerous behaviors. Congress also has established agencies whose primary purpose is to make information available to the public (e.g., the U.S. Government Printing Office (GPO)), and tasked others with carrying out media campaigns (e.g., the Office of National Drug Control Policy's National Youth Anti-Drug Media Campaign). It is unclear how much the executive branch, let alone the federal government as a whole, spends on communications each year. However, CRS has estimated that executive branch agencies spent nearly $945 million on contracts for advertising services in FY2010, a figure that does not include all agency public communications expenditures. The Department of Defense spent $545.4 million on advertisements in FY2010, much of it for the purpose of drawing recruits. Congress has established three executive branch-wide statutory restrictions on executive agency communications: A 1913 statute (P.L. 63-32; 38 Stat. 212; 5 U.S.C. 3107) declares, "Appropriated funds may not be used to pay a publicity expert unless specifically appropriated for that purpose." A 1919 statute (P.L. 66-5; 41 Stat. 68; 18 U.S.C. 1913) forbids agencies from spending appropriated funds to encourage the public to contact Members of Congress. This "grassroots lobbying" prohibition, as it is often called, forbids agencies from paying for "any personal service, advertisement, telegram, telephone, letter, printed or written matter, or other device, intended or designed to influence in any manner a Member of Congress." Annual appropriations acts often carry a prohibition that forbids the use of appropriated funds "for publicity or propaganda purposes within the United States not authorized by the Congress." These restrictions have appeared in appropriations laws for over a half century. The rationales advanced for each of these statutes have varied. The 1913 anti-publicity expert statute may have been motivated by concern over agencies spending funds to extol their achievements. Plainly, the annual appropriations restrictions aim to prevent agencies from propagandizing the public. The 1919 anti-lobbying statute, meanwhile, aims to protect the separation of powers by preventing executive agencies from pressuring legislators through the public. All three statutes also were justified as means for stopping agencies from wasting public funds. Historically, Congress has found enforcing the restrictions on government communications is inherently challenging for at least three reasons. First, no single federal agency is responsible for reviewing agencies' communications with the public and enforcing statutory restrictions. The Department of Justice is responsible for prosecutions under the aforementioned 1919 anti-lobbying law. However, the DOJ "has never prosecuted anyone" for violating this statute. Otherwise, oversight, investigation, and enforcement of appropriate practices regarding government advertising falls to agencies' inspectors general, the Government Accountability Office (GAO), and Congress, all of whom have numerous other responsibilities. Second, the enforcement of public communications restrictions is inevitably post hoc--it comes after an agency action. Each agency has the authority to communicate with the public; there is no central federal communications agency that reviews agency communications for legal propriety before they are released to the public. (Individual agencies, in contrast, limit their own employees' communications with the public. Agencies' public communications are the responsibility of press offices and public affairs officials.) This "fire alarm" approach to oversight tends to mean in practice that authorities (Congress, GAO, inspectors general, etc.) only learn of possible transgressions when alerted by someone else (e.g., the media or a whistle-blower). Third, the brevity of the current statutes has left agencies and oversight authorities with the responsibility for interpreting the extent of the statutes' coverage. Annual appropriations restrictions, for example, speak of "publicity or propaganda purposes" but do not define these terms. The 1913 anti-publicity expert statute does not define who is a "publicity expert." The GAO, however, has developed a body of opinions that attempt to define the scope of these terms. Thus GAO construes "publicity and propaganda" to cover agency communications that are self-aggrandizing, designed to aid a political party, or that fail to disclose that they were produced by the government ("covert propaganda"). But GAO's determinations are not authoritative. The Department of Justice (DOJ) has contested GAO's conclusions in some instances and directed executive agencies not to heed GAO's opinion. Over the past two decades, federal agencies have adopted new electronic communication technologies. These "new media" technologies include e-mail, websites, weblogs (or blogs), text messaging, and social media, such as Facebook and Twitter. Federal agencies are increasingly using new media technologies to communicate with the public. At present, there are more than 1,504 federal government domains (e.g., Data.gov), and thousands of websites on these domains. As of June 2011, the GAO found that 23 of 24 of the federal agencies it surveyed had a presence on Facebook, Twitter, and YouTube. All 15 of the President's Cabinet agencies have at least one Twitter account. Some agencies are especially heavy users of these new communications technologies. For example, the National Archives and Records Administration (NARA) utilizes blogs, Facebook pages, Twitter accounts, and Flickr photography pages, and it has a YouTube video channel. Additionally, a survey of 3,000 federal managers found that approximately a quarter of them used Facebook for work purposes. In part, the incorporation of these technologies into agency communications is in keeping with past adoptions of emergent communications technologies in the hopes of improving agency operations. Additionally, the Administration of President Barack H. Obama has strongly encouraged agencies to use the most recent new media communications technologies. The President issued a memorandum on his first day in office declaring, [e]xecutive departments and agencies should harness new technologies to put information about their operations and decisions online and readily available to the public. Executive departments and agencies should also solicit public feedback to identify information of greatest use to the public. This "Open Government Initiative" was operationalized by a subsequent memorandum, and the Office of Management and Budget (OMB) provided agencies guidance on using new media to make government more transparent, participatory, and collaborative. President Obama appointed a deputy chief technology officer to head the "open government initiative" and a federal chief information officer, both of whom advocated expanding agency use of Internet technologies. Different agencies have used different new media to communicate with the public for different reasons and purposes. Several recent examples include the following: The U.S. Army uses websites (e.g., ArmyStrongStories.com) and Facebook (Facebook.com/goarmy) to reach potential recruits. Lieutenant General Benjamin C. Freakley, who led the Army Accessions Command which previously was in charge of troop recruitment, reportedly stated, "We're working hard to increase our social media" because "we fully recognize that young people TiVo over commercials or are multitasking on their smartphones when the commercials come on." Department of Energy Secretary Steven Chu has a Facebook page ( http://www.facebook.com/stevenchu ) where he posts short messages on a variety of subjects, such as energy conservation. The NARA employs the aforementioned social media technologies for multiple purposes. According to David S. Ferriero, the National Archivist, "Social media tools can help us make it easier for researchers, students, and the general public to learn about and make use of the billions of items in our collection. And just as important, they give the public direct ways to reach us: asking questions, telling us what's important to them, helping us plan for the future.... Digitization and online access to government records can also benefit from the collaborative expertise of the many, including the citizen archivists, researchers, federal agencies, the private sector, and IT professionals." The Department of State uses Twitter ( http://twitter.com/#!/statedept ) as a tool of public diplomacy. Along with online video and other new media, Twitter enables the agency to speak directly with foreign audiences. After the April 20, 2010, Deepwater Horizon explosion in the Gulf of Mexico, a multi-federal agency "unified command" was established. It utilized a website (deepwaterhorizonresponse.com), Twitter, Facebook, Flickr, and YouTube to explain how it was responding to the oil spill, and how affected individuals (e.g., fishermen) could get assistance. The Department of Veterans Affairs (VA) hired Alex Horton, a former soldier who has been openly critical of the VA, to write for the VA blog ( http://www.blogs.va.gov/VAntage/ ). "Alex is not here to flack for the agency," his VA supervisor has said. Horton serves as an in-house critic of the agency, identifying to the VA shortcomings in its services and understanding of veterans' issues. Smithsonian museums, such as the Museum of Natural History and the National Postal Museum, have allowed the public to vote via the Internet on which items it would like to see displayed in particular exhibits. The development and use of new media by agencies has several implications for Congress in its oversight and enforcement of agency public communications. (1) Quantity of Agency New Media Communications . The ease of producing new media communications makes it easier for agencies to produce more public communications. The Department of State, for example, has more than 15,191 posts ("tweets") from its main Twitter account ( http://twitter.com/#!/StateDept ) since late 2008, and this is not its only Twitter account. More communications may provide for more opportunities for an agency to transgress (inadvertently or otherwise) the statutory prohibitions against unauthorized publicity and propaganda and lobbying with appropriated funds (18 U.S.C. 1913). (2) Quality of Agency New Media Communications . New media technologies can remove the filters between agency employees and the public. This intimacy and immediacy enables prompt communications between agencies and the public. It also may lead to agency employees making misstatements of fact or comments that violate statutory restrictions. Daniel Mintz, who served as CIO of the Department of Transportation during the second term of President George W. Bush, has further cautioned, "any material a federal employee publishes [online] can be taken as establishing or implying the establishment of a formal policy." (3) Locating Agency New Media Communications . The nature of new media communications could complicate oversight further. Digital communications often are "born digital"--they exist in digital format only, and often may be deleted easily. Digital communications produced today can be difficult to locate subsequently, especially if they are "real-time" communications (e.g., live online "chats" or video). The NARA has issued guidance to agencies on the preservation of new media communications. However, managing and preserving electronic records in general is a complex undertaking, and historically agencies have not given these activities high priority. (4) Authenticating and Securing Agency New M edia Communications . As with paper-based communications, new media communications can be altered or forged. The Government Printing Office produces digital documents that carry a signature indicating their authenticity. But federal agencies' new media public communications seldom are subjected to similar security protocols. Someone with desktop publishing software and the requisite skills easily could download an agency's new media, alter its content, and then distribute it via e-mail and document-sharing websites. In some instances, agencies' new media communications have been commandeered by hackers or other malefactors and used to send out inappropriate content. (5) Identifying Publicity Experts . New media technologies may make it more difficult to determine who is acting as a "publicity expert" for the purposes of 5 U.S.C. 3107. For one, the employees who author new media often are not readily discernable. For example, government agencies' Twitter accounts seldom state which employees are authorized to send agency tweets. Government agency blog posts may not list an author. Additionally, Twitter, Facebook, and other new media technologies are not difficult to use, which makes it easier for agencies to have more federal employees (whatever their official agency position) communicate with the public. For example, the Department of Commerce's Chief Economist has a blog ( http://www.esa.doc.gov/blog ) and Twitter account ( https://twitter.com/#!/EconChiefGov ). Similarly, Congress established the position of chief information officer (CIO) within federal agencies to coordinate and monitor the acquisition and implementation of information technology programs ( P.L. 104-106 , Div. E, Title LI, SS5125(b)-(d); 110 Stat. 3009-393; 40 U.S.C. 11315). CIOs are not public affairs personnel, yet some have blogs that promote their agencies' activities. (6) Identify ing Agency Grassroots Lobbying . The use of new media may make it more difficult to discern when an agency has violated 18 U.S.C. 1913. As noted previously, grassroots lobbying occurs when an agency consciously encourages the public to pressure Congress. Arguably, any time an agency publishes anything on the Internet it could have the effect (intentionally or unintentionally) of encouraging citizens to contact Congress, especially if the communication "goes viral." Thus, an agency may think it is serving the public's "need to know" by publishing its congressional testimony online on the day of a hearing. Congress, meanwhile, might view this as an attempt to create public pressure. Additionally, in the past, agency grassroots lobbying efforts could be identified partly based upon the format of the communication (e.g., press releases and direct mail). Today, new media have expanded the number of formats that agency communications may take, and any new media format might carry content that has the effect of grassroots lobbying. (7) Rebroadcasting and the Loss of Control Over Communications. Government communications produced as new media may be easily rebroadcast. For example, a document posted on an agency website may be downloaded by an individual and then reposted on a personal website or blog. If the initial document contained an error or transgressed the statutory limitations on public communications, it would be difficult for the agency to rectify the situation by removing all online reproductions of it. The ease with which new media may be rebroadcast also may raise unforeseen legal issues. Thus, should a federal agency "retweet" another federal agency's communication, could the former agency be held culpable if the initial communication violated any of the statutory restrictions on public communications? As noted earlier, Congress historically has found it challenging to enforce the current statutory restrictions on agency communications. Agencies' adoption of new media appears to have further complicated oversight. Should Congress find that the proliferation of new media communications is problematic, it may find value in considering a range of possible policy options to improve or augment the public communications restrictions, such as the following: 1. Defining the major terms in the statutes, such as "publicity expert," "publicity," and "propaganda." 2. Updating the 1919 anti-lobbying statute (18 U.S.C. 1913) to explicitly extend coverage to new media communications. 3. Surveying agencies to see whether agency employees who use new media communications technologies are trained to respect the current statutory public communications restrictions. The Department of Veterans Affairs, for example, has released a policy directive for VA employee use of social media. It makes no mention of the statutory prohibitions. 4. Requiring all agency public communications to identify the author and his or her position at the agency. 5. Requiring the OMB to provide agencies with public communications guidelines. The Information Quality Act (IQA; P.L. 106-554 ; 114 Stat. 2763A-153; 44 U.S.C. amendments), which was enacted December 21, 2000, required the OMB to issue guidance to federal agencies designed to ensure the "quality, objectivity, utility, and integrity" of information disseminated to the public. However, as an amendment to the Paperwork Reduction Act (44 U.S.C. 3501), the IQA's coverage has not been construed by OMB as covering public relations communications (67 Federal Register 8460). 6. Requiring agencies to report annually to Congress on their public communications activities, expenditures, and the agencies' rationales for these activities. 7. Including in agencies' annual appropriation acts a requirement that GAO assess agencies' public communications for comportment with the public communications restrictions. This would provide Congress with assessments of agency compliance; it also could serve as a reminder to agencies of the public communications restrictions.

This report intends to assist Congress in its oversight of executive branch agencies' public communications. Here, "public communications" refers to agency communications that are directed to the public. Many, and perhaps most, federal agencies routinely communicate with the public. Agencies do so for many purposes, including informing the public of its rights and entitlements, and informing the public of the agency's activities. Agencies spent more than $900 million on contracts for advertising services in FY2010, a figure that does not include all agency communications expenditures. Congress frequently has investigated agency public communication activities. For example, in late February 2012 the Senate Homeland Security and Governmental Affairs Committee's Subcommittee on Contracting Oversight began investigating 11 federal agencies' public communications activities and expenditures. Congressional oversight of agency public communications activities is not new; it has occurred frequently since at least the beginning of the 20th century. Congress has enacted three statutory restrictions on agency communications with the public. One limits agencies' authority to hire publicity experts, another prohibits using appropriated funds to lobby Congress, and a third disallows using appropriated funds for "publicity or propaganda." For a number of reasons, enforcing these restrictions has been challenging, not least of which is that these statutory prohibitions do not well clarify licit from illicit public communications. Many federal agencies have adopted new electronic communication technologies over the past two decades. These "new media" technologies include e-mail, websites, weblogs (or blogs), text messaging, and social media such as Facebook and Twitter. Agencies' use of these new media has implications for congressional oversight of agency public communications. Most fundamentally, the ease of use of new media and the nature of digital communications further complicates congressional oversight and enforcement of the public communications restrictions. This report will be updated in the event of any significant developments.

Once a port of call on ancient maritime trade routes, Sri Lanka is located in the Indian Ocean off the southeastern tip of India's Deccan Peninsula. The island nation was settled by successive waves of migration from India beginning in the 5 th century BC. Indo-Aryans from northern India established Sinhalese Buddhist kingdoms in the central part of the island. Tamil Hindus from southern India settled in the northeastern coastal areas, establishing a kingdom in the Jaffna Peninsula. Beginning in the 16 th century, Sri Lanka was colonized in succession by the Portuguese, Dutch, and English, becoming the British crown colony of Ceylon in 1815. In the late 19 th century, Tamil laborers were brought from India to work British tea and rubber plantations in the southern highlands. Known as Indian Tamils, the descendants of these workers currently comprise approximately 4% of Sri Lanka's population and are clustered in the south-central "tea country." Descendants of earlier Tamil arrivals, known as Sri Lankan or Ceylon Tamils, constitute up to 13% of the country's population and live predominantly in the North and East. Moorish and Malay Muslims (largely Sunni) account for another 9% of the population. The majority of Sri Lankans (about three-quarters) are ethnic Sinhalese, most of them Buddhist. In 1972, Ceylon was renamed Sri Lanka ("resplendent land"), as it was known in Indian epic literature. Although Ceylon gained its independence from Britain peacefully in 1948, succeeding decades were marred by ethnic conflict between the country's Sinhalese majority clustered in the densely populated South and West, and a largely Hindu Tamil minority living in the northern and eastern provinces. Following independence, the Tamils--who had attained educational and civil service predominance under the British--increasingly found themselves discriminated against by the Sinhalese-dominated government, which made Sinhala the sole official language and gave preferences to Sinhalese in university admissions and government jobs. The Sinhalese, who had deeply resented British favoritism toward the Tamils, saw themselves not as the majority, however, but as a minority in a large Tamil sea that includes approximately 60 million Tamils just across the Palk Strait in India's southern state of Tamil Nadu. The Sri Lankan civil war, a separatist struggle between the two ethnic groups, lasted 26 years, ending with the Sinhalese-dominated government's defeat of Tamil separatist groups in 2009. Although there are no exact figures on the death toll, an estimated 30,000-40,000 people were killed in the war. The government of Sri Lanka has denied any accusations of war crimes and resents recent international pressure to address a more equitable economic and political structure. U.S. policy towards Sri Lanka has historically supported Sri Lanka's sovereignty and territorial integrity as well as its democratic institutions and socio-economic development. The United States has also supported policies that would foster inter-communal harmony and ethnic reconciliation with the Tamil minority of the country. Since 2009, U.S.-Sri Lanka relations have centered on human rights abuses committed at the end of the civil war. Susan Rice, then the U.S. Permanent Representative to the United Nations, welcomed the April 2011 U.N. Panel of Experts Report on Sri Lanka and stated that the U.S. supports an effective, transparent post-conflict reconciliation process in Sri Lanka that includes accountability for violations by all parties. The report indicates the need for an independent and full accounting of the facts in order to ensure that all allegations of abuse are addressed and impunity for human rights violations is avoided. U.S. Assistant Secretary of State for South and Central Asia Robert Blake, who was also previously U.S Ambassador to Sri Lanka, reportedly stated that the U.S. first looks to host governments to take responsibility for such issues but that "international mechanisms can become appropriate in cases where states are either unable or unwilling to meet their obligations." In light of human rights concerns, Washington sponsored a United Nations Human Rights Council resolution in 2012, to the displeasure of Colombo, calling upon the government to provide more comprehensive action and legal support to address human rights violations during the civil war, and to address inequalities between ethnic groups in the nation. In March 2013 UNHRC adopted a U.S.-sponsored reolution which again called on Sri Lanka to address human rights concerns and and to take steps to foster reconcilliation. The 113 th Congress has also expressed its views on the situation in Sri Lanka. H.Res. 247 , "Expressing support for internal rebuilding, resettlement, and reconciliation within Sri Lanka that are necessary to ensure a lasting peace," was introduced on June 4, 2013, and calls for transparency, reconciliation, media freedom, investigation into war crimes, access for humanitarian workers into war-affected regions, demilitarization, as well as the equal distribution of political power. The bill was referred to the House Committee on Foreign Affairs. The United States Agency for International Development (USAID) has maintained a presence in Sri Lanka since 1948. A key goal of this assistance is to even the inequitable growth and development between the dominantly Sinhalese-populated and dominantly Tamil-populated provinces, specifically targeting widows, ex-soldiers, and combatants and marginalized communities for economic assistance programs. The USAID funded projects aim for long-term, sustainable development, and include initiatives to improve democratic institutions. USAID has especially assisted Sri Lanka's agricultural sector, through programs focused on farmer productivity, and helping farmers market their products. Its infrastructure assistance has focused on upgrading schools and hospitals, as well as livelihood skills and the educational structures for students. The United States also works with the Sri Lankan defense establishment through the International Broadcast Bureau (IBB), which controls a radio-transmitting station in Sri Lanka. Defense cooperation also assists technical and training opportunities for Sri Lankan defense, as well as other fields such as intellectual property rights, biotechnology, and cybersecurity. The U.S. has most actively been involved in food security, easing cultural tensions between Sinhalese and Tamil populations, as well as promoting peaceful transitions in Sri Lankan provinces. The Republic of Sri Lanka has a multi-party democratic structure with high levels of political conflict and violence. The country's political life long featured a struggle between two broad umbrella parties--President Mahinda Rajapaksa's Sri Lanka Freedom Party (SLFP) and the United National Party (UNP). The president's United Freedom People's Alliance (UFPA), of which the SLFP is the main party, has consolidated power. President Rajapaksa gained widespread popularity among the Sinhalese majority for ending the war. The SLFP is viewed as being more Sinhala nationalist and statist than the UNP. The political divisions between the Sinhalese and Tamil populations remain serious. The government has amended the constitution to restrain provinces from merging, making it impossible for Tamils in Sri Lanka to have a majority within the regions where they currently have large populations, as well as constraining the rise of the political groups sympathetic to Tamil causes. The SLFP has, moreover, taken steps to make the central government much stronger, through proposed bills and amendments, in efforts to keep power in President Rajapaksa's government. Sri Lanka follows a strong executive presidential system of government. Under this French-style system, the popularly elected president has the power to dissolve the 225-member unicameral parliament and call new elections, as well as to appoint the prime minister and cabinet. President Rajapaksa's was reelected to a second six-year term in January 2011; the current parliament was elected in April 2011. The president's family plays an important role in government. The U.S. State Department found that "both elections were fraught with violations of the election law by all major parties and were influenced by the governing coalition's massive use of state resources." The ruling UPFA now has a significant majority in parliament. The next presidential election is scheduled for 2015 and the next parliamentary election is to be held by 2016. Given the UPFA's large majority in parliament, it is likely that it will serve out its full term. The current government is accused of a number of serious human rights violations that have persisted since the civil war ended. They include the targeting, surveillance, and limitation of free speech by the media and individuals. President Rajapaksa has also appointed family members to high ranking government positions. Human rights groups say the government has also killed, threatened, or detained human rights defenders, and remains non-trasparent. Sri Lanka's economy mainly relies on the services sector, and has a thriving tourism market. It additionally relies on agriculture and, to a lesser extent, industry, with the largest exports being garments, tea, spices, rubber, gems and jewelry, refined petroleum, fish, and coconuts/coconut products. Nearly 20% of the nation's exports reach the United States, though other large trading partners include neighboring India and several European Union nations. Rajapaksa has identified improving the investment climate in Sri Lanka as a priority. Large trade and balance of payments deficits remain a concern. Other presidential economic priorities reportedly include rural and infrastructure development. Sri Lanka and the United States have an important bilateral economic relation. The U.S. Department of State notes: The United States is Sri Lanka's second-biggest market for garments, taking almost 40% of total garment exports. United States exports to Sri Lanka were estimated at $302 million for 2011, consisting primarily of wheat, aircraft and parts, machinery and mechanical appliances, plastics, and medical and scientific equipment. India remains the largest source of foreign investment in Sri Lanka, with direct investments of over $1 billion in the last ten years. Other large investors include Taiwan, Canada, the Virgin Islands, Netherlands, Singapore, the United Kingdom, the United States, and Australia. Colombo has faced criticism for the way it has addressed alleged domestic human rights violations. The government has been accused by the international community of favoring the Sinhalese people, and doing little to promote equal political voice and economic opportunities for its Tamil population. The human rights abuses that the Sri Lankan government has been accused of include control over the media and harassment of journalists, sudden "disappearances" in the forms of arrests or abductions of Tamil sympathizers, the military's monitoring and control of Tamil populations in the north and eastern provinces, and insufficient government interest in investigating the location and status of former Tamil militants, despite family requests. Abuses against women have also increased in recent years. Peaceful protests and supporters are often punished for what the government views unfavorably, and although some actions have been taken in the past by the Sri Lankan governments, they are viewed as having been ineffective. On March 21, 2013, with support from the United States and India, the United Nations Human Rights Council voted to pass a resolution which is critical of the Sri Lankan government's failure to take action to stop ongoing human rights violations and calling for an investigation into abuses committed during and in the aftermath of the country's 26-year civil war. Despite a significant campaign by the Sri Lankan government to prevent its passage, twenty-five countries voted in support of the resolution while thirteen countries opposed and eight abstained. The non-binding resolution has faced criticism due to its relatively weak nature. It "encourages" Sri Lanka to take action, and, while it discusses human rights violations, it does not address the need for international investigations into the conflict. Regardless of the international community's fears of future conflict, Colombo has dismissed and continues to criticize international actions deeming them unfair. The Wall Street Journal reports that "Colombo pushed back against the U.S., forcefully rejecting the resolution and saying it plays down the country's efforts to rebuild Tamil areas and to promote reconciliation between the country's Sinhalese majority and its Tamil minority." The envoy for the Human Rights Council stressed the strength of Sri Lankan domestic policies, and accused the international community of indifference. Sri Lanka is situated near strategically important sea lanes that transit the Indian Ocean. These sea lanes link the energy rich Persian Gulf with the economies of East and Southeast Asia. Recent developments demonstrate to some observers that the maritime strategic dimension of the Indo-Pacific is increasingly integrating the Indian and Pacific Ocean littoral regions into a more unified strategic arena. Sri Lanka and India share close longstanding historical and cultural ties. India's native Tamil populations feel kinship with Sri Lanka's Tamils. Recently, India, along with the United States, has been an active voice for reconciliation, and fair elections within the international community. Although India has and continues to be a strong economic partner of Sri Lanka, the connection between the Tamil minority in Sri Lanka and the native Tamil populations in India have been a factor in relations between Tamil and Sinhalese ethnic groups in Sri Lanka. The relationship is also aggravated by massive refugee populations. India has played host to large number of Tamil refugees, both during and post the Sri Lankan civil war. In late 2012 the Indian government estimated that more than 100,000 Tamil refugees reside in the southern state of Tamil Nadu, which shares a common language and a maritime border, at the closest points, of about 40 miles away. Of this figure, 68,000 refugees remain in camps operated by the Indian government, while 32,000 live outside of the refugee camps. Although living conditions in the refugee camps are poor, only 5,000 refugees have returned to their native Sri Lanka after the declared end of the civil war, regardless of UNHCR's assistance. Recent contentions have risen over the Palk Strait, a strait between the southern tip of India's state of Tamil Nadu, and the northern tip of Sri Lanka, in which fishermen from both nations compete for limited resources. Sri Lankans have accused Indian fisherman of encroaching into their waters, while Indian fisherman accuse Sri Lankan naval vessels of threatening behavior, including damage of vessels, robbery of stocks, and abuse against the fishermen. The dispute stands as a piece of a larger long-standing grudge between the native Tamil Indians who empathize with the defeated Tamil minorities in Sri Lanka, and their mistrust and anger against the Sinhalese dominant government. Despite differences, India and Sri Lanka have a close relationship through commercial interests, the growing tourism industry, educational cooperation, and migrant workers as well as mutual cultural and religious interests. India is Sri Lanka's largest trading partner. China and Sri Lanka have developed increasingly close ties in recent years. In the last five years, China has invested heavily in Sri Lanka's defense and security. This comes in addition to Beijing's promises for assistance in other scientific and militaristic endeavors, including maritime, satellite and space technology programs. Some view China's initiatives in Sri Lanka as part of a "string of pearls" strategy by China to gain access to ports to help it secure its interests along the sea lanes which link the energy rich Persian Gulf with China's economic and trade centers on the east coast of China. Others are less concerned by China's investment. Chinese assistance is viewed by some as having played a key role in enabling Sri Lanka to win its civil war against the LTTE. According to an Operations Officer of the U.S. Army and Marine Corps Counterinsurgency Center: The most decisive factor enhancing Sri Lanka's ability to combat the LTTE involved significant economic and military aid from China.... China's aid enabled the Sri Lankan government to attain the military superiority needed to defeat the LTTE.... In exchange for the aid, China received development rights for port facilities and other investments. China has assisted Sri Lanka with a series of very large infrastructure development projects, a second international airport, a telecommunications tower in Colombo, and the reconstruction of highway A9 between Kandy and Jaffna. China is also assisting with railways and a $1.3 billion coal power plant development. It was announced in April 2013 that China would lend Sri Lanka $200 million to finance part of the Matara-Kataragama railway. Sri Lanka's disapproval of the West's and India's focus on human rights within the country, has led some to conclude that the these foreign influences are waning in Sri Lanka relative to Chinese influence. Some in strategic circles in New Delhi are increasingly concerned that China may be seeking to gain strategic positions around India in South Asia and the Indian Ocean. India and China have unresolved border disputes that date back to their 1962 border war. China remains a large trading partner of Sri Lanka with $3.2 billion in bilateral trade in 2011. Comparatively, Sri Lankan exports to the United States totaled $2.1 billion in 2011 while United States exports to Sri Lanka totaled $302 million in 2011. Sri Lanka holds the status as the only South Asian nation with a relatively high Human Development Index score, demonstrating the focus of government policies on social factors. In particular, the island nation has excelled in health and education, though concerns about the environment and the nation's susceptibility to natural disasters remain significant. The Sri Lankan Ministry of Health targets maternal and child health problems, malaria, hypertension, hearth disease, and HIV/AIDS, has pledged itself to the improvement of preventative health programs. It provides universal healthcare for all Sri Lankan citizens, though studies have revealed that there is still a priority for healthcare assistance to high income groups. Sri Lanka possesses one of the most diverse ecosystems in the world. Conservation International, a U.S.-based organization focused on environmental research, policy, and field work, notes that, "Sri Lanka alone may be home to as many as 140 endemic species of amphibians. The region also houses important populations of Asian elephants, Indian tigers, and the endangered lion-tailed macaque. Freshwater fish endemism is extremely high as well, with over 140 native species." Grouped along with the Western Ghats region, which extends through the western peninsula of India, Sri Lanka remains one of the thirty-four "biodiversity hotspots" in the world; one of the regions that are known to house important medical plants, different grain sources, spices, and genetic resources of plants and animals. According to the Australian Department of Sustainability, Environment, Water, Population and Communities, Biodiversity hotspots are areas that support natural ecosystems that are largely intact and where native species and communities associated with these ecosystems are well represented. They are also areas with a high diversity of locally endemic species, which are species that are not found or are rarely found outside the hotspot. They are also defined by the risk of destruction that they face, and the lack of conservation efforts due to their high monetary potential. The rapid threat of environmental degradation is very real for the South Asian nation. Sri Lanka's ecosystem has been under immense strain, with a lack of regulation of the biodiversity. Today, the nation's remaining forests only account for 1.5% of the original, due to farms, loggers, poachers, population pressures, and fishing. The United Nations Development Programme reports that between the twenty years of 1990 and 2010, Sri Lanka's forests have been reduced by an alarming and unsustainable 20.9%. Often the use of the forests and its biodiversity is illegal, but continues to occur. These environmental degradation processes have taken many forms in Sri Lanka, and has altered the terrain of the disaster-vulnerable nation. Sri Lanka has had a susceptibility to a number of natural disasters due to its geographic position. A majority of the disasters are hydro-climatological, taking the form of cyclones, tsunamis, landslides, droughts and floods. According to the United Nations Office for the Coordination of Humanitarian Affairs (OCHA), in the last 34 years, the death toll due to natural calamities has remained over 37,000. One of the deadliest recorded tsunamis hit India, Thailand, Sumatra, and Sri Lanka in December 2004, contributing to this massive figure. U.S. Geological Survey (USGS) reports that the 2004 tsunami claimed over 31,000 lives in Sri Lanka with its 9.0 scale earthquake, while the Office for the Coordination of Humanitarian Affairs (OCHA) states that displacement due to threat of tsunamis, earthquakes, and other natural phenomenon is also common, noting that, "as recently as November 2010, a monsoon triggered devastating floods across parts of the country, affecting close to 1.2 million people"

The Democratic Socialist Republic of Sri Lanka, an island nation in the Indian Ocean, is a constitutional democracy with a relatively high level of development. For two and a half decades, political, social, and economic development was seriously constrained by years of ethnic conflict and war between the government and the Liberation Tigers of Tamil Eelam (LTTE), also known as the Tamil Tigers. After a violent end to the civil war in May 2009, in which authorities crushed LTTE forces and precipitated a humanitarian emergency in Sri Lanka's Tamil-dominated north, attention has turned to whether the government now has the ability and intention to build a stable peace in Sri Lanka. This report provides historical, political, and economic background on Sri Lanka and examines U.S.-Sri Lanka relations and policy concerns. In recent years interest in Sri Lanka has focused on human rights issues related to the final stages of Sri Lanka's 26-year civil war with the LTTE, and its attendant humanitarian emergency. Sri Lanka has faced criticism for what has been viewed as an insufficient response to reported war crimes, a more nepotistic and ethnically biased government, as well as increasing restrictions on media and an unequal distribution of economic development. Between 1983 and 2009, a separatist war costing at least 70,000 lives was waged against government forces by the LTTE, a rebel group that sought to establish a separate state or internal self-rule in the Tamil-dominated areas of the north and east. The United States designated the LTTE as a Foreign Terrorist Organization in 1997. Sri Lanka offers a test case of how to respond to a brutal military victory over a violent ethno-nationalist separatist movement. The situation presents decision-makers questions of how to balance the imperatives of seeking accountability and resolution, providing development assistance, and promoting broad geopolitical interests. President Mahinda Rajapaksa has a firm hold on government and popular support among the Sinhalese majority for his leadership in presiding over a military victory over the LTTE. But Sri Lanka remains a multi-ethnic society, where long-held historic grievances have been deepened still further by the conflict's brutal end. Although Sri Lanka maintains strong economic ties with countries in its close geographic proximity, Sri Lanka-India relations have been strained due to political and ethnic tensions (Sri Lanka's minority Tamils have strong linkages with Tamil communities in India), and there has been an increase in military and energy related investments from China in recent years. Sri Lanka remains the only South Asian nation with a high human development index ranking. The United States recognizes the importance of the nation with its significant geographic positioning, and has paid close attention to human rights in the island nation. The U.S.-Sri Lanka relationship has been focused on human rights issues over the last few years, with an emphasis on U.S. sponsorship of resolutions through the United Nations Human Rights Council.

In recent years, the issue of industry gifts and other payments to health care professionals such as physicians, and the possible conflicts of interest that could arise from these payments, has been controversial. Examples of gifts and payments mentioned in media reports include meals, honoraria for speaking engagements, and travel expenses for conferences. As Congress addresses health reform, there has been interest in increasing transparency, preventing inappropriate relationships, and requiring disclosure of gifts and other payments made to physicians. While companies are free to voluntarily disclose this information about gifts and other payments, there is no current federal requirement to do so. Supporters of a federal disclosure provision emphasize concern about the effects of gifts and payments on both the cost of prescription medication and on health care quality. They may point to recent data showing that payments from pharmaceutical companies influence some physicians' decisions to prescribe certain medications, occasionally resulting in over-prescribing of the most expensive medications or even causing unnecessary health risks for patients. They also argue that the ethical guidelines such as the American Medical Association (AMA) code discussed below are insufficient deterrents because they "are not being followed." Groups opposing a federal disclosure argue that it is unnecessary because existing guidelines within the medical and pharmaceutical-marketing professions discourage unethical behavior. They also argue that gifts and payments can benefit patients, as physicians receive product samples, attend educational seminars, and receive detailed information about particular medications. This report outlines the existing AMA guidelines on disclosure and describes certain state disclosure laws and selected federal legislation, in particular, the Physician Payment Sunshine Act of 2009 ( S. 301 , H.R. 3138 ). This report also analyzes various legal and constitutional considerations that may pertain to a federal disclosure requirement. The AMA Code of Medical Ethics, which "serves as the primary compendium of medical professional ethical statements in the United States," addresses ethical considerations for gifts given to physicians by companies in the pharmaceutical, device, and medical equipment industries. In the opinion of the AMA's Council on Ethical and Judicial Affairs on "Gifts to Physicians from Industry," it is acknowledged that while many gifts to physicians from the drug manufacturing and other industries may serve an important and socially beneficial function, other gifts may be considered inappropriate if they fall outside of certain guidelines. For example, gifts accepted by physicians "should primarily entail a benefit to patients and should not be of substantial value." Items such as textbooks, modest meals, and other gifts are appropriate if they serve a genuine educational function. Cash payments should not be accepted. In addition, permissible gifts must be "related to the physician's work," and gifts such as pens and notepads are appropriate under the code. The guidelines also provide that while subsidies used to underwrite the costs of continuing medical education conferences or professional meetings are acceptable, subsidies from industry should not be accepted directly or indirectly to pay for the costs of travel, lodging, or other personal expenses of physicians attending conferences or meetings, nor should subsidies be accepted to compensate for the physicians' time. In addition, physicians should not accept gifts with "strings attached." For example, if gifts are given by a drug company in relation to the physician's prescribing practices, the gift is considered improper. The AMA guidelines are self-regulating, and thus there may be no legal consequences for failure to adhere to these ethical standards. Legislation requiring pharmaceutical companies and other entities to disclose gifts and payments to health care professionals has been enacted in states such as Maine, Minnesota, Vermont, and Massachusetts, as well as the District of Columbia. Minnesota enacted the first disclosure law more than 10 years ago, and other disclosure laws were enacted relatively recently. The state laws have some similarities; they all require disclosure on an annual basis and exempt certain categories of gifts and payments. However, states such as Vermont and Massachusetts prohibit certain gifts from being provided to health care professionals. In addition, states such as Maine, as well as the District of Columbia, require the reporting of expenses relating to marketing products to the general public. As authority for the disclosure requirements, states have invoked their responsibilities as regulators and as protectors of public welfare. They have also expressed concern with the rising cost of prescription medication and noted their role in reimbursing such medication through their Medicaid programs. For example, Maine's asserted purpose in its disclosure legislation focuses on the state's roles as "guardian of the public interest" and "administrator of prescription drug programs." In addition to states that have already enacted disclosure legislation, many other states have considered legislation to regulate the relationship between pharmaceutical companies and physicians. Minnesota's Wholesale Drug Distribution Licensing Act generally prohibits a "wholesale drug distributor" from offering or giving any gift of value to a practitioner. However, a gift does not include drug samples intended for free distribution to patients, items with a "total combined retail value, in any calendar year, of not more than $50," educational materials, and salaries and benefits given to the pharmaceutical companies' own representatives. Minnesota's requirement is a licensing requirement; therefore, a penalty for non-compliance might be denial of a wholesale drug distributor license in the state. Minnesota's act requires each "wholesale drug distributor" to submit an annual report to the state detailing (1) payments to sponsors of medical conferences; (2) honoraria and payments of expenses for practitioners who serve on faculties of professional or educational meetings; and (3) compensation of practitioners in connection with research projects. The report must identify the nature of value of any payments totaling $100 or more to a particular practitioner during the year. In contrast to the other states, Minnesota does not require that an annual summary report be provided to its state legislature. However, the state law provides that information submitted pursuant to its disclosure requirement is "public data." In 2008, Vermont amended its disclosure legislation to ban certain gifts from manufacturers of prescribed products and wholesale distributors to health care providers. A gift is defined by the state statute to include something of value provided to a health care provider for free, including any payment, food entertainment, or anything else of value. The statute makes an exception from the ban for certain specified allowable expenditures. Under the amended disclosure requirements, manufacturers are required to annually disclose to the Vermont Attorney General the value, nature, purpose, and recipient information about allowable expenditures given to health care providers, academic institutions, or certain organizations serving health care providers. The attorney general must report annually on the disclosures to Vermont's General Assembly and the governor and must make the reported data publicly available on a website. The state attorney general may also sue violators for civil penalties not to exceed $10,000, plus attorneys' fees. While Vermont's earlier disclosure law required the attorney general to keep confidential all trade secret information, this provision was repealed by the 2008 legislation. The District of Columbia's disclosure law applies to every "manufacturer or labeler of prescription drugs dispensed in the District that employs, directs, or utilizes marketing representatives in the District." The District requires each pharmaceutical manufacturer or labeler to annually report expenses associated with items such as educational or informational programs or materials; food, entertainment, and gifts; trips and travel; and product samples. Furthermore, each report must provide the "value, nature, purpose, and recipient" of each expense. However, like Minnesota and Vermont, the District exempts certain categories of items from the reporting requirements, including expenses worth less than $25, "reasonable reimbursement" for clinical trials, product samples if they will be distributed to patients for free, and scholarships for attending "significant" conferences if the attendee is chosen by the association sponsoring the conference. Violators of the disclosure law may be subject to a fine of $1,000 plus attorneys' fees. The District of Columbia requires the D.C. Department of Health to compile an annual report presenting the disclosed information in "aggregate form." In addition to the provisions relating to physicians, it mandates disclosure of expenses associated with advertising to the public at large, including through television advertisements, "as they pertain to District residents." Under Maine's disclosure law, pharmaceutical manufacturers and labelers must file an annual report that discloses, among other things, all expenses associated with (1) educational or informational programs or materials; (2) food, entertainment, and gifts; (3) trips and travel; and (4) product samples. Maine's law also exempts expenses worth less than $25, reasonable reimbursement for clinical trials, product samples if they will be distributed to patients for free, and scholarships for attending "significant" conferences if the attendee is chosen by the association sponsoring the conference. As in the District of Columbia, violators may be subject to a fine of $1,000 plus attorneys' fees. The Maine disclosure statute also resembles the District's law in that it contains a broad reporting requirement that extends to expenses associated with marketing to the general public. Maine requires that a report summarizing the aggregate data and a report providing analysis be provided to the Maine attorney general's office and the state legislature each year by November 30 and January 1, respectively. The Massachusetts Act to Promote Cost Containment, Transparency and Efficiency in the Delivery of Quality Healthcare, enacted in 2008, requires pharmaceutical or medical device manufacturers that employ a person to sell or market a drug, medicine, or medical device in the commonwealth to adopt and comply with a "marketing code of conduct," as established by regulation. Under this code of conduct, the provision or payment for things such as meals (subject to exception); entertainment or recreational items of value (e.g., tickets to sporting events); and financial support for the costs of lodging, travel, and other expenses of non-faculty health care practitioners attending a continuing medical education (CME) event, conference, or professional meeting may be prohibited. However, the provision, distribution, or dissemination of peer-reviewed academic, scientific, or clinical information, and the provision of prescription drugs to a health care practitioner solely for the use of the practitioner's patients, among other things, are permitted by the code of conduct. In addition, every pharmaceutical or medical device manufacturing company must annually disclose to the department of public health the value, nature, purpose and particular recipient of any fee, payment, or other economic benefit of at least $50, which the company provides to persons authorized to prescribe, dispense, or purchase prescription drugs or medical devices in the commonwealth. The department of public health is responsible for making all disclosed data publicly available and easily searchable on its website. In addition, the department must report to the attorney general items of value provided in violation of the market code of conduct. Legislation has been introduced in the 111 th Congress that would require disclosure of gifts and other transfers of value from manufacturers of a covered drug, device, biological, or medical supply to health care provider recipients. The Physician Payments Sunshine Acts of 2009, as introduced in the House ( H.R. 3138 ) and the Senate ( S. 301 ), contain similar but not identical provisions. In addition, other versions of these bills have been included in health reform proposals considered in various House and Senate committees. Under S. 301 and H.R. 3138 , a manufacturer of drugs and other medical products that provides a payment or other transfer of value to a covered recipient (e.g., a physician, a physician medical practice, or a physician group practice) or a recipient's designee would be required to annually submit specified information to the Secretary about the recipients and the payments or other transfers of value, including a description of the form of transfer of value such as cash or stock, and the nature of the transfer of value (e.g., consulting fee, gift, food, entertainment, charitable contribution). Exceptions would be made for certain transfers of value of a small dollar amount, product samples for patient use that are not intended to be sold, and educational materials that directly benefit patients or are intended for patient use. In addition, manufacturers and other entities would be responsible for submitting to the Secretary information regarding certain ownership or investment interests held by a physician or a physician's immediate family member, not including interest in a publicly traded security or mutual fund. Manufacturers and other entities that fail to submit the required information in a timely manner in accordance with regulations would be subject to an annual civil monetary penalty of at least $1,000 but not more than $10,000 for each payment or transfer of value not reported, up to a maximum of $150,000. Any entity that knowingly fails to submit information would be subject to a civil monetary penalty of at least $10,000 but not more than $100,000 for each payment or transfer of value, and may not exceed $1,000,000 in total for each annual submission of information. In addition, under both bills, the Secretary must make the submitted information available through a website that is searchable, in a format that is clear and understandable, and that meets various other requirements. The bills would also preempt state laws and regulations that have analogous requirements to the federal bill, but would not interfere with state laws that mandate the reporting or disclosure of information not required under the federal bill. In enacting a federal disclosure requirement, Congress may consider the following statutory and constitutional considerations. These considerations include the prohibition of certain payments under the anti-kickback statute, and the question of whether payments to physicians could be considered trade secrets, which require certain legal protections. Another issue is whether requiring a pharmaceutical company or other entity to make a disclosure would violate the freedom of speech guaranteed under the First Amendment. While current federal law does not require disclosure of industry payments to health care professionals, it may prohibit certain payments from being given or received. Under the federal anti-kickback statute, it is a felony to knowingly and willfully offer, pay, solicit, or receive anything of value (i.e., "remuneration"), directly or indirectly, overtly or covertly, in cash or in kind, in return for a referral or to induce generation of business reimbursable under a federal health care program such as Medicare or Medicaid. The statute prohibits both the offer or payment of remuneration for patient referrals, as well as the offer or payment of anything of value in return for purchasing, leasing, ordering, or arranging for, or recommending the purchase, lease, or ordering of any item or service that is reimbursable by a federal health care program. Persons found guilty of violating the anti-kickback statute may be subject to a fine of up to $25,000, imprisonment for up to five years, and exclusion from participation in federal health care programs for up to one year. However, a number of statutory and regulatory "safe harbors" to the anti-kickback statute protect various business arrangements from prosecution. Safe harbors include certain types of investment interests, personal services and management contracts, referral services, space rental or equipment rental arrangements, warranties, discounts, and employment arrangements. As mentioned above, the anti-kickback statute only applies to referrals for services reimbursable under a federal health care program. Thus, if a company were to offer a kickback or other type of remuneration that did not involve reimbursement from the federal government, the anti-kickback statute would not be implicated. In 2003, the Department of Health and Human Services' Office of the Inspector General (OIG) issued Compliance Program Guidance for Pharmaceutical Manufacturers (CPG), designed to assist pharmaceutical manufacturers in developing and implementing internal controls and procedures that promote compliance with applicable statutes, regulations, and requirements of federal health care programs. In addition, the CPG alerted companies and health care practitioners to activities that could lead to prosecution under the anti-kickback statute as well as other federal laws. Among other things, the CPG explains that pharmaceutical companies and their employees and agents often engage in a number of arrangements that offer benefits to physicians or others in a position to make or influence prohibited referrals under the anti-kickback statute. Examples of remunerative arrangements between pharmaceutical manufacturers and parties in a position to influence referrals that were cited by OIG included entertainment, recreation, travel, meals, or other benefits in association with information or marketing presentations, as well as gifts, gratuities, and other business courtesies. OIG indicated these arrangements potentially implicate the anti-kickback statute if any one purpose of the arrangement is to generate business for the pharmaceutical company. While the CPG guidelines for companies to follow in developing or maintaining compliance programs are not legally binding, the document puts manufacturers on notice as to certain arrangements that OIG may see as suspect. A trade secret can be defined as secret, commercially valuable information. It is a company's proprietary interest in such information that is protected from disclosure, theft, or unauthorized use under both state and federal law. The U.S. Supreme Court has explained that for subject matter to be protected as a trade secret, the material must meet minimal standards of novelty and inventiveness to avoid extending trade secret protection to matters of general or common knowledge in the industry in which it is used. Whether information qualifies as a "trade secret" under federal or state law, however, is a question of fact that is to be determined by a jury. Confidential commercial information can lose its trade secret status through unprotected disclosure. For example, a trade secret may lose its legal protection by accidental or intentional disclosure by a company's employee. Once a trade secret is exposed to the public, its protected character is lost forever and cannot later be retrieved. Some pharmaceutical companies have attempted to shield certain physician gift and payment information from public disclosure by designating it as confidential trade secrets, in order to prevent their competitors from gaining information about drugs under development, their marketing practices, and their consulting and research arrangements. Until recently, Vermont law allowed pharmaceutical companies to protect such data as trade secrets, thus preventing the state's attorney general from publicly disclosing the information. This exemption in Vermont's disclosure law, however, was criticized for being too widely used by the companies and thus severely restricting public access to detailed physician payment information. In May 2009, the Vermont legislature passed a law, effective July 1, 2009, that eliminates the trade secret exemption. Neither the Senate or House version of the Physician Payment Sunshine Act 2009 permits a company to characterize physician payment data as trade secrets to avoid public disclosure. However, legislation introduced in the 110 th Congress, the Drug and Medical Device Company Gift Disclosure Act ( H.R. 3023 ), contained a provision that would have directed the FDA commissioner to "keep confidential any information disclosed to or otherwise obtained by the Commissioner ... that relates to a trade secret ... " If Congress were to enact a federal disclosure requirement, it would likely survive judicial scrutiny. A preliminary question when considering the constitutionality of any federal statute is whether any power enumerated in the Constitution authorizes Congress to take such action. A disclosure requirement would likely pass that preliminary threshold. Congress has broad authority to regulate activities under its Commerce Clause power, including the authority to regulate activities as long as they "substantially affect" interstate commerce. The second question in determining the constitutionality of a federal statute is whether the statute violates any constitutional provision. The First Amendment is one plausible basis for a constitutional challenge to a disclosure provision. Specifically, pharmaceutical and other companies might argue that mandatory disclosure of gifts and payments to physicians violates their First Amendment freedoms of speech and association. Companies might identify two different manifestations of "speech" implicated by a federal disclosure provision. First, they might argue that the disclosure of information regarding gifts and payments is unconstitutionally compelled speech. Second, they might argue that the gifts and payments are, themselves, speech that the law unconstitutionally restricts. As a threshold matter, it is not clear that gifts and payments made to physicians are "speech." The Supreme Court has treated monetary transactions as "speech" in the past, most notably in the area of campaign finance. However, the payments at issue here are arguably distinct from campaign contributions because they are not "political expression" or "discussion of governmental affairs" as were the transactions in the campaign finance arena. If the gifts and payments are not speech, then they fall outside of First Amendment protection. A federal provision would likely survive a compelled speech challenge. The First Amendment generally prohibits the government from compelling speech. However, two case law trends suggest that a court would uphold a federal provision compelling disclosure of gifts and payments made to physicians or other health care professionals. First, a court might analyze the disclosure by pharmaceutical companies in the context of compelled commercial speech. Commercial speech is "speech that proposes a commercial transaction." Although the disclosures would not themselves propose commercial transactions, they report transactions made for the purpose of increasing business. In the compelled commercial speech category, under applicable case law, the government's interest need only be "reasonably related" to the disclosure requirements to survive judicial scrutiny. Mandatory disclosure of gifts and payments to health care professionals appears reasonably related to potential governmental interests, such as transparency and patient protection. Second, even if the compelled speech at issue is viewed as non-commercial, a court would likely uphold the provision. Although the Court has invalidated nearly all laws it has reviewed in the non-commercial compelled speech category, most of the Court's non-commercial compelled speech cases addressed political speech, which garners a greater level of constitutional protection than other types of speech. In contrast, the speech implicated here, if not commercial, is medical rather than political. Therefore, a federal disclosure provision would likely survive a compelled speech challenge under the First Amendment. A mandatory disclosure provision would likewise probably survive a restricted speech challenge. Such a challenge would allege that the provision unconstitutionally restricts pharmaceutical companies' gifts and payments to health care professionals. If gifts and payments are "speech," then such transactions are likely also commercial speech, because a likely message conveyed by the gifts and payments is, for example, that doctors should prescribe the promoted drugs. Commercial speech garners less constitutional protection than political or other types of speech. The applicable test for determining the constitutionality of commercial speech is the four-part Central Hudson test. Under the Central Hudson framework, the preliminary questions are (1) whether the speech is protected by the First Amendment (i.e., is not unlawful or misleading), and (2) whether the government's asserted interest in regulation is "substantial." If the regulation satisfies both preliminary questions, the third and fourth prongs then apply: (3) whether the regulation directly advances the government's asserted interest, and (4) if so, whether the regulation is no more extensive than is necessary to serve that interest. Assuming that the gifts and payments made to health care professionals are not unlawful or misleading, a court would find that the first Central Hudson prong is satisfied. A court would also likely find that a federal disclosure requirement satisfies the second prong. In Rubin v. Coors Brewing Co. , the Supreme Court found "substantial" the government's interest in deterring efforts by beer companies to advertise the most potent beer. Here, the government's potential interests--for example, transparency, reduced drug costs, and patient protection--would seem likely to be at least as "substantial" as the interest asserted in Rubin . The third and fourth Central Hudson prongs could be closer issues, but would still likely result in a finding of constitutionality. When applying the third prong, the Supreme Court has indicated that courts should consider the effect of the regulation in its general application, rather than as applied to the particular group challenging the law. In a case invalidating a law on the basis of the third prong, the Supreme Court stated that the government must "demonstrate that the harms it recites are real and that its restriction will in fact alleviate them to a material degree." Although it seems likely that the government could identify a real harm caused by gifts and payments to physicians, some question exists as to whether mandatory disclosure of such gifts and payments would "materially alleviate" that harm. The Court noted in the above case that the government offered "no studies" giving evidence of the asserted harm and failed to present even "anecdotal" evidence that the law would address the harm identified. Thus, the question might be whether the government can present sufficient studies and anecdotal evidence to show that the disclosure would alleviate any identified harm created by gifts and payments to health care professionals. Regarding the fourth Central Hudson prong, the Supreme Court has clarified that "no more extensive than necessary" should not be interpreted strictly to require the government to use the "least restrictive means" of all available alternatives to accomplish its purpose; rather, the fourth prong merely requires a reasonable "fit" between the legislature's ends and the means chosen to accomplish those ends. Thus, a court need only find a reasonable fit between a disclosure rule and the government's asserted interest in order to uphold the government action. For laws affecting political speech, in contrast, the more onerous "least restrictive means" test applies. Nonetheless, in a disclosure case involving political speech in the context of campaign finance, the Court stated that disclosure is generally the "least restrictive means" of addressing corruption in government. Since the fourth Central Hudson prong is less onerous than the "least restrictive means" test, it is likely that disclosure would survive First Amendment scrutiny in the commercial speech arena. A federal disclosure requirement would likely also survive a freedom of association challenge. The Supreme Court has stated that "compelled disclosure, in itself, can seriously infringe on privacy of association and belief." To be constitutional, a disclosure law must have a "relevant correlation" or "substantial relation" to the asserted government interest. It is unclear whether the right of association would extend to an "association" between a pharmaceutical company and a physician, since the Supreme Court cases to date have generally invalidated laws on freedom of association grounds only when political or membership associations were at issue. Even if a court found that the pharmaceutical company-physician relationship constituted an "association" such that it triggered right of association claims under the First Amendment, it is unlikely that a court would find that a disclosure law violated privacy of association rights because the Court has upheld disclosure laws against freedom of association challenges in other contexts. For example, in Buckley v. Valeo , the Supreme Court upheld federal laws mandating disclosure of certain campaign finance activities, holding that the government's interest in regulation outweighed the private association concerns raised by the requirements. It seems likely that government interests asserted here would similarly outweigh the pharmaceutical companies' freedom of association concerns. Finally, it is telling in assessing a federal disclosure requirement's constitutionality that the state disclosure laws now in effect have faced no significant legal challenges. Although a U.S. district court recently invalidated on First Amendment grounds a New Hampshire law regulating prescription information, that law was distinct from the possible federal requirement discussed here because it prohibited disclosure of prescription information. In sum, there have been recent efforts to crack down on perceived conflicts of interest between health care professionals and the pharmaceutical and other medical industries, in particular through disclosure of certain gifts or other payments. Several states have already enacted legislation requiring companies to disclose gifts and payments to these professionals. Federal legislation has also been introduced, which would require disclosure of gifts and other transfers of value from the pharmaceutical and other entities to health care provider recipients. A federal disclosure requirement would likely survive a legal challenge. Pharmaceutical companies might challenge the provision on First Amendment grounds. However, it appears likely that it would survive judicial scrutiny under the various applicable tests of constitutionality.

In recent years, questions have been raised over the propriety of certain financial relationships between health care professionals such as physicians, and the pharmaceutical and other medical industries. As part of these relationships, companies may give gifts or make payments to healthcare professionals as part of their marketing efforts, or for other purposes. In an effort to promote transparency and prevent inappropriate relationships, there has been interest in requiring disclosure of certain types of payments. Several states and the District of Columbia have enacted legislation requiring pharmaceutical companies to disclose gifts and payments made to health care professionals. While companies are free to voluntarily disclose this information, there is currently no federal requirement to do so. This report briefly outlines American Medical Association (AMA) guidelines addressing gifts to physicians from industry, and describes selected state disclosure laws already in effect. The report also discusses proposed federal legislation, in particular, the Physician Payments Sunshine Act of 2009 (S. 301, H.R. 3138). In addition, the report analyzes potential legal and constitutional considerations associated with a federal disclosure requirement, including how a court may evaluate a federal disclosure requirement if it were challenged on First Amendment grounds. If a federal disclosure requirement was enacted and subsequently challenged on these grounds, it appears likely to survive judicial scrutiny. This report supersedes CRS Report RL34094, Requiring Disclosure of Gifts and Payments to Physicians: State Efforts and a Legal Analysis of Potential Federal Action, by [author name scrubbed].

Medicaid is a means-tested entitlement program that finances the delivery of primary and acute care services, as well as long-term services and supports. It is a federal-state program, and participation in Medicaid is voluntary for states, though all states and the District of Columbia choose to participate. In order to participate in Medicaid, the federal government requires states to cover certain mandatory populations and benefits, but the federal government also allows states to cover optional populations and services. Due to this flexibility, there is substantial variation among the states in terms of factors such as Medicaid eligibility, covered benefits, and provider payment rates. Medicaid is jointly financed by the federal government and the states. States incur Medicaid costs by making payments to service providers (e.g., for doctor visits) and performing administrative activities (e.g., making eligibility determinations), and the federal government reimburses states for a share of these costs. The federal government's share of a state's expenditures for most Medicaid services is called the federal medical assistance percentage (FMAP). The FMAP varies by state and is inversely related to each state's per capita income. For FY2015, FMAP rates range from 50% (13 states) to 74% (Mississippi). Historically, Medicaid eligibility has generally been limited to certain low-income children, pregnant women, parents of dependent children, the elderly, and individuals with disabilities; however, starting January 1, 2014, states have the option to extend Medicaid coverage to most non-elderly, nonpregnant adults with income up to 133% of the federal poverty (FPL). This expansion of Medicaid eligibility is one of a number of changes the Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as amended) made to the Medicaid program, and it is referred to as the ACA Medicaid expansion. This report provides an overview of the ACA Medicaid expansion, and the impact of the Supreme Court decision on the ACA Medicaid expansion. Then, the report describes who is covered under the expansion, the expansion rules, and how the expansion is financed. In addition, enrollment and expenditure estimates for the ACA Medicaid expansion are provided. Finally, the report reviews state decisions whether or not to implement the ACA Medicaid expansion, and the implications of those decisions on certain individuals, employers, and hospitals. A common misconception about the Medicaid program is that all low-income individuals are eligible for Medicaid. Instead, only certain low-income individuals are eligible for Medicaid coverage. To qualify, an individual must meet both categorical (i.e., must be a member of a covered group, such as children, pregnant women, parents with dependent children, the elderly, or individuals with disabilities) and financial eligibility requirements. In addition, individuals need to meet federal and state requirements regarding residency, immigration status, and documentation of U.S. citizenship. The federal Medicaid statute (Title XIX of the Social Security Act) defines a number of distinct population groups as being potentially eligible for Medicaid coverage. Some of these populations are mandatory eligibility groups that states must cover if they choose to participate in Medicaid, while others are optional eligibility groups that states are allowed to cover if they choose to do so. In addition, states are able to provide Medicaid coverage to additional populations not listed as a mandatory or optional coverage group in statute through Section 1115 demonstration waivers. Due to optional eligibility groups and the Section 1115 demonstration waivers, Medicaid eligibility varies significantly from state to state. The bars in Figure 1 show the federally mandated Medicaid income eligibility levels for the major population groups that were in effect prior to the implementation of the ACA Medicaid expansion. The text in Figure 1 indicates the number of states in January 2013 using optional eligibility groups and Section 1115 waivers to provide Medicaid coverage to individuals with incomes above the federally mandated level and the highest income eligibility level for each population. The ACA Medicaid expansion provides states with the option to increase Medicaid eligibility to 133% of FPL for non-elderly, nonpregnant adults. As shown in Figure 1 , prior to the ACA, Medicaid income eligibility levels for parents with dependent children were low relative to the income eligibility levels for children and pregnant women, and adults without dependent children were not eligible for Medicaid in most states. For this reason, 70% of low-income children had Medicaid coverage, while 30% of low-income, non-elderly adults had Medicaid coverage. In addition, the uninsured rate for low-income, non-elderly adults was 42%, which was more than twice the national average of 18%. The primary goals of ACA are to increase access to affordable health insurance for the uninsured and to make health insurance more affordable for those already covered. The ACA Medicaid expansion is one of the major insurance coverage provisions included in the law, but the ACA Medicaid expansion is just one of a few Medicaid eligibility expansions included in the ACA. The ACA Medicaid expansion (as initially enacted) established 133% of FPL as the new mandatory minimum Medicaid income eligibility level for most non-elderly, nonpregnant adults. The law also specified that an income disregard in the amount of 5% of FPL be deducted from an individual's income when determining Medicaid eligibility based on the modified adjusted gross income (MAGI). Thus, the upper income eligibility threshold for individuals in this new eligibility group is effectively 138% of FPL. This ACA Medicaid expansion was effective January 1, 2014 (or earlier at state option). The Supreme Court decision in National Federation of Independent Business (NFIB) v. Sebelius made the ACA Medicaid expansion optional rather than mandatory. In states that adopt the ACA Medicaid expansion, the three major groups of individuals gaining Medicaid coverage are adults without dependent children, parents with dependent children, and adults with disabilities. States that implement the ACA Medicaid expansion are required to follow the ACA Medicaid expansion rules. The federal government funds a vast majority of the cost for the ACA Medicaid expansion. Originally, it was assumed that all states would implement the ACA Medicaid expansion in 2014 as required by statute because implementation was required in order for states to receive any federal Medicaid funding. However, with respect to Medicaid, the Supreme Court decision in NFIB addressed the issue of whether withholding Medicaid reimbursement to a state unless that state complies with the expansion of its Medicaid program exceeds Congress's enumerated powers under the Spending Clause and/or violates the Tenth Amendment. On June 28, 2012, the Supreme Court issued its decision in NFIB , and the Supreme Court held that the ACA Medicaid expansion violated the Constitution. The Supreme Court decision held that the federal government could not withhold payment for a state's entire Medicaid program for failure to implement the ACA Medicaid expansion. However, the federal government could withhold the funding for the ACA Medicaid expansion if a state did not implement the expansion. As a result, the Supreme Court's ruling in NFIB effectively made state participation in the ACA Medicaid expansion voluntary. The federal government cannot terminate federal Medicaid matching funds for a state's pre-ACA Medicaid program if a state doesn't implement the ACA Medicaid expansion. After the Supreme Court ruling, the Centers for Medicare and Medicaid Services (CMS) issued guidance to states specifying that states have no deadline for deciding when to implement the ACA Medicaid expansion. Also, the guidance said states that decide to implement the expansion have the ability to end the ACA Medicaid expansion at any point in time. The three major categories of non-elderly adults that would receive Medicaid coverage under the ACA Medicaid expansion are adults without dependent children, parents with dependent children, and adults with disabilities. Prior to the implementation of the ACA Medicaid expansion, only a few states provided Medicaid coverage to adults without dependent children, and in general, the Medicaid income eligibility level for parents and adults with disabilities was significantly lower than 133% of FPL (i.e., the ACA Medicaid expansion eligibility level). Prior to the ACA, adults without dependent children were not included in the federal statute as either a mandatory or an optional Medicaid coverage group. However, states were able to provide Medicaid coverage to these adults through Section 1115 demonstration waivers or state-funded programs. As of January 2013, eight states (Arizona, Colorado, Connecticut, Delaware, Hawaii, Minnesota, New York, and Vermont) and the District of Columbia provided full Medicaid coverage to adults without dependent children, and only two of these states and the District of Columbia covered adults without dependent children up to at least 133% of FPL. In addition, 18 states provided Medicaid coverage with limited benefits to adults without dependent children. For most states, a significant portion of the population that would gain Medicaid coverage through the implementation of the ACA Medicaid expansion would be adults without dependent children. See Figure A-1 for state-by-state Medicaid income eligibility levels for non-elderly adults without dependent children as of January 1, 2014. Under Section 1931 of the Social Security Act, states are required to provide Medicaid coverage for parents (and their dependent children), at a minimum, at the Aid to Families with Dependent Children (AFDC) eligibility levels in place on July 16, 1996. This federally mandated eligibility threshold varies by state but averages 41% of FPL. Section 1931 of the Social Security Act also gives states the option to cover parents with incomes above the 1996 minimum levels and most states do. As of January 2013, 12 states provided full Medicaid coverage for parents of dependent children with incomes at or above 133% of FPL, and 13 states provided Medicaid coverage with limited benefits to parents of dependent children with incomes of 133% of FPL or higher. In most states, the ACA Medicaid expansion would provide Medicaid coverage to a significant number of parents with dependent children. See Figure A-2 for state-by-state Medicaid income eligibility levels for parents with dependent children as of January 1, 2014. The major Medicaid eligibility pathway for non-elderly, disabled individuals is based on the program rules for the Supplemental Security Income (SSI) program. Federal law requires states to provide Medicaid coverage to recipients of SSI. The income eligibility threshold for SSI translates to 74% of FPL in 2014. However, Section 209(b) of the Social Security Amendments of 1972 (P.L. 92-603) gave states the option to use Medicaid eligibility criteria for adults with disabilities with income and resources thresholds that are more restrictive than SSI but no more restrictive than those in effect on January 1, 1972. Therefore, in 209(b) states, receipt of SSI does not guarantee eligibility for Medicaid. States also have the option to provide Medicaid coverage to non-elderly adults with disabilities through other optional eligibility pathways, such as the poverty level, medically needy, and special income level. Prior to the ACA Medicaid expansion, all states had Medicaid income eligibility thresholds for non-elderly adults with disabilities below 133% of FPL. As a result, the implementation of the ACA Medicaid expansion would provide a significant increase in the Medicaid income eligibility level for non-elderly adults with disabilities. See Figure A-3 for state-by-state Medicaid income eligibility levels for non-elderly adults with disabilities as of January 1, 2014. The requirements for the ACA Medicaid expansion vary from other aspects of the program. If a state accepts the ACA Medicaid expansion funds, it must abide by the new expansion coverage rules. For instance, MAGI counting rules are used for determining eligibility for the ACA Medicaid expansion population, and individuals covered under the ACA Medicaid expansion are required to receive alternative benefit plan (ABP) coverage. As of January 1, 2014, the MAGI counting rules are used in determining eligibility for most of Medicaid's non-elderly populations, including the ACA Medicaid expansion. MAGI is defined as the Internal Revenue Code's adjusted gross income (AGI, which reflects a number of deductions, including trade and business deductions, losses from sale of property, and alimony payments) increased (if applicable) by tax-exempt interest and income earned by U.S. citizens or residents living abroad. Under the MAGI counting rules, the state looks at the individual's MAGI, deduct 5%, which the law provides as a standard disregard, and compare that income to the MAGI income standards set by each state in coordination with CMS. The ACA mandates the individuals gaining Medicaid coverage through the ACA Medicaid expansion receive Medicaid benefits through ABPs, which are a Medicaid benefit structure that has different requirements than the traditional Medicaid benefits. In general, ABP coverage may be less generous than traditional Medicaid coverage but more generous than most private health insurance coverage. ABPs may cover fewer benefits than traditional Medicaid, but there are some requirements, such as coverage of family planning and transportation services that private insurance generally does not cover. As a result, an adult with disabilities may have access to different coverage through the ACA Medicaid expansion eligibility pathway (i.e., eligible for Medicaid based solely on their low-income status) than the adults with disabilities that have Medicaid coverage through the SSI eligibility pathway (i.e., eligible for Medicaid based on being low-income and disabled). However, during the application process, states must identify those who are medically frail and offer them a choice of ABP or traditional Medicaid benefits as their ABP coverage. The ACA provides different federal Medicaid matching rates for the individuals that will gain Medicaid coverage through the ACA Medicaid expansion. The federal government's share of most Medicaid expenditures is determined according to the FMAP rate, but exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services. The ACA adds a few FMAP exceptions for the ACA Medicaid expansion: the "newly eligible" FMAP rate, the "expansion state" FMAP rate, and the additional FMAP increase for certain expansion states. The "newly eligible" FMAP rate is used to reimburse states for the Medicaid expenditures for "newly eligible" individuals who gained Medicaid eligibility due to the ACA Medicaid expansion. The "newly eligible" individuals are defined as non-elderly, nonpregnant adults with family income below 133% of FPL who would not have been eligible for Medicaid in the state as of December 1, 2009 (or were eligible under a waiver but not enrolled because of limits or caps on waiver enrollment). States will receive 100% FMAP rate (i.e., full federal financing) for the cost of providing Medicaid coverage to "newly eligible" individuals, from 2014 through 2016. For "newly eligible" individuals, the FMAP rate will phase down to 95% in 2017, 94% in 2018, 93% in 2019, and 90% afterward ( Table 1 ). Federal statute specifies the "newly eligible" FMAP rate for each year, which means the "newly eligible" FMAP rates are available for these specific years regardless of when a state implements the ACA Medicaid expansion. For instance, if a state implements the ACA Medicaid expansion in 2018, then that state will receive a "newly eligible" FMAP rate of 94% in 2018, 93% in 2019, and 90% afterward. As mentioned earlier, prior to the ACA, some states used Section 1115 waivers to provide Medicaid coverage to adults without dependent children and to parents with incomes above the threshold for the Section 1931 pathway. As a result, these states have few or no individuals who will qualify for the "newly eligible" FMAP rate. As of 2014, these states receive an increased FMAP rate, which is referred to as the "expansion state" FMAP rate. This definition of expansion state was established prior to the Supreme Court decision making ACA Medicaid expansion optional for states. In this context, expansion state refers to states that had already implemented (or partially implemented) the ACA Medicaid expansion at the time the ACA was enacted. Specifically, "expansion states" are defined as those that, as of March 23, 2010 (ACA's enactment date), provided health benefits coverage meeting certain criteria statewide to parents with dependent children and adults without dependent children up to at least 100% of FPL. As of early December 2013, the Centers for Medicare and Medicaid Services (CMS) determined the following states met the definition of "expansion state" and would be eligible for the "expansion state" FMAP rate if the state implements the ACA Medicaid expansion: Arizona, Delaware, District of Columbia, Hawaii, Maine, Massachusetts, Minnesota, New York, Pennsylvania, Vermont, and Washington. The "expansion state" FMAP rate is available for individuals in "expansion states" that have implemented the ACA Medicaid expansion who were eligible for Medicaid on March 23, 2010 and are in the new eligibility group for non-elderly, nonpregnant adults at or below 133% of FPL. The formula used to calculate the "expansion state" FMAP rates is based on a state's regular FMAP rate, so the "expansion state" FMAP rates varies from state to state until CY2019, at which point the "newly eligible" FMAP rates and the "expansion state" FMAP rates will be equal (see Table 1 ). "Expansion states" are not excluded from receiving the "newly eligible" FMAP rates. Populations in an "expansion state" that meet the definition for the "newly eligible" FMAP rate will receive the "newly eligible" FMAP rate. For example, an "expansion state" that prior to the ACA provided Medicaid coverage to non-elderly adults without dependent children and parents with dependent children up to 100% of FPL, will receive the higher "newly eligible" FMAP rate for individuals between 100% and 133% of FPL if it implements the ACA Medicaid expansion. Also, "expansion states" will receive the "newly eligible" FMAP rate for individuals who received limited Medicaid benefits prior to the expansion. In addition, "expansion states" that provided state-funded health benefits coverage will receive the "newly eligible" FMAP rate for individuals previously covered by the state-only program. During 2014 and 2015, an FMAP rate increase of 2.2 percentage points is available for "expansion states" that (1) the Secretary of the Department of Health and Human Services (HHS) determines will not receive any FMAP rate increase for "newly eligible" individuals and (2) have not been approved to use Medicaid disproportionate share hospital (DSH) funds to pay for the cost of health coverage under a waiver in effect as of July 2009. The 2.2 percentage point increase is applied to the state's regular FMAP rate and is applied to those individuals who are not "newly eligible" individuals. Vermont is the only state that has been confirmed as meeting the criteria for the additional FMAP increase for certain "expansion states." The ACA Medicaid expansion is expected to significantly increase Medicaid enrollment and federal Medicaid expenditures. In terms of enrollment, the Congressional Budget Office (CBO) estimates the insurance coverage provisions from the ACA will increase Medicaid and the State Children's Health Insurance Program (CHIP) enrollment of non-elderly individuals by 13 million in FY2024. A vast majority of the increase in enrollment for Medicaid and CHIP is due to the ACA Medicaid expansion, but enrollment is also impacted by other provisions, such as the expansion of Medicaid eligibility for foster care children and children ages six to 18. Figure 2 shows the year-by-year estimates of the effects of the ACA insurance coverage provisions on Medicaid and CHIP enrollment. Even without all states participating in the ACA Medicaid expansion, the ACA insurance coverage provisions are expected to increase Medicaid and CHIP enrollment for non-elderly individuals by more than 25% in each year after FY2015. Regardless of whether a state decides to implement the ACA Medicaid expansion or not, all states are expected to experience an increase in Medicaid enrollment due to the "woodwork" effect. This is the term for uninsured individuals who without the expansion are eligible for Medicaid but decide to enroll in Medicaid due to increased media attention and outreach efforts associated with the ACA. The impact of the woodwork effect depends on the percentage of a state's population that is eligible but not enrolled in Medicaid. Nationally, an estimated 7.3 million to 9.0 million uninsured children and adults were eligible but not enrolled in Medicaid prior to the implementation of the expansion. Actual enrollment for the ACA Medicaid expansion is not currently available. CMS has been reporting monthly Medicaid and CHIP enrollment numbers since October 2013, but this enrollment data does not break out the enrollment for the ACA Medicaid expansion. The data provides the aggregate enrollment for Medicaid and CHIP enrollees receiving comprehensive coverage on a state-by-state basis. However, the preliminary July 2014 data is the first month for which all states reported enrollment data and states are still transitioning to the standardized reporting specifications. Both of these considerations limit the conclusions that can be drawn from the monthly enrollment data. According to this data, among the 49 states reporting enrollment data for both September 2014 and the baseline period (i.e., July 2013 through September 2013), approximately 9.2 million additional individuals were enrolled in Medicaid and CHIP in September 2014 compared with the average monthly enrollment for the baseline period, which is almost a 16% increase. For states that had implemented the ACA Medicaid expansion, Medicaid and CHIP enrollment increased by more than 23%, whereas states that had not implemented the expansion reported an increase of approximately 6% over the same period. CMS is working on Medicaid enrollment reports that will specify the number of individuals that are newly eligible due to the ACA Medicaid expansion and plans to release these enrollment reports "soon." Figure 3 shows the annual estimated federal budgetary effect of the ACA insurance coverage provisions on Medicaid and CHIP outlays compared to estimated Medicaid and CHIP outlays without the ACA insurance coverage provisions. Most of the federal expenditures for the Medicaid and CHIP insurance coverage provisions are due to the ACA Medicaid expansion, but these expenditures also include other provisions, such as the expansion of Medicaid eligibility for foster care children and children ages six to 18. From FY2015 through FY2024, CBO estimates the ACA Medicaid and CHIP insurance coverage provisions will increase federal Medicaid and CHIP outlays by almost 23%. The federal government will be covering a vast majority (94%) of the cost of the ACA Medicaid and CHIP insurance coverage provisions. CBO estimates these provisions will increase federal Medicaid and CHIP outlays by a total of $792 billion from FY2015 through FY2024, while states' cost of these provisions is estimated to be $46 billion over the same period of time. The potential impact of the ACA Medicaid expansion varies significantly from state to state. Medicaid enrollment and expenditures are estimated to increase at varying rates from state to state due to the current variation in states' Medicaid income eligibility levels for non-elderly adults and state demographics. See Table B-1 for state-by-state estimates of the potential impact of the ACA Medicaid expansion on Medicaid expenditures and enrollment. On January 1, 2014, when the ACA Medicaid expansion went into effect, 24 states and the District of Columbia included the expansion as part of their Medicaid programs. Michigan implemented the expansion on April 1, 2014, and New Hampshire implemented the expansion on July 1, 2014. Pennsylvania received approval for a Section 1115 waiver to implement the ACA Medicaid expansion beginning on January 1, 2015. See Figure 4 for a map of the states that have and have not decided to implement the ACA Medicaid expansion as of December 2014. In six of the states that have not expanded (Indiana, Montana, Tennessee, Utah, Virginia, and Wyoming), the ACA Medicaid expansion is currently being debated. Although there are some exceptions, most of the states that have implemented the ACA Medicaid expansion tend to have low rates of uninsured individuals (relative to the national average) and traditionally have provided Medicaid coverage to more non-elderly adults through relatively higher Medicaid income eligibility levels. Also, in general, the states that have not implemented the ACA Medicaid expansion have relatively higher rates of uninsured and traditionally have covered fewer non-elderly adults under Medicaid. Because states are able to implement or discontinue the expansion at any time, the status of the ACA Medicaid expansion in states remains uncertain. State laws must be enacted and funds appropriated to implement or discontinue a Medicaid expansion decision. As a result, states' decisions regarding the expansion generally occur during the legislative sessions, which typically occur during the first half of the calendar year. In response to a budget survey, Medicaid officials in several states noted that implementing the ACA Medicaid expansion would be debated during their state's next legislative session. Even states that have already implemented the expansion could debate the issue. For instance, in Arkansas, state law requires the legislature to approve the ACA Medicaid expansion annually and the expansion received just enough votes to pass last year. States have chosen not to implement the ACA Medicaid expansion for various reasons, including because they view the expansion as unaffordable to the state and the Medicaid program as "broken." However, the ACA Medicaid expansion became more politically feasible for some states with CMS's approval of Arkansas's proposal to implement the ACA Medicaid expansion using the "private option," which provides premium assistance for Medicaid enrollees to purchase private health insurance through the health insurance exchange. Most states implementing the ACA Medicaid expansion will do so through an expansion of their current Medicaid program. However, some states are implementing the expansion through alternative models, such as premium assistance through the "private option" and health savings accounts. Four states (Arkansas, Iowa, Michigan, and Pennsylvania) have received approval for Section 1115 waivers to implement their ACA Medicaid expansions. Arkansas and Iowa have been approved to use the "private option," and Michigan received approval to use health savings accounts. In addition, Iowa, Michigan, and Pennsylvania received approval to charge premiums in excess of what is allowed under Medicaid state plans, and in each of these states, the cost-sharing requirements can be reduced through healthy behaviors. Iowa and Pennsylvania also received waivers from being required to provide nonemergency medical transportation services for the first year. State decisions not to implement the ACA Medicaid expansion could have implications for low-income individuals, large employers with low wage workers, and hospitals. The decision for a state to opt out of the ACA Medicaid expansion is expected to increase the number of individuals in that state receiving premium tax credits and cost-sharing subsidies through the health insurance exchanges and create a coverage gap for individuals not eligible for those credits and subsidies. In addition, a state's decision not to implement the expansion may increase the number of ACA employer penalties in that state and make the Medicaid DSH reduction lower for that state. Even if a state does not implement the ACA Medicaid expansion, some of the individuals that would have been covered by the Medicaid expansion may still gain health insurance coverage under the ACA health insurance coverage provisions. The ACA provides premium tax credits to individuals with household income between 100% and 400% of FPL who do not have access to minimum essential coverage, and these individuals with income between 100% and 250% of FPL could be eligible for cost-sharing subsidies. As a result, most uninsured individuals with incomes between 100% and 133% of FPL living in states that decide not to implement the ACA Medicaid expansion may become eligible for premium tax credits and cost-sharing subsidies to purchase insurance through the health insurance exchanges. However, most uninsured individuals with incomes under 100% of FPL living in states that decide not to implement the ACA Medicaid expansion will likely remain uninsured, because these individuals are not eligible for premium tax credits or the cost-sharing subsidies to purchase health insurance through the exchanges. However, legal permanent residents within their first five years in the country are eligible for premium tax credits with incomes ranging from zero up to 400% of FPL. For this reason, after the Supreme Court decision, some states were initially interested in implementing a partial ACA Medicaid expansion rather than the full Medicaid expansion. Under the partial Medicaid expansion, Medicaid eligibility would be increased to all non-elderly individuals up to 100% of FPL rather than to 133% of FPL, because premium tax credits and cost-sharing subsidies would be available to individuals above 100% of FPL. However, CMS informed states that the 100% federal funding for 2014 through 2016 would not be available to states that implement a partial expansion. CMS said if states wish to implement the partial expansion, they could do so and receive their regular federal Medicaid matching rate through 2016, and at that point, CMS will consider Section 1115 Medicaid demonstrations with the enhanced federal matching rates. The ACA was supposed to provide health coverage for all low income individuals by providing Medicaid coverage to the individuals with the lowest incomes and providing premium tax credits and cost-sharing subsidies for coverage through the exchanges to low-income individuals with incomes above Medicaid eligibility levels. However, the Supreme Court's decision making the Medicaid expansion optional for states has created a coverage gap in states that have not implemented the Medicaid expansion. Nearly 5 million uninsured adults were estimated to be in the coverage gap resulting from states' decisions not to implement the ACA Medicaid expansion, which means these 5 million individuals have incomes above their states' Medicaid eligibility levels and below the lower income limit for premium tax credits and cost-sharing subsidies for exchange coverage. Figure A-1 , Figure A-2 , and Figure A-3 show as of January 1, 2014, the coverage gaps in states for adults without dependent children, parents, and adults with disabilities (respectively). Large employers with low-wage workers in states that do not implement the ACA Medicaid expansion might have greater exposure to employer penalties included in the ACA when the penalty goes into effect in 2015. The ACA imposes penalties on "large" employers if at least one of their full-time employees obtains a premium credit through the exchange. Individuals who are not offered employer-sponsored coverage and who are not eligible for Medicaid or other programs may be eligible for premium tax credits for coverage through an exchange. As mentioned above, to receive premium tax credits, individuals must have income of at least 100% and up to 400% of FPL. In states that do not implement the ACA Medicaid expansion, large employers with low income workers could be at greater risk of paying the ACA employer penalty. That is because more low-income workers could qualify for premium tax credits. The Medicaid statute requires states to make DSH payments to hospitals treating large numbers of low-income patients. This is intended to recognize the disadvantaged financial situation of those hospitals because low-income patients are more likely to be uninsured or Medicaid enrollees. Hospitals often do not receive payment for services rendered to uninsured patients, and Medicaid provider payment rates are generally lower than the rates paid by Medicare and private insurance. The federal government provides each state an annual DSH allotment, which is the maximum amount of federal matching funds that each state can claim for Medicaid DSH payments. The ACA included a provision directing the Secretary of HHS to make aggregate reductions because the ACA health insurance coverage provisions would reduce the need for Medicaid DSH payments. The ACA Medicaid DSH reductions have been amended a few times since the ACA, but under current law, the Medicaid DSH allotments will be reduced for the years FY2017 through FY2024. Hospitals in states that are not expanding Medicaid are concerned because Medicaid DSH allotments will be reduced without regard to whether or not states implement the expansion. If a state implements the expansion, uncompensated care for hospitals should decline along with the DSH allotments (though not proportionally). However, if a state chooses not to implement the expansion, the demand for uncompensated hospital care is expected to persist but the amount of Medicaid DSH payments hospitals receive to subsidize such care may be reduced. As a result, hospitals have been encouraging states to implement the ACA Medicaid expansion in order to reduce uncompensated care for hospitals. Even though Medicaid provider rates are generally lower than the rates paid by private insurance or Medicare, hospitals are likely better off with payment for a Medicaid patient than no payment for an uninsured patient. Appendix A. States' Current Medicaid Income Eligibility Levels The three major categories of non-elderly adults that would receive Medicaid coverage under the ACA Medicaid expansion are adults without dependent children, parents with dependent children, and adults with disabilities. Prior to the implementation of the ACA Medicaid expansion, only a few states provided Medicaid coverage to adults without dependent children, and in general, the Medicaid income eligibility level for parents and disabled adults was significantly lower than 133% of FPL (i.e., the ACA Medicaid expansion eligibility level). State-by-state Medicaid income eligibility levels and private health insurance exchange eligibility for subsidized coverage for non-elderly adults without dependent children, parents with dependent children, and non-elderly adults with disabilities as of January 1, 2014 are provided in Figure A-1 , Figure A-2 , and Figure A-3 (respectively). These figures show the coverage gaps in states, which means individuals with incomes that fall in the coverage gap do not have access to full Medicaid coverage or exchange subsidized coverage. States that have implemented the ACA Medicaid expansion do not have coverage gaps, while most states that have not implemented the expansion have coverage gaps for all three populations. Figure A-1 shows the coverage for adults without dependent children. Most states that have implemented the ACA Medicaid expansion provide Medicaid eligibility up to 133% of FPL (effectively 138% of FPL with the 5% income disregard). Of the states that have implemented the expansion, only the District of Columbia and Minnesota have higher income eligibility levels at 210% of FPL (effectively 215% of FPL) and 200% of FPL (effectively 205% of FPL), respectively. Except for Wisconsin, the states that have not implemented the expansion do not have Medicaid coverage for adults without dependent children. Wisconsin provides Medicaid coverage to adults without dependent children up to 95% of FPL (effectively 100% of FPL). Figure A-2 shows the coverage for parents with dependent children. All states provide Medicaid coverage to this population through the mandatory Medicaid eligibility pathway of Section 1931 coverage, which requires states to provide Medicaid coverage for parents (and their dependent children), at a minimum, at the Aid to Families with Dependent Children (AFDC) eligibility levels in place on July 16, 1996. Section 1931 of the Social Security Act also gives states the option to cover parents with incomes above the 1996 minimum levels and most states do. Under Section 1931 coverage, parents receive traditional Medicaid coverage. The income eligibility level for Section 1931 coverage is less than 133% of FPL for most states. For states that have implemented the ACA Medicaid expansion and did not have Medicaid coverage for parents up to 133% of FPL (effectively 138% of FPL), parents with incomes above the pre-expansion level up to 133% of FPL (effectively 138% of FPL) receive coverage under the expansion rules (e.g., alternative benefit plan coverage). Except for Maine and Wisconsin, the states that have not implemented the expansion have coverage gaps for parents with dependent children between the upper bound of their Section 1931 coverage and 100% of FPL when most of these parents are eligible for subsidized coverage through the exchange. Maine and Wisconsin provide Medicaid coverage to parents with dependent children up to 100% of FPL (effectively 105% of FPL) and 95% of FPL (effectively 100% of FPL), respectively. Figure A-3 shows coverage for adults with disabilities. All states provide Medicaid coverage to adults with disabilities through mandatory Medicaid coverage for recipients of SSI or through optional eligibility pathways, such as Section 209(b), poverty level, medically needy, and special income level. Under these eligibility pathways, adults with disabilities receive traditional Medicaid benefits. In all states, the Medicaid income eligibility levels for adults with disabilities under these eligibility pathways are significantly less than 100% of FPL. For states that have implemented the ACA Medicaid expansion, adults with disabilities with incomes above the pre-expansion level up to 133% of FPL (effectively 138% of FPL) receive coverage under the expansion rules (e.g., alternative benefit plan coverage). The states that have not implemented the expansion have coverage gaps for adults with disabilities between the upper bound of their Medicaid coverage for adults with disabilities and 100% of FPL when most of these adults are eligible for subsidized coverage through the exchange. Appendix B. Estimates of State-by-State Impact of ACA Medicaid Expansion The potential impact of the ACA Medicaid expansion varies significantly from state to state. In terms of expenditures, while the federal government will be funding a vast majority of the ACA Medicaid expansion, the estimated state share of the ACA Medicaid expansion expenditures range from states that already provide Medicaid coverage to the expansion population saving money to states with the largest coverage gains seeing increases to state Medicaid expenditures. Medicaid enrollment is estimated to increase at varying rates from state to state due to the current variation in states' Medicaid income eligibility levels for parents and childless adults. Table B-1 shows the estimated state-by-state impact of the ACA Medicaid expansion on Medicaid expenditures and enrollment for 2022 if a state chooses to implement the expansion. According to the data in this table from an Urban Institute analysis, if all states chose to implement the ACA Medicaid expansion, Medicaid expenditures for 2022 would be $122.8 billion ($117.4 billion in federal funds and $5.4 billion in state funds) higher than if no states chose to implement the expansion. Also, if all states chose to implement the expansion, Medicaid enrollment would be 15.5 million higher in 2022 than if no states chose to implement the expansion.

Historically, Medicaid eligibility has generally been limited to certain low-income children, pregnant women, parents of dependent children, the elderly, and individuals with disabilities; however, as of January 1, 2014, states have the option to extend Medicaid coverage to most non-elderly, low-income individuals. The Patient Protection and Affordable Care Act (ACA; P.L. 111-148 as amended) established 133% of the federal poverty level (FPL) (effectively 138% of FPL with an income disregard of 5% of FPL) as the new mandatory minimum Medicaid income eligibility level for most non-elderly individuals. On June 28, 2012, the U.S. Supreme Court issued its decision in National Federation of Independent Business v. Sebelius, finding that the enforcement mechanism for the ACA Medicaid expansion violated the Constitution, which effectively made the ACA Medicaid expansion optional for states. If a state accepts the ACA Medicaid expansion funds, it must abide by the expansion coverage rules. For instance, modified adjusted gross income (MAGI) counting rules are used for determining eligibility for the ACA Medicaid expansion population, and individuals covered under the ACA Medicaid expansion are required to receive alternative benefit plan (ABP) coverage. The ACA provides different federal Medicaid matching rates for the individuals who receive Medicaid coverage through the ACA Medicaid expansion. The federal government's share of most Medicaid expenditures is determined according to the federal medical assistance percentage (FMAP) rate, but exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services. The ACA adds a few FMAP exceptions for the ACA Medicaid expansion: the "newly eligible" FMAP rate, the "expansion state" FMAP rate, and the additional FMAP increase for certain expansion states. Due to these ACA FMAP rates, the federal government pays for a vast majority of the cost of the ACA Medicaid expansion. On January 1, 2014, when the ACA Medicaid expansion went into effect, 24 states and the District of Columbia had included the ACA Medicaid expansion as part of their Medicaid programs. Michigan and New Hampshire implemented the expansion on April 1, 2014, and July 1, 2014 (respectively). Pennsylvania recently received approval to implement the ACA Medicaid expansion beginning on January 1, 2015. Most states implementing the ACA Medicaid expansion will do so through an expansion of their current Medicaid program. However, some states are implementing the expansion through an alternative method, such as the "private option" (i.e., premium assistance to purchase health insurance through the health insurance exchanges under the ACA) and health savings accounts. State decisions not to implement the ACA Medicaid expansion could have implications for low-income individuals, large employers with low-wage workers, and hospitals. For example, most uninsured individuals with incomes under 100% of FPL will likely remain uninsured, and large employers with low-wage workers might have greater exposure to employer penalties included in the ACA. Also, Medicaid disproportionate share hospital (DSH) allotments will be reduced by the same across the nation whether or not states implement the expansion.

Federal courts may not order a defendant to pay restitution to the victims of his or her crimes unless authorized to do so. Two general statutes authorize restitution. One, 18 U.S.C. 3663, permits it for certain crimes. The second, 18 U.S.C. 3663A, requires it for other crimes. In addition, several individual restitution statutes authorize awards for particular offenses. In addition, federal courts may order restitution pursuant to a plea agreement or as a condition of probation or supervised release. Section 3664 supplies the procedure under which the restitution orders are imposed. In the case of mandatory restitution, federal courts must order victim restitution when sentencing a defendant for a felony that constitutes either (1) a crime of violence; (2) an offense against property, including fraud or deceit proscribed in Title 18; (3) maintaining a drug-involved premise; (4) animal enterprise terrorism; (5) failure to provide child support; (6) human trafficking; (7) sexual abuse; (8) child pornography; (9) stalking or domestic violence; (10) copyright infringement; (11) telemarketing fraud; or (12) amphetamine or methamphetamine offenses. The various federal restitution statutes address three questions: Who qualifies as a victim? What crimes trigger restitution authority? What type of injuries or losses does restitution cover? As originally cast, SS3663 authorized restitution for "any victim" of any crime proscribed in title 18 of the United States Code , but did not define the term "victim." The Supreme Court read the statute narrowly and concluded that restitution might only extend to harm attributable to the crime of conviction. Congress endorsed this view almost immediately with a more explicit statement of SS3663's coverage. It replicated and enlarged that statement when it enacted SS3663A six years later. Sections 3663 and 3663A authorize restitution orders for the benefit of the victims of the crime of conviction, and now expressly define the term "victim" (i.e., "a person directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered"). A victim is also someone harmed by a scheme, conspiracy, or pattern of activity that is an element of the crime of conviction. And, a victim may be someone whom the government and the defendant agree in a plea bargain is entitled to restitution. Harm is directly caused by the defendant's offense of conviction when the harm would not have occurred but for that misconduct. Directly caused harm is proximately caused when there is no attenuation between the crime and the harm; when the harm and but-for misconduct are closely, not remotely, related in time and fact. The presence of an intervening cause of the harm may suggest a want of either direct causation, or proximate causation, or both. The presence of an intervening cause will defeat an assertion of direct and proximate harm unless intervening cause is related to or a foreseeable consequence of the offense of conviction. As the Supreme Court explained in the context of one of the specialized restitution statutes, As a general matter, to say one event proximately caused another is a way of making two separate but related assertions. First, it means the former event caused the latter.... Every event has many causes, however, and only some of them are proximate.... So to say that one event was a proximate cause of another means that it was not just any cause, but one with a sufficient connection to the result. The idea of proximate cause.... is a flexible concept, that generally refers to the basic requirement that there must be some direct relation between the injury asserted and injurious conduct alleged.... Proximate cause is often explicated in terms of foreseeability or the scope of the risk created by the predicate conduct. A requirement of proximate cause thus serves, inter alia, to preclude liability in situations where the causal link between conduct and result is so attenuated that the consequence is more aptly described as mere fortuity. The definition of a victim for purposes of restitution under SSSS3663 and 3663A expands when the crime of conviction has as an element a conspiracy or a scheme or pattern of misconduct. In the case of conspiracy, a defendant may be compelled to make restitution both for the harm caused by his or her own misconduct and for the harm caused by the foreseeable misconduct of his or her coconspirators. As for the scheme and pattern exception, most federal crimes do not list schemes or patterns among their elements, although the mail fraud, wire fraud, and racketeering statutes do. In such cases, restitution may include the losses incurred from a different episode of the scheme than the one mentioned in the indictment. Yet the scheme must be the same; victims entitled to restitution do not include those harmed by an otherwise identical scheme but different in time or place than the crime of conviction. The courts are divided over which statutes qualify as "scheme, conspiracy or pattern" laws. Some say the scheme or pattern must be an element of the crime of conviction; it is not enough that the defendant's crime involves contrivance or repeated related criminality. Others say it is enough; the statute proscribing the crime of conviction need not use the words "scheme," or "conspiracy," or "pattern." Sections 3663 and 3663A describe, with somewhat overlapping grants of authority, the circumstances under which representatives and others may stand in the shoes of a victim. A court may also order restitution pursuant to a plea bargain for "victims" who would not otherwise qualify. Although a victim must be a "person" and governmental entities are ordinarily not considered persons, state, local, and federal governmental entities are entitled to restitution orders when they otherwise qualify as victims of a crime under SSSS3663 and 3663A. On the other hand, although the courts enjoy authority to order restitution paid to family members on behalf of the victims of crime, it is unclear whether the victimization of one member of a family constitutes victimization of its other members sufficient to warrant a restitution order for the benefit of a victim's family members in their own name. Although SSSS3663 and 3663A employ the same definition of victim, they do not authorize restitution for the same crimes. The list of crimes for which SS3663 permits restitution supplements the list for which SS3663A demands restitution. The mandatory restitution of SS3663A applies upon conviction for (1) a crime of violence, as defined in SS16; (2) an offense against property under 18 U.S.C., or an offense against property under SS416(a) of the Controlled Substances Act (21 U.S.C. 856(a), including any offense committed by fraud or deceit; (3) an offense described in SS1365 (relating to tampering with consumer products); or (4) an offense under SS670 (relating to the theft of medical products). Section 16 describes a crime of violence as either "(a) an offense that has as an element the use, attempted use, or threatened use of physical force against the person or property of another, or (b) any other offense that is a felony and that, by its nature, involves a substantial risk that physical force against the person or property of another may be used in the course of committing the offense." The controlled substance offense that carries with it a restitution requirement under SS3663A (21 U.S.C. 856) consists of maintaining a place where controlled substances are manufactured, stored, or used. The property damage/fraud predicate in SS3663A must involve a violation proscribed under title 18 of the United States Code rather than an offense found in another title. Yet, the general conspiracy provision in title 18 can provide the necessary basis for a mandatory restitution order when the defendant is convicted of conspiracy to commit property damage in violation of a federal law found outside of title 18. The product tampering offense consists of tampering with a product or its labeling that affects interstate or foreign commerce or spreading false rumors that such a product is contaminated. Section 670 outlaws the theft of, or unlawful trafficking in, pre-retail medical products. Three qualifications temper the mandatory restitution requirements facing defendants convicted of the predicate offenses listed in SS3663A(c)(1)(A). First, there must be an identifiable victim who has suffered a physical injury or a pecuniary loss. Second, in the case of the property damage/fraud predicates, restitution need not be ordered when the number of victims makes an order impractical. Third, again in the case of property damage/fraud predicates, restitution need not be ordered when the complexity that restitution would introduce into the sentencing process would represent an undue burden. A few other federal statutes authorize restitution. Numbered among these provisions are: (1) 18 U.S.C. 43 (animal enterprise); (2) 18 U.S.C. 228(d) (restitution child support cases); (3) 18 U.S.C. 1593 (restitution in cases under chapter 77 relating to peonage, slavery, and trafficking in persons); (4) 18 U.S.C. 2248 (restitution in cases under chapter 109A relating to sexual abuse); (5) 18 U.S.C. 2259 (restitution in cases under chapter 110 relating to sexual exploitation of children); (6) 18 U.S.C. 2264 (restitution in cases under chapter 110A relating to domestic violence and stalking); (7) 18 U.S.C. 2323(c) (restitution in copyright infringement cases); (8) 18 U.S.C. 2327 (restitution in telemarketing fraud cases); and (9) 21 U.S.C. 853(q) (restitution in controlled substances cases involving amphetamine and methamphetamine offenses). All but the animal enterprise statute, require it. Most apply the procedures that govern SSSS3663 and 3663A to a narrower range of crimes but a wider range of losses than SSSS3663 and 3663A and their attendant enforcement procedures might otherwise permit. Section 3663 authorizes restitution when the defendant has been convicted of a crime proscribed under title 18 of the United States Code . It comes into play when the mandatory restitution statutes do not control. It also authorizes restitution when the defendant is convicted of any of several trafficking offenses under the Controlled Substances Act, or of any of a few air safety prohibitions. In addition, as mentioned earlier, a court may also order restitution consistent with a plea agreement or as a condition of probation or supervised release, even with respect to crimes for which restitution is not authorized under SSSS3663 or 3663A. Restitution is a creature of statute. A court may order reimbursement only for those losses authorized by statute. Sections 3663 and 3663A recognize three categories of reimbursable losses: property losses, losses relating to bodily injuries, and losses relating to participation in the investigation or prosecution of the victimizing offense. Sections 3663 and 3663A have essentially identical restitution provisions: both call for the return of the property, if that provides full victim restitution. If not, restitution takes the form of compensatory payments. As a general rule, victims are entitled only to be made whole; unlike the sentencing guidelines which calculate sentence enhancements based on both actual and intended losses, the restitution statutes permit awards only for actual losses. It is often not the fact of a reimbursable loss, but its measure, that challenges the courts. Nevertheless, the types of reimbursable property losses contemplated by SSSS3663(b)(1) and 3663A(b)(1) include things like the salary of a faithless employee, or the insurance replacement costs of a stolen car, or the losses visited upon a loan guarantor by a mortgage fraud scheme. Circumstances dictate whether attorneys' fees qualify as reimbursable property losses. The strongest arguments for recovery seem to attend those cases in which the scurrilous litigation is an integral part of the crime of conviction. On the other hand, the courts seem less receptive when restitution is sought as a property loss under either SS3663(b)(1) or SS3663A(b)(1) in order to compensate a victim for the costs of civil litigation filed against the offender. Section 3663, unlike its counterpart, permits the court to order those convicted of crime-assisting identity theft or aggravated identity theft to pay for the costs incurred by their victims to remedy the actual or intended harm associated with the offense. Section 3663(c) also authorizes community restitution in the form of awards apportioned between state victim assistance agencies and state agencies dedicated to the reduction of substance abuse. The court may order restitution in certain drug trafficking cases where there are no identifiable victims, capped by the amount of the fine that the court may impose for commission of the offense. Moreover, at least one court has held that the section authorizes restitution only in those cases where the court actually imposes a fine as well; if the court fails to impose a fine, it may not order community restitution. Section 3663 expressly provides for restitution for the remedial effects of the victims of identity theft committed in relation to other offenses and for state agencies in certain drug trafficking cases if there are no other identifiable victims. Section 3663A has no comparable provision. The individual restitution sections fall within two categories. One group focuses on restitution for the victims of crimes involving property damage or loss; the other on restitution for the victims of crimes involving personal injury. Among the first group, only the copyright infringement statute adopts by cross reference the mandatory restitution provisions of SS3663A. Each of the others follows the same general pattern as SS3663A but adds at least one unique feature of its own. The child support restitution section, 18 U.S.C. 228(d), adopts the procedures of SS3663A upon conviction for interstate evasion of child support orders. The amount of restitution that must be awarded is determined by reference to a state court support order or by other governing state law and, as such, may include the interest on overdue support payments and support owed after children have reached their majority. The peonage restitution section, 18 U.S.C. 1593, uses the common definition of "victim" and affords victims of human trafficking offenses a wide range of compensation that, unlike SSSS3663 and 3663A, includes the economic benefits derived from the victim's services and a catch-all clause ensuring compensation for predicate crime-related injuries and losses. The telemarketing fraud restitution statute, 18 U.S.C. 2327, originally enacted two years before the passage of the mandatory restitution provisions of SS3663A, once had highly individualistic features. It has since been amended so that its provisions more closely track those of the general restitution provisions for losses caused by predicate crimes. The methamphetamine statute, 21 U.S.C. 853(q), covers the cleanup cost of closing down illicit amphetamine and methamphetamine production sites. At one time, the section applied only to those convicted of manufacturing offenses and consequently reached convictions for attempted manufacture but not for possession with intent to distribute. The USA PATRIOT Improvement and Reauthorization Act amended the section so that it now authorizes restitution upon conviction for offenses involving possession, possession with intent to distribute, or manufacture of amphetamine and methamphetamine. The animal enterprise interference section, 18 U.S.C. 43(c), permits a sentencing court to order a defendant convicted of violating its proscriptions to pay restitution for specific kinds of damage (i.e., the cost of repeating disrupted experiments, the loss of farm income, and the costs of economic disruption). Sections 3663 and 3663A have parallel provisions governing the restitution for personal injuries that permit or, in the case of SS3663A, require compensation for medical expenses, lost income, rehabilitation, and funeral expenses in the event the victim is killed. The medical expenses covered by a restitution order may include those paid on the victim's behalf by a third party, and may include the costs of psychiatric and psychological treatment when the victim has suffered a physical injury. Restitution for lost income extends to both past and future lost income. Prior to passage of the general mandatory restitution authority in SS3663A, Congress authorized restitution for three related small sets of offenses. Those authorizations, found in 18 U.S.C. 2248, 2259 and 2264, require the courts to order restitution following conviction for an offense proscribed in chapters 109A (sexual abuse), 110 (sexual exploitation of children), and 110A (domestic violence and stalking), respectively. Other than their designation of predicate offenses, the sections are identical. They each: (1) insist on restitution of the "full amount of the victim's losses;" (2) define "victims" in much the manner of SSSS3663 and 3663A; (3) supply a list of losses for which restitution must be ordered; (4) make it clear that neither the defendant's poverty nor victim compensation from other sources absolves the court of its obligation to order restitution; and (5) otherwise adopt the procedural mechanisms used for restitution under Section 3663A. Unlike SSSS3663 and 3663A, the three sections on their face do not require bodily injury of the victim as a precondition for the award of the cost of psychiatric treatments. They also have a catch-all clause that has no counterpart in either SSSS3663 or 3663A. On the other hand, unlike SSSS3663 and 3663A, they do not authorize payments to third parties to reimburse them for crime-related treatment of a victim. Sections 3663 and 3663A cover a victim's lost income, as well as necessary child care expenses, transportation costs, and other expenses associated with his or her participation in the investigation and prosecution of the crime, regardless of whether the resulting injury is to person or to property. A number of courts seem to share the view of that "investigation costs--including attorneys' fees--incurred by private parties as a direct and foreseeable result of the defendant's wrongful conduct may be recoverable" under SSSS3663(b)(4) or 3663A(b)(4). At least one appellate court, however, has concluded that those sections do not permit "restitution for the costs of an organization's internal investigation, at least when (as here) the internal investigation was neither required nor requested by the criminal investigators or prosecutors." The sections mention child care, attendance at judicial proceedings, and other matters that bespeak a human victim, but the courts have made it clear that corporations and other legal entities are likewise entitled to restitution under the provisions. Governmental entities may be entitled to restitution awards when they are the victims of a qualifying offense, but not for the costs of investigating and prosecuting the offense. Awards for investigative and prosecutorial participation have included relocation expenses for threatened victims; compensation for wages lost while the victim assisted in the investigation; and attorneys' fees related to the recovery of the victim of international parental kidnapping. Except to the limited extent otherwise provided in the individual authorization statutes, SS3664 supplies the procedure that governs the issuance of restitution orders. Upon conviction of a defendant, the court directs the probation service to investigate and prepare a report identifying each victim of the offense and the extent of their injuries, damages, or losses. Prosecutors are to provide the probation officer with pertinent information. The officer is also to ask victims to detail the extent and specifics of their predicate crime-related losses. The defendant is obliged to give the officer a complete description of his or her financial situation. The probation officer's report is presented to the court, the defendant, and the prosecutor. The court resolves contested restitution issues by a preponderance of the evidence following a hearing, at which the prosecution bears the burden of establishing the existence and extent of the victim's losses, and the defendant bears the burden on questions regarding his or her finances and the extent to which the defendant has compensated the victim for the losses. The court may conduct a hearing or task the probation officer to secure additional information and resolve disputes. Section 3664 is precise when it describes how the court must frame the restitution order. The order must envision full compensation for the losses of each victim without regard to the financial circumstances of the defendant. In its calculation of the manner and schedule of payment for each victim, however, the court is to consider the defendant's assets, anticipated future income, and other financial obligations. Compensation may be made in a lump sum, in-kind payments, installments, or any combination of such methods of payment. In-kind payments may take the form of a return of lost property, replacement in-kind or otherwise, or personal services. When the defendant's financial condition precludes any alternative, the order may call for nominal periodic payments. Several courts have emphasized the importance of the court's close attention to the restitution payment schedule by prohibiting sentencing courts from initially ordering that restitution be paid immediately when it is readily apparent that the defendant is unable to do so, thereby effectively leaving the task of establishing a payment schedule to the probation officer or the Bureau of Prisons. When it sets the restitution owed by the defendant, the court may not take into account the fact that a victim may have been compensated by insurance or any other alternative form of compensation of his or her injury, loss, or damage. The amount of a restitution order may later be reduced to account for compensatory damages for the same loss recovered in a civil action. When the government and the probation officer have been unable to determine the full extent of victim losses within 10 days of sentencing, they are obligated to inform the court. The court is then to set a date, no later than 90 days after sentencing, for the final determination of victim losses. Thereafter, victims have a limited option to present claims for restitution relating to undiscovered losses. The Supreme Court resolved a circuit split over how these provisions should be applied, particularly in cases where the time lines have not been observed. The Court held in Dolan that a sentencing court may determine the extent of a victim's losses and order restitution after the expiration of the statutory 90-day deadline, as long as the defendant was aware beforehand that the court intended to order restitution. Victims may assign their right to receive restitution payments to Crime Victims Fund, but the courts are divided over whether the court may order restitution to be paid to the Crime Victims Fund on its own initiative if the victim refuses to accept it. Should the court determine that more than one defendant contributed to the victim's loss, it may apportion restitution accordingly or it may make the defendants jointly and severally liable. When defendants are made jointly and severally liable, each is liable for the entire amount, but the victim is entitled to no more than what is required to be made whole, regardless of what portion each of the defendants ultimately contributes. There had been a difference of opinion over whether joint and severable liability may be imposed other than with respect to co-defendants. The Supreme Court has recently provided some clarification as to how courts should deal with restitution when those who are not co-defendants are responsible for a substantial portion of the victim's losses. The defendant in the case viewed child pornography of which the victim was the subject. To hold the defendant liable for all of the victim's losses attributable to production, distribution, and viewing of the material might contravene the proscriptions of the Eighth Amendment's excessive fines clause, the Court suggested. Rather, it held that the defendant's restitution order should be calculated to reflect his relative contribution to the harm caused. Section 3664(i) declares that when it comes to restitution, the United States is to be served last. The provision is cited most often to confirm that under the appropriate circumstances, the government and its departments and agencies may be considered victims for restitution purposes. When the government is not a victim, the defendant is not entitled to have the restitution award offset by the value of any forfeited property, except to the extent a governmental victim shares in the proceeds of the confiscation. Section 3664(j) permits a court to order restitution to third parties who, as insurers or otherwise, have assumed some or all of the victim's losses, although in such cases, the victim must be fully compensated first. It also permits a court to reduce an earlier restitution order by any amounts that the victim later receives in the course of related federal or state civil litigation. The victim, the defendant, or the government may petition to have a restitution order amended to reflect the defendant's changed economic circumstances. The changed economic circumstances envisioned in SS3664(k) do not include anticipated future changes or a later, better-informed understanding of the defendant's financial condition at the time of sentence. Nor does the section provide defendants with a mechanism with which to later challenge the legality of their restitution orders. There are several means to enforce a restitution order. Section 3664(m) declares that restitution orders may be enforced in the manner for the collection of fines or "by all other available and reasonable means." When restitution is a condition of probation or supervised release, failure to make restitution may provide the grounds for revocation. Moreover, a restitution order operates as a lien in the name of the United States on the defendant's property that remains in effect for 20 years. The government may also use garnishment and the other collection mechanisms of the Federal Debt Collection Procedures Act (FDCPA) to enforce a restitution order. A victim may use a restitution order to secure a lien in his own name against the defendant's property to ensure the payment of restitution. In addition, the victims' rights provisions of 18 U.S.C. 3771 entitle a victim to "full and timely restitution as provided in law," a right, enforceable in the face of legally insufficient restitution order through a liberalized form of mandamus in some circuits. In most instances, a victim may also sue the defendant based on the conduct that led to the conviction and the issuance of the restitution order. During the course of such civil litigation, the defendant may be precluded from denying the facts that formed the basis of the conviction. Section 3664(o) provides that the court's restitution order constitutes a final order notwithstanding the fact it may later be corrected, modified, or appealed under various court rules and statutory provisions. This does not mean that the district court may later reduce a restitution order in the absence of specific authority. Nor does it convey appellate rights upon third parties who claim a right to restitution for expenses necessarily incurred on behalf of a victim. In a criminal law context, the lower federal courts have generally taken the view that the death of a defendant at any time prior to the determination of his or her final direct appeal abates all underlying proceedings; appeals are dismissed as moot, convictions are overturned, indictments are dismissed, and abated convictions cannot be used in related civil litigation against the estate-all as if the defendant was never criminally charged. It might seem from this that a restitution order would abate as well, but there is no consensus among the lower federal courts on the issue.

Federal courts may not order a defendant to pay restitution to the victims of his or her crimes unless authorized by statute to do so. Several statutes supply such authorization. For instance, federal courts are statutorily required to order victim restitution when sentencing a defendant either for an offense against property, including fraud or deceit, proscribed in Title 18 of the United States Code or for a crime of violence. The obligation exists even if the defendant is indigent, and restitution must take the form of in-kind, lump sum, or installment payments. Federal courts are permitted, but not required, to order victim restitution when sentencing a defendant for any offense proscribed in Title 18 for which restitution is not required. Federal courts are permitted to order victim restitution when sentencing a defendant for various controlled substance and aviation safety offenses. In addition, a federal court may order restitution pursuant to a plea bargain or as a condition of probation or supervised release. As a general rule, restitution is available only to victims who have suffered a physical injury or financial loss as a direct and proximate consequence of the crime of conviction, and only to the extent of their losses. Several provisions governing restitution following conviction for particular crimes permit awards for types of losses that might not otherwise be permitted under the general restitution provisions. For example, the Identity Theft Enforcement and Restitution Act of 2008 (18 U.S.C. 3663(b)(6)) authorizes restitution orders to compensate victims for the cost of remediating the intended or actual harm caused by certain identity theft violations. The courts are divided over the extent to which a defendant convicted of possession of child pornography may be ordered to make restitution to the child depicted in the material. When restitution is authorized, a probation officer gathers information from victims, the government, the defendant, and other sources for a report to the court. The parties receive copies of the report and may contest its recommendations. The court has considerable discretion as to the manner and scheduling of restitution payments, but the authority may not be delegated to probation or prison officials. Furthermore, the order must provide for full restitution for all victims unless the sheer number of victims or the complications of a given case preclude such an order. Under the abatement doctrine, when a defendant dies before his or her appeal has become final, the law treats the indictment and conviction as though they had never happened. The conviction is vacated and the indictment dismissed. The courts do not agree on whether the doctrine also reaches unfulfilled obligations under a restitution order. This report is an abridged version of CRS Report RL34138, Restitution in Federal Criminal Cases--without footnotes, citations to most authorities, or appendixes found in the longer report. Related reports include CRS Report RL33679, Crime Victims' Rights Act: A Summary and Legal Analysis of 18 U.S.C. 3771, available in abridged form as CRS Report RS22518, Crime Victims' Rights Act: A Sketch of 18 U.S.C. 3771.

Under the Higher Education Act (HEA), institutions of higher education (IHEs) must be accredited by an agency or association recognized by the Secretary of the U.S. Department of Education (ED) to participate in HEA Title IV federal student aid programs. While this process is voluntary, failure to obtain accreditation could have a dramatic effect on an institution's student enrollment, as only students attending accredited institutions are eligible to receive federal student aid (e.g., Pell grants and student loans). Accrediting agencies are private organizations set up to review the qualifications of member institutions based on self-initiated quality guidelines and self-improvement efforts. This process and its critical role in determining institutional eligibility to participate in Title IV has sometimes been controversial. As the 110 th Congress considers reauthorizing the HEA, it may consider making changes to the role accreditation plays with respect to federal student aid or to the accreditation process itself, such as the factors accrediting agencies must consider when evaluating an institution. This report provides an overview of some of the possible accreditation issues that Congress may address during the reauthorization process, a discussion of the findings and recommendations regarding accreditation from the Secretary of Education's Commission on the Future of Higher Education's final report, and a brief overview of relevant legislation from the 109 th Congress that addressed accreditation issues. There are several key issues related to accreditation that may arise during the reauthorization of the HEA. These issues include, but are not limited to, the use of accreditation as a gauge of institutional quality, the elimination of accreditation as a prerequisite for participation in HEA Title IV programs, accreditation and distance education, accreditation and transfer of credit, and due process requirements that apply to accrediting agencies. One question that may be raised during the reauthorization process focuses on whether accreditation can be equated with the provision of a quality education. Accreditation is used as an indicator that an institution or program has met at least minimal standards and as evidence of fiscal stability. Nearly all institutions that have lost their accreditation or have been put on probation by their accrediting agency have been cited for fiscal mismanagement or lack of fiscal integrity. Based on testimony provided before the Senate Health, Education, Labor, and Pensions Committee, few institutions have lost their accreditation due to poor educational performance. The accreditation process, while required to assess institutions with respect to student achievement, primarily bases accreditation decisions on the inputs (e.g., curricula and faculty) rather than the outcomes (e.g., graduation rates and job placement rates) of higher education. In light of the increased congressional emphasis on accountability for outcomes in education programs, Congress may revisit the extent to which accrediting agencies focus on student outcomes in making accreditation decisions in order to better gauge the educational quality of institutions granted accreditation. If Congress does decide to require accrediting agencies to increase their focus on outcome measures, there may be a debate about what outcome measures to use and how they should be measured. For example, would student grades be a valid indicator of the quality of an institution? Would students' standardized test scores (e.g., Graduate Record Exam, Graduate Management Admission Test) be a useful indicator of institutional quality? Would graduation rates or job placement rates be valuable measures? Outcomes such as these have various measurement problems, such as grade inflation, possible biases on standardized tests, differences in how graduation rates might be calculated, or which jobs should constitute a successful placement. Another possible issue is the elimination of accreditation as a prerequisite for Title IV institutional eligibility. Some argue that the current accreditation system is a poor indicator of educational quality and, therefore, should have no bearing on institutional eligibility decisions. Others argue that if the accreditation system were eliminated, the federal government would have to develop its own measures of educational quality, a potentially costly and controversial action; or the burden would fall on states, leading to 50 different sets of standards for accreditation. Currently, ED plays an integral role in determining institutional eligibility to participate in Title IV programs through the eligibility and certification process. Some have suggested that it would be appropriate and possible for ED to extend this role to specify student outcome data that institutions must provide and ED would collect. Accrediting agencies and organizations would continue to play a role in evaluating or assisting institutions if the institutions wanted their input. Others have suggested that accrediting agencies continue in their current role, but another organization, such as ED, be responsible for evaluating student outcomes. Detractors of this proposal question whether increased ED involvement or the involvement of any organization trying to impose specific student outcome criteria on institutions would undermine the autonomy of postsecondary institutions. They argue that this autonomy is a critical component to providing high quality education. Another possible issue that may be debated during HEA reauthorization focuses on accreditation and distance education. Key issues center on whether accrediting agencies that accredit distance education programs should meet additional requirements and whether accrediting agencies that evaluate institutions offering distance education programs should be required to examine specific measures related to distance education, such as student achievement for students enrolled in distance education programs. The Deficit Reduction Act ( P.L. 109-171 ) added a new requirement that distance education programs must be evaluated by an accrediting agency recognized by the Secretary of Education as having the evaluation of distance education programs within its scope of recognition. Congressional debate during reauthorization may also focus on the issue of transfer of credit and how to encourage institutions to accept transfer credits, while still recognizing that not all institutions offer the same level of quality education and not all courses may merit recognition of credit. Based on a study of bachelor's degree recipients in 1999-2000, 59% of students attended more than one institution in their pursuit of an undergraduate degree. Currently, when a student transfers from one institution to another, the receiving institution determines which courses taken at another institution will be accepted as credit toward a degree at the new institution. A recent GAO study found that receiving institutions base their decisions on which credits to accept on the type of accreditation held by the sending institution, whether academic transfer agreements have been established with the sending institution, and the comparability of coursework. The study also found that many institutions that are accredited by regional accrediting agencies would not accept credits earned at nationally accredited institutions. The credit review process can be labor intensive and costly, as institutions must evaluate the quality of education received by the student at previous institutions. In addition, for each course that the receiving institution awards transfer credit, students may take one less course at the new institution, translating into a loss of tuition for the new institution. Thus, institutions may not have incentives to recognize transfer credits and may even have disincentives to recognize them. For students, this may result in additional time and money required to complete a degree. Some students may also reach limits on their federal student aid eligibility (i.e., available federal student loans) prior to completing their program of study if credits are not accepted or not accepted in the student's major. For the federal government, this could translate into wasted tax dollars if students using federal student aid to pursue a postsecondary education have to retake courses. Supporters of efforts to establish transfer of credit requirements argue that any institution that is accredited by an agency or association recognized by ED should be acknowledged as providing an education of an acceptable level of quality (or presumably they would not have received accreditation). Opponents of these requirements, however, argue that the federal government should not be involved in determining whether an institution should accept credit for course work from another institution, and that federal recognition of an accrediting agency establishes only a minimum level of quality that some institutions may find unacceptable. In addition, arguments have been made that if institutions are required to analyze each transfer students' courses for course compatibility and quality, as opposed to rejecting transfer credits from institutions holding specific accreditation, it will result in a substantially more costly review process. Another issue that may arise during HEA reauthorization is whether to make changes to the statute's due process requirements. Under Section 496(a)(6) of the HEA, accrediting agencies recognized by ED must meet certain requirements with respect to due process. That is, an accrediting agency is required to implement specific procedures to resolve disputes between the accrediting agency and any institution that is subject to the accreditation process. Under current law, accrediting agencies are required to provide an IHE with, at a minimum, the following: adequate specification of requirements and deficiencies at the institution of higher education or program being examined; the opportunity to have a hearing; the right to appeal any adverse action against it; and the right to be represented by counsel. During the reauthorization process, Congress may consider revisiting statutory language relevant to due process. Some proponents of altering the current due process requirements have, for example, proposed changes that include requiring that hearing records be kept and that IHE appeals be heard by a panel of three outside arbitrators. When considering such proposals, Congress may wish to weigh the benefits that would result from additional protections for IHEs against the administrative burdens for accrediting agencies that would result from additional procedural requirements. Although the due process requirements that apply to accrediting agencies are statutory in nature, the concept of procedural due process has its origins in the U.S. Constitution. Both the Fifth Amendment, applicable to federal agencies, and the Fourteenth Amendment, which incorporates certain guarantees in the Bill of Rights and is applicable to the states, prohibit government action that would deprive any person of "life, liberty, or property, without due process of law." The premise behind due process is that the government, for reasons of basic fairness, must provide certain procedures before taking any of these important interests away from protected parties. The threshold question in a claim alleging a violation of due process rights is whether there has been a deprivation of life, liberty or property. In order to establish a due process violation, a challenger must show (a) a deprivation, (b) of a protected interest and (c) "state action," either federal or action under the color of state law, whichever is applicable. Additionally, the petitioner must show that the action was not a random act but one caused by established procedure. The Supreme Court has stated that due process "is a flexible concept that varies with the particular situation." Thus, the degree of procedural protection afforded is determined on a case-by-case basis, with the amount of procedure due increasing as the importance of the interest at stake becomes greater. For example, in Lassiter v. Dept. of Social Services , the Court held that the termination of parental rights represented a sufficiently high interest such that increased procedural protections were necessary. In Mathews v. Eldridge , the Court established a balancing test to determine the procedural protections required in a particular case: [I]dentification of the specific dictates of due process generally requires consideration of three factors: First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirements would entail. In applying this test, the Court has generally held that due process requires some type of notice and "some kind of a hearing before the State deprives a person of liberty or property," although the litigant is not necessarily entitled to a trial-type hearing similar to those used in judicial trials or formal administrative trial-type hearings. In Goldberg v. Kelly , the Court held that welfare recipients facing termination of their benefits were entitled to nearly all of the rights afforded in a trial-type hearing. In subsequent cases, however, the Court has made it clear that trial procedures are not essential for every governmental decision that might affect an individual and that "something less than a full evidentiary hearing is sufficient prior to adverse administrative action." Other procedures that courts have at times recognized as required by due process include the presentation of evidence and witnesses, legal representation, an impartial decision-maker, a written decision, and administrative and/or judicial review of the agency's action. Ultimately, however, the Court has recognized as constitutionally sufficient many different types of procedures, depending on the nature of the individual and governmental interests at stake, and federal agencies currently provide a wide range of procedural protections. As noted above, constitutional due process requirements apply only to governmental actors, not private entities. Since accrediting agencies are private organizations, the courts have generally held that they are not bound by the Due Process clause of the Constitution. Nevertheless, most courts, reasoning that accrediting agencies serve a quasi-governmental function in their role as the gate-keepers that determine whether IHEs will be eligible to participate in Title IV student financial aid programs, have ruled that accrediting agencies are subject to common law due process principles. Under these principles, courts evaluate whether the decision of an accrediting agency "was arbitrary, capricious, an abuse of discretion, or reached without observance of procedure required by law." In addition to these common law due process requirements, IHEs that wish to contest certain accrediting agency decisions may be protected by the HEA's due process statutory provisions. Under the HEA, "any civil action brought by an institution of higher education seeking accreditation from, or accredited by, an accrediting agency or association recognized by the Secretary ... and involving the denial, withdrawal, or termination of accreditation of the institution of higher education, shall be brought in the appropriate United States district court. It is unclear, however, whether this jurisdictional provision gives IHEs a private right of action to sue accrediting agencies, and courts have split on this question. For example, in Thomas M. Cooley Law School v. American Bar Association , the court noted that "nearly every court to consider the issue in the last twenty-five years has determined that there is no express or implied private right of action to enforce any of the HEA's provisions," and thus held that the HEA's jurisdictional provision did not give the IHE in question the right to enforce the statute's due process provisions by suing its accrediting agency directly. On the other hand, other courts have suggested that the HEA's jurisdictional provision could be interpreted to confer a private right of action on IHEs, but have not definitively ruled on the point. Regardless of how the courts have ruled on the question of whether the statute grants a private right of action to sue accrediting agencies, they have generally noted that the lack of such a right is not significant, given that IHEs still have the ability to sue accrediting agencies under principles of common law due process. A recent court case between Auburn University and its accrediting agency, Southern Association of Colleges and Schools (SACS), provides a good illustration of how courts approach due process disputes between IHEs and their accrediting agencies. In the case, Auburn alleged that SACS violated the HEA, common law due process principles, and the Due Process clause of the Constitution by not following its own procedures for a planned investigation. Although the court declined to rule that accrediting agencies were governmental actors for purposes of applying constitutional due process requirements, the court did find that accrediting agencies, in their role as quasi-governmental entities that act as the gatekeepers to Title IV student financial aid, are subject to common law due process principles. Applying those principles, the court held that "Auburn is entitled to some kind of due process at this stage in the accrediting process." Since the investigation was in an early phase, the court concluded that the university did not require strong due process protection at that stage. As a result, the court allowed discovery on whether the executive director had a conflict of interest under the association's policies, but denied a preliminary injunction. In addition, the court rejected Auburn's HEA claim because, although the court found that the statute's jurisdictional provision might contain an implied private right of action, the lawsuit did not challenge the "denial, withdrawal, or termination of accreditation" as required by the statute. More recently, Edward Waters College (Jacksonville, FL) and Hiwassee College (Madisonville, TN) sued their accrediting agency, SACS, based on the denial of due process. Edward Waters College was found to have plagiarized material on a report due to the accrediting agency. The school, however, claimed that SACS did not provide it with due process when the agency took action to remove the college's accreditation based on this infraction. The case was settled out of court, and Edward Waters College retained its accreditation in exchange for dropping the lawsuit. Hiwassee College is also suing SACS on the grounds that due process was denied when its accreditation status became threatened by issues of fiscal mismanagement. While the case is considered, a federal court has issued an injunction requiring SACS to reinstate the accreditation of Hiwassee College. In September 2006, the Secretary of Education's Commission on the Future of Higher Education (the Commission) released its final report examining the current state of higher education. The report included recommendations for improving access to higher education and making higher education more affordable for students. Included in its examination of higher education and related recommendations were several findings and recommendations specifically related to accreditation. The Commission found that accreditors play a gate-keeping function with respect to federal student aid programs. Despite this public function and increased attention to outcome measures, much of the information collected by accreditors is kept private. The information that is made public tends to focus more on the results of process reviews, rather than providing information about learning outcomes and costs. To meet the needs for increased accountability, quality, and transparency, accreditation must change. They also argued that accreditation and federal and state regulations impede innovation in higher education, which diminishes the ability of IHEs to address national workforce needs and compete globally. In addition, the Commission noted that it needs to be easier for students to transfer between different kinds of institutions. Current institutional policies with respect to the transfer of credit are often not clear and result in lost time and money for students and create the need for additional federal student aid. The Commission also noted that while accreditation once represented a private relationship between an accreditor and an institution, it is now a public policy issue and the process needs to be made more transparent to the public. The Commission made several recommendations regarding changes to the accreditation process. For example, the Commission recommended that accreditation agencies move more quickly to accredit new institutions and new programs at already accredited institutions, and increase their focus on results and quality, rather than prescribing requirements for process, inputs, and governance that perpetuate the current models of evaluation and impede innovation in higher education. The Commission also recommended that accrediting agencies make performance outcomes the priority over measures of inputs or process. Accrediting agencies need to create a framework to align and expand existing standards to permit comparisons across institutions on performance and outcome measures, to encourage innovation and continuous improvement, and to require institutions, based on their specific missions, to move toward world class quality and demonstrate progress in relation to national and international peers. Finally, the overall accreditation process must become more transparent and the final findings of the accreditation process must be made publicly available. Since the release of the Commission's report, the Secretary has continued to focus national dialogue on issues related to accreditation. In November 2006, the Secretary convened representatives from accrediting organizations and other key stakeholders to address the Commission's recommendations. She has also scheduled a Higher Education Summit for March 2007; accreditation will be a key topic considered at the summit. This section provides a brief overview of relevant provisions contained in H.R. 609 , the College Access and Opportunity Act of 2005, and S. 1614 , the Higher Education Amendments of 2005--the primary vehicles for HEA reauthorization in the 109 th Congress. H.R. 609 was passed by the House on March 30, 2006, by a vote of 221-199 ( H.Rept. 109-231 ). S. 1614 was reported by the Senate Health, Education, Labor, and Pensions Committee on November 17, 2005, without a report. A report ( S.Rept. 109-218 ) was subsequently filed on February 28, 2006. It was not considered on the Senate Floor during the 109 th Congress. Both the House and Senate bills would have made several changes related to accreditation issues. For example, both bills would have altered accountability requirements that accrediting agencies must use in evaluating institutions, adding a new requirement that accrediting agencies consider the stated mission of the institution, including religious missions, when applying and enforcing standards to ensure the courses and programs offered by an institution are of sufficient quality to achieve their stated objective. Both bills would have added new requirements related to distance education, including requiring accrediting agencies to have standards that adequately evaluate distance education programs in the same areas as regular classroom-based programs and requiring accrediting agencies to ensure that IHEs had implemented a process whereby the institution could determine that the student who registered for a distance education course or program was the same student who participated in, completed, and received credit for the course. H.R. 609 and S. 1614 would also have prohibited IHEs from denying the transfer of credit based solely on the accreditation held by the sending institution and would have required IHEs to publicly disclose their transfer of credit policies. Finally, both bills would have modified existing due process requirements. For example, both bills would have prohibited the appeals panel from including current members of the accrediting agency's decision-making body that made the adverse decision, and the appeals panel would have been subject to a conflict of interest policy.

Under the Higher Education Act (HEA), institutions of higher education (IHEs) must be accredited by an agency or association recognized by the Secretary of the U.S. Department of Education (ED) to participate in HEA Title IV federal student aid programs. While this process is voluntary, failure to obtain accreditation could have a dramatic effect on an institution's student enrollment, as only students attending accredited institutions are eligible to receive federal student aid (e.g., Pell grants and student loans). Accrediting agencies are private organizations set up to review the qualifications of member institutions based on self-initiated quality guidelines and self-improvement efforts. This report provides an overview of some of the possible accreditation issues that Congress may address during the HEA reauthorization process. For example, as Congress considers reauthorizing the HEA, it may consider making changes to the role accreditation plays with respect to federal student aid or to the accreditation process itself, such as the factors accrediting agencies must consider when evaluating an institution. More specifically, potential issues for consideration include, but are not limited to, the use of accreditation as a gauge of institutional quality, the elimination of accreditation as a prerequisite for participation in HEA Title IV programs, accreditation and distance education, accreditation and transfer of credit, and due process requirements that apply to accrediting agencies. In the 109th Congress, both H.R. 609, the College Access and Opportunity Act of 2005, and S. 1614, the Higher Education Amendments of 2005, the primary vehicles for HEA reauthorization, would have altered accreditation requirements. Most notably, both bills would have added new requirements related to considering the mission of an institution when performing evaluations, outcome measures, distance education, transfer of credit, due process, and accrediting agency operations. HEA reauthorization may also be considered by the 110th Congress. This report will be updated as warranted by legislative action.

The Budget Control Act of 2011 ( P.L. 112-25 ) provided for automatic reductions to most federal discretionary spending if no agreement on deficit reduction was reached by the Joint Select Committee on Deficit Reduction. Such reductions, referred to as sequestration, went into effect on March 1, 2013, the extended deadline for a deficit reduction agreement established under the American Taxpayer Relief Act of 2012 ( P.L. 112-240 ). In general, sequestration required agencies to reduce non-defense discretionary spending by 5.3% in FY2013. Sequestration affects Federal Aviation Administration (FAA) operations in different ways. FAA's grants for airport improvements, which are subject to obligation limitations, were statutorily exempt from the sequester cuts. On the other hand, FAA's air traffic operations face significant spending reductions. In total, it is estimated that FAA will need to reduce its total funding by roughly $636 million in FY2013 compared to FY2012 enacted levels, with roughly three-quarters of this amount coming from FAA operations, primarily air traffic and aviation safety functions. In anticipation of the sequester cuts, Transportation Secretary Ray LaHood and FAA Administrator Michael Huerta issued a joint letter on February 22, 2013, announcing cost-cutting measures under consideration including furloughs for most FAA employees, elimination of late-night shifts in as many as 72 air traffic control facilities, and the complete closure of up to 238 control towers at airports that have fewer than 150,000 flight operations or fewer than 10,000 commercial operations per year. Towers listed as candidates for closure included 195 run by contractors under the Federal Contract Tower (FCT) program and 43 staffed by FAA controllers. On March 22, 2013, FAA announced it would close 149 FCT program towers over four weeks beginning April 7, 2013. FAA said it chose to keep open 24 FCT facilities initially identified for closure after weighing national security interests; adverse economic impacts beyond the local community; potentially significant impacts on interstate transportation, communication, or banking and financial networks; and status as a critical diversionary airport for a large hub airport. On April 5, 2013, citing a need for additional time to address multiple legal challenges to its tower closure decisions, FAA delayed the closures and set June 15, 2013, as the date it would cease funding the 149 FCT program towers. Several airports have filed suit against FAA, chiefly questioning whether it has adequately met legal obligations to evaluate potential safety risks associated with the pending tower closures. On May 1, 2013, following a week of FAA air traffic controller furloughs that contributed to some isolated air traffic system delays, particularly at the nation's busiest airports, the Reducing Flight Delays Act of 2013 ( P.L. 113-9 ) was enacted. The act gave FAA authority to transfer up to $253 million to FAA operations using available monies from unspent airport funds, which were not subject to sequestration, and from other available sources within FAA. On May 2, 2013, a bipartisan group of 25 Senators transmitted a letter to Secretary of Transportation Ray LaHood and FAA Administrator Michael Huerta. The letter indicated that the $253 million transfer authority was "far above the amount required to prevent furloughs," stressing further that "[c]ongressional intent is clear: the FAA should prevent the slated closure of 149 contract towers by fully funding the contract tower program." On May 10, 2013, Secretary LaHood announced that the funds transfer authority under P.L. 113-9 was sufficient to end FAA employee furloughs and keep the 149 towers open for the remainder of FY2013. While this action appears to have settled debate over the pending closure of control towers in FY2013, long-range plans for tower closures, cutbacks in operating hours, or both may be revisited in future policy debates regarding the FAA budget. The financing and continued operation of low-activity towers, in particular, remain significant issues for future FAA budgets. In general, the funding and operation of civil air traffic control towers in the United States and U.S. territories fall into one of four categories: (1) tower operations funded through FAA's operations budget and staffed with federal air traffic controllers; (2) contract tower operations fully funded through FAA's operations budget but staffed with controllers employed by the contractor under the federal contract tower (FCT) program (also known as the contract tower base program); (3) contract tower operations partially funded through the FAA's operations budget and partially funded by local or state government funding and managed and staffed by contractor personnel, referred to as the contract tower cost-share program; and (4) non-federal control towers that receive no funding from the federal government and are staffed with non-federal controllers. Regardless of funding and operation, FAA maintains responsibility for the regulation and oversight of operations and safety at all civil air traffic control towers in the United States. Contract towers and contract controllers must be certified by FAA and must follow FAA directives. FAA funds for tower operations are derived from appropriations to the FAA's Operations and Maintenance (O&M) account, which is funded partially from the Airport and Airways Trust Fund (AATF) and partially from the Treasury general fund. These sources provide funding for both the contract tower program and FAA-staffed towers. Of U.S. airports with control towers, 251 (slightly less than half) are operated by private firms and staffed with contract employees under the FCT program. Sixteen of the 251 contract towers are funded under arrangements in which local governments or entities pay up to 20% of the costs. The cost-share program is provided as an option to communities that wish to retain an operating air traffic control tower after FAA determines that the costs to the federal government outweigh their tower's benefits related to safety and efficiency of flight operations. With the exception of these 16 cost-share towers, towers in the federal contract tower program are fully funded by FAA. In recent years, the budget for the FCT program has been about $140 million annually, including approximately $10 million for the federal share of cost-share towers. The FCT program came into existence in 1982--initially as a pilot program at five airports--in an effort to provide air traffic services at low-activity towers in the wake of the nationwide air traffic controller strike and subsequent dismissal of striking FAA controllers. For the first 12 years, the program remained relatively small, growing to 27 towers by 1993. Nonetheless, it gained the attention of Vice President Gore's National Performance Review--later known as the National Partnership for Reinventing Government--which endorsed the program in 1993 and recommended its expansion. The FAA developed a plan to close or contract out all low-activity towers, and the number of contract towers grew to 160 by the end of FY1997. In FY1999, Congress first funded the cost-sharing program, allowing airports that would not otherwise have met FAA's threshold benefit-to-cost ratio to maintain contract tower operations with non-federal funds to supplement federal expenditures. Subsequently, Congress has limited the local share to not more than 20% of a tower's costs. Currently 16 towers are funded through this program at a cost of roughly $10 million annually. The federal funding for cost-share towers has been designated separately in recent appropriations measures, and therefore is not included in the proposed funding cuts and tower closures being considered in FY2013. However, FAA has indicated that it would seek to increase the local share portion of the cost-share program in FY2014 from 20% to 50%. While this could expand program eligibility, it could also have the effect of triggering tower closures in communities that are unwilling or unable to contribute additional funding for tower operations. In a 2012 audit, the Department of Transportation Office of Inspector General concluded that the FCT program provided air traffic services to low-activity airports at lower costs than FAA-staffed towers could. The audit found that, on average, contract towers required six fewer controllers and cost almost $1.5 million less annually than FAA-staffed towers at airports with comparable levels of flight activity. These savings were achieved through lower staffing levels and lower controller pay at contract towers compared to FAA towers. The audit found that contract towers had a lower rate of reported safety incidents than comparable FAA towers. Also, a survey of aircraft operators, conducted as part of the audit, found similar levels of satisfaction with the services provided by contract towers and FAA towers handling similar numbers of aircraft. The FAA operates 262 airport air traffic control towers. About one-quarter of these are similar in activity levels to contract towers. These have remained under FAA operation primarily because of local operational considerations, such as proximity to congested airspace, or are considered candidates for conversion to the FCT program, but have not yet been converted. Of the FAA-operated towers, 43 have been identified as having fewer than 150,000 total operations or fewer than 10,000 commercial operations annually and have been included on the list of potential tower closures. Additionally, several FAA-staffed towers at mid-sized airports had been identified as facilities where late-night shifts could be eliminated in FY2013. Several of the towers listed have radar approach capabilities. However, these towers typically see limited late-night activity, comprising mainly all-cargo operations with occasional general aviation traffic. Examples include the towers at Little Rock, AK; Manchester, NH; Oklahoma City, OK; Harrisburg, PA; Reno, NV; El Paso, TX; and Norfolk, VA. Many other towers, including both FAA-operated and contract towers, already close during late-night hours. When a tower closes, either overnight or permanently, the airport will typically remain open to traffic as an uncontrolled airport. In some rare instances, an uncontrolled airport may close late at night for noise abatement or due to safety concerns in mountainous areas, but runway lights and other navigational aids remain functional so it could serve as an emergency landing site for an aircraft in distress. When an airport is uncontrolled, pilots assume responsibility for following prescribed traffic procedures and seeing and avoiding other aircraft, both on the ground and in flight in the vicinity of the airport. Historically, FAA has relied on a formal benefit-to-cost assessment process for establishing and discontinuing air traffic control tower operations. This analysis weighs the monetized lifecycle safety and efficiency benefits derived from operating a tower against the lifecycle costs of operating and maintaining it. The analysis yields a single benefit-to-cost ratio which serves as FAA's criterion for determining whether a tower should be established or discontinued: If the ratio is greater than or equal to one, a recommendation to establish a tower may be made, whereas if the ratio falls below one, an existing tower would be subject to closure, to continuation under the cost-share program, or to conversion to a non-federal control tower if a local entity is willing to assume the costs. Currently, all airport towers in the contract tower program have benefit-to-cost ratios greater than or equal to one under FAA's valuation methodology, except for the 16 cost-share towers where local communities contribute to fund costs that outweigh the benefits, up to 20% of the total cost. Communities may identify other benefits derived from the operation of the tower, such as attracting business, that are not considered in FAA's benefit-to-cost ratio. The U.S. Contract Tower Association, a trade organization representing contract towers, has been critical of FAA's benefit-to-cost analysis methodology, claiming that it fails to consider many intangible benefits, including local economic benefits derived from maintaining an airport tower. On the other hand, the FAA methodology also ignores certain disbenefits that may arise from operation of a tower, such as increased community noise from additional aircraft attracted because of the tower's presence. Despite the criticisms, the established FAA methodology continues to serve as a basis for quantifying a tower's added value or benefit to aviation safety and operational efficiency. These econometric valuations can be used to quantify the effects of tower closures based on the levels of flight activity at affected airports. FAA compares benefits derived from operation of an existing tower against the costs of operating and maintaining it over a 15-year span. The quantified benefits include prevention of collisions between aircraft, prevention of other accidents, and benefits from reduced flight time. These benefits are considered in further detail below in the context of potential impacts associated with tower closures. The FAA's tower benefit safety analysis is predicated on projections that the presence of a tower will prevent, on average (mean value), the following number of accidents over a 15-year span as a function of the average annual number of flight operations: 1.802 x (Number of Operations/10 6 ) 2 midair collisions (both aircraft airborne); 1.238 x (Number of Operations/10 6 ) 2 collisions between an aircraft on the ground and an aircraft in flight; and 2.775 x (Number of Operations/10 6 ) 2 ground collisions between aircraft. As these equations indicate, collision risk is projected to increase exponentially (as a function of operations squared) as the number of airport operations increases. Therefore, the busier an airport is, the more significant a control tower's role in collision risk reduction. Closing 100 towers with 150,000 annual operations each would be expected to increase the number of collisions over the 15-year span by roughly 13, or slightly less than 1 per year. The likely severity of injuries and aircraft damage differ among accident types, with midair collisions being far more likely to result in fatalities and destruction of aircraft. Most accidents are minor, except among midair collisions, which pose greater than a 50% chance of fatality. It is estimated that, among all accidents that might be prevented by the operation of a tower, about 18% of aircraft occupants will be fatally injured. Other types of accidents that can be prevented by the presence of tower controllers include wheels-up landings, collisions with objects such as construction equipment, downwind landings, misaligned approaches, and runway overshoots and undershoots. From 1983 through 1986, these types of accidents occurred at nearly twice the rate at non-towered airports (2.583 accidents per million operations) than at towered airports (1.398 accidents per million operations). By adding these other accident classes into the analysis, the presence of an operational control tower would reduce total accident risk (collisions between aircraft plus other accidents) by roughly one mishap for every 2.14 million operations. The collision likelihoods in the FAA benefit-to-cost methodology are based on accident data from 1983 through 1986. Accident rates for both general aviation and commercial aviation have declined since that time, so the FAA methodology likely overestimates present-day collision probability and severity. At airports without operating control towers, pilots often overfly the field to assess conditions before landing and follow an established traffic pattern to conform to traffic management practices. Towers provide operators with efficiency gains by reducing flight time and the associated fuel burn associated with these practices. The operation of a tower typically reduces flight time by less than one minute per flight, with less of an effect on commercial aircraft than on general aviation aircraft. While the impact of tower closures on individual operators' efficiency is relatively small, tower closures can also be viewed as having a negative cumulative impact on energy and the environment by increasing aircraft fuel burn, emissions, and noise as a result of these extended flying times, assuming flight activity remains constant after closure of the tower. Tower closures could affect airlines in terms of their receipt of required information regarding current airport data and weather information that they must obtain from approved sources. A tower closure would not preclude commercial air service, but it could affect airlines' decisions regarding whether to reduce or eliminate service to an airport. Also, tower closures may affect private and business aircraft operators' decisions regarding where to base and to operate their aircraft, and could result in the diversion of some general aviation traffic from designated reliever airports to busier commercial airports. If this were to occur, it could increase commercial airline delays at certain airports. The Aircraft Owners and Pilots Association (AOPA), an advocacy group for general aviation interests, asserts that "in and near metroplexes, towers at smaller airfields provide a measure of relief to larger airports serving commercial traffic. Closing such towers will impact the entire metroplex." The potential safety impacts of long-term tower closures could be mitigated to some degree by technologies now under development. These technologies fall into two broad categories: (1) in-cockpit situation awareness technologies and (2) remote air traffic services. In-cockpit situation awareness technologies include capabilities such as moving maps and cockpit displays of traffic information. While commercial passenger aircraft are equipped with traffic collision avoidance systems (TCAS), such systems are not affordable for typical general aviation aircraft, which make up the majority of traffic at most small and mid-sized airports. A new technology known as Automatic Dependent Surveillance-Broadcast (ADS-B) may provide a means for general aviation aircraft to be equipped with in-cockpit moving maps with overlays of nearby traffic by receiving broadcast signals from other aircraft of the precise aircraft location, typically determined by global positioning system (GPS) tracking. FAA will require most aircraft to be equipped with the ADS-B capability to broadcast precise location information, a capability known as ADS-B Out, by 2020. However, at present there is no mandate to equip aircraft with the capability to receive and display information about other traffic, a capability known as ADS-B In. While some general aviation operators may see an inherent safety benefit in this capability to improve situation awareness, greater participation may be needed to obtain a comparable level of situation awareness and traffic avoidance in the air terminal environment that is currently provided by manned air traffic control towers. Another potential remedy is to provide air traffic services similar to those currently provided by towers from remote locations. Remote facilities could potentially realize cost savings over existing stand-alone towers by centralizing and consolidating operations among low-activity airports. However, initial start-up costs may be high. Some air traffic services are already provided remotely. For example, an aircraft on an instrument approach to a non-towered airport can remain under the control of an en route or approach control facility until it descends below radar coverage. While under radar control, the controller would remain responsible for maintaining aircraft separation from other aircraft flying under instrument rules and may provide advisories regarding aircraft operating in or near the airport traffic pattern under visual flight rules. Remote or virtual towers are seen as a potential next step in air traffic facility consolidation and could provide a comparatively low-cost alternative to manned towers. Remote towers could utilize data such as ADS-B and surface radar capabilities. Cameras and other sensors, such as infrared for night operations, could be installed at airports without operating towers to provide information to consolidated air traffic facilities, from which controllers could provide services similar to those airport towers currently provide. Pooling of resources at these consolidated facilities could potentially allow for significantly reduced staffing compared to stand-alone towers currently in operation. European researchers have initiated a project to develop and examine the potential benefits of expanding remote air traffic service capabilities at test sites in Norway and Sweden and are working toward full operational certification of remote tower facilities. Also, AirServices, the nationwide air traffic services provider in Australia, is testing remote approach control and airport services at Alice Springs from a remote tower center in Adelaide. In the United States, both the National Aeronautics and Space Administration and the Department of Transportation's John A. Volpe National Transportation Systems Center are conducting research on staffed "virtual towers" and remote tower sensing capabilities. Field tests at U.S. airports are currently under consideration, but it appears unlikely that remote or virtual air traffic control tower facilities will be ready for routine operation at U.S. airports in the near future. S.Amdt. 45 , amending H.R. 933 , the vehicle for consideration of an FY2013 continuing budget resolution, was submitted on March 13, 2013, with the purpose of limiting FAA tower closures in response to budget sequestration. Specifically, the amendment would fund the contract-tower program for FY2013 at a level of $130.5 million with $10.35 million for the cost-sharing program. The amendment would offset the continued funding of the contract tower program at this level by rescinding $24 million of unobligated prior-year funds appropriated for FAA facilities and equipment and $26 million of unobligated prior-year funds for FAA research, engineering, and development. The measure would not protect contract towers from budget reductions beyond FY2013 and does not address possible closures of FAA-staffed towers. On March 20, 2013, the Senate passed an amended version of H.R. 933 that did not include the language of S.Amdt. 45 regarding funding for the contract tower program. Subsequently, S. 687 was introduced on April 9, 2013. It would explicitly prohibit FAA from suspending or terminating operation of any FAA air traffic control tower that was operational on March 1, 2013, in either FY2013 or FY2014. Further, it stipulates that if FAA suspends or terminates any tower operations between March 1, 2013, and the date of enactment, FAA shall resume operations of such tower as soon as practicable. Prior to the announcement of pending tower closures in response to sequestration, legislation was offered seeking to increase tower staffing, particularly during late-night shifts. The Minimum Staffing of Air Traffic Controllers Act of 2013 ( H.R. 66 ) would require a tower to be staffed with a minimum of two air traffic controllers at all times at all airports where there are regular air carrier operations. The legislation appears to address concerns over fatigue among air traffic controllers during midnight shifts and over controller workload and operational errors, and is not directly related to budget reductions in tower operations. Due to budget limitations, a requirement for additional staffing at certain towers could result in a larger number of towers closing.

Budgetary flexibility enacted under the Reducing Flight Delays Act of 2013 (P.L. 113-9) has permitted the Federal Aviation Administration (FAA) to cancel plans to close 149 air traffic control towers operated by contractors, a measure it had proposed to address funding decreases brought about by the budget sequester. On March 22, 2013, FAA announced the planned tower closures. The closures were originally planned for April 2013, but the closure was pushed back to June 2013 and then abandoned due to receipt of new authority in P.L. 113-9 allowing funds to be transferred from other FAA accounts to FAA operations. FAA had also named 72 air traffic control facilities that would cease operations late at night as a cost-saving measure, but elimination of FAA controller furloughs subsequent to passage of P.L. 113-9 led FAA to cancel these plans as well. Roughly 10% of U.S. airports have operating control towers, although many towers close at night when flight activity is low. Closure of a tower does not mean closure of an airport: At airports where no tower is operating, pilots use established traffic patterns and procedures to avoid other aircraft. The towers that were slated for closure have no radar approach control capabilities and perform air traffic separation functions using procedures for visual flight. These airports can handle aircraft in poor weather on a limited basis, but unlike airports with radar approach control they cannot handle multiple aircraft on approach in low visibility and clouds. About half of the roughly 500 towers in the United States are operated by private firms under contract to FAA. Sixteen of the contract towers are partially funded through local (non-federal) shares of up to 20%, while 235, including the 149 identified for closure, have been fully funded by FAA. The cost-share towers are currently partially funded through a separate federal appropriation that is subject to the 5.3% sequester cut, but they were not slated to be closed in FY2013. A tower scheduled to close could be converted to a non-federal tower if a local community were willing to fully fund the tower's operation. Non-federal towers are still regulated, but not funded, by FAA. FAA has historically relied on a benefit-to-cost ratio methodology for establishing and discontinuing air traffic control tower operations. This methodology quantifies the safety and efficiency benefits of a tower in reducing aircraft collisions and other accidents and reducing flight times, and identifies established towers for possible closure or conversion to cost-share or non-federal towers if their benefit-to-cost ratio falls below one. However, all towers identified for closure under the sequestration cuts have benefit-to-cost ratios greater than one. Long-term tower closures would have relatively small but measureable impacts on safety and efficiency, and could cause a shift in both commercial and general aviation traffic to busier airports where towers remain open, depending on how airlines and other aircraft operators respond. Legislation to maintain federal control tower funding and a measure to increase tower staffing at busy airports are under consideration in the 113th Congress. S. 687 would prohibit the closure of any air traffic control tower in FY2013 and FY2014. S.Amdt. 45 had sought to maintain funding for the FAA contract towers to prevent their closure, but was not considered on the floor in the Senate. H.R. 66, pending in the House Transportation and Infrastructure Committee, would increase staffing minimums for towers at busier commercial airports, which could put additional fiscal pressures on FAA to close low-activity towers or reduce their operating hours.

W ith the Rules Enabling Act, Congress granted to the Supreme Court the authority to write federal rules of procedure, including the rules of criminal procedure. After several years of evaluation by the Judicial Conference, the policy-making arm of the federal judiciary, on April 28, 2016, the Supreme Court transmitted to Congress proposed changes to Rule 41 of the Federal Rules of Criminal Procedure. These proposed changes would amend the federal search and seizure rules to permit the government to remotely access electronic devices although the location of the device may be unknown. This issue has become more pressing in recent years with an increasing number of users anonymizing their communications, hindering the government's ability to pinpoint the location of the target, and thus making it difficult to discern the appropriate federal court to apply for a search warrant. In recent years, a tension has arisen between Rule 41 as currently drafted and the Department of Justice's (DOJ's) desired use of the rule for digital searches. One facet of this problem arose in a 2013 magistrate judge's ruling from the Southern District of Texas, in which the court denied DOJ's application to conduct remote searches of a computer believed to have been part of a fraudulent scheme. The court declined to grant the DOJ's application because the government could not establish the location of the target, thereby placing the proposed search outside the scope of Rule 41 and in violation of the Fourth Amendment particularity requirement. There have been at least two lines of argument against the proposed rule change, one based on the substance of the proposed amendment and the other grounded in the process by which the rule is being changed. The substantive arguments pertain to the actual substance of the rule and include for example, an argument that the new rule would breach the particularity requirement of the Fourth Amendment. The procedural arguments concern how this potential authorization should be made law: through the rulemaking process by the courts or through enacted legislation by Congress. While federal law enforcement has been supportive of the proposed rule change, some advocacy groups have argued that the proposed change "would have significant legal and technical implications" and thus "merit[s] open consideration by Congress, rather than a rulemaking proceeding of the Judicial Conference." This report provides a brief overview of the proposed amendment to Rule 41. First, it sets out background on the origin of, and rationale underlying, the proposed amendment and a description of the rule as currently written. Second, it reviews the potential changes made by the proposed amendment and surveys various concerns commenters have raised with the proposal. Rule 41 of the Federal Rules of Criminal Procedure governs the procedures for obtaining a search warrant in federal court. Among other elements, Rule 41 primarily requires a government official to demonstrate probable cause that evidence of a crime will be found in the place to be searched. As to the question of venue--that is, which is the appropriate federal district court to seek a search warrant--Rule 41 provides that a search warrant may be issued by "a magistrate judge with authority in the district." In a 2013 ruling from the Southern District of Texas, discussed below, the court found that although Rule 41 permits extraterritorial warrants (a warrant to be served outside of that judge's jurisdiction) in limited situations, the factual predicates to obtaining one were not present there. Rule 41 permits the issuance of extraterritorial warrants in four limited instances: (1) the property is within the jurisdiction but may be moved out of the jurisdiction before the warrant is executed; (2) the property is part of an investigation of domestic or international terrorism; (3) tracking devices are used which can be monitored outside the jurisdiction if installed within the jurisdiction; or (4) the property is located in a U.S. territory or U.S. diplomatic or consular mission. However, based on the text of the rule, none of these exceptions appear to permit searches where the location of the target is unknown, such that it is not clear in which jurisdiction to request a warrant. The amendment to Rule 41 approved by the Supreme Court and now before Congress would expand the instances in which DOJ could seek extraterritorial warrants. More broadly, it would codify DOJ's ability to "to use remote access to search electronic storage media and to seize or copy electronically stored information," an authority that is not explicitly found in the rule now. Before looking at the amendment, it is helpful to understand some of the background and cases behind the current version of Rule 41. The universe of reported cases in which DOJ has relied on the current version of Rule 41 to remotely access a target's computer is small, but does shed light on how DOJ might use amended Rule 41 if adopted. The federal government's ability to remotely access computers as part of a criminal investigation was first revealed in 2001 when journalists discovered the existence of "Magic Lantern," later renamed the "Computer and Internet Protocol Address Verifier," a covert project used by the FBI to hack into a target's computer. Known more generally as "network investigative techniques" (NIT), this technology can be used to gather both metadata from a computer, such as the Internet Protocol (IP) address of a target's computer, and the c ontent of data stored on that computer, such as email communications or photographs. The first publicly reported court case which relied on a NIT was in 2007, where the government obtained a Rule 41 search warrant to identify a Myspace user who had made bomb threats to a high school. The warrant permitted the government to access the computer's IP address, MAC address, and other identifying information, but explicitly did not permit access to the content of any electronic messages. In a similar case from 2013, law enforcement officials were investigating a series of threats to detonate bombs at universities and airports scattered throughout the United States. The FBI sought and received a warrant from a magistrate judge of the U.S. District Court for the District of Colorado that permitted the FBI to access, among other information: the target computer's IP address; MAC address; the computer's open communication ports; a list of programs running on the computer; the type of operating system running on the computer; the web browser running on the computer; the computer's time zone information; and the Uniform Resource Locators (URLs) to which the target computer was previously connected. In these cases, the FBI used a "phishing attack," in which it sent an email embedded with a link to the target of a search. Once the user hit the link, it connected to FBI computers and downloaded malicious software that sent vital identifying information back to the FBI. Ultimately, the software produced two IP addresses which suggested the suspect was located in Tehran, Iran. In addition to targeting specific computers, DOJ has also targeted nefarious websites more broadly. In 2012, for instance, the government initiated Operation Torpedo, which involved the take down of a large-scale online child pornography network, users of which utilized the Tor network to anonymize their identities when accessing the website. There, the magistrate judge issued a warrant to install a NIT that would collect the IP addresses and other identifying information from visitors to the child pornography site, a technique known as a "watering hole" attack. Ultimately, based on this information, 14 individuals were brought to trial on child pornography charges. In addition to obtaining addressing information, remote access searches can also be used to activate the microphones in certain cell phones and laptops to record conversations without the user knowing. Additionally, the FBI has stated that it can access the camera on laptops without activating the light which lets users know it is recording. Perhaps the most prominent case for purposes of the proposed Rule 41 amendment is a 2013 magistrate judge's ruling from the Southern District of Texas in which the government's request to conduct covert searches was denied. There, the government requested a search warrant to remotely search an unknown computer in an unknown location that was believed to have been used to perpetrate a fraudulent scheme. The government wanted access to, among other things, IP addresses used; records of Internet activity, including browsing history and search terms used; and photographs taken using the computer's built-in camera. Magistrate Judge Stephen Smith rejected the government's application on two grounds. First, Judge Smith found that the government's application did not meet one of the territorial limitations found in the Rule. Again, Rule 41 permits extraterritorial warrants in four limited instances, but does not cover instances where the location of the target is simply unknown from the outset. Second, he found that the application failed to meet the particularity requirement contained in the Fourth Amendment, which requires that "no warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized ," as the government failed to explain how the target device was to be found. Further, Judge Smith noted the risk of targeting innocent computers when the location of the target is unknown. The proposal to amend Rule 41 was first brought to the attention of the Judicial Conference in a September 2013 memorandum from DOJ, which highlighted two "increasingly common situations" faced by investigators that warranted a change in the rules. The first is where the warrant sufficiently describes the device to be searched, but law enforcement officials do not know the location of the target device. The second is where the investigation requires officials to engage in surveillance of numerous computers in multiple jurisdictions. The proposed rule change was published for public comment in August 2014, in which DOJ, privacy advocates, computer experts, and members of the general public offered various arguments for and against the proposed rule change. On April 28, 2016, the Supreme Court transmitted the proposed rule change to Congress. Pursuant to the Rules Enabling Act, unless Congress responds via enacted legislation, the proposed rule will take effect on December 1, 2016. Upon transmittal of the proposed amendment to Rule 41, Senator Ron Wyden and Representative Ted Poe introduced companion bills ( S. 2952 , H.R. 5321 ) to reject this rule change. Each bill provides as follows: The proposed amendments to rule 41 of the Federal Rules of Criminal Procedure, which are set forth in the order entered by the Supreme Court of the United States on April 28, 2016, shall not take effect. The proposed amendment was designed to address two issues: (1) access to a device at an unknown location; and (2) access to multiple computers in multiple districts. Each will be addressed in turn. The first rationale for amending Rule 41 applies to situations when the government is able to describe the computer to be searched, but does not know the location of the computer. DOJ asserted, and the Judicial Conference accepted, that the government faces this situation more regularly because persons who commit crimes on the Internet are using anonymizing technologies with greater frequency. Through the use of proxy servers, criminals are able to mask their IP addresses such that the recipient only knows the IP address of the proxy and not the originator's IP address. This issue of knowing the computer to be searched but not its location was the primary issue facing the court in the Southern District of Texas ruling, a case that was cited by DOJ as a motivating factor in seeking the amendment to Rule 41. To permit extraterritorial searches, Rule 41 would be amended to read as follows: a magistrate judge with authority in any district where activities related to a crime may have occurred has authority to issue a warrant to use remote access to search electronic storage media and to seize or copy electronically stored information located within or outside that district if ... (A) the district where the media or information is located has been concealed through technological means[.] It appears that the government would have to demonstrate two elements: (1) that activities of the crime occurred in the magistrate judge's jurisdiction, and (2) that the location of the target has been concealed through technological means. Note that the first element--"any district where activities related to the crime may have occurred"--is the same as that found in the provision for extraterritorial searches as part of a terrorist investigation--"any district in which activities related to the terrorism may have occurred." Additionally, beyond permitting extraterritorial searches, this amendment would codify the authority to engage in "remote access" searches altogether, something that is not explicitly found in the current text of the rule. The second rationale for amending Rule 41 applies to situations where the government needs to search multiple computers in numerous districts as part of a large-scale investigation of computer crimes. Under the current rule, there are limited mechanisms for seeking a warrant outside of the judicial district in which a computer is located, but none cover the type of authorization DOJ seeks here. In its submission to the Judicial Conference, DOJ argued that effective investigation of large-scale online attacks, such as botnets--an "interconnected network of computers infected with malware without the user's knowledge and controlled by cybercriminals" --requires a change to Rule 41 such that government officials can seek authorization in one district court, although the criminal activity may span multiple districts. As submitted to Congress, the second prong of the proposed rule change reads as follows: [A] magistrate judge with authority in any district where activities related to a crime may have occurred has authority to issue a warrant to use remote access to search electronic storage media and to seize or copy electronically stored information located within or outside that district if ... (B) in an investigation of a violation of 18 U.S.C. SS 1030(a)(5), the media are protected computers that have been damaged without authorization and are located in five or more districts. As part of the review process, the Advisory Committee received comments both supporting and opposing the proposed amendment to Rule 41. The Advisory Committee noted that "the most common theme in the comments opposing the amendment was concern that it relaxed or undercut the protections for personal privacy guaranteed in the Fourth Amendment." Objectors made other arguments against the proposal including that it might engender forum shopping. This section will briefly explore these and other concerns raised by public comments. Commenters have proffered various arguments in support of the proposed rule change. First, and perhaps most obviously, is the fact that DOJ has been prevented in at least one reported ruling from remotely searching a target's computer when it could not state the location of the target. More generally, DOJ has argued that criminals are using anonymizing techniques more frequently, so that DOJ is able to identify the computer but not the location of the target. In this vein, DOJ has argued that "there is a substantial interest in catching and prosecuting criminals who use anonymizing technologies, but locating them can be impossible for law enforcement absent the ability to conduct a remote search of the criminal's computer." As noted by the Judicial Conference, DOJ "could not now obtain a warrant even by going to every one of the 94 judicial districts, since it would not be able to establish that the property to be searched was located in any of these districts." As to the second proposed change, which would most directly implicate the investigation of botnet-like schemes that involve many computers in many districts, the National Association of Assistant United States Attorneys argued that coordinating many requests and review by many magistrate judges "not only wastes judicial and investigative resources, but also may cause delay that impedes investigation." Similarly, DOJ noted that in certain large-scale botnet investigations, the government would have to go to 94 federal courts in 94 judicial districts, a task "impossible as a practical matter." Opponents of the proposed amendment to Rule 41 have argued that it would violate the particularity requirement of the Fourth Amendment. The Fourth Amendment requires that no warrant shall issue unless it " particularly describe[s] the place to be searched, and the persons or things to be seized ." There are several different iterations of the argument that Rule 41 could authorize practices inconsistent with the particularity requirement, depending on the type of hack the government is attempting to employ. One civil liberties group argues that with "watering hole" attacks, in which the government configures a website to deliver malware to every computer that visits it, the government "will end up searching the computers of people who it cannot particularly identify or describe and to whom it lacks probable cause." Although there may websites that have no legitimate lawful purpose (e.g., terrorist websites), there may be valid reasons for visiting these sites (e.g., research, journalism). Even with more targeted surveillance that might be performed by law enforcement, such as including a link in an email directed at a specific target, the civil liberties advocate notes that the target could easily forward the message to an innocent third party in which the government would not have probable cause to search. A similar concern was raised by Magistrate Judge Smith in the Southern District of Texas Rule 41 ruling. There, Judge Smith described the government as having offered little to no information on how the targeted computer was to be found, and Judge Smith also suggested that a sophisticated target might "spoof" a fake IP address, such that the search technique could infect innocent devices. In the context of botnets, one advocacy group claimed that that the proposed amendment would allow the police to search multiple computers using one warrant, "often without particularly describing those computers or demonstrating probable cause as to their owners or users." Courts have noted that with multiple-location search warrants, the magistrate must be careful to evaluate each location separately: "A search warrant designating more than one person or place to be searched must contain sufficient probable cause to justify its issuance as to each person or place named therein." One commenter argues that this same rule should apply when multiple computers, instead of multiple residences, are involved, as "[t]he need for particularity . . . is especially great in the case of eavesdropping." In response to these concerns, the Advisory Committee included a Committee Note to Rule 41, providing the following explanation about how the Fourth Amendment should apply to the proposed amendment: The amendment does not address constitutional questions, such as the specificity of description that the Fourth Amendment may require in a warrant for remotely searching electronic storage media or seizing or copying electronically stored information, leaving the application of this and other constitutional standards to ongoing case law development. However, some privacy advocates believe that this proviso will be largely ineffective. For example, the one privacy advocate noted that while "the Committee does not seek to address such questions in this rulemaking, the proposed modification to Rule 41 nonetheless does have direct bearing on these very questions since it specifically contemplates the issuance of warrants for computers in concealed locations." Some have argued that, in certain situations, remote access searches can only be conducted using an order under Title III of the Omnibus Crime Control and Safe Streets Act of 1968, commonly referred to as the Wiretap Act, and not a warrant under Rule 41. Title III applies when the government seeks to intercept electronic, wire, or oral communications in real time, rather than stored on a computer or with a service provider. Because of the invasiveness of these searches, Title III has more robust procedural safeguards than a traditional warrant, including that the government has exhausted other investigatory procedures prior to seeking a Title III application; and that the court shall limit surveillance to what is necessary for the investigation and that the government shall minimize any communications not relevant to the purpose of the search. In addition to oral and written communications, courts have also applied Title III's requirements to video surveillance. One commenter posited that some of the searches envisioned under the changes to Rule 41 would trigger Title III's heightened requirements. For instance, if the government seeks to activate a camera or microphone on a device remotely, which the FBI claims it is capable of doing, or it seeks to access electronic communications in real time, this commenter argues that it should adhere to Title III, rather than simply Rule 41. Moreover, this entity suggests that the installation of malware, spyware, or other government software that remains on a target computer and collects information could trigger similar concerns. However, there is nothing in the text of the proposed amendment that would seem to require a Title III order when real time content was being accessed. That said, the Judicial Conferences Committee Note seems to envision that courts would resolve such questions on a case-by-case basis. At least one observer has argued that the proposed amendment cannot meet the more demanding Fourth Amendment standard required for covert-entry remote access searches, which generally requires that the government has some "reasonable necessity" for conducting the surreptitious search and that notice be given a reasonable time after the search is conducted. Others have argued that the use of "malware and zero-day exploits is more invasive than other forms of permissible searches because the consequences and collateral damage associated with their use are inherently unpredictable and often irreversible." Poorly designed malware could cause the destruction of data or the corruption of the whole operating system. Moreover, when the government releases malware, there may be a risk that the code gets into the hands of bad actors or spreads virally across the Internet, causing damage to innocent third parties. Like with the particularity arguments, discussed earlier, the Judicial Conference responded to these comments by highlighting the Committee Note, which asserts that the rule "does not foreclose or prejudge these constitutional issues," but rather "leaves them to be resolved on a case-by-case basis." Several commenters challenged the sufficiency of the notice requirements provided under the proposed rule. One privacy advocate argued, for instance, that the notice requirements were lessened under the proposed amendment as they did not require that the officer "must" provide a copy of the warrant--as is required currently under Rule 41(f)(1)(C)--but instead would require only that the officer "make reasonable efforts to serve a copy of the warrant and receipt" and ensure service is "reasonably calculated to reach that person." This advocate argued that providing notice will be difficult in many common situations, such as a target who signs onto a wireless network at a coffee shop or library. In response, the Advisory Committee described the proposed notice requirements as "intended to be parallel, to the degree possible, with the requirement for physical searches." Providing notice in the case of physical searches is not always possible, the Committee noted, and the rule as currently written does not require actual notice, but rather that notice be given "to the person from whom, or from whose premises, the property was taken, or leave a copy of the warrant and receipt at the place where the officer took the property." Additionally, one commenter argued that the government should have to provide notice to both the owner of a computer and others who may have used and stored information on that device, not one or the other as is currently proposed in the rule. The Judicial Conference rejected this suggestion, claiming that if the government executes a warrant for a business and seizes records of individual customers, providing notice to each customer would be too burdensome on the government, and is not required under current law. Finally, several commenters argued that government officials could delay giving notice, as the proposed notice requirement only requires that the government make "reasonable efforts" to provide notice, but does not require that it be given promptly. Answering these comments, the Committee noted that Rule 41(f)(3) permits delayed notice if allowed by statute. The Committee added a Committee Note stating that "Rule 41(f)(3) allows delayed notice only 'if the delay is authorized by statute.'" Some commenters also raised concerns that the proposed rule, combined with existing judicial doctrines, could hinder judicial review in various ways, including the following: Ex parte proceedings and lack of technical sophistication in the judiciary . Warrant proceedings are largely resolved ex parte --that is, only the government's attorney is present to offer arguments to the magistrate judge. Some have argued that the nature of these one-sided proceedings would hinder effective judicial review, especially when difficult technological questions are involved. Good Faith . Under the good faith exception to the exclusionary rule of the Fourth Amendment, unlawfu lly obtained evidence can still be admissible in a criminal trial if the evidence was "obtained in objectively reasonable reliance on a subsequently invalidated search warrant." Some have argued that, because c ourts have the authority to resolve the good faith question before the substantive Fourth Amendment question, the constitutional merits could largely go unresolved. Qualified Immunity . Qualified immunity operates in a similar manner in the civil context as good faith does in the criminal context: it "protects government officials from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known." Again, courts are permitted to resolve this procedural question before moving to the merits of the plaintiff's claim. Commenters have posited that qualified immunity, like good faith, could preclude judicial review of the constitutionality of these largely untested search and seizure techniques. Some have argued that permitting remote searches under Rule 41 in any district in which an element of the crime occurred raises significant concerns of forum shopping. That is, they argue that when the government has multiple options of jurisdictions in which to file a warrant application, it will more often than not choose the more government friendly judge. In addition to comments concerning the changes to Rule 41 itself, many observers have challenged the method in which the rule is being changed. Some have argued that as sensitive a topic as remote hacking should undergo a more thorough vetting via the formal congressional lawmaking process rather than through the rulemaking process of a federal agency. As argued by the one privacy advocacy group: The proposed changes to FRCrmP Rule 41 are not a Congressional amendment, nor do they implement a direct expansion of extraterritorial jurisdiction codified in statute. Congress has not authorized extraterritorial or multi-district searches for computers with concealed locations or during investigations under 18 U.S.C. SS 1030(a)(5), as the proposed modification to Rule 41 contemplates. The proposed modification attempts to expand magistrates' Rule 41 authority in a manner that has historically been accomplished by Congressional action. The proposed modification should be handled through Congress rather than judicial rulemaking. Similar arguments have been made by technologists at one privacy advocacy group : "We have transitioned into a world where law enforcement is hacking into people's computers, and we have never had public debate. . . . Judges are having to make up these powers as they go along." Rule 41 of the Federal Rules of Criminal Procedure regulates the issuance of warrants to search and seize papers, effects, and other things related to federal crimes. As currently drafted, the rule neither explicitly permits nor prohibits "remote access" searches--that is, searches performed remotely to access a target's device. However, DOJ has sought and obtained Rule 41 warrants to conduct various remote access searches over the past 15 years, including accessing both metadata and content from criminals' devices. The current rule only permits judges to issue warrants within their jurisdiction, subject to several limited exceptions. This requirement cannot be satisfied when the government does not know in which jurisdiction the computer is located. With the increasing use of anonymizing technology by criminals and other targets, DOJ has claimed it has been frustrated in its attempt to seek certain warrants when it cannot locate the device. To this end, DOJ requested that the Judicial Conference of the United States, the policy-making arm of the federal judiciary, evaluate two changes to Rule 41. The first would authorize remote access searches of computers in which the location has been hidden through technological means. The second would allow the government to use one warrant to search multiple computers when five or more computers have been the subject of certain hacking attacks. After several years of evaluation, the amendments have been approved by the Judicial Conference and are now pending before Congress. Unless Congress acts, the amendments will take effect on December 1, 2016. Opponents of the rule change have argued, among other things, that it would undermine Fourth Amendment privacy protections, including the particularity requirement. Moreover, they argue that the rule change could have many unintended consequences that should be worked out by Congress in the first instance, and not the rulemaking body of the federal courts. Both DOJ and the Judicial Conference have asserted, on the other hand, that this rule change would only change the venue requirements of the rule, and that any constitutional questions would be addressed as they arise on a case-by-case basis. The following language is the final proposed amendment transmitted from the Supreme Court to Congress: Rule 41. Search and Seizure. ... (b) Authority to Issue a Warrant. Venue for a Warrant Application. At the request of a federal law enforcement officer or an attorney for the government: ... (6) a magistrate judge with authority in any district where activities related to a crime may have occurred has authority to issue a warrant to use remote access to search electronic storage media and to seize or copy electronically stored information located within or outside that district if: (A) the district where the media or information is located has been concealed through technological means; or (B) in an investigation of a violation of 19 18 U.S.C. SS 1030(a)(5), the media are protected computers that have been damaged without authorization and are located in five or more districts. (f) Executing and Returning the Warrant. (1) Warrant to Search for and Seize a Person or Property. ... (C) Receipt. The officer executing the warrant must give a copy of the warrant and a receipt for the property taken to the person from whom, or from whose premises, the property was taken or leave a copy of the warrant and receipt at the place where the officer took the property. For a warrant to use remote access to search electronic storage media and seize or copy electronically stored information, the officer must make reasonable efforts to serve a copy of the warrant and receipt on the person whose property was searched or who possessed the information that was seized or copied. Service may be accomplished by any means, including electronic means, reasonably calculated to reach that person.

With the Rules Enabling Act, Congress granted to the Supreme Court the authority to write federal rules of procedure, including the rules of criminal procedure. After several years of evaluation by the Judicial Conference, the policy-making arm of the federal judiciary, on April 28, 2016, the Supreme Court transmitted to Congress proposed changes to Rule 41 of the Federal Rules of Criminal Procedure. These proposed changes would amend the federal search and seizure rules in two ways. First, they would permit the government to remotely access electronic devices although the location of the device may be unknown. This issue has become more pressing in recent years with an increasing number of users anonymizing their communications, hindering the government's ability to pinpoint the location of the target, and thus making it difficult to discern the appropriate federal court to apply for a search warrant. Second, they would permit DOJ to search multiple computers in numerous districts as part of a large-scale investigation of computer crimes. In recent years, a tension has arisen between Rule 41 as currently drafted and the Department of Justice's (DOJ's) desired use of the rule for digital searches. One facet of this problem arose in a 2013 magistrate judge's ruling from the Southern District of Texas, in which the court denied DOJ's application to conduct remote searches of a computer believed to have been part of a fraudulent scheme. The court declined to grant the DOJ's application because the government could not establish the location of the target, thereby placing the proposed search outside the scope of Rule 41 and in violation of the Fourth Amendment particularity requirement. There have been at least two lines of argument against the proposed rule change, one based on the substance of the proposed amendment and the other grounded in the process by which the rule is being changed. The substantive arguments pertain to the actual substance of the rule and include, for example, an argument that the new rule would breach the particularity requirement of the Fourth Amendment. The procedural arguments pertain to how this potential authorization should be made law: through the rulemaking process by the courts or through enacted legislation by Congress. While federal law enforcement has been supportive of the proposed change, some advocacy groups have argued that the proposed rule change "would have significant legal and technical implications" and thus "merit[s] open consideration by Congress, rather than a rulemaking proceeding of the Judicial Conference." This report provides a brief overview of the proposed amendment to Rule 41. First, it provides background on the origin of, and rationale underlying, the proposed amendment and a description of the rule as currently written. Second, it reviews the potential changes made by the proposed amendment and surveys various concerns commenters have raised with the proposal.

Nicaragua began to establish a new democracy in the early 1990s after eight years of civil war in which the United States supported the anti-Sandinista contra movement in the country. Institutions such as a demo cratically elected legislature, a partially independent judiciary (judges are elected by the National Assembly), and an independent electoral council remained weak, however. Since the late 1990s, these institutions have become increasingly politicized. In 1998, the leftist Sandinista National Liberation Front (FSLN, or Sandinistas) and the conservative Constitutionalist Liberal Party (PLC) made a pact intended to limit participation by other political parties. Current President and FSLN leader Daniel Ortega was a member of the junta that took power in 1979 after overthrowing dictator Anastasio Somoza and was elected president in 1984. As part of a regional peace plan, Ortega agreed to democratic elections in 1990, which he lost to Violeta Chamorro. After losing three successive bids to regain the presidency in 1990, 1996, and 2001 elections, Ortega was elected in 2006. Since then the government has grown increasingly authoritarian in nature. He was reelected in 2011 and 2016. As opposition leader in the National Assembly from 1990 to 2006 and during his two subsequent terms as president, Ortega slowly consolidated Sandinista--and his own--control over the country's institutions. The United States and other observers cite municipal and regional elections over this period, and the 2011 presidential elections, as having been flawed and used to strengthen Ortega's control of national institutions. Nonetheless, Ortega and the FSLN have raised the standard of living for much of Nicaragua's poor population, thereby increasing the Sandinistas' popularity and public support. Although numerous observers questioned the legitimacy of the 2011 national elections and the official tally giving Ortega almost 63% of the vote, many also conceded that Ortega most likely would have won even without carrying out fraud. By 2012, the FSLN had achieved "near complete dominance over most of the country's institutions," according to Freedom House. In summer 2016, the government removed some of the last checks on Ortega's power by removing members of the opposition from the legislature, easing Ortega's way to winning a third consecutive presidential term that November. Ortega's popularity may be diminishing, however. Although the official electoral authority reported voter turnout was almost 70%, opponents estimated a much lower turnout of only 30%. Ortega was inaugurated to his third consecutive, and fourth overall, five-year term as president on January 10, 2017. In early September 2016, Nicaragua granted asylum to former El Salvadoran President Mauricio Funes, who is being investigated for alleged corruption. Funes, of the leftist Farabundo Marti National Liberation Front (FMLN), said he is fleeing political persecution from rightist elements and is afraid for his safety. President Ortega further consolidated not only his party's but also his own dominance with 97 constitutional amendments passed by the FSLN-dominated 92-member legislature in January 2014. The changes eliminated presidential term limits, removed the requirement for at least 35% of the vote to win the presidency in the first round of voting, and limited dissent by banning lawmakers from voting against their own party. Ortega also drafted a new military code and pushed it through the legislature the same month. The constitutional amendments and the revised military code gave the president new powers of patronage and expanded the role of the military in public administration. The armed forces had been the one institution that remained independent from the executive branch. The 2014 code, however, gave the president more influence over the appointment of the army's high command and afforded him the power to appoint active-duty officers to civilian government positions, which the previous code had prohibited. The code also expanded the army's role, under a new "national security" framework, in internal security. The military is designated to provide security for the proposed inter-oceanic canal; share management of ports, airports, and telecommunications facilities with civilian agencies; and protect national data systems and ground-based satellite communications. Critics are concerned that these expanded duties could be used to increase surveillance of civilians for political purposes. Ortega further expanded his legal control over state institutions in June 2014, when the legislature approved a reformed law regulating the national police. Although some observers believe Ortega has had de facto control of the police since 2007, the law shifted responsibility for the police from the interior ministry directly to the president. The law also established a vetting process for police recruits through community groups controlled by the ruling FSLN, raising concerns that the police will be used for increased political repression. Opposition groups worry that a prohibition in the police law against "private investigative activities" may be used further to impede investigative reporting by the media. According to Freedom House, the Ortega administration "engages in systematic efforts to obstruct and discredit media critics." Journalists are victims of death threats and violence, and complain that the police fail to protect them when they are attacked by pro-government groups at opposition demonstrations. The Nicaraguan constitution impedes freedom of the press by limiting the right of criticism to "constructive" criticism. In summer 2016, the government removed some of the last checks on Ortega's power. In June 2016, the Sandinista-controlled Supreme Court issued rulings that prevent any major opposition force from running against Ortega and the FSLN. The court removed opposition leader Eduardo Montealegre as the head of the Liberal Independent Party (Partido Liberal Independiente, or PLI), ruling that Pedro Reyes, the head of a weaker faction, should be recognized as the party's leader instead; Montealegre and others say that Reyes is supportive of the FSLN. The PLI was the largest group within the opposition bloc. In July 2016, the Supreme Electoral Council ousted 16 legislators from the PLI and its ally, the Sandinista Renovation Movement (Movimiento Renovador Sandinista, or MRS) from congress for their refusal to recognize Reyes as their party's leader. The MRS called the decision "a new blow to completely liquidate political pluralism and make disappear [stet] the opposition voices in parliament ... that have played an important role in denouncing Ortega's abuses of power." The Sandinista government has defended many of its actions as strengthening the legal system by codifying decrees into law. Opponents and other analysts see the measures as a means to perpetuate Ortega in power indefinitely. Since his long-sought return to the presidency in 2006, Ortega has implemented social welfare programs that have benefited Nicaragua's poor--reducing poverty, raising incomes, and providing subsidies and services--and thereby buoyed his popularity. Today, despite criticism from some quarters within the country and some loss of popularity over the past few years, Ortega remains the most popular political figure in Nicaragua. As his popularity and power increased, so did Ortega's family wealth and influence. Ortega is reputed to be one of the wealthiest men in the country, and his children all own businesses, inviting comparisons to the Somoza family dictatorship the Sandinistas overthrew in 1979. Some press reports claim that President Ortega has lupus or another disease, but he has not disclosed the exact nature of his illness. His wife, Rosario Murillo, has considerable power in his administration and is regarded by many observers as a de facto co-ruler. She is the chief government spokesperson and appears almost daily on national television. Widespread speculation that the couple was positioning Murillo to succeed her husband appeared to be validated when Ortega named Murillo as his vice-presidential running mate in August 2016. Critics charge that the couple runs Nicaragua like a fiefdom --charges that were leveled against the Somoza family dictatorship, which the Sandinistas overthrew. The opposition is weak and divided, and it is handicapped by FSLN control of the legislature, electoral council, and other aspects of Nicaraguan political life. The United States and some other countries have responded in critical but measured terms to Ortega becoming more authoritarian. Several reasons may account for the lack of a stronger response. Perhaps the principal reason is that Ortega has been very pragmatic in international relations. Politically, he has fostered relations, but not joined in lockstep, with governments critical of the United States, such as Venezuela, Russia, and Iran. But he also carefully balances his antagonistic stance against the United States and parts of Europe with cooperation on issues of importance to these countries and to Nicaragua, such as counternarcotics efforts, free trade, and Central American integration. Economically, Ortega's government has pursued macroeconomic policies that enable it to maintain working relationships with multilateral financial institutions such as the World Bank and the International Monetary Fund. For instance, unlike some of his fellow members in the Venezuelan-led Bolivarian Alliance for the Americas (ALBA), Ortega has maintained mostly mainstream macroeconomic policies and has not nationalized resources. Another reason some countries may not want to press Nicaragua on these issues is that Nicaragua is more stable and less violent than most of its Central American neighbors and there is no clear alternative to Ortega. Although opposition exists, it is divided and so far has been unable to present a coherent alternative to Ortega's governance plans and programs. Essentially, in the minds of many Nicaraguans, Ortega's authoritarian tendencies appear to be outweighed by populist measures that have improved their standard of living. Similarly, for many in the international community, the relative stability in Nicaragua seems to outweigh Ortega's perceived provocations and authoritarian proclivities. National elections for president and the legislature were held on November 6, 2016. Ortega, currently 70 years of age, won reelection to a third consecutive term. The constitutional changes he pushed through the legislature mean that presidents have no limit on reelection and can now be elected with a simple plurality. Critics both at home and abroad question the legitimacy of the electoral process. The Consejo Supremo Electoral (CSE, Supreme Electoral Council) issued the electoral calendar without making any changes that the political parties had suggested for improving the process. The regulations did not allow for either domestic or international observation of the elections. In addition, opposition party participation has been eliminated or severely restricted. Ortega began another five-year term when he was inaugurated on January 10, 2017; by 2018, he will have been president for more than 16 years--longer than Anastasio Somoza Garcia, founder of the dictatorial dynasty that Ortega helped to overthrow. In April 2016, two principal opposition candidates withdrew from the race. Fabio Gadea, who officially won 31% of the vote in the 2011 elections, announced that he would not run on the center-right Partido Liberal Independiente (PLI, Liberal Independent Party) ticket again, as had been expected. Gadea, aged 84, cited a lack of transparency in the electoral process as the basis for his decision. The PLC candidate, Noel Vidaurre, also unexpectedly withdrew from the race, reportedly saying that longtime PLC leader Arnoldo Aleman's decision to name his wife and other close associates as candidates for deputy would undermine efforts to revive the party's image. Aleman was president from 1997 to 2002 and was prosecuted by the subsequent Bolanos administration for embezzling about $100 million in public funds while in office. Without these candidates at the head of their ticket, the opposition parties' chances in legislative elections were hurt as well. After the 2011 elections, the PLI had 22 out of 91 seats in the National Assembly and the PLC had 2 seats. A June 2016 poll had each of these parties garnering just 5.6% of the intended votes, to the FSLN's 65%. Despite this sizeable lead, the Sandinista government continued to take steps that further crippled the opposition. The Sandinista-controlled Supreme Court issued rulings in June 2016 that prevent any major opposition force from running against Ortega and the FSLN. The court removed opposition leader Eduardo Montealegre as the head of the PLI, ruling that the head of a weaker faction--but one Montealegre says is supportive of the FSLN--should be recognized as the party's leader instead. The PLI had joined other parties in a Coalicion Nacional por la Democracia (National Coalition for Democracy, or CND); Montealegre and the other party leaders denounced the Supreme Court's ruling as an effort to keep them out of the 2016 electoral race. The Supreme Court then invalidated both factions seeking control of the small Partido de Accion Ciudadana (Citizen Action Party), the only other party in the coalition with legal standing under which the coalition might have run candidates. In July 2016, as mentioned above, the government ousted 16 members of the PLI and MRS from the legislature. On September 6, 2016, having been prohibited by the court from participating in the elections, the election-oriented coalition disbanded. Some members of the CND launched a protest movement, Citizens for Liberty, which, along with the MRS and other groups, boycotted the November 6 presidential election, calling it an "electoral farce." Other organizations expressed concern about the Supreme Court's decisions, including the principal private-sector lobby, COSEP; human rights groups, such as the Nicaraguan Human Rights Center; and the Episcopal Conference of Nicaragua. The latter reportedly said that any "intent to create conditions for the implementation of a single party regime ... is harmful for the country." The State Department expressed grave concern over the actions of the Nicaraguan government and Supreme Court to limit democratic space in advance of the presidential and legislative elections and called on the government to take steps to ensure fair and transparent elections and allow opposition parties to operate independently. On November 7, 2016, the State Department said that Nicaragua's "flawed presidential and legislative electoral process ... precluded the possibility of a free and fair election on November 6." Because the FSLN has had a majority in the current National Assembly, it has been able to pass legislation proposed by the Ortega administration without having to compromise with the opposition. The further weakening and exclusion of the largest opposition coalition during the November elections ensured that the FSLN maintained its supermajority in the new session. Nationwide municipal elections are scheduled for 2017. The FSLN is also widely expected to win many of those offices. Nicaragua's establishment of a framework for economic development since the signing of the 1990 Central American Peace Accords, which ended years of armed civil war in Nicaragua, has followed a more consistent path than has its democratic development. The World Bank says Nicaragua stands out for maintaining growth levels above the average for Latin America and the Caribbean. Nicaragua's economic growth reached a high of 6.2% in 2011; the World Bank estimates a drop in growth of 3.9% for 2015 and predicts growth of 4.2% for 2016. President Ortega's stated goal has been to implement socialism in Nicaragua, which he defines as a mixed economy. Nonetheless, he has maintained many elements of a market-based economy, including participation in the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR). Nicaragua's economy faces two significant challenges. High electricity costs appear to hinder the business community's ability to compete and stifle foreign investment in new businesses. The future of the Trans-Pacific Partnership (TPP) agreement could also have a negative impact on Nicaragua's textile production, a major export commodity for Nicaragua. According to the World Bank, "Nicaragua's macroeconomic stability has allowed the country's decisionmakers to shift from crisis control mode to longer-term, pioneering strategies to fight poverty." Poverty has declined in recent years but remains high. Over the past decade, poverty dropped from almost half the population (48%) in 2005 to 30% in 2014. Since his election in 2006, President Ortega has instituted many social-welfare programs to help the country's poor population, providing free education, free health care, and home-improvement programs. Nevertheless, Nicaragua remains the poorest country in Central America--in terms of per capita GDP--and the second-poorest country in the Western Hemisphere, ahead of Haiti. Many of Ortega's social welfare programs have been paid for in past years with assistance from Venezuela, particularly through low oil prices paid by Nicaragua, a sizeable export of Nicaraguan farm goods to Venezuela, and large-scale Venezuelan investments in Nicaraguan infrastructure. According to some estimates, more than 25% of the Ortega administration's revenues have come from Venezuela in some years. International donors and institutions have raised concerns about the lack of transparency of funds from Venezuela and the use of those funds for political patronage by Ortega, sometimes suspending or reducing aid in response to those concerns. A sharp contraction in funds from Venezuela, a possibility due to the drop of oil prices to historic lows and to political troubles in Venezuela, could seriously harm Nicaragua's economy. The Ortega administration is preparing for that possibility, however. According to the Economist Intelligence Unit, the Ortega administration has "curtailed some subsidies, removed others from off-budget expenditure and attracted new sources of external finance" --including international financial institutions. The Ortega government says it also will be taking fuller advantage of U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) benefits to expand exports further and continuing to attract foreign direct investment to strengthen its economy. Nicaragua became a full member of the Caribbean Community (CARICOM) in July 2016. CARICOM's goals include promoting economic integration and cooperation and coordinating foreign--primarily economic--policy. Controversy and conflict have been growing over Ortega's decision to grant a 100-year concession for an inter-oceanic canal through Nicaragua to a private Chinese company, HK Nicaragua Canal Development Investment Company Ltd. (HKND). The deal was rushed through the legislature for approval in June 2013. It gave HKND powers to expropriate lands, exempted the company from local tax and commercial regulations, and guaranteed HKND that there would be no criminal punishment for breach of contract. The government maintains the project will stimulate the economy and provide jobs. No environmental study was conducted before the deal was made. On June 1, 2015, the government said a just-concluded environmental study--which was paid for by HKND--had found the canal to be "viable," but the government released no details of the report to the public. The government has also kept the technical and financial studies secret. The canal would be 172 miles long, three times the length of the Panama Canal, and twice as deep. The Chinese company estimated the cost would be $50 billion and broke ground in December 2014, but it has made no visible progress since then. The investor with whom the Ortega administration made the canal deal, Chinese billionaire Wang Jing, reportedly lost about 80% of his $10 billion worth, heightening questions about the project's financing. HKND officials say the company is doing preconstruction studies and will begin canal construction in late 2016, but some experts are wondering if the project is dead. Various biologists and scientific organizations have expressed alarm that the canal would cut across Lake Nicaragua, or Cocibolca, endangering Central America's largest source of fresh water. Scientists also express concern that the route would damage networks of internationally protected nature preserves that include wetlands, coral reefs, rainforests, and coastal areas. Noting that international standards require environmental studies to be completed and published before work begins, these scientific organizations have asked the Nicaraguan government to suspend the project until independent studies are completed and publicly debated. The U.S. embassy also expressed concern about the lack of information and urged that all stages of the project be conducted openly and transparently. A British consulting firm issued a study of the project in fall 2015, recommending further studies in many areas before work proceeded. According to another analysis, "[d]rought, declining water levels, expanding deforestation, rising sedimentation, and frequent seismic events do not bode well for an undertaking that requires stable ecological and geological conditions." In early April 2016, an organization called the National Council for the Defense of Land, Lake, and Sovereignty, which includes farmers and environmental organizations, presented a measure to the legislature to repeal the law allowing the canal's construction. Petitioners need 5,000 stamped signatures to ask that any measure be reviewed by the National Assembly; the group collected 7,000 stamped signatures and more than 28,000 non-stamped signatures. The National Assembly rejected the measure on April 11, saying the assembly lacked "jurisdiction" to repeal the law and noting that in 2013 the Supreme Court had already rejected another legal action to prevent the canal's construction. Nicaraguan human rights and indigenous groups have filed a complaint with the Inter-American Court on Human Rights, saying their rights to prior consent have been violated. The canal's proposed route will go through indigenous lands and displace many communities inhabited by indigenous and Afro-Caribbean people. Members of the opposition Sandinista Renovation Movement have been concerned that very little is known about the developers and that because the agreement lacks sufficient oversight or input, it may open the door to corruption. Numerous demonstrations against the canal have occurred, some involving thousands of protesters. Government forces have sometimes responded with force; at least two protesters died in late 2014. On April 22, 2016, thousands of people again marched to protest the proposed canal, saying it would displace rural communities and harm the environment. More protests have occurred and seem likely to continue. The United States has sought to strengthen democratic institutions and practices in Nicaragua since Nicaragua initiated a transition to democracy in 1990. The United States has repeatedly expressed concerns as those institutions became politicized and, according to the State Department, democratic space has narrowed. It has sometimes reduced assistance to sanction the Nicaraguan government. In 2013, for example, the United States moved almost $4 million in counternarcotics assistance away from direct support to the government because of inadequate Nicaraguan government transparency. The funds were shifted to drug eradication and nongovernmental drug demand reduction programs instead. Both houses of Congress are currently considering bills that would oppose loans at international financial institutions for the Nicaraguan government unless it is taking effective steps to hold free, fair, and transparent elections ( H.R. 5708 , S. 3284 ). According to the U.S. Department of State, despite some of the concerns about the direction the Ortega government has taken Nicaragua, increasing numbers of private American citizens, including retirees, reside in Nicaragua. In addition, about 250,000 U.S. citizens visited Nicaragua in 2014. Tensions between the two countries have risen recently. Nicaragua expelled three U.S. officials--two U.S. customs and border control agents and a U.S. Army War college professor researching the canal--from the country on June 14, 2016. The State Department said that such action was "unwarranted" and could have a negative impact on bilateral relations, particularly trade." The Ortega government stated that two officials (it did not mention the third official) were acting without the knowledge of Nicaraguan authorities. The State Department issued a travel alert on June 29, 2016, informing U.S. citizens to increased Nicaraguan government scrutiny of foreigners' activities, new requirements for volunteer groups, and the potential for demonstrations during the fall election season. The Administration's FY2016 foreign aid request for Nicaragua totaled $18.2 million and focused on strengthening independent media and civil society organizations and working with at-risk youth along the Caribbean coast to reverse increasing violence and insecurity. Congress appropriated $10 million for Nicaragua. The FY2017 request of $14.8 million for Nicaragua had the same goals. The request included $14.5 million in Development Assistance (DA) and $300,000 in International Military Education and Training (IMET). The DA funding would support civil society, education, and citizen-security programs. The United States and Nicaragua cooperate on security and counternarcotics issues. According to the Administration's Congressional Budget Justification, IMET assistance would "promote the professional development of the Nicaraguan military and strengthen the military-to-military relationship with the United States." Through the Central America Regional Security Initiative (CARSI), the United States has provided equipment, training, and technical assistance to support law-enforcement operations. The United States has worked with the Nicaraguan police and navy to improve their narcotics interdiction capabilities and supported nongovernmental drug demand reduction programs. From 1994 to 2015, U.S. administrations had to certify to Congress that Nicaragua was resolving property claims by U.S. citizens whose property was expropriated in the 1980s, or issue a property waiver, before Congress would approve aid on an annual basis. In August 2015, the United States announced that Nicaragua had resolved the last of the relevant claims, and that requirement was dropped. On September 21, 2016, the House of Representatives passed the Nicaraguan Investment Conditionality Act of 2016 (NICA; H.R. 5708 ) to oppose loans at international financial institutions for the government of Nicaragua unless the government was taking effective steps to hold free, fair, and transparent elections. The Senate did not pass the bill before the end of the 114 th Congress. For decades, various U.S. administrations and Congresses have expressed concerns about respect for human rights in Nicaragua. According to the State Department's 2015 human rights report on Nicaragua, the principal human rights abuses committed by the Nicaraguan government were restrictions on citizens' rights to vote, obstacles to freedom of speech and press, and increased government harassment and intimidation of nongovernmental and civil society organizations. Other notable abuses included biased policies to promote single-party dominance; arbitrary arrests by police; life-threatening prison conditions; widespread corruption; violence against women and lesbian, gay, bisexual, transgender, and intersex people; trafficking in persons; and violations of trade union rights. Discrimination against ethnic minorities and indigenous people and communities, people with disabilities, and people with HIV/AIDS has also been reported. According to the State Department's human rights report, there were several allegations that the Nicaraguan government or its agents committed arbitrary or unlawful killings and "human rights organizations and independent media alleged some killings ... were politically motivated." Government agents committed "many" of those killings during confrontations with illegal armed groups in the northern part of the country, the report said. According to the State Department, the Nicaraguan government generally did not act on complaints of corruption or human rights abuses--including unlawful killings--allegedly committed by security forces. In addition, the Nicaraguan government limits public information on abuse investigations. Under such conditions, some observers are concerned that it may be difficult for the United States to ensure that officers participating in U.S.-sponsored IMET programs are not human rights abusers. The State Department's report said that human rights organizations reported several cases of arbitrary arrests by the Nicaraguan police and army related to protests in several cities. The State Department also reported that the Ortega government intimidated and harassed journalists, increased restriction of access to public information, and harassed and intimidated nongovernmental and civil society organizations in 2015. Nicaragua made some progress in combatting corruption during earlier democratically elected governments. In 2003, for example, then-president Enrique Bolanos's Administration convicted former president Arnoldo Aleman of embezzling about $100 million in public funds while in office. According to the State Department's 2015 human rights report on Nicaragua, Nicaraguan officials frequently engage in corrupt practices with impunity. As mentioned above, recent U.S. administrations, both Democratic and Republican, have emphasized respect for human rights as a key component of U.S. foreign policy, including regarding Nicaragua. During confirmation hearings for Secretary of State nominee Rex Tillerson, Members on both sides of the aisle and human rights advocates expressed concerns that Tillerson was not committed to human rights. The Senate Foreign Relations Committee voted to send his nomination to the full Senate, where a vote was expected the week of January 30, 2017. The United States and Nicaragua are participants in the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR). Since the accord went into effect in 2005, U.S. exports to Nicaragua have increased by 101% and Nicaraguan exports to the United States have grown by 170%. According to the Office of the U.S. Trade Representative, Nicaragua is the United States' 62 nd largest goods trading partner, with $4.4 billion in total (two-way) goods trade during 2015. Although President Trump pledged to renegotiate the North American Free Trade Agreement with Canada and Mexico and withdrew from the Trans-Pacific Partnership process, which includes some South American countries, he has yet to mention any intentions regarding CAFTA-DR. Central American leaders seemed to believe that their trade agreement would remain intact, but Nicaraguan and other officials said they are watching the new Administration for indications otherwise. The top U.S. exports to Nicaragua in 2015 were machinery, articles donated for relief, electrical machinery, mineral fuels, and knitted or crocheted fabrics. Nicaragua was the United States' 72 nd largest goods export market in 2015, with U.S. goods exports up 25% ($248 million) from 2014. U.S. exports of agricultural products to Nicaragua include soybean meal and oil, corn, dairy products, and prepared food. Nicaragua was the 57 th largest supplier of goods imports to the United States in 2015. The top Nicaraguan exports to the United States in 2015 were knit apparel, electrical machinery, woven apparel, precious metal and stone (gold), and coffee. Recent changes in U.S. laws regarding cigars could have a negative impact on future tobacco exports from Nicaragua. The American Chamber of Commerce estimates that more than 125 companies operating in Nicaragua have some relation to a U.S. company, either as wholly or partly owned subsidiaries, franchisees, or exclusive distributors of U.S. products. The companies have more than 300,000 employees in Nicaragua. Some Members of Congress have expressed concern about Nicaragua's relationship with Russia, especially recent military purchases. Russian President Vladimir Putin visited Nicaragua in 2014, saying that he intended to continue strengthening economic ties with Nicaragua. President Ortega pushed through the legislature authorization for a ground station in Nicaragua for a Russian satellite network. The Nicaraguan Army has expressed interest in buying a fleet of Russian-made fighter jets for defense and to prevent aerial drug trafficking. Costa Rican and Honduran analysts have expressed concerns that such an arms purchase would be destabilizing to the region. Nicaragua ordered 50 tanks from Russia to be delivered in 2016-2017, reportedly costing $80 million, which also raised concern among its neighbors. Nicaraguan and Russian military officials reportedly said that delivery of the battle tanks was part of ongoing "military cooperation" between the two countries. The Nicaraguan government has kept many aspects of the canal deal, including the technical and financial studies, secret. This secrecy has contributed to speculation that the Chinese government is involved in the project. China and Nicaragua do not have diplomatic relations; Nicaragua maintains relations with Taiwan. The Chinese government denies involvement in the canal, but some experts claim that it has influence over HKND, the private Chinese company granted the canal concession. Although various reports emerged in 2009 that Iran was expanding its role in Nicaragua, causing concern in Washington, those reports were later shown to be untrue or exaggerated. In late August 2016, Iran's foreign minister, Mohammad Javad Zarif, included a visit to Nicaragua on his Latin American tour. The Iranian government said the trip was part of its efforts to expand economic relations with the region now that international sanctions against Iran have been lifted. Zarif said that areas of cooperation between the two countries could include work on the Nicaraguan canal, agriculture, energy production, and banking, among others.

This report discusses Nicaragua's current politics, economic development, and relations with the United States, and it provides context for Nicaragua's controversial reelection of President Daniel Ortega late last year. After its civil war ended, Nicaragua began to establish a democratic government in the early 1990s. Its institutions remained weak, however, and they have become increasingly politicized since the late 1990s. Ortega was a Sandinista (Frente Sandinista de Liberacion Nacional, FSLN) leader when the Sandinistas overthrew the dictatorship of Anastasio Somoza in 1979. Ortega was elected president in 1984. An electorate weary of war between the government and U.S.-backed contras denied him reelection in 1990. After three failed attempts, he won reelection in 2006 and again in 2011. Ortega consolidated control over national institutions, which facilitated him winning a third consecutive term in the November 6, 2016, presidential elections. The Sandinista-controlled Supreme Court issued rulings that prevented any major opposition force from running against Ortega and the FSLN and allowed Ortega's wife, Rosario Murillo, to run as his vice president despite a constitutional prohibition against relatives of a sitting president running for office. As in previous elections at all levels in recent years, opposition figures and international analysts strongly questioned the legitimacy of this election. As a leader of the opposition in the legislature from 1990 to 2006 and as president since then, Ortega slowly consolidated Sandinista--and personal--control over Nicaraguan institutions. As Ortega has gained power, he reputedly has become one of the country's wealthiest men. His family's wealth and influence have grown as well, inviting comparisons to the Somoza family dictatorship. As president, Ortega has implemented social welfare programs that have benefited Nicaragua's poor--reducing poverty and raising incomes--and thereby buoyed his popularity. The United States and other countries have responded in critical but measured terms to Ortega becoming more authoritarian. For many in the international community, Ortega's cooperation on issues of importance to them, such as counternarcotics efforts and free trade, and the relative stability in Nicaragua seem to outweigh Ortega's perceived provocations and authoritarian proclivities. Similarly, in the minds of many Nicaraguans, Ortega's authoritarian tendencies appear to be outweighed by populist measures that have improved their standard of living. Although President Ortega's stated goal has been to implement socialism in Nicaragua, which he defines as a mixed economy, he has maintained many elements of a market-based economy. Nicaragua has maintained growth levels above the average for Latin America and the Caribbean in recent years. Over the past decade, poverty has declined significantly. Nevertheless, Nicaragua remains the poorest country in Central America and the second-poorest country in the Western Hemisphere, ahead of Haiti. The Ortega administration is taking steps to prepare for a probable sharp contraction in funds from Venezuela, a major source of government revenues in recent years. Controversy and conflict have been growing over Ortega's decision to grant a 100-year concession for an inter-oceanic canal through Nicaragua to a Chinese company. The government maintains the project will stimulate the economy and provide jobs. Critics argue it will displace rural communities and harm the environment. The United States and Nicaragua cooperate on issues such as free trade and counternarcotics. U.S. aid has sometimes been reduced over concern for the narrowing democratic space in Nicaragua. Currently, Nicaragua is part of the U.S. Strategy for Engagement in Central America. Tensions rose recently when Nicaragua expelled three U.S. officials. Other U.S. concerns include violations of human rights, including restriction on citizens' rights to vote; government harassment of civil society groups; arbitrary arrests and killings by security forces; and corruption. The Administration and some Members of Congress have expressed concern about Nicaragua's relationship with Russia, especially recent military purchases.

At the outset of the 113 th Congress, there has been renewed congressional interest in gun control legislation. Senator Dianne Feinstein introduced S. 150 , the Assault Weapons Ban of 2013, which would prohibit, subject to certain exceptions, the sale, transfer, possession, manufacturing, and importation of specifically named firearms and other firearms that have certain features, as well as the transfer and possession of large capacity ammunition feeding devices. Representative Carolyn McCarthy introduced a companion measure, H.R. 437 , in the House of Representatives. S. 150 is similar to the Assault Weapons Ban of 1994 that was in effect through September 13, 2004. As Congress considers S. 150 and other gun control measures, it may be useful to review the 1994 law and its relation to federal firearms law, as well as the disposition of the legal challenges to the ban. Congress enacted the Gun Control Act of 1968 (GCA or Act) to "keep firearms out of the hands of those not legally entitled to possess them because of age, criminal background, or incompetency, and to assist law enforcement authorities in the states and their subdivisions in combating the increasing prevalence of crime in the United States." The GCA establishes a comprehensive statutory scheme that regulates the manufacture, sale, transfer, and possession of firearms and ammunition. In particular, the GCA establishes nine classes of individuals who are prohibited from shipping, transporting, possessing, or receiving firearms and ammunition. The individuals targeted by this provision include (1) persons convicted of a crime punishable by a term of imprisonment exceeding one year; (2) fugitives from justice; (3) individuals who are unlawful users or addicts of any controlled substance; (4) persons legally determined to be mentally defective, or who have been committed to a mental institution; (5) aliens illegally or unlawfully in the United States, as well as those who have been admitted pursuant to a nonimmigrant visa; (6) individuals who have been discharged dishonorably from the Armed Forces; (7) persons who have renounced United States citizenship; (8) individuals subject to a pertinent court order; and, finally, (9) persons who have been convicted of a misdemeanor domestic violence offense. When the GCA was enacted, the transfer and sale of ammunition appear to have been regulated in the same manner as firearms. In 1986, Congress passed the Firearm Owners' Protection Act (FOPA), which repealed many of the regulations regarding ammunition. Consequently, the transfer and sale of ammunition is not as strictly regulated as the transfer and sale of firearms. In order to effectuate the general prohibitions outlined above, the GCA imposes significant requirements on the transfer of firearms. Pursuant to the Act, any person who is "engaged in the business" of importing, manufacturing, or dealing in firearms must apply and be approved as a Federal Firearms Licensee (FFL). FFLs are subject to several requirements designed to ensure that a firearm is not transferred to an individual disqualified from possession under the Act. For example, FFLs must verify the identity of a transferee by examining a government-issued identification document bearing a photograph of the transferee, such as a driver's license; conduct a background check on the transferee using the National Instant Criminal Background Check System (NICS); maintain records of the acquisition and disposition of firearms; report multiple sales of handguns to the Attorney General; respond to an official request for information contained in the licensee's records within 24 hours of receipt; and comply with all other relevant state and local regulations. Not all sellers of firearms are required to be approved FFLs, however. The GCA contains a specific exemption for any person who makes "occasional sales, exchanges, or purchases of firearms for the enhancement of a personal collection or for a hobby, or who sells all or part of his personal collection of firearms." Although private sellers are not required to conduct a background check or maintain official records of transactions under federal law, they are prohibited from transferring a firearm if they know or have reasonable cause to believe that the transferee is a disqualified person. In addition to the requirements imposed upon the sale of firearms by FFLs and non-FFLs (or private individuals) generally, federal law also places significant limitations on the actual interstate transfer of weapons. Although FFLs have the ability to sell and ship firearms in interstate or foreign commerce, the GCA places several restrictions on the manner in which a transfer may occur. Specifically, while FFLs may make an in-person, over-the-counter sale of a long gun (i.e., shotgun or rifle) to any qualified individual regardless of her state of residence, they may only sell a handgun to a person who is a resident of the state in which the dealer's premises are located. Relatedly, FFLs are prohibited from shipping firearms, both handguns and long guns, directly to consumers in other states. Instead, FFLs making a firearm sale to a non-resident must transfer the weapon to another FFL that is licensed in the transferee's state of residence and from whom the transferee may obtain the firearm after passing the required NICS background check. Firearm transfers between non-FFL sellers are also strictly regulated. Specifically, whereas FFLs may transfer a long gun to any individual regardless of her state of residence in an over-the-counter sale, the GCA specifically bars a non-FFL from directly selling or transferring any firearm to any person who is not a resident of the state in which the non-FFL resides. Instead, interstate transactions between non-FFLs result in the transferring party shipping the firearm to an FFL located in the transferee's state of residence. Congress enacted, as part of the Violent Crime Control and Law Enforcement Act of 1994, the Public Safety and Recreational Firearms Act (referred to as the "Assault Weapons Ban"), which established a 10-year prohibition on the manufacture, transfer, or possession of "semiautomatic assault weapons," as defined by the act, as well as large capacity ammunition feeding devices. The act contained several exceptions, including a "grandfather clause" allowing for the possession of such items that were otherwise lawfully possessed on the date of enactment. The Assault Weapons Ban expired on September 13, 2004. Generally speaking, an "assault weapon" is considered to be a military style weapon capable of providing by a selector switch either semiautomatic--that is, the firearm discharges one round, then loads a new round, each time the trigger is pulled until the magazine is exhausted--or a fully automatic firearm--that is, continuous discharge of rounds while the trigger is depressed until all rounds are discharged. Under federal law, a fully automatic firearm falls under the definition "machinegun," which is defined as "any weapon that shoots ... automatically more than one shot, without manual reloading, by a single function of the trigger." Semiautomatic firearms, including semiautomatic assault weapons, are "produced with semiautomatic fire capability only." The 1994 act made it "unlawful for a person to manufacture, transfer, or possess a semiautomatic assault weapon." Weapons banned were identified either by specific make or model (including copies or duplicates thereof, in any caliber), or by specific characteristics that slightly varied according to whether the weapon was a pistol, rifle, or shotgun. The act also made it unlawful to transfer and possess large capacity ammunition feeding devices (LCAFD). An LCAFD was defined as "any magazine, belt, drum, feed strip, or similar device manufactured after the date [of the act] that has the capacity of, or that can be readily restored or converted to accept, more than 10 rounds of ammunition." LCAFDs manufactured after the date of enactment were required to have a serial number that "clearly shows" that they were manufactured after such date, as well as other markings prescribed by regulation. The 1994 act included a grandfather clause and therefore allowed for the transfer of any "semiautomatic assault weapon" or LCAFD that was otherwise lawfully possessed on the date of enactment. Additionally, Congress exempted roughly 650 types or models of firearms, such as various models of Browning, Remington, and Berettas, deemed mainly suitable for target practice, match competition, hunting, and similar sporting purposes. This list was not exhaustive and the act provided that the absence of a firearm from the exempted list did not mean it was banned unless it met the definition of "semiautomatic assault weapon." The act also exempted any firearm that (1) is manually operated by bolt, pump, lever, or slide action; (2) has been rendered permanently inoperable; or (3) is an antique firearm. The act also did not apply to any semiautomatic rifle that cannot accept a detachable magazine that holds more than five rounds of ammunition nor any semiautomatic shotgun that cannot hold more than five rounds of ammunition in a fixed or detachable magazine. Furthermore, there were exemptions that permitted semiautomatic assault weapons and LCAFDs to be manufactured for, transferred to, and possessed by law enforcement and for authorized testing or experimentation purposes. The other exemptions included a transfer for purposes of federal security pursuant to the Atomic Energy Act, as well as possession by retired law enforcement officers who are not otherwise a prohibited possessor under law. The 1994 Assault Weapons Ban did not address the importation of semiautomatic assault weapons, rather Section 925(d)(3) of the GCA provides that the Attorney General shall authorize a firearm or ammunition to be imported or brought into the United States if it does not meet the definition of a firearm under the National Firearms Act, and is "generally recognized as particularly suitable for or readily adaptable to sporting purposes, excluding surplus military rifles." Notably, the statute does not specifically describe or list any criteria that the Attorney General is required to take into consideration when determining what constitutes "suitable for or readily adaptable to sporting purposes." This provision permitting the importation of firearms is generally known as "the sporting purposes test," and its implementation appears to be left to the Attorney General's discretion. Prior to the implementation of the 1994 Assault Weapons Ban, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) identified several semiautomatic assault rifles that it determined did not meet the sporting suitability standard of Section 925(d)(3). On July 6, 1989, ATF prohibited importation of these rifles. This decision was, in part, based on ATF's finding that "these rifles have certain characteristics that are common to modern military assault rifles and that distinguish them from traditional sporting rifles." Subsequent to this decision, domestic manufacturing of semiautomatic assault weapons reportedly increased, and foreign manufacturers reportedly "circumvented the strictures of the [1989] ban [under President Bush] by reconfiguring their weapons and shipping them out under different models," as well as attempting to give the weapons a sporting appearance. The enactment of the 1994 Assault Weapons Ban addressed these developments to a certain degree; however, ATF subsequently determined in 1997 that certain semiautomatic assault rifles could no longer be imported even though they were permitted to be imported under the 1989 "sporting purposes test" because they had been modified to remove all of their military features other than the ability to accept a detachable magazine. Accordingly, on April 6, 1998, ATF prohibited the importation of 56 such rifles, determining that they did not meet the "sporting purposes test." S. 150 , the Assault Weapons Ban of 2013, was introduced by Senator Dianne Feinstein in the 113 th Congress. A companion measure, H.R. 437 , was introduced by Representative Carolyn McCarthy in the House of Representatives. S. 150 would establish a regulatory scheme for "semiautomatic assault weapons" similar to the 1994 law with a few differences. First, it would ban approximately 157 specifically named firearms and any copies, duplicates, or variants thereof. It differs from the 1994 law because a semiautomatic firearm would be considered a "semiautomatic assault weapon" if it accepts a detachable magazine and has any one of five features (compared to two of five features in the 1994 law). The features listed in S. 150 are slightly different than those listed in the 1994 law. The bill also further provides definitions for each of the features listed. Second, the bill would prohibit the importation of--in addition to the sale, manufacture, transfer, and possession of--such weapons and LCAFDs. The bill's exemptions are similar to the 1994 law; however, it would exempt more hunting and sporting rifles and shotguns by make and model (approximately 2,258), and prohibit the transfer of grandfathered semiautomatic assault weapons to other private individuals unless a background check is conducted through an FFL. Other differences from the 1994 law include an absence of a sunset provision; requirements for safe storage of semiautomatic assault weapons by any private persons; and a requirement for the Attorney General to establish, maintain, and annually report to Congress the make, model, and if available, the date of manufacture of any semiautomatic assault weapon which the Attorney General is made aware has been used in relation to a crime under federal or state law. The Assault Weapons Ban of 1994 was unsuccessfully challenged as violating several constitutional provisions. While arguments that the act constituted an impermissible Bill of Attainder, is unconstitutionally vague, and is contrary to the Ninth Amendment were readily dismissed by the courts, challenges to the ban based on the Commerce Clause and the Equal Protection Clause received more measured consideration. The 1994 Assault Weapons Ban was challenged on the basis that it violated the Commerce Clause. The ban was evaluated under the factors delineated by the Supreme Court in United States v. Lopez , which held that Congress had exceeded its constitutional authority under the Commerce Clause by passing the Gun Free School Zone Act of 1990 (School Zone Act). The Court in Lopez clarified the judiciary's traditional approach to Commerce Clause analysis and identified three broad categories of activity that Congress may regulate under its commerce power. These are (1) the channels of commerce; (2) the instrumentalities of commerce in interstate commerce, or persons or things in interstate commerce; and (3) activities which "substantially affect" interstate commerce. In examining the School Zone Act, the Court concluded that possession of a gun in a school zone was neither a regulation of the channels nor the instrumentalities of interstate commerce. Because the conduct regulated was considered to be a wholly intrastate activity, the Court concluded that Congress could only regulate if it fell within the third category and "substantially affect[ed]" interstate commerce. The Court indicated that intrastate activities have been, and could be, regulated by Congress where the activities "arise out of or are connected with a commercial transaction" and are "part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activity were regulated." With respect to the School Zone Act, the Court declared that the intrastate activity was not a part of the larger firearms regulatory scheme. Moreover, the Court found it significant that the act did not require that interstate commerce be affected, such as by requiring the gun to be transported in interstate commerce. Commerce Clause challenges to the 1994 Assault Weapons Ban were evaluated under the framework provided by the Lopez decision, and lower courts readily determined that the act met minimum constitutional requirements under the Commerce Clause. For example, in Navegar, Inc. v. United States , the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) addressed the question of whether the act fell within one of the three categories of activity identified in Lopez . Like the Court in Lopez , the D.C. Circuit determined that it was not required to analyze the act under the first or second categories because the "[it] readily falls within category 3 as a regulation of activities having a substantial [e]ffect on interstate commerce." The court analyzed individually the act's prohibitions on manufacture, transfer, and possession. Regarding the manufacturing prohibition, the D.C. Circuit declared that "[t]he Supreme Court has repeatedly held that the manufacture of goods which may ultimately never leave the state can still be activity which substantially affects interstate commerce." Regarding the prohibition on transfers, the court similarly remarked that "the Supreme Court precedent makes clear that the transfer of goods, even as part of an intrastate transaction, can be an activity which substantially affects interstate commerce." Based on these maxims, the court held that "it is not even arguable that the manufacture and transfer of 'semiautomatic assault weapons' for a national market cannot be regulated as activity substantially affecting interstate commerce." However, with respect to the possession of a semiautomatic assault weapon, the court in Navegar noted that the Lopez decision raised a question of whether "mere possession" can substantially affect interstate commerce. The court proceeded to analyze the purposes behind the act to determine whether "it was aimed at regulating activities which substantially affect interstate commerce." Analyzing the congressional hearings, the court determined that the ban on possession was "conceived to control and restrict the interstate commerce in 'semiautomatic assault weapons,'" and that the "ban on possession is a measure intended to reduce the demand for such weapons." The D.C. Circuit stated that the ban on possession was "necessary to allow law enforcement to effectively regulate the manufacture and transfers where the product comes to rest, in the possession of the receiver." Based on these factors, the court held that the "purpose of the ban on possession has an 'evident commercial nexus.'" Although the Supreme Court further clarified its Commerce Clause jurisprudence in later decisions, such as Gonzales v. Raich , it appears that the Commerce Clause analysis applicable to the ability of Congress to regulate or ban certain semiautomatic assault weapons would not be fundamentally altered by these later developments. The Assault Weapons Ban of 1994 was also challenged on Equal Protection Clause grounds, with opponents arguing that it prohibited weapons that were the functional equivalents of weapons exempted under the Act, and because the prohibition of other semiautomatic assault weapons based upon their characteristics served no legitimate governmental interest. A court must employ one of the three levels of judicial scrutiny in an Equal Protection Clause analysis to determine whether a law negatively impacts a suspect class or a fundamental right. If there is such an impact, the law is subjected to strict scrutiny, requiring the government to prove that the law is necessary to satisfy a compelling governmental interest. If a law does not affect a suspect class or a fundamental right, the court engages in a "rational basis" review, requiring only that the law be rationally related to a legitimate governmental interest. Applying these standards, the U.S. Court of Appeals for the Sixth Circuit (Sixth Circuit) held that the provisions of the 1994 law did not violate the Equal Protection Clause. In Olympic Arms v. Buckles , the Sixth Circuit first noted that the lower court had held that the plaintiffs' claim was non-cognizable, given that the "Equal Protection Clause protects against inappropriate classifications of people, rather than things." However, the court stated that other rulings have held that since persons may have an interest in things, their classification may be challenged on equal protection grounds. Rather than resolve this disparity on the scope of the Equal Protection Clause, the Sixth Circuit went on to declare that "even if we were to assume that equal protection analysis is appropriate here, we would have to conclude that the semi-automatic assault weapons ban meets all equal protection requirements." The court first addressed the argument "that variations in the specificity of weapon descriptions and lack of common characteristics in the list of weapons outlawed destroy the constitutional legitimacy of the 1994 Act." The Sixth Circuit found this argument to be without merit for several reasons. First, the court found it significant that the list of prohibited firearms was developed to target weapons commonly used in the commission of violent crimes. Additionally, the court found that the prohibition on copies or duplicates of listed firearms was incorporated to prevent manufacturers from circumventing the act's terms "by simply changing the name of the specified weapons." Finally, the court noted that the list of exempted weapons was based on the determination that they were particularly suited to sporting purposes. Taking these factors together, the Sixth Circuit held that it was "entirely rational for Congress ... to choose to ban those weapons commonly used for criminal purposes and to exempt those weapons commonly used for recreational purposes." The fact that many of the protected weapons were somewhat similar in function to those that were banned does not destroy the rationality of the congressional choice. The Sixth Circuit next addressed whether prohibiting weapons based upon having two or more qualifying features was irrational, given that the act allowed a weapon to possess one such feature and that the individual features did not operate in tandem with one another. The court also rejected this argument, explaining that each characteristic served to make the weapon "potentially more dangerous," and were not "commonly used on weapons designed solely for hunting." The court also explained that "Congress could have easily determined that the greater the number of dangerous add-ons on a semi-automatic weapon, the greater the likelihood that the weapon may be used for dangerous purposes." Accordingly, the Sixth Circuit concluded that the plaintiffs had "failed to meet the heavy burden required to show that the 1994 Act violates equal protection." Notably, the Sixth Circuit reviewed the equal protection claim under the rational basis test finding that "precedent does not recognize a fundamental right to individual weapon ownership or manufacture, and the plaintiffs, gun retailers and owners, are not a suspect class." While the latter is still accurate, precedent regarding a fundamental right to individual weapon ownership has changed with the Supreme Court's decision in District of Columbia v. Heller . As discussed below, the full nature of the right guaranteed by the Second Amendment has yet to be determined by the courts. Therefore, a court considering an equal protection claim in the context of a semiautomatic assault weapons ban could conceivably determine that it is necessary to first address the fundamental issue of whether assault weapons are protected by the Second Amendment. If enacted, an assault weapons ban could also be challenged on Second Amendment grounds in light of the Supreme Court's decision in District of Columbia v. Heller . In Heller , the Court recognized that the Second Amendment protects an individual right to bear arms for lawful purposes such as self-defense within the home. The decision was not an exhaustive analysis of the full scope of the right guaranteed by the Second Amendment, but the Court stated that "[l]ike most rights, the right secured by the Second Amendment is not unlimited." One limitation upon the Second Amendment the Court addressed is that it "does not protect those weapons not typically possessed by law-abiding citizens for lawful purposes, such as short-barreled shotguns." The Court found that its prior 1939 decision in United States v. Miller supported this conclusion. Relying on Miller , the Court acknowledged that this limitation is supported by the "historical tradition of prohibiting the carrying of 'dangerous and unusual weapons'" and that the "sorts of weapons protected were those 'in common use at the time'" because those capable of service in the militia at the time of ratification would have brought "the sorts of lawful weapons that they possessed at home to militia duty." Since Heller , cases that have evaluated the constitutionality of state assault weapons bans have generally found them to be valid under the Second Amendment. In 2009, the California Court of Appeals decided People v. James , which held that possession of an assault weapon in California remains unlawful and is not protected by the Second Amendment. California's Roberti-Roos Assault Weapons Control Act of 1989, like the 1994 federal assault weapons ban, defines "assault weapons" by providing a list of proscribed weapons and through characteristics "which render these weapons more dangerous than ordinary weapons typically possessed by law-abiding citizens for lawful purposes." Relying on Heller 's brief discussion that the Second Amendment does not protect a military weapon, such as an M16 rifle, the court in James declared that the prohibited weapons on the state's list "are not the types of weapons that are typically possessed by law-abiding citizens for lawful purposes such as sport hunting or self-defense; rather these are weapons of war." It concluded that the relevant portion of the act did not prohibit conduct protected by the Second Amendment as defined in Heller and therefore the state was within its ability to prohibit the types of dangerous and unusual weapons an individual can use. The District of Columbia amended its firearms regulations after the Heller decision and enacted new firearms regulations including an assault weapons ban that is similar to California's. In 2011, the D.C. Circuit issued its decision in Heller v. District of Columbia ( Heller II ) which upheld the District's ban on certain semiautomatic rifles and LCAFDs. Under the "common use" factor delineated in Heller , the D.C. Circuit acknowledged that "it was clear enough in the record that certain semi-automatic rifles and magazines holding more than 10 rounds are indeed in 'common use.'" However, the court could not conclude definitely whether the weapons are "commonly used or are useful specifically for self-defense or hunting" such that they "meaningfully affect the right to keep and bear arms." Therefore, the court went on to analyze the bans under a two-stepped approach to determine their validity under the Second Amendment. Under this approach, the court first asks whether a particular provision impinges upon a right protected by the Second Amendment as historically understood. If it does, then it goes on to determine whether the provision passes muster under the appropriate level of constitutional scrutiny. Assuming that the ban impinged on the right protected under Heller (i.e., to possess certain arms for lawful purposes such as individual self-defense or hunting), the court found that such regulations should be reviewed under intermediate scrutiny because the prohibition "does not effectively disarm individuals or substantially affect their ability to defend themselves." Under intermediate scrutiny, the government has the burden of showing that there is a substantial relationship or reasonable "fit" between the regulation and the important governmental interest "in protecting police officers and controlling crime." The D.C. Circuit held that the District carried this burden and that the evidence demonstrated that a ban on both semiautomatic assault rifles and LCAFDs "is likely to promote the Government's interest in crime control in the densely populated urban area that is the District of Columbia." In 2012, the Supreme Court of Illinois decided Wilson v. Cook County , a case that evaluated the constitutionality of the Blair Holt Assault Weapons Ban of Cook County, a long-standing ordinance that was amended to similarly reflect provisions of the 1994 Assault Weapons Ban. The plaintiffs argued that the ordinance violates the Due Process and Equal Protection Clauses of the U.S. Constitution as well as the Second Amendment. Regarding the due process claim, the court concluded that the ordinance is not unconstitutionally vague such that it "fails to provide people of ordinary intelligence a reasonable opportunity to understand what conduct it prohibits." The court also dismissed the plaintiff's equal protection claim, finding that the "[o]rdinance does not arbitrarily differentiate between two owners with similar firearms because the banned firearms are either listed, a copy or duplicate, or fall under the characteristics-based test." With respect to the Second Amendment claim, the court indicated that it would follow the two-step approach similar to the Heller II court. While the court acknowledged that the ordinance banned only a subset of weapons with particular characteristics similar to other jurisdictions, it found that it could not "conclusively say ... that assault weapons as defined in the [o]rdinance categorically fall outside the scope of the rights protected by the [S]econd [A]mendment." The court ultimately remanded the Second Amendment claim to the trial court for further proceedings, because unlike the James and Heller II decisions, the county did not have an opportunity to present evidence to justify the nexus between the ordinance and the governmental interest it seeks to protect. These cases demonstrate that courts evaluating various assault weapons bans, and to a limited extent LCAFD bans, have looked to the Heller decision and the general framework that has developed in the lower courts for analyzing claims under the Second Amendment. Based on the Heller decision where the Supreme Court indicated that certain weapons fall outside the protection of the Second Amendment, lower courts have examined whether the prohibited weapons are considered in "common use" or "commonly used" for lawful purposes or "dangerous and unusual." It is uncertain whether, to be protected under the Second Amendment, the weapon must be in "common use" by the people and if so, must it be in "common use" for self-defense or hunting, or what constitutes "dangerous and unusual." Heller could arguably be taken to indicate that if the prohibited weapons do not meet these criteria then they are not protected by the Second Amendment, in which case no heighted judicial scrutiny would be applied. Courts also could evaluate such measures under the two-step approach laid out by the lower courts. This asks whether a ban on certain weapons and firearm accessories imposes a burden on conduct falling within the scope of the Second Amendment. If so, then a heightened level of judicial scrutiny will be applied to determine the ban's constitutionality. How the "common use" and "dangerous and unusual" criteria should be read, if at all, in connection with the two-step approach remains unclear. Neither the James , Heller II , nor Wilson courts appear to have fully explained the connection between the two approaches. Lastly, while it appeared that constitutional claims under the Due Process and Equal Protection Clauses were largely dismissed when the 1994 Assault Weapons Ban was in effect, the Wilson case demonstrates that they are claims challengers may still consider raising.

In the 113th Congress, there has been renewed congressional interest in gun control legislation. On January 16, 2013, President Obama announced his support for legislation on gun control, including a ban on certain semiautomatic assault firearms and large capacity ammunition feeding devices. Senator Dianne Feinstein introduced S. 150, the Assault Weapons Ban of 2013, which would prohibit, subject to certain exceptions, the sale, transfer, possession, manufacturing, and importation of specifically named firearms and other firearms that have certain features, as well as the transfer and possession of large capacity ammunition feeding devices. Representative Carolyn McCarthy introduced a companion measure, H.R. 437, in the House of Representatives. S. 150 is similar to the Assault Weapons Ban of 1994 (P.L. 103-322) that was in effect through September 13, 2004. The Assault Weapons Ban of 1994 was challenged in the courts for violating, among other things, the Equal Protection Clause and the Commerce Clause. This report reviews the disposition of these challenges. It also discusses Second Amendment jurisprudence in light of the Supreme Court's decision in District of Columbia v. Heller and how lower courts have evaluated state and local assault weapons bans post-Heller.

Unanimous consent agreements are special orders of the Senate that are agreed to without objection by the chamber's membership. Fundamental to the management of the contemporary Senate, these devices are typically employed to structure floor proceedings and to expedite the chamber's business. Two general types of unanimous consent permeate Senate operations: "simple" and "complex." Both types set aside the rules, precedents, or orders of the Senate via the unanimous concurrence of all Senators. A simple unanimous consent request addresses routine matters, such as dispensing with quorum calls or requesting that certain staff aides have floor privileges. To be sure, there are occasions when a simple unanimous consent request can have policy consequences, such as an objection to setting aside an amendment or dispensing with the reading of an amendment. Simple unanimous consent requests have been used since the First Congress. For example, a Senate rule adopted on April 16, 1789, stated: Every bill shall receive three readings [prior] to its being passed; and the President [of the Senate] shall give notice at each, whether it be first, second, or third; which readings shall be on three different days, unless the Senate unanimously directs otherwise. The focus of this report is on the complex variety: their historical origin, some benchmarks in their evolution, and how they came to be reflected in the Senate's rulebook. Complex agreements establish a tailor-made procedure for virtually anything taken up by the Senate, such as bills, joint resolutions, concurrent resolutions, simple resolutions, amendments, nominations, treaties, or conference reports. As two Senate parliamentarians wrote: There is a fundamental difference between the Senate operating under a unanimous consent agreement and the Senate operating under the Standing Rules. Whereas the Senate Rules permit virtually unlimited debate, and very few restrictions on the right to offer amendments, these agreements usually limit time for debate and the right of Senators to offer amendments. Senators generally accept the debate and amendment restrictions common to most unanimous consent agreements largely for two overlapping reasons: they facilitate the processing of the Senate's workload, and they serve the interests of individual lawmakers. Based on trust, and reached after often protracted negotiations, unanimous consent agreements are the equivalent of "binding contracts" that can only be changed or modified by unanimous consent. It is not clear when the Senate actually began to employ unanimous consent agreements to limit debate or to fix a time for a vote on a measure. Perhaps the first instance occurred in the mid-1840s. On March 24, 1846, Senator William Allen, D-OH, stated that the Senate had been debating a joint resolution concerning the Oregon Territory for more than two months, and it was now time to proceed to a final vote on the matter. Noting that the Senate neither allowed for the previous question (a motion employed in the House to end debate) nor adopted resolutions directing that a vote should occur at a specific time, Senator Allen pointed out that it was the Senate's habit to have "a conversational understanding that an end would be put to a protracted debate at a particular time." A Senate colleague suggested that Allen delay several days before making such a request. Two days later Senator Allen again asked that the Senate informally agree to fix "a definite day on which the vote might be taken." The Senate, he said, should simply refuse to adjourn until there is a final vote. No action occurred on Allen's recommendation. On April 13, 1846, however, a consensus developed among Senators that a final vote on the joint resolution should occur three days later. Finally, after spending around 65 days debating the matter, the Senate on April 16 enacted the joint resolution. Indeed, if this was the first time that the Senate employed something like a unanimous consent agreement to end debate and precipitate a vote on a measure, there is little question that these accords became both more commonly used and more sophisticated in their procedural features. By 1870, noted two scholars, unanimous consent agreements "were being used with some frequency." These early unanimous consent agreements were, "as they are today, time-limitation agreements that provided for the disposal of a measure by a specified time." An April 24, 1879, exchange illustrates the practical use of these accords for limiting debate and setting the time for a vote. The exchange is reminiscent of what occurs in today's Senate. The President pro tempore . The Chair will once more state the proposition and again ask the Senate whether there be any objection to it. The proposition is, that at three o'clock to-morrow, all debate on this bill shall cease, and the Senate shall then proceed to vote upon the pending amendment or amendments that may be offered, and finally on the bill itself without debate. Mr. Conkling . That is right. The President pro tempore . Is there objection to that understanding. The Chair hears none, and it is agreed to. Bill managers apparently took the initiative in propounding unanimous consent agreements. Their increasing use in subsequent decades led one Senator, Roger Mills, D-TX, to complain that the Senate "reaches its vote on all questions like the historic Diet of Poland, by the unanimous agreement of the whole, and not by the act of the majority." Other issues associated with these early accords also sowed confusion among the membership. Many of the complaints stemmed from the fact that the early unanimous consent agreements were often viewed "as an arrangement simply between gentlemen" and could, as a president pro tempore once said, be "violated with impunity by any member of the Senate." To reduce the confusion, the Senate adopted a new rule. The fundamental objective of Rule XII was to clarify several uncertainties associated with these senatorial contracts. In the early 1900s, the Senate took modest steps to reduce some of the confusion associated with unanimous consent agreements, such as requiring these accords to be submitted in writing to the desk, read to the chamber, and "printed on the title page of the daily calendar of business as long as they were operative." More changes were in the offing, however. Two overlapping factors explain why the Senate agreed to a formal rules change to govern these accords. First, there were a couple of ambiguities associated with these accords that continued to arouse contention and confusion. Past precedents simply did not adequately address these recurring problems. Second, a riveting event--a Senator was caught by "surprise" when a unanimous consent agreement was entered into--underscored the need for a formal rule (Rule XII) to clear up issues associated with these "gentlemen's agreements." On the matter of ambiguity, there were two principal issues. First, could these agreements be changed or modified by another unanimous consent agreement? Second, could the presiding officer enforce these accords? Today, both principles are accepted as procedural "givens." Not so several decades ago. For example, on March 3, 1897, Senator George Hoar, R-MA, stated: "I think it is very serious, indeed, under any circumstances, to set the precedent of revoking a unanimous-consent agreement by other unanimous-consent agreements." As another example, one of the Senate's institutional leaders, Henry Cabot Lodge, R-MA., argued: "If it is to be supposed that unanimous-consent agreements are to be modified, we shall soon find it impossible to get a unanimous-consent agreement. I think nothing is more important than the rigidity with which the Senate preserves unanimous-consent agreements." Or as Senator Joseph O'Gorman, D-NY, stated: "Has it not been established by the precedents of this body that a unanimous-consent agreement could not be impaired or modified either by another unanimous-consent agreement or by an order of the Senate?" To be sure, other Senators contended that these compacts could be modified by another unanimous consent agreement. As to the enforcement of these accords, presiding officers took different positions. As one presiding officer observed, "it has been the universal ruling of the Chair that the Chair can not enforce a unanimous-consent agreement, but that it must rest with the honor of Senators themselves." On another occasion, the president of the Senate asked: "[W]hat is the pleasure of the Senate, whether he shall enforce the agreements entered into by unanimous consent or not?" Senator John Sherman, R-OH, replied that the chair should "enforce the agreement with respect to the bill under consideration." The chair then asked, "In similar cases, what is the pleasure of the Senate?" Senator Eugene Hale, R-ME, provided this answer: "We'll cross that bridge when we reach it." Contrarily, "Vice Presidents Charles Fairbanks and James Sherman were not timid about enforcing [unanimous consent agreements] at times." Sundry other issues were also associated with these compacts. For example, Senators argued about whether a motion to recommit a bill violated a unanimous consent agreement to vote on the bill. Some Senators said that if they were not present when a unanimous consent agreement was proposed, colleagues could object for them. In response, Senator Thomas Martin, VA, the ostensible Democratic floor leader, stated: "When unanimous consent is asked, unless objection is made from the floor of the Senate by a Senator who is present, he can not leave his vote here to be recorded against it. The Senate can not do business by proxy that way." Senator Reed Smoot, R-UT, was caught off-guard when a unanimous consent agreement he opposed was agreed to. The issue involved a 1913 bill (S. 4043) to prohibit interstate commerce in intoxicating liquors. A unanimous consent agreement was properly made and announced by the presiding officer. Senator Smoot, who was present in the chamber, had planned to object but was momentarily distracted and failed to lodge a timely dissent. For the next two days the Senate debated the legitimacy of the unanimous consent agreement and whether it could be modified by another unanimous consent agreement. In the end, the presiding officer submitted the question of legitimacy to the Senate, which voted 40 to 17 (with 37 Members not voting) to instruct the chair to resubmit the unanimous consent agreement to the Senate. When this was done, Senator Smoot objected to the accord. Quickly, another unanimous consent agreement on the liquor bill was propounded by Senator Jacob Gallinger, R-NH, and it was accepted by the Senate. In short, uncertainties and controversies influenced the Senate on January 16, 1914, to adopt a formal rule to govern unanimous consent agreements. There was relatively little debate on Rule XII. The major controversy involved whether these compacts could be modified by another unanimous consent agreement. Unsurprisingly, Senator Lodge argued against the new rule on the ground that to permit any subsequent changes to unanimous consent agreements would only lead to delays in expediting the Senate's business. Senator Charles Thomas, D-CO, responded: "It seems to me the most illogical thing in the world to say that the Senate of the United States can unanimously agree to something and by that act deprive itself of the power to agree unanimously to undo it." By a vote of 51 to 8, the Senate adopted Rule XII. Two critical portions of the rule stipulate that (1) unanimous consent agreements are orders of the Senate, which means that the presiding officer is charged with enforcing their terms; and (2) the Senate, by unanimous consent, could change a unanimous consent agreement. As orders of the Senate, unanimous consent agreements are now printed in the Senate Journal . (They are also printed in the Senate's daily Calendar of Business , as noted earlier, and the Congressional Record .) In subsequent decades, the Senate witnessed increasing use of unanimous consent agreements. The contemporary Senate regularly operates via the terms of unanimous consent agreements. They are used on every type of measure or matter that comes before the Senate, and at least since the post-World War II period, all party leaders and floor managers have extensively relied on them to process the chamber's business. During the majority leadership of Senator Lyndon Johnson, D-TX (1955-1960), unanimous consent agreements were often comprehensive in scope (e.g., identifying when a measure is to be taken up, when it is to be voted upon for final passage, and what procedures apply in-between these two stages). Today, in a period of heightened individualism and partisanship, unanimous consent agreements tend to be piecemeal, such as establishing debate limits on a number of discrete amendments without limiting the number of amendments or specifying a time or date for final passage of the legislation. Still, compared with the compacts promulgated during the early 1900s, today's accords are often broader in scope, more complex, and involve more procedural detail. A large body of precedents has even evolved to govern "how [unanimous consent agreements] are to be interpreted and applied in various situations." In short, unanimous consent agreements are essential to the processing of the Senate's workload and protecting the procedural prerogatives of individual senators.

Unanimous consent agreements are fundamental to the operation of the Senate. The institution frequently dispenses with its formal rules and instead follows negotiated agreements submitted on the floor for lawmakers' unanimous approval. Once entered into, unanimous consent agreements can only be changed by unanimous consent. Their objectives are to waive Senate rules and to expedite floor action on measures or matters. Typically, these accords (sometimes called time-limitation agreements) restrict debate and structure chamber consideration of amendments. Given their importance to chamber operations, it is worthwhile to understand the background, or origin, of unanimous consent agreements. The purpose of this report is to examine how and why these informal agreements became special orders of the Senate enforceable by the presiding officer. This report will be updated as circumstances warrant. Further information on unanimous consent agreements can be found in CRS Report 98-225, Unanimous Consent Agreements in the Senate, by [author name scrubbed]; CRS Report RS20594, How Unanimous Consent Agreements Regulate Senate Floor Action, by [author name scrubbed]; and CRS Report 98-310, Senate Unanimous Consent Agreements: Potential Effects on the Amendment Process, by [author name scrubbed].

The 112 th Congress is considering legislative proposals to limit the government's present and future risk from Fannie Mae and Freddie Mac. The two entities are government-sponsored enterprises (GSEs)--congressionally chartered, stockholder-owned companies with special legal privileges and special obligations to facilitate the flow of mortgage funds. Their basic business includes purchasing mortgages that have been issued by others, pooling and guaranteeing the mortgages into mortgage-backed securities (MBS), and either selling the MBS to investors or holding the MBS "in portfolio" as an investment. In recent years, Fannie Mae and Freddie Mac together were responsible for nearly half of the nation's outstanding residential mortgage debt. In 2008, the enterprises' capital proved to be inadequate as mortgage defaults and foreclosures increased more than anticipated, and the cost of borrowing to finance their investment portfolios increased. To support the mortgage markets during the financial crisis of 2008-2009 and to keep these enterprises in business, the U.S. Department of the Treasury has purchased more than $175 billion of special preferred stock. In addition, Treasury and the Federal Reserve (the Fed) have provided mortgage market support by purchasing nearly $1.4 trillion in MBS from investors in the open market. Treasury's purchase of more than $175 billion in preferred stock is one element in contracts that require the enterprises to pay an annual 10% cash dividend on the Treasury funds. Based on their past histories, it is not clear that the enterprises could survive without Treasury's continued support. Some of the bills that have been introduced are likely to reduce the enterprises' future size by reducing or eliminating certain advantages conferred by their charters. More specifically, one category of proposed legislation would increase their cost of doing business (e.g., H.R. 1222 ). It is likely that the increased costs would be passed onto the enterprises' business partners in the form of lower prices for mortgages and higher interest rates to borrowers. This would potentially allow other securitizers to compete more effectively with the enterprises. A second group of bills would impose new limitations on the types of mortgages that the enterprises can purchase, leaving more of the mortgage market to their competition (e.g., H.R. 1227 ). A third category of changes contained in some of the bills would increase regulatory oversight and disclosure (e.g., H.R. 31 and H.R. 1225 ). The proposed increased capital requirements would be another source of increased costs, but would also reduce risks. New requirements to file with the Securities and Exchange Commission (SEC) would eliminate a competitive advantage enjoyed by the enterprises and require them to adhere to some of the same rules as their competitors. A fourth category of legislative proposals would set a deadline for the enterprises to return to stockholder control or to be dissolved; in the event they were to return to stockholder control, the bills would phase out their charters (e.g., two pairs of companion bills H.R. 408 / S. 178 and H.R. 1182 / S. 693 ). A fifth category of legislative proposals would make provisions for replacing the enterprises in the secondary mortgage markets (e.g. H.R. 1859 and H.R. 2413 ). Table 1 summarizes and illustrates differences in provisions of the various bills introduced in the 112 th Congress. The enterprises came to their current financial difficulties following a period of increasing losses due to mortgage delinquencies, coupled with inadequate capital. In September 2008, Fannie Mae and Freddie Mac separately agreed to enter voluntary conservatorship, which entailed giving their regulator, the Federal Housing Finance Agency (FHFA), management and control of the enterprises. At the same time, the Treasury signed separate contracts with Fannie Mae and Freddie Mac to provide whatever financial support might be needed to keep them solvent. Homeowners and potential homeowners indirectly depend on Fannie Mae and Freddie Mac as a source of mortgage money. The enterprises are prohibited from making loans directly to borrowers; instead, they purchase mortgages that lenders have already made. They package the mortgages into MBS and either keep them "in portfolio" or sell them to institutional investors. Sometimes the originator "swaps" the mortgages for an MBS backed by the same loans. The advantage of a swap is the addition of the enterprise's guarantee that the loans will be repaid. Fannie Mae and Freddie Mac back almost half of the home mortgages in the nation. The Obama Administration's report on the future of the enterprises and the housing finance system presents three broad alternatives: a privatized system with existing government mortgage programs (Federal Housing Authority, Veterans Affairs, and U.S. Department of Agriculture) more narrowly targeted toward groups based on income or first-time homebuyer status; a privatized system with a government guarantee only during a crisis; and a privatized system with backup government reinsurance of private mortgage insurance. As of this writing, no legislation has been introduced to implement any of the Administration's proposals; therefore, they are not discussed further in this report. If and when legislation is introduced, it will be incorporated into this report. More detail on the proposals is contained in CRS Report R41719, The Obama Administration's Report on "Reforming America's Housing Finance Market": Implications for Fannie Mae and Freddie Mac , by [author name scrubbed]. This report continues with summaries of legislation that has been introduced in the 112 th Congress. Most of the bills address individual areas of concern, such as executive compensation, but two pairs of companion bills would reform a number of areas. This section analyzes legislation that has been introduced and that would make changes to a single area of the enterprises' operations. H.R. 31 , Fannie Mae and Freddie Mac Accountability and Transparency for Taxpayers Act of 2011, would require the director of FHFA to make quarterly reports on Fannie Mae and Freddie Mac in 12 specific areas: 1. total liabilities and the risk to the federal government; 2. executive compensation and bonuses; 3. the impact of reducing the conforming loan limits at the end of FY2011; 4. foreclosure mitigation efforts; 5. mortgage fraud prevention efforts; 6. communications with the Federal Reserve and Treasury regarding the purchase or sale of enterprise securities; 7. enterprise investments outside of their mission; 8. reasons for equity (preferred stock) investments by Treasury; 9. capital levels, portfolio size and their impacts on the safety and soundness of the enterprises; 10. underwriting standards; 11. mortgage buyback policies; and 12. the enterprises' actions that affected enterprise securities, in particular, preferred stock issued before September 6, 2008. The director could include additional information that he "considers relevant or important with respect to the enterprise, and the activities and condition of the enterprise." The FHFA inspector general (IG) would be required to review the reports and inform Congress of his findings. The bill would require both the reports and the IG's comments to be posted on the FHFA website. The bill would also require the IG to examine FHFA's loss mitigation policies, including the impact of principal reduction on the enterprises' financial condition and the nationwide foreclosure rate. There is some overlap between these reporting requirements and current reports. For example, the FHFA's quarterly Report on the Enterprises' Financial Performance covers capital, investments, and loss mitigation activities. The FHFA's monthly Foreclosure Prevention and Refinance Report also covers loss mitigation efforts. FHFA has issued a report on the effect of reducing the conforming loan limit. On April 5 and 6, 2011, the House Subcommittee on Capital Markets and Government-Sponsored Enterprises of the Committee on Financial Services marked up H.R. 31 and forwarded it to the full committee. Even without this legislation, FHFA could send such quarterly reports to Congress, and the IG could review the reports. The bill indicates to FHFA and the FHFA IG that Congress attaches particular importance to these areas of oversight. H.R. 463 , Fannie Mae and Freddie Mac Transparency Act of 2011, would make the enterprises subject to Freedom of Information Act (FOIA) requests by making them federal agencies for the purpose of FOIA compliance. No action has been taken on H.R. 463 . H.R. 1221 , Equity in Government Compensation Act of 2011, would limit the pay of the enterprises' employees. Current executive compensation packages, previously approved by FHFA, would be suspended and declared to be the sense of Congress that any pay in 2010 exceeding Level I of the Executive Schedule ($199,700) or the Senior Executive Service ($179,700) should be turned over to the Treasury. Other employees of the enterprises would be paid according to the federal government's general schedule (GS), with a maximum pay in the Washington, DC, area in 2011 of $155,500. Executive compensation would be based in part on the enterprise's profitability. The enterprises would be covered by Troubled Asset Relief Program (TARP) provisions on executive compensation and corporate governance. The bill states that enterprise employees shall not be considered federal employees. On November 15, 2011, the House Financial Services Committee ordered the bill to be reported as amended. As conservator, FHFA currently has the authority to reject enterprise salaries without this legislation, but this bill would remove FHFA's discretion. As regulator, 12 U.S.C. 4518 authorizes FHFA to prohibit and order an enterprise to withhold executive compensation that is "not reasonable and comparable" to that provided by similar companies. The same section prohibits FHFA from actually setting salaries or salary ranges. H.R. 1222 , GSE Subsidy Elimination Act of 2011, would require the enterprises to charge a guarantee fee that reflects the risk of the mortgages purchased and the cost of capital that a totally private company would charge. FHFA would have the option to either phase in the higher fee over two years or to impose it at the higher level two years after enactment. On April 5 and 6, 2011, the House Subcommittee on Capital Markets and Government-Sponsored Enterprises of the Committee on Financial Services marked up H.R. 1222 and forwarded it to the full committee. As conservator or receiver, FHFA has the authority to implement these provisions. As regulator, it appears that FHFA could not require guarantee fees consistent with the provisions of H.R. 1222 unless necessary for the safety and soundness of the enterprises. H.R. 1223 , GSE Credit Risk Equitable Treatment Act of 2011, would prohibit treating mortgage-backed securities issued by the enterprises differently from similar MBS issued by an otherwise identical company. The bill would require that regulatory determinations as to what is a mortgage with a low risk of default, called a "qualified residential mortgage" (QRM) in the Dodd-Frank Wall Street Reform and Consumer Protection Act, "Dodd-Frank," ( P.L. 111-203 , 124 Stat. 1376 et seq.), not be based solely on the enterprises' role in the securitization. Dodd-Frank requires the federal banking regulators, the SEC, the Department of Housing and Urban Development (HUD), and FHFA to issue joint regulations to implement the act's risk retention requirements for mortgages included in MBS. Under Dodd-Frank, QRMs would be exempt from this risk retention requirement. On April 5 and 6, 2011, the House Subcommittee on Capital Markets and Government-Sponsored Enterprises of the Committee on Financial Services marked up H.R. 1223 and forwarded it to the full committee. Scott G. Alvarez, the Federal Reserve's general counsel, has testified that Dodd-Frank does not exempt the enterprises from the risk retention requirement, and that their 100% guarantee of timely payment of principal and interest on their MBS is "generally in the form of an unfunded guarantee, which would not satisfy the risk retention requirements of the proposed rules." Nevertheless, he said that the proposed rules would allow the enterprises' guarantees to satisfy the risk retention requirements as long as the enterprises were in conservatorship or receivership. H.R. 1224 , GSE Portfolio Risk Reduction Act of 2011, would require the enterprises to accelerate the reduction of their portfolios over five years to $250 billion each. At the end of 2010, Fannie Mae's portfolio was $789 billion and Freddie Mac's was $697 billion. The financial support agreements between Treasury and the GSEs require the GSEs to reduce their mortgage portfolios to stay within a cap that started at $900 billion at the end of 2009 and decreases 10% annually reaching $250 billion in 2022. The companion bills H.R. 1182 and S. 693 would reduce the enterprises' portfolios on the same five-year schedule as H.R. 1224 . The companion bills H.R. 408 and S. 178 would reduce the portfolios over four years. Table 2 compares the portfolio caps under the current agreement, H.R. 1224 , and the pairs of companion bills. H.R. 1224 would not count delinquent mortgages that were repurchased to fulfill an enterprise's guarantee against the portfolio limits. On April 5 and 6, 2011, the House Subcommittee on Capital Markets and Government-Sponsored Enterprises of the Committee on Financial Services marked up H.R. 1224 and forwarded it to the full committee. As regulator, FHFA could order the enterprises to reduce their risk by reducing their portfolios more rapidly than the current contract provides. H.R. 1225 , GSE Debt Issuance Approval Act of 2011, would require the enterprises to request in writing permission from the Secretary of the Treasury to issue new debt. The Secretary would announce his decision and reasons in writing to the enterprise, FHFA, and Congress. There would be a seven-day waiting period following Treasury's approval before the enterprise could issue the debt. On April 5 and 6, 2011, the House Subcommittee on Capital Markets and Government-Sponsored Enterprises of the Committee on Financial Services marked up H.R. 1225 and forwarded it to the full committee. Fannie Mae's and Freddie Mac's charters currently provide the Secretary of the Treasury this authority. According to FHFA staff, it was used in the past to prevent the enterprises from issuing large amounts of debt too close to Treasury debt sales, but this practice fell into disuse. Former Assistant Secretary of the Treasury Emil Henry has written that there was a more formal process until the mid-1990s. Arguably, the Secretary of the Treasury could assert the existing review authority contained in the enterprises' charters. The requirements that the enterprises make the requests for approval in writing, that the secretary publish his decision, and that there be a seven-day waiting period would formalize the process. H.R. 1226 , GSE Mission Improvement Act, would repeal the affordable housing goals first established by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( P.L. 102-550 , 106 Stat. 3672 et seq.) and amended by the Housing and Economic Recovery Act of 2008 ( P.L. 110-289 , 122 Stat. 2654 et seq.). It would repeal, also, the duty to serve underserved markets, and funding for both the housing trust fund and the capital magnet fund. FHFA would have six months to submit a report to Congress on this bill's effect on multifamily properties, loans to low-income borrowers, and loans to borrowers in rural areas. The report would contain recommendations on increasing mortgage credit in these areas. On April 5 and 6, 2011, the House Subcommittee on Capital Markets and Government-Sponsored Enterprises of the Committee on Financial Services marked up H.R. 1226 and forwarded it to the full committee. Unless the housing goals are repealed, the enterprises will continue to be required to meet them. H.R. 1227 , GSE Risk and Activities Limitation Act of 2011, would prohibit FHFA from approving any new products while an enterprise is in conservatorship or receivership unless FHFA determined the new products were necessary to preserve the enterprises' assets or reduce losses. When the enterprises are not in conservatorship or receivership, the FHFA would retain its existing new product approval authority. On April 5 and 6, 2011, the House Subcommittee on Capital Markets and Government-Sponsored Enterprises of the Committee on Financial Services marked up H.R. 1227 and forwarded it to the full committee. Arguably, FHFA could announce a new policy that would restrict new product approvals while the GSEs are in conservatorship. H.R. 2425 , Transparency and Security in Mortgage Registration Act of 2011, would prohibit Fannie Mae, Freddie Mac, and Ginnie Mae from purchasing or securitizing a mortgage that is registered with the Mortgage Electronic Registration System (MERS). MERS is a centralized mortgage registration system that bypasses state laws requiring local registration of mortgages and other liens on real estate. MERS is involved in legal challenges questioning its authority to participate in foreclosures and its ability to maintain a clear history of ownership of real estate. Some of the employment contracts between the enterprises and employees and former employees provide that the appropriate enterprise shall pay legal expenses incurred as a result of the employment. H.R. 2428 , GSE Legal Fee Reduction Act of 2011, would require the enterprises to propose to FHFA a methodology to determine "reasonable" legal expenses of an employee or former employee. Under HERA the conservator, FHFA, can repudiate any contracts (including employment contracts) entered into prior to the conservatorship. H.R. 2436 , Fannie Mae and Freddie Mac Taxpayer Payback Act of 2011, would prevent a reduction in the annual dividend rates of 10% in cash or 12% in preferred stock paid by the enterprises to Treasury. H.R. 2439 , Removing GSEs Charters During Receivership Act of 2011, would empower FHFA to revoke an enterprise's charter and requires the charter to be revoked at the termination of a limited-life entity created as part of the receivership process. Presently only Congress can terminate an enterprise's charter. H.R. 2441 , Housing Trust Fund Elimination Act of 2011, would terminate the Housing Trust Fund, the Capital Magnet Fund, and the Hope Reserve Fund, which were established by the Housing and Economic Recovery Act of 2008 ( P.L. 110-289 ) and were to be funded by the enterprises. The enterprises financial conditions precluded any contributions, but $80 million was appropriated in the FY2010 budget for the Capital Magnet Fund. H.R. 2440 , Market Transparency and Taxpayer Protection Act of 2011, would direct FHFA to identify non-mission critical assets held by the enterprises. Patents and mortgage data are specifically identified as possibly non-mission critical assets. FHFA would submit to Congress a plan to sell these assets. It would, also, require Fannie Mae and Freddie Mac to release loan and appraisal data in a manner that would not disclose personally identifiable information. H.R. 2462 , Cap the GSE Bailout Act of 2011, would set in statute the maximum amount of support that Treasury has contracted to provide each enterprise in the Preferred Stock Purchase Agreements (PSPA), although an amendment to this bill would allow the director of FHFA to supply additional financial support if the private secondary mortgage market were not viable. To keep each of the enterprises solvent, Treasury has contracted to purchase preferred stock subject to certain limits. Initially, the limit was $100 billion for each GSE, but this amount was raised to $200 billion each. In late 2009, the PSPA were amended to provide for unlimited support in calendar years 2010 through 2012. Outside of 2010-2012, the $200 billion limits apply. For more information of the enterprises' financial condition, see CRS Report RL34661, Fannie Mae's and Freddie Mac's Financial Problems , by [author name scrubbed]. Two pairs of broader companion bills have been introduced in the 112 th Congress. The first pair is Title VI of H.R. 408 and Title VI of S. 178 ; the second pair is H.R. 1182 and S. 693 . The two sets of companion legislation have some different provisions pertaining to the enterprises and include some, but not all, of the provisions of H.R. 1221 through H.R. 1227 . In addition, H.R. 1859 and H.R. 2413 would replace the enterprises. H.R. 408 and S. 178 , both titled the Spending Reduction Act of 2011, are identical and address many other issues besides reforming Fannie Mae and Freddie Mac. These unrelated concerns are not addressed in this report. Title VI, the GSE Bailout Elimination and Taxpayer Protection Act, of these two bills would terminate the enterprises' conservatorships in 24 months (or six months later if FHFA determines that financial markets would be adversely affected by the termination and so notifies Congress). At the end of the conservatorship, the enterprises would either go into receivership and be dissolved or would continue under revised charters. These revisions would impose the following changes: Starting one year after leaving conservatorship, the enterprises would have to reduce their portfolios to $250 billion each over four years; H.R. 1224 provides for five years, starting one year after enactment. (Section 604(2)) The enterprises would no longer have housing goals (including the housing trust fund and the magnet fund contributions). This is similar to H.R. 1226 . (Section 604(1)) Certain provisions in H.R. 408 and S. 178 are not included in the more narrowly focused bills: The enterprises would leave conservatorship 24-30 months after enactment. They would either be returned to stockholder control or be dissolved under receivership. (Section 603) Three years after the enterprises return to stockholder control, their charters would be repealed as applied to new business. There would be a 10-year wind-down period followed by their dissolution, which would make provisions for continued payment of each enterprise's financial obligations such as debts and MBS. (Section 606) FHFA would have strengthened authority to set and to enforce minimum capital levels. (Section 604(3)) The conforming loan limit would be set at $417,000 nationwide with no high-cost exceptions and the enterprises could not purchase homes selling for more than the area median home price. The conforming loan limit would only increase in future years to reflect increasing house prices. The conforming loan limit is currently $417,000, except in high-cost areas where the limit is higher with a maximum of $625,500. (Section 604(4)) The enterprises would be prohibited from purchasing mortgages greater than the area median home price. (Section 604(4)(F)) The minimum downpayment for mortgages purchased by the enterprises would be 5% during the 12 months after leaving conservatorship, 7.5% during the second 12 months and 10% afterward. Currently, the required downpayment is flexible as part of the mortgage underwriting process and may affect the interest rate paid by the borrower. (Section 604(5)) The enterprises would be required to pay all state and local taxes. Currently, they pay only state and local property taxes. (Section 604(6)) The enterprises would be required to register all stocks and public offerings with the Securities and Exchange Commission (SEC). (Section 604(7)) FHFA would charge each enterprise for the value of the benefits provided by the government. (Section 604(8)) The other pair of companion bills ( H.R. 1182 and S. 693 ) contains all the provisions of H.R. 408 and S. 178 (except for the recovery of the value of the federal guarantee), and has two additional provisions. More specifically, compared with H.R. 408 and S. 178 , H.R. 1182 and S. 693 would add the guarantee fee increase also contained in H.R. 1222 (Section 4(a)(4)); require the enterprises to reduce their portfolios to $250 billion each over five years like H.R. 1224 , but unlike the four years in H.R. 408 and S. 178 (Section 4(a)(2)); and repeal the affordable housing goals like H.R. 1226 and the other pair of companion bills (Section 4(a)(1)). Provisions in H.R. 1182 and S. 693 not contained in any of the narrowly focused bills but contained in H.R. 408 and S. 178 would end the enterprises' conservatorship in 24 months (without the option for FHFA to grant a six month extension) (Section 3); start the phase-out the enterprises' charters as pertains to new business three years after they leave conservatorship (Section 5); repeal the enterprises' exemption from SEC registration as pertains to MBS and subordinated debt (Section 4(b)(4)); lower the conforming loan limit to $417,000, eliminate the high-cost areas limit, and increase in future years to reflect increasing house prices (Section 4(a)(3)); direct FHFA to increase the minimum capital required of the enterprises (Section 4(b)(1)); increase borrower downpayment requirements (Section 4(b)(2)); and require the enterprises to pay all state and local taxes (Section 4(b)(3)). In addition, H.R. 1182 and S. 693 would prohibit a reduction in the 10% annual cash dividend paid to Treasury under terms of the support contracts with the enterprises (Section 4(a)(5)). H.R. 1859 , Housing Finance Reform Act of 2011 , would authorize FHFA to charter housing finance guaranty associations to pool and to securitize single-family and multifamily mortgages (Section 3). The associations would guarantee the timely payment of principal and interest to investors, and the federal government would provide (and charge for) a backup guarantee. The associations would be restricted to purchasing and securitizing existing mortgages, and they could specialize in particular markets such as community banks and multifamily mortgages. The maximum mortgage size would be the greater of 150% of the national average home price or 150% of the area median price. Using the National Association of Realtor's median single-family house sales data, the nationwide mortgage limit would be $256,000 compared to $417,000 presently. The highest area limits would be Honolulu at $897,300 (currently $721,050) and San Jose at $886,500 (currently, $625,500). Mortgages on one-to-four family dwelling units (usually called single family), could be purchased only if the loan-to-value ratio is 80% or less, unless the seller retains a 10% participation, the seller agrees to repurchase the mortgages in default according to terms approved by FHFA, or the unpaid principal balance in excess of 80% is guaranteed. FHFA would regulate the associations and could place them into conservatorship or receivership. FHFA would create a plan to wind down the enterprises as the associations were chartered (Section 4). During the transition, the enterprises would not have affordable housing goals and would be required to pay state and local taxes. Currently, the only state and local taxes that they pay are property taxes. H.R. 2413 , Secondary Market Facility for Residential Mortgages Act of 2011, would create a federal corporation to purchase and securitize mortgages that meet certain underwriting standards. The facility would be prohibited from originating mortgages and would charge a guarantee fee and a reinsurance fee for purchasing mortgages. The fees would be adjusted to keep the facility's market share under 50%, except in unusual circumstances. The goal of the guarantee fee would be to cover the payment of mortgages during normal times. The reinsurance fee would compensate Treasury for the backup federal guarantee. The fees would be based on the quality of the mortgages, regardless of the location of the home, the volume of mortgages provided by the seller, or any reduction in homeownership costs proved to the owner. Mortgages eligible for purchase would be for 30 years or less, be for no more that 80% of the sales price of the house (or 90% of the sales price if the seller retains a 10% participation, or the homeowner purchases private mortgage insurance). The maximum mortgage size would be based on the formula most recently used in FY2011 that provides for a $729,750 maximum in high-cost areas. A reorganized FHFA would oversee the facility.

As households and taxpayers, Americans have a large stake in the future of Fannie Mae and Freddie Mac. Homeowners and potential homeowners indirectly depend on Fannie Mae and Freddie Mac, which in recent years backed and guaranteed home loans accounting for nearly half of the outstanding home mortgages in the nation. Taxpayers have a large investment in Fannie Mae and Freddie Mac. The Department of the Treasury kept the two insolvent companies in business by providing more than $175 billion in support. Based on past performance, it is not clear how the enterprises will be able to repay Treasury out of future earnings. In addition to the $175 billion in direct support, Treasury and the Federal Reserve (the Fed) purchased nearly $1.4 trillion in GSE-issued and guaranteed mortgage-backed securities (MBS). These two entities are stockholder-owned, congressionally chartered companies that purchase home mortgages, commonly called government-sponsored enterprises (GSEs). In 2008, increasing mortgage delinquencies and the general financial crisis weakened the two enterprises to the point that they agreed to a voluntary takeover by the federal government known as conservatorship. This report summarizes and analyzes bills introduced in the 112th Congress that seek to enhance the public accountability of the two enterprises. The bills covered are H.R. 31, H.R. 408, H.R. 463, H.R. 1182, H.R. 1221, H.R. 1222, H.R. 1223, H.R. 1224, H.R. 1225, H.R. 1226, H.R. 1227, H.R. 1859, H.R. 2413, H.R. 2425, H.R. 2428, H.R. 2436, H.R. 2439, H.R. 2440, H.R. 2441, H.R. 2462, S. 178, and S. 693. Some seek to reduce the cost to the government, while others seek to change the enterprises' charters if or when they leave conservatorship. None of the above bills introduced proposes government actions to replace the two enterprises. To date, two bills, H.R. 1859 and H.R. 2413, propose creating a replacement for the two enterprises. H.R. 1859 would authorize the Federal Housing Finance Agency (FHFA) to charter special purpose associations to support the secondary mortgage market by issuing MBS with an explicit federal catastrophic guarantee. The associations would be charged for this guarantee. H.R. 1859 would require FHFA to develop a plan to transition from enterprise support for the secondary mortgage market to support by these new associations. The second bill, H.R. 2413, would create a government corporation (the Secondary Market Facility for Residential Mortgages) to purchase and to securitize mortgages. Those selling mortgages to the facility would be required to pay guarantee and reinsurance fees for an explicit federal guarantee on the securities. Because Fannie Mae and Freddie Mac are under conservatorship, Congress has unusual leverage to direct FHFA, which is both their regulator and conservator, to implement policy changes. Currently, FHFA has unusual control in that it both regulates and manages Fannie Mae and Freddie Mac. This report will be updated as warranted.

The Chesapeake Bay (the Bay) is the largest estuary in the United States. Congress has described it as a "national treasure" ( P.L. 106-457 ), and it is recognized as a "Wetlands of International Importance" by the Ramsar Convention. The Chesapeake Bay estuary resides in a more than 64,000-square-mile watershed that extends across parts of Delaware, Maryland, New York, Pennsylvania, Virginia, West Virginia, and the District of Columbia. It is home to more than 18 million people and thousands of species of plants and animals. Over time, the Bay's ecological conditions have deteriorated due to land-use changes, increased sediment loads and nutrient pollution, the use and spread of chemical contaminants, overfishing and overharvesting of aquatic species, and the introduction of invasive species. These changes have resulted in reductions to economically important fisheries, such as oysters and crabs; the loss of habitat, such as underwater vegetation and sea grass; annual dead zones, as nutrient-driven algal blooms die and decompose; and potential impacts to tourism, recreation, and real estate values. Joint state and federal restoration attempts did not begin until the early 1980s. Since then, federal agencies have worked together under a watershed-wide agreement and through a restoration program spearheaded by the U.S. Environmental Protection Agency (EPA). Congress has and may continue to examine Chesapeake Bay restoration efforts. Actions in the Chesapeake watershed have served as examples for other estuary restoration efforts in the United States. This report provides background on the physical and ecological properties of the Bay and watershed, its economic value, the health of the ecosystem over time, and federal governance of Bay restoration efforts. It then discusses issues facing Congress as work continues toward 2025 restoration goals set by several state and federal plans. The Chesapeake Bay receives water from across the Chesapeake Bay watershed, including parts of six states (Delaware, Maryland, New York, Pennsylvania, Virginia, and West Virginia) and the entirety of the District of Columbia (DC) ( Figure 1 ). The Bay watershed is more than 64,000 square miles in size, and its land-to-water surface area ratio (14:1) is the largest of any coastal water body in the world. More than 100,000 streams and rivers flow into the Chesapeake Bay. The Bay and its tidal tributaries have almost 11,700 miles of shoreline and an average depth between 26 feet and 33 feet with deep troughs that reach up to 174 feet in depth. The Bay's waters are roughly 50% freshwater and 50% salt water. The Susquehanna River supplies 45% of the Bay's freshwater. Four other rivers, the Rappahannock, York, James, and Potomac, provide another 45%. The remaining 10% of the Bay's freshwater comes from smaller rivers and tributaries. More than 3,600 species of plants, fish, and animals--including 348 species of finfish, 173 species of shellfish, more than 2,700 plant species, and 16 species of underwater grasses--are part of the Bay watershed ecosystem. The Bay is part of the Atlantic Flyway, and at least 140 species of birds regularly use the Bay's aquatic resources; every year, 1 million waterfowl winter in the Bay region. The watershed is also home to 46 plants and 113 animals listed as threatened or endangered species as of August 2014. In 2016, more than 18 million people lived in the Chesapeake Bay watershed. According to the U.S. Geological Survey (USGS), that number is likely to rise to 20 million by 2030. The Bay's economy centers on seafood, tourism, recreation, and real estate. Few reports estimating the total economic value of the Chesapeake Bay are available. Instead, reports focus on a limited set of industries and services. For example, in 1989, Maryland state economists estimated that the Bay added $678 billion annually to the economies of Maryland and Virginia in annual incomes generated from commercial fishing; activities for the ports, ship and boat building, ship repair, and tourism; and waterfront property premiums. NOAA reported that the commercial seafood industry in Maryland and Virginia landed more than 440 million pounds of seafood, for a total value of nearly $300 million, in 2016. In 2013, researchers estimated that the value of the Chesapeake Bay watershed for selected ecosystem services (food production, climate stability, air pollution treatment, water supply, water regulation, waste treatment, aesthetics, and recreation) was $107 billion per year. According to the researchers, the aesthetic value of the Bay was worth over $38 billion per year and accounted for the largest component of the total. The Chesapeake Bay has experienced various natural and man-made changes over the course of its existence. Land use has been changing in the watershed, with trends toward loss of forests, wetlands, and underwater vegetation and increases in agricultural, urban, and suburban development. Forest, wetlands, and underwater vegetation regulate water flow and sediment, provide food and habitat for wildlife, and filter contaminants. Some scientists estimate that the Bay's watershed was once fully forested and became primarily used for agriculture by the early 1900s. The most recently available data from 2012 show that forested areas cover about 55% of the watershed ( Figure 2 ), with the remaining land cover divided between agricultural and urban/mixed uses. Wetlands and underwater vegetation (known as submerged aquatic vegetation ) once covered up to 600,000 acres of the Bay and its tidal tributaries but have decreased in area since the 1960s. However, this trend has been reversing. For example, in 2017, scientists found the highest amounts of submerged aquatic vegetation in the Bay since 1984, estimated at more than 100,000 acres. Forest and wetland conversion into agricultural, urban, or suburban areas, and underwater vegetation loss or degradation can affect the Bay's water resources in several ways. Two key effects, according to scientists, are increased sediment loads and nutrient pollution, as discussed below. Deforestation, agriculture, and increases in the amount of impervious surfaces from urban and suburban development have lowered the Bay ecosystem's ability to regulate and filter sediment. These land-use changes can accelerate water flow off of the land and into water bodies and increase erosion, transporting sediment along the way. In some parts of the Bay, sedimentation rates have increased by four to five times since the 1800s. In terms of human and wildlife health, sediment can lower light penetration, affecting underwater grasses, and can transport toxic contaminants, diseases, and excess nutrients downstream. Accreted sediments also can cause navigational hazards and block waterways. The Chesapeake Bay also is affected by excess nutrient concentrations. Nutrients, such as nitrogen and phosphorus, enter the Bay from sources such as agricultural runoff, urban runoff, and wastewater treatment plant discharges. High nutrient amounts can lead to the growth of excess algae or blooms, and potentially harmful algal blooms (HABs) that may produce toxins that can pose a threat to human and aquatic ecosystem health. The decomposition of algal blooms, even when nontoxic, can develop into areas of low oxygen or hypoxia known as dead zones , which are harmful to aquatic life that may not be able to survive in low-oxygen waters ( Figure 3 ). Changes to the land that remove natural filters, such as forests and wetlands, and that increase impervious surfaces can increase nutrient concentrations. The amounts of nitrogen and phosphorus added to the Bay have varied since EPA began monitoring; high amounts of rain and large river flows have correlated with higher amounts of nitrogen and phosphorus. Since 1985, the Bay watershed has hosted an annual dead zone that is, on average, 1.7 cubic miles in volume. Ecologists forecast a larger-than-average dead zone of 1.9 cubic miles in 2018 due to high spring rainfall, which can increase nutrient loads into the bay. Chesapeake Bay waters and sediments contain a wide array of contaminants, such as potentially toxic metals and organics. Chemical contaminants affect humans and wildlife. In wildlife, contaminants may lead to infectious disease and parasite infestations, endocrine disruption, and impaired reproduction. Chemical contaminants also can build up in fish tissue and may affect humans who consume fish. Mercury and polychlorinated biphenyl's (PCBs) are the most commonly found metal and organic contaminants across the watershed, respectively. Chemical contaminants are linked to industry and vehicle air pollution, agricultural and stormwater runoff, and wastewater discharge. In 2014, the Chesapeake Bay Program (CBP) reported that approximately 80% of the Bay's tidal-water segments were fully or partially impaired due to the presence of toxic chemical contaminants ( Figure 4 ). Recreational fishing data is unavailable, but annual commercial harvests of all fisheries species landed in the Chesapeake Bay more than doubled between 1950 and 1990 with harvests decreasing since 1990. Several factors, such as changes in gear technology, regulations, and environmental conditions, may have led to the increase and subsequent decrease of commercial harvests. For example, eastern oyster, blue crab, menhaden, Atlantic surf clam, Atlantic croaker, striped bass, and alewife harvests have fluctuated over time but generally have decreased since the mid-1990s due to water quality issues and overharvesting. Oysters are a popular recreational fishery and an economic resource for Bay fisherman and the region, worth more than $46 million in commercial harvests in 2016. Oysters also improve ecological conditions in the Bay by filtering water and providing habitat for other species. Bay commercial oyster landings rose steeply in the late 1800s, reaching more than 120 million pounds, and began to decline in the early 1900s, leading to state and federal regulations on the industry. Oyster populations were further affected by diseases such as Dermo and MSX. Poor water conditions, disease, habitat loss, and overfishing led to harvests of less than 1 million pounds of landings in the 1990s and 2000s ( Figure 5 ). Since 2007, oyster landings have increased relative to its low point, with almost 5 million pounds landed in 2016. Blue crabs are commercially and recreationally harvested and have been affected by habitat loss and overharvesting in the Bay. The Bay blue crab fishery has experienced high and low commercial harvest years ( Figure 5 ). Volume of blue crab landed reached a high point in 1993, with more than 110 million pounds, and a low of approximately 42 million pounds in 1955. The Bay and its watershed are home to thousands of species of plants and wildlife, including 46 plants and 113 animals listed as threatened or endangered species as of August 2014. Plants and wildlife populations in the Bay are principally affected by loss of habitat and in some cases disease and toxins. For example, the Bay region has one of the highest concentrations of bald eagles and osprey in the country. Although the birds are recovering from the effects of DDT pesticide use in the 20 th century, they continue to be affected by habitat loss. The Bay is also home to more than 300 invasive species, which can have negative ecological and economic effects on native plants and wildlife. For example, nutria, which are semi-aquatic South American rodents introduced to Maryland in 1943, have destroyed some wetlands with their feeding habits. Efforts by federal, state, and local government, and nongovernmental organizations (NGOs) to remove the invasive rodent began in 2002; the known nutria populations were removed by 2016, and monitoring is ongoing. According to stakeholders, restoring the Bay ecosystem state is a complicated process due to the size of the Bay's watershed, the variety of stakeholders, and the complexity of Chesapeake Bay ecosystems. The Bay transcends geographical and political boundaries and affects numerous jurisdictions. Restoration efforts are challenging because they require cooperation and coordination between multiple federal and state agencies, tribes, local governments, NGOs, and private stakeholders. Planning and implementing complex environmental and ecosystem restoration efforts raises many technical, policy, and organizational issues. Congress began to concentrate on Bay issues in the 1960s, as public and stakeholder pressure grew for federal government involvement in Bay restoration. Congress ordered a series of reports from the U.S. Army Corps of Engineers (USACE) and the EPA to investigate issues including the decline in fisheries, "control of noxious weeds," water pollution, and water quality control in the Chesapeake Bay. Since then, federal restoration activities have expanded across several federal agencies and are primarily coordinated by the Chesapeake Bay Program (CBP). The CBP was established by the 1983 Chesapeake Bay Agreement. In 1987, Congress codified the CBP and directed the EPA Administrator to achieve and maintain water quality and to conduct habitat restoration and conservation for the benefit of Bay living resources in Section 117 of the Clean Water Act ( P.L. 100-4 ). The CBP is a partnership of federal, state, and local agencies; tribes; academic institutions; and NGOs, and restoration activity implementation authority lies within individual agency program authorizations and the states. The CBP works with states through a committee structure to develop actions and strategies for restoration. The program's organization has changed over time as partners, agreements, and priorities have shifted. The program's organization may continue to change under the CBP's adaptive management approach. CBP activities have been led by an Executive Council (EC). The EC establishes policy direction for restoring and protecting the Bay and its living resources and is accountable to the public for progress made under the agreement ( Figure 6 ). The EC is supported by the Principals' Staff Committee. Strategic planning, creation of guidance, and implementation of activities toward Agreement goals occur in the five different groups below the Principals' Staff Committee. The entire effort is informed by three Advisory Committees. Federal agency representatives are involved at each level of the CBP organization, including membership on the Executive Council; Principals' Staff Committee; Management Board; Goal Implementation Teams; and Science, Technical Analysis, and Reporting group. EPA has been considered the lead federal agency for implementing the program because it was directed by Congress to continue the CBP (33 U.S.C. 1267(b); Figure 6 ). Congress also directed the EPA to maintain an EPA Chesapeake Bay Program office (33 U.S.C. 1267(b)), which is staffed by employees from a number of federal and state agencies, academic institutions, and NGOs. Federal agencies are also partners through formal memoranda of understanding with EPA. The agencies also coordinate through the Federal Leadership Committee (FLC), which was established through President Obama's 2009 Executive Order 13508. In addition, federal agencies have various authorities to implement restoration programs and activities in the Bay on their own, as discussed in the section titled " What Authorities Are Federal Agencies Working Under to Restore the Chesapeake Bay? " Each of the states in the Bay watershed conduct restoration efforts on an independent or joint basis. State restoration activities are formally shared and coordinated through proceedings of the CBP Executive Council. Congress directed EPA to aid states in developing action plans to reach restoration objectives (33 U.S.C. 1267). In addition to information sharing and coordination, federal agencies may award grants to the states to improve water quality and living resources in the Bay. E.O. 13508 sought to strengthen federal coordination with state and local governments. In its oversight role, Congress continues to weigh if and how Chesapeake Bay federal restoration efforts should continue. If there is a federal role, Congress may consider how Bay restoration is coordinated, how much funding is available and may be needed for Bay restoration efforts, and what progress is being made in restoring the Bay. A large, multi-jurisdictional ecosystem restoration initiative, such as in the Bay, raises several questions for Congress about the federal role in restoration. Congress may consider the mechanisms in place to guide restoration activities, what role the federal government has in Bay restoration, and what federal agency authorities exist or are needed to complete, coordinate, and fund restoration activities in the Bay. Although various state and federal stakeholders have set forth several frameworks, agreements, and visions for restoring the Chesapeake Bay, which address different jurisdictions, Bay issues and timelines, no single, comprehensive ecosystem restoration plan exists to facilitate coordination of these efforts. There are currently three guiding documents for restoration and one draft plan: the 2010 Strategy for Protecting and Restoring the Chesapeake Bay Watershed (pursuant to President Obama's 2009 E.O. 13508), the EPA's 2010 Chesapeake Bay total maximum daily load (TMDL), the 2014 Chesapeake Bay Watershed Agreement, and the draft 2018 USACE Chesapeake Bay Comprehensive Water Resource and Restoration Plan. Table 1 briefly compares these guiding documents. The extent to which one of these plans guides restoration efforts is unclear. The plans cover different jurisdictions and vary in terms of implementation. The plans also relate to each other in different ways. Select differences include the following: Implementation of the 2010 E.O. strategy, 2010 TMDL, and 2014 Chesapeake Bay Watershed Agreement is led by the EPA, with other federal agencies involved in some cases, and each plan contains two-year work plans or milestones. In comparison, the 2018 USACE draft comprehensive plan does not specify a certain timeline, contain specific goals or objectives, or require periodic sub-plans. The 2014 Chesapeake Bay Watershed Agreement includes many of the actions outlined in the 2010 E.O. strategy and the 2010 TMDL, and has guided the development of the 2018 USACE draft comprehensive plan. Stakeholders utilize the plans in different ways. The Trump Administration has left the 2009 E.O. in place, but the 2010 E.O. strategy's use as a guiding mechanism is uncertain. Some federal program managers have argued that the 2010 E.O. strategy is no longer a focus and that the 2018 draft USACE comprehensive plan could serve as an organizing document for federal agencies when considering where to focus restoration efforts geographically. Some stakeholders have lauded the 2014 Chesapeake Bay Watershed Agreement's success in obtaining consensus results largely without regulatory or legally required action, in contrast to the actions required by the 2010 TMDL (see next section for more information). Others argue that the voluntary nature of the 2014 Chesapeake Bay Watershed Agreement weakens restoration efforts. Finally, some may contend that the 2010 TMDL, which is focused on specific water quality factors, is not holistic in terms of addressing the entire ecosystem. Congress may consider other questions related to the plans, such as whether the current plans successfully integrate efforts across agencies, states, and local governments or whether they overlap and may cause confusion. In addition, Congress may continue to consider if the plans are most effective in their current states or with changes to jurisdictions, leadership, and enforcement, and if state and local stakeholders have been or should be equal partners in the implementation of the plans. Congress may examine the federal government's role in restoration efforts. The federal government is authorized to perform restoration activities under several congressional authorizations (see next section). Federal agencies complete restoration activities on their own or in partnership with other agencies. Federal agencies execute these collaborations through memoranda of understanding. Congress may also examine the role of state restoration efforts as they are coordinated and integrated with federal work in the Chesapeake Bay. With the exception of the statutory relationship between the federal government and states in protecting water quality under the Clean Water Act, the federal and state roles in Bay restoration are not defined by law. This is in contrast to other restoration initiatives, such as the Comprehensive Everglades Restoration, which considers the State of Florida as a nonfederal partner with formal duties under law ( P.L. 106-541 , Title VI, SS601). In the Chesapeake Bay, coordination of broad restoration activities between state and federal agencies is largely achieved through the voluntary Chesapeake Bay Watershed Agreement and CBP, where decisions are determined by consensus. Some have challenged the extent of the federal government's role in managing restoration of the Chesapeake Bay. These stakeholders and Members of Congress contend that the federal government has overreached its authority and intruded upon the states' powers to regulate land use, especially in regard to the EPA TMDL. For example, a lawsuit challenged the extent of EPA's authority and oversight over state actions, in regard to the TMDL, with the Third Circuit of Appeals finding that the EPA had acted within its authority. In the 115 th Congress, the FY2019 House Interior, Environment, Financial Services, and General Government appropriations bill ( H.R. 6147 ) was amended to include a provision that would prohibit EPA funding for actions against watershed states and DC in the event the jurisdiction did not meet TMDL goals. The Trump Administration has encouraged "the six Chesapeake Bay states and Washington, D.C. to continue to make progress in restoring the Bay from within [EPA] core water programs" in the proposed FY2018 EPA budget. In contrast, other stakeholders--such as some environmental groups, local government officials, and other Members of Congress--support federal government involvement in Bay restoration. These stakeholders argue that the federal government should lead restoration efforts and should provide greater federal funding for restoration activities. Several federal agencies conduct restoration activities in the Chesapeake Bay watershed independently or with other agencies under various authorities. In contrast to restoration efforts in other large estuaries, such as the Great Lakes or Everglades, Congress has not authorized restoration work in the Bay under a single comprehensive law. Some of the restoration work is authorized under a variety of Chesapeake Bay-specific laws and regulations ( Appendix C ). For example, Congress has directed the EPA to maintain a Chesapeake Bay Program (33 U.S.C. SS1267), offer Chesapeake Bay restoration-related grants (33 U.S.C. SS1267(d) & (e)), and perform annual Bay grass surveys (33 U.S.C. SS2803(d)), among other activities. Congress has also authorized federal agencies to perform more general activities that may be applied in the Chesapeake Bay, such as the Clean Water Act (33 U.S.C. SSSS1251 et. seq.) and the Aquatic Nuisance Prevention and Control Act (16 U.S.C. SSSS4701 et seq.) ( Appendix C ). Some stakeholders may contend that directing agencies to work together under a specific federal authority and with an organizing structure would encourage more efficient progress toward restoration. Congress has enacted organizing entities for the Great Lakes Task Force, under the Great Lakes Restoration Initiative ( P.L. 111-88 , Title I), and the South Florida Ecosystem Restoration Task Force, under the Comprehensive Everglades Restoration Plan ( P.L. 106-541 , Title VI, Section 601). Other stakeholders, however, may note that legislation authorizing coordination and collaboration among federal agencies is not necessary, as restoration activities are already authorized for the EPA and several other agencies under more general authorities. Further, these individuals may note that federal agencies are coordinating efforts under the Chesapeake Bay Watershed Agreement and through the CBP. Congress continues to consider how much funding has been spent, how much should be allocated to Chesapeake Bay restoration, and the total costs of restoring the Bay. Answering these questions is complicated by the number of federal programs and states involved in restoring the Chesapeake Bay. Congress has been interested in how much has been appropriated for Bay restoration, in part, to evaluate the appropriate level of federal spending on restoration activities. Most federal funding to restore the Chesapeake Bay is discretionary, subject to the annual congressional appropriations process. Until recently, tracking the amounts federal agencies have spent on restoration has been difficult, as many nationwide programs support restoration activities in the watershed but do not specify the level of funding for Chesapeake Bay efforts in their budget. Congress has been interested in tracking costs related to Bay restoration and enacted the Chesapeake Bay Accountability and Recovery Act in 2014 (CBARA; P.L. 113-273 ), which requires the Office of Management and Budget (OMB) to compile Chesapeake Bay restoration funding information from the seven federal departments on the FLC in an annual crosscut report. OMB released crosscut reports in 2016 and 2017 for funding information between FY2014 and FY2016, and estimates for FY2017 ( Table 2 ). The reported amounts have specific limitations and assumptions (see text box below). According to the Chesapeake Bay crosscut reports, the federal government had between $460 million and $570 million per year in budget authority for restoration activities in the Bay between FY2014 and FY2017 ( Table 2 ). According to the crosscut, EPA and the Department of Agriculture (USDA) provided the most funding to the overall total budget authority. EPA distributed two-thirds through grants to state and local partners. The remaining EPA funding supported CBP office and personnel, contracts and interagency agreements, and scientific analysis and decision-support tools. USDA distributed most of its restoration funding through the nationwide Natural Resource Conservation Service, which supports conservation easement programs and provides technical and financial assistance to farmers and private landowners. Stakeholders have various viewpoints on how much funding should be appropriated to Chesapeake Bay restoration that Congress may consider during the appropriations process. For example, some stakeholders and Members of Congress have emphasized that consistent federal funding for activities is key to successful restoration and that the elimination or significant reductions of restoration funding could halt current progress on restoring the Bay. Others contend that the federal government is spending too much on restoration and that financial responsibility for restoring the Bay should fall to the states. For instance, the Trump Administration proposed to eliminate FY2018 funding for the EPA CBP and noted that EPA would "encourage the six Chesapeake Bay states and Washington, D.C. to continue to make progress in restoring the Bay from within core [EPA] water programs" and return "responsibility for funding local environmental efforts and programs to state and local entities." In FY2019, the Administration's EPA budget request proposed $7.3 million for the CBP for state and local water quality monitoring and science coordination activities. Some stakeholders may contend that the Chesapeake Bay restoration effort would have a higher chance of receiving consistent funding if the authorization for funding for the CBP were current. The CBP authorization for appropriations expired in 2005. Similarly, other stakeholders, who believe that federal restoration efforts receive insufficient funding, may argue that if all federal restoration efforts were authorized and organized under one law, the efforts may receive more funding. For example, Great Lakes restoration activities were supported by appropriations of $888 million to $986 million per year between FY2012 and FY2016, the largest component of which supported the Great Lakes Restoration Initiative, a program with dedicated Great Lakes funding, in addition to agency Great Lakes restoration work. Some could disagree by arguing that gathering all restoration activities under one authorization could create a large target for funding decreases, implying that having restoration efforts spread across several authorities is more advantageous for receiving appropriations. Several groups have attempted to estimate the total cost of restoring the Bay and maintaining a restored Bay, with varying results. Cost estimates have ranged from $7 billion for individual state costs to $28 billion for the entire watershed, with additional annual maintenance costs projected once restoration is complete. Costs estimates vary depending on the restoration metrics, assumptions, and measures (e.g., nutrient-reduction technology, agricultural best management practices, etc.) included in the calculations. Some stakeholders contend that the increase in social and economic benefits to the watershed will justify the final cost. They add that the current cost of restoration is likely to be less than the cost of restoration in the future. Other stakeholders argue that the costs have and will result in continual, if slow, improvements to Bay conditions. Others, including some Members of Congress, question the justification for funding Bay restoration because a comprehensive cost-benefit analysis of restoration has not been completed. Some stakeholders may also contend that the reported improvements in water quality and habitat do not justify the funding already spent nor the expected final cost to restore the Bay. Congress continues to be interested in whether progress is being made in restoring the Bay. The Chesapeake Bay Watershed Agreement contains milestones for achieving its goals, and progress toward meeting those goals by 2025 is evaluated periodically. Even with these evaluations, it is unclear whether progress is being made toward the stated goals. Since the CBP's inception, stakeholders have considered whether appropriate progress is being made to restore the Chesapeake Bay and its resources. Several Chesapeake Bay evaluations are conducted on an ongoing basis to measure the progress of Bay restoration over time, each with unique methodologies. Chesapeake Bay restoration progress results differ among evaluations. The differences may be due to different priorities, methodologies, data sets, metrics, and timescales of interest. The CBP has periodically assessed progress in restoring the Bay since the 1983 Chesapeake Bay Watershed Agreement. Goals set in the Bay agreements have been largely missed, such as in the 2000 Chesapeake Bay Agreement, which aspired to restore the Bay to certain conditions by 2010. The 2014 Chesapeake Bay Watershed Agreement set 2025 as its target year to reach certain goals (and underlying outcomes) and tracks biennial progress toward the goals. For 2016-2017, CBP reports that progress was made in five goals, and five goals showed no progress/regress. For example, progress was made toward the sustainable fisheries goal due to reported increases in the blue crab and oyster populations. In July 2018, the EPA released its midpoint assessment of progress in implementing practices to reach a 60% reduction of nutrients and sediment by 2017, as set in the TMDL. According to the EPA, jurisdictions have implemented practices to achieve the phosphorus and sediment reductions, but did not reach the nitrogen reduction. In addition to federal reporting, several NGOs have evaluated restoration progress over time. Non-federal evaluations of restoration progress generally have been critical of the level of progress. The 2016 Chesapeake Bay Foundation (CBF) State of the Bay report assigned the Chesapeake Bay a rating of 34 out of 100, a slight increase from the 2014 rating of 32. Since 1998, CBF has rated the Bay between 27 and 34; CBF would consider the Bay restored at a rating of 70. Similar Chesapeake Bay conditions were reported by an evaluation completed by the University of Maryland Center for Environmental Science (UMCES). According to UMCES, in 2017 decreased nutrient levels were "significantly improving" the Bay, but poor to moderate water clarity and nitrogen, among other indicators, persisted. UMCES rated the Bay at a C, or 54% overall; since 1986, UMCES has rated the Bay between 36% and 55%. Stakeholders have a range of opinions on whether Bay restoration is progressing. Some stakeholders may contend that Bay conditions are improving at an acceptable rate for the resources being spent on restoration. Others argue that restoration efforts are progressing even though restoration ratings remain stable or show minor improvements. These stakeholders note that a stable ecosystem is progress since there has been no further deterioration of conditions despite population growth, increasing impermeable surfaces, and growing nutrient loads in the watershed. Others may contend that although the Bay is improving, it could be doing so at a faster pace. Finally, some stakeholders may argue that it may not be possible to restore the Bay to a pristine or semi-pristine level due to the persistence of original problems such as excess nutrients and habitat loss, among others. These stakeholders may argue for lower expectations to measure restoration success or concede that a man-made ecosystem should be the goal of restoration. Since 1983, the progress of the Bay's resources and restoration efforts has received oversight from both the public and different levels of government. Congress, GAO, and the EPA Office of Inspector General (OIG) have addressed the CBP's reporting of Bay health and restoration progress. GAO recommended the establishment of an independent evaluator or peer review in 2005, again in 2008, with the EPA OIG echoing these concerns in 2008 as well. President Obama's 2009 Executive Order 13508 called for a consistent, periodic evaluation in coordination with the FLC. In response, some CBP stakeholders argued for the creation of an outside review group, an independent entity within the CBP with an enforcement role, or an internal audit committee. Some noted that the use of a one-time National Academy of Science evaluation in 2011, while helpful to evaluate the short-term scientific and technical efforts of restoration, could not hold the CBP accountable in the long term. Others argued that the CBP's adoption of an adaptive management framework, which allows internal program evaluations, removed the need for external evaluation. In 2014, Congress directed EPA to appoint an independent evaluator to report its findings and recommendations to Congress on a biannual basis (Chesapeake Bay Accountability and Recovery Act; CBARA; P.L. 113-273 ). Under CBARA, EPA must appoint an independent evaluator from a list of nominees provided by the CBP Executive Council. In June 2018, CBP stated that the implementation of an independent evaluator was "on hold pending direction from the [Principle Staff Committee]." Appendix A. Chronology Appendix B. Chesapeake Bay Agreement Over Time Appendix C. Selected Federal Authorities Related to Chesapeake Bay Restoration

The Chesapeake Bay (the Bay) is the largest estuary in the United States. It is recognized as a "Wetlands of International Importance" by the Ramsar Convention, a 1971 treaty about the increasing loss and degradation of wetland habitat for migratory waterbirds. The Chesapeake Bay estuary resides in a more than 64,000-square-mile watershed that extends across parts of Delaware, Maryland, New York, Pennsylvania, Virginia, West Virginia, and the District of Columbia. The Bay's watershed is home to more than 18 million people and thousands of species of plants and animals. A combination of factors has caused the ecosystem functions and natural habitat of the Chesapeake Bay and its watershed to deteriorate over time. These factors include centuries of land-use changes, increased sediment loads and nutrient pollution, overfishing and overharvesting, the introduction of invasive species, and the spread of toxic contaminants. In response, the Bay has experienced reductions in economically important fisheries, such as oysters and crabs; the loss of habitat, such as underwater vegetation and sea grass; annual dead zones, as nutrient-driven algal blooms die and decompose; and potential impacts to tourism, recreation, and real estate values. Congress began to address ecosystem degradation in the Chesapeake Bay in 1965, when it authorized the first wide-scale study of water resources of the Bay. Since then, federal restoration activities, conducted by multiple agencies, have focused on reducing pollution entering the Chesapeake Bay, restoring habitat, managing fisheries, protecting sub-watersheds within the larger Bay watershed, and fostering public access and stewardship of the Bay. Congress has authorized various programs and activities to restore the Chesapeake Bay, including the Chesapeake Bay Program (CBP), created in 1983. The CBP implements the Chesapeake Bay Agreement, a periodically renewed agreement between executives in the watershed states, a joint Bay state legislative body, and select federal agencies that aims to coordinate Bay restoration efforts. The most recent agreement was signed in 2014 (known as the 2014 Chesapeake Bay Watershed Agreement) and set a series of restoration goals and actions to be completed by 2025. The 2014 Chesapeake Bay Watershed Agreement, like others in the past, is not binding. Other restoration plans--including the 2010 Chesapeake Bay Strategy for Protecting and Restoring the Chesapeake Bay Watershed (pursuant to President Obama's 2009 Executive Order 13508), the U.S. Environmental Protection Agency's 2010 Chesapeake Bay Total Maximum Daily Load, and a draft Comprehensive Plan from the U.S. Army Corps of Engineers--harmonize with the goals of the 2014 Chesapeake Bay Watershed Agreement and contain objectives for federal agencies and states. As work continues toward the 2025 restoration goals set by state and federal plans, Congress may consider what role the federal government plays in Chesapeake Bay restoration, if any. In considering the federal role in Chesapeake Bay restoration, Congress may weigh issues related to coordination of federal activities and federal agency authority, funding and total cost of activities, and the rate of progress toward restoration.

Until they were placed under government conservatorship in September 2008, Fannie Mae and Freddie Mac were stockholder-controlled companies that were chartered by Congress to improve the nation's residential mortgage market and are known as government-sponsored enterprises (GSEs). The charters convey special privileges, but also impose certain restrictions on the GSEs' business activities. Congress enacted the modern conforming loan limit, which establishes the maximum size mortgage that the GSEs can purchase, in the Housing and Community Development Act of 1980. The initial limit was $93,750 for a single-family home (39% above the Federal Housing Administration (FHA) ceiling at the time), and the law provided for annual increases in the loan limit to adjust for rising prices, as reflected in a housing price index published by the Federal Housing Finance Board (FHFB). This loan limit is the maximum value of a mortgage that Fannie Mae and Freddie Mac can purchase. The loan limit was initially set at a level significantly higher than the national average home price, and with indexation it has remained higher. In 2007, the conforming loan limit stood at 145% of the average new home price, and 162% of the average resale price of an existing home. Since 2006, the basic conforming loan limit has held steady at $417,000. In 2008, the passage of the Economic Stimulus Act of 2008 (ESA; P.L. 110-185 ) created a temporary higher loan limit in high-cost areas that was 125% of the area median house price, but no greater than 175% of the national median house price. This resulted in limits greater than $417,000 in areas where the median house price exceeded $333,600. The Housing and Economic Recovery Act of 2008 (HERA; P.L. 110-289 ) and the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) made temporary and permanent changes to the limits for high-cost areas. With the expiration of the Continuing Appropriations Act of 2011, the conforming loan limit in high-cost areas is determined by the Housing and Economic Recovery Act of 2008 ( P.L. 110-289 ): 115% of area median house price, but not to exceed 150% of the national conforming loan limit, which results in a high-cost limit of $625,500. This results in limits greater than $417,000 in areas where the median house price exceeds $362,609. According to a study by Federal Reserve economists, if the HERA limits had applied in 2010, 1.3% of home-purchase mortgages and 1.3% of refinance mortgages that were eligible for GSE purchase would not have been eligible for purchase by Fannie Mae and Freddie Mac. On the other hand, of those mortgages that would have lost their eligibility, 53.4% of those used to purchase a home and 59.6% of those used to refinance were purchased by the GSEs. The Consolidated and Further Continuing Appropriations Act of 2012 ( P.L. 112-55 ) set the high-cost limit for mortgages insured by the Federal Housing Administration (FHA) at 125% of area median house price, not to exceed 175% of the national limit or $729,750. Prior to this law, the high-cost FHA mortgage limit was identical to the GSE high-cost conforming loan limit. In other areas, the FHA mortgage limit was and is 65% of the national conforming loan limit or $271,050. The interaction between the 125% of area median house price and the $271,050 national limit raises the high-cost limit in areas where the median house price is greater than $216,840. According to recent congressional testimony, most recent home purchase mortgages are guaranteed by FHA and securitized by Ginnie Mae; the majority of mortgages purchased recently by Fannie Mae and Freddie Mac have refinanced existing mortgages. Since 2008, Congress has adjusted the conforming loan limit five times. The first bill was ESA, which enacted a temporary increase in the conforming loan limit. For mortgages originated between July 1, 2007, and December 31, 2008, the loan limit for an area was the greater of (1) the existing limit of $417,000 or (2) 125% of the area median home price, not to exceed a ceiling of 175% of the statutory limit, or $729,750. A total of 71 metropolitan and micropolitan statistical areas had higher 2008 conforming loan limits, including 224 counties and cities not in counties. There were 21 counties outside of metropolitan or micropolitan areas with increases in 2008. HERA permanently removed the single conforming loan limit for the contiguous 48 states. The loan limit is higher in metropolitan statistical areas--defined as "high-cost"--where the median home sale price exceeds the current conforming loan limit. Under HERA, the conforming loan limit for those areas was 115% of the median home price in the area, except that increases were to be capped at 150% of the statutory loan limit (the limit that now applies to Alaska, Hawaii, and the two island territories). This system for determining the limit took effect when the temporary limits set by the stimulus act expired on December 31, 2008. Subject to the requirement in their charters that loans purchased be no more than one year old, the GSEs were able to purchase high-cost conforming loans after December 31, 2008. ARRA returned the conforming loan limits for mortgages originated in 2009 in high-cost areas to the 2008 ESA limit, that is, the high-cost limit was set at 175% of the statutory limit or $729,750. The Federal Housing Finance Agency (FHFA), which is both regulator and conservator of the GSEs, was authorized to create subarea limits, but has declined to do so. The FY2010 Department of the Interior Appropriations Act ( P.L. 111-88 ) applies the ESA limits to mortgages originated in calendar 2010. The Continuing Appropriations Act of 2011 ( P.L. 111-242 ) continued the ESA limits to mortgages originated in FY2011. They were not continued, however, into FY2012. Therefore the current limits are those set by HERA. A look at median prices in various metropolitan areas of the country shows that the conforming limit is rising in several localities under ESA, and (in fewer areas) has risen under HERA. Table 2 shows the current conforming loan limit for selected areas. Some areas (including Barnstable, MA; Boulder, CO; Miami, FL; and Riverside, CA) are now subject to the nationwide conforming loan limit, but under earlier law were high-cost areas. The existence of high-cost housing areas implies that the benefits of the GSE subsidy are not distributed uniformly. GSE status allows Fannie and Freddie to borrow at lower interest rates than non-GSE financial institutions. A portion of this subsidy is passed on to home buyers whose mortgage loans are purchased and securitized by the GSEs. In 2003, Fannie and Freddie purchased 35.1% of all mortgages (by dollar value) originated nationwide. This percentage varied from state to state. In three states (California, New York, and Connecticut) and the District of Columbia, the GSEs purchased less than 30% of new mortgages. In 15 states, on the other hand, the two GSEs purchased more than 40% of new mortgages. In high-cost areas, the GSEs' mortgage purchase and securitization operations are constrained by the conforming loan limit. Loans that exceed the conforming loan limits can only be securitized by non-GSE issuers, and prior to the recent recession, there was a large secondary market for jumbo mortgage loans. In 2006, total prime jumbo loan originations were estimated at $480 billion, while $219 billion in prime jumbo mortgage-backed securities (MBS) were issued, implying a securitization rate for jumbo mortgages of 45.6%. By contrast, Fannie and Freddie securitized 83% of loans originated in 2006 in the conventional, conforming mortgage markets where they are allowed to operate. Conforming mortgage loans tend to carry lower interest rates than nonconforming loans. A number of studies have attempted to measure the spread between conforming mortgage and jumbo loan rates and the extent to which the rate differential can be attributed to the subsidy contained in GSE status. Most estimates of the spread between conforming and jumbo loans have fallen into the range of 18-60 basis points. (A basis point is one one-hundredth of a percent.) All researchers assume that at least part of this spread is due to the GSE subsidy, but other factors are involved. For example, as properties become more expensive, lenders worry more about price volatility. That is, as the risk of a significant drop in the market value of the house--the loan's collateral--increases, lenders raise rates to compensate for that risk. Second, the existing jumbo secondary market cannot realize certain economies of scale because market participants are largely frozen out of the conforming loan market (due to their inability to compete with the GSEs). These and other factors suggest that allowing the GSEs into the jumbo market would not cause the entire spread to disappear. There is no consensus as to how much of the 18-60 basis point spread is due to the GSE subsidy--estimates range as low as 4 basis points. Thus, it is uncertain how significant the benefits would be if the conforming loan limit were increased during normal times. As a rough guide to the size of potential savings, assume that the interest rate on a 30-year, 4.00% mortgage is reduced to 3.75%. Over the 10-year average life of a mortgage, the savings would be about $10,750, or approximately $90 per month. Of course, this figure shrinks if some portion of the rate spread persists, if, that is, not all the savings are passed through to borrowers. If the interest rate paid by the hypothetical home buyer in the example above falls by only seven basis points, the monthly payments are lower by about $28 a month, and interest savings would be about $4,400 over 10 years. With the housing market downturn that began in 2006, there is a new rationale for a higher conforming loan limit: to stimulate the jumbo mortgage market, which would in turn provide stimulus for the housing sector and the economy. Credit conditions in the jumbo market are said to be unusually tight--the spread between jumbo and conforming loan rates has widened. In August 2013, the interest rate on a "conforming jumbo" was approximately the same as the interest rate on a conforming mortgage and the spread on a "non-conforming jumbo" was around 34 basis points. Since 2007, the market for private, non-GSE mortgage-backed securities has all but disappeared, as investors are unwilling to accept the risks without the GSE guarantee. Another reason why non-conforming loans are more expensive is that in the absence of a secondary market for jumbo loans, lenders must hold the loans on their own books and bear the risk of further drops in home prices and increases in defaults due to the weak economy. Allowing the GSEs to securitize some jumbo loans restored liquidity to the part of the secondary market covered by the higher limits, enabled lenders to transfer the risk of holding jumbo mortgages, and made loans more affordable and available. The conservatorship of Fannie and Freddie and the Treasury financial support are indicative of strong government support for the GSEs that should reduce the risk to lenders of jumbo loans that are purchased by the GSEs. According to the Securities Industry and Financial Markets Association (SIFMA), there has been a very slight resurgence in non-GSE MBS issuance--the value of such bonds issued in the first six months of 2013 was $39.8 billion, compared with $946.4 billion issued by the government agencies: Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and Ginnie Mae. In the first six months of 2012, $16.7 billion of MBS was issued by the private sector as compared with $789.9 billion by government agencies. The case for a higher conforming loan limit is based partly on equity concerns. Home buyers in the conforming mortgage market may receive part of the GSE subsidy in the form of lower interest rates. Because housing prices vary across the nation, the geographical distribution of this benefit is uneven. Before the increases in high-cost areas, the loan limit was $417,000; in many parts of the country, this amount covers all but the top end of the housing market. In high-cost areas such as San Francisco or New York City, on the other hand, a large proportion of real estate transactions exceed that limit. A counter-argument is that the additional subsidy created by raising the loan limit would go overwhelmingly to mortgage holders with high incomes. If the purpose of the GSEs is to foster home ownership, the impact of raising the limit is likely to be minor: those who would benefit from the change already have high homeownership rates. Another key issue is risk. As noted above, the non-conforming jumbo home market is dormant because perceptions of risk are sharply higher than they were during the boom. Lenders are more cautious because the value of their collateral--the house--may drop further. MBS investors have the same fear, making it harder for lenders to transfer price and credit risk to the secondary market. GSE entry into the jumbo market would appear to meet the needs of both lenders and investors: the GSE (and the implicit Treasury) guarantee would reassure MBS buyers, leading to a resumption of securitization, in turn encouraging lenders to make loans at more affordable rates. But GSE participation would not reduce overall risk in the market, it would simply shift that risk to the taxpayers. As house prices continue to fall, and delinquencies and foreclosures continue to rise, the GSEs have lost billions of dollars and now depend on special support from the federal government. The ultimate cost to taxpayers of this intervention is unknown. If the current tightness in the mortgage market reflects an overreaction on the part of market participants in the grip of panic, some argue that a higher conforming loan limit may be a useful corrective and avert unnecessary damage to housing markets and the economy. On the other hand, if market fundamentals dictate that home prices decline further, the assumption of more risk by the GSEs (and, more or less implicitly, by the Treasury) could arguably slow the market adjustment process and foster an unwelcome expectation in financial markets that investors will be rescued from the consequences of their own mistakes.

Congress is concerned with the pace of the recovery in the housing and mortgage markets. A series of laws starting with the Economic Stimulus Act of 2008 (ESA; P.L. 110-185) were designed to increase the availability and affordability of mortgages in "high-cost" areas. This concern about housing and mortgage markets is balanced by attention being paid to possible taxpayer financial risks and the desire to minimize government intervention in economic markets. Two congressionally chartered government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, provide liquidity to the mortgage market by purchasing residential mortgages from the original lenders and either reselling them as mortgage-backed securities to investors or holding them as investments in their own portfolios. Their charters include a ceiling on the size of loans the GSEs can buy. Since the end of FY2011 (September 30, 2011), the maximum limit in high-cost areas was reduced to $625,500 from $729,750. The current high-cost limit is calculated as 115% of the area median house price, but cannot exceed 150% of the national limit or $625,500. The limit in other areas of the nation remains unchanged since 2006 at $417,000. Securitization of mortgages that exceed the applicable limit--called non-conforming jumbo loans--is done by private financial institutions, although in the present financial environment virtually no jumbo mortgages are being securitized. GSE status allows Fannie and Freddie to issue debt at lower cost than other private firms; part of this subsidy is passed on to home buyers in the form of lower interest rates. Interest rates on jumbo mortgages are slightly higher than those on the conforming loans that the GSEs can purchase. The spread between non-conforming jumbo and conforming loan rates has been elevated since the start of the financial crisis and is now about three-fourths of 1%. According to recent congressional testimony, most recent home purchase mortgages are guaranteed by FHA and securitized by Ginnie Mae; the majority of mortgages purchased recently by Fannie Mae and Freddie Mac have refinanced existing mortgages. S. 1217, the Housing Finance Reform and Taxpayer Protection Act of 2013, would reduce the maximum high-cost limit from 150% of the national limit ($625,500) to 130% of the national limit ($542,100). H.R. 2767, the Protecting American Taxpayers and Homeowners (PATH) Act of 2013, could reduce the high-cost limit to $525,500. This report analyzes the implications of the higher conforming loan limit in high-cost areas. It will be updated as legislative and market developments warrant.

The failure of the U.S. Intelligence Community to provide better warning of the September 11, 2001, attacks has been widely attributed to the existence of "walls" between intelligence and law enforcement agencies. The walls arguably kept analysts from talking to each other and from sharing pieces of information that, if they had been viewed in close relationship, might have yielded a coherent picture of the emerging plot. This theory cannot of course be fully proven--the overall plot might not have been discerned even if the best analysts had had access to all available information in every agency. Nevertheless, the fact that available data had not in fact been shared focused public and congressional attention on the real or perceived walls that inhibited the exchange of information among agencies. A consensus emerged that the walls should be torn down. In December 2002, the Joint Inquiry into Intelligence Community Activities Before and After the Terrorist Attacks of September 11, 2001, established by the two congressional intelligence committees, made a factual finding that the "important point is that the Intelligence Community, for a variety of reasons, did not bring together and fully appreciate a range of information that could have greatly enhanced its chances of uncovering and preventing Usama Bin Ladin's plan to attack the United States on September 11, 2001." The Inquiry also made a systemic finding that: Within the Intelligence Community, agencies did not adequately share relevant counterterrorism information, prior to September 11. This breakdown in communications was the result of a number of factors, including differences in the agencies' missions, legal authorities and cultures. Information was not sufficiently shared, not only between different Intelligence Community agencies, but also within individual agencies, and between the intelligence and law enforcement agencies. Similar conclusions were reached in July 2004 by the 9/11 Commission (the National Commission on Terrorist Attacks Upon the United States) carefully documented the failures of pre-9/11 information sharing among agencies and within different offices of the Justice Department and recommended a number of initiatives to encourage unity of effort in sharing information. The failure to share information prior to 9/11 had not occurred by happenstance. Law enforcement and intelligence information was not routinely shared and collectors and analysts were walled off from one another through a complex arrangement of constitutional principles, statutes, policies, and practices. These regulations had their origin in longstanding divisions of labor that reached back far into pre-World War II practices and in the provision of the National Security Act of 1947 requiring that the Central Intelligence Agency (CIA) "have no police, subpoena, or law enforcement powers or internal security functions." The regulations were significantly strengthened in the 1970s when, in reaction to domestic intelligence gathering activities during the Vietnam War era, Congress undertook extensive investigations of intelligence activities and enacted legislation regulating domestic surveillance activities. Ultimately, in response to recommendations derived from this investigation, in 1978 Congress passed and President Jimmy Carter signed the Foreign Intelligence Surveillance Act (FISA), P.L. 95-511 . FISA provides a statutory framework for electronic surveillance in foreign intelligence investigations while electronic surveillance in criminal investigations continues to be governed by Title III of the Omnibus Crime Control Act of 1968 (usually referred to as Title III). The implementation of FISA came to have an important influence on the relationship between law enforcement and intelligence. FISA required that "the purpose" of domestic electronic surveillance (or a physical search) had to be the gathering of foreign intelligence information. FISA permitted the dissemination to the law enforcement community of information relating to criminal activity incidentally acquired during a FISA electronic surveillance or physical search. When such dissemination was challenged by defense attorneys as running afoul of the Fourth Amendment, a number of federal courts of appeals had upheld the government's contention in several cases that the "primary purpose" of an electronic surveillance or physical search had been the collection of foreign intelligence information. Thus, this use of FISA was held to be not inconsistent with Fourth Amendment requirements for criminal cases. Before 9/11 a considerable body of government practice and Justice Department policy increasingly reflected an understanding that adhering to the primary purpose standard effectively precluded Fourth Amendment challenges. The concern was to avoid letting aggressive criminal investigators obtain FISA court orders when they were interested in obtaining evidence of criminal activities. There was a pervasive concern within the Justice Department that a court in a criminal trial would suppress information obtained through a FISA investigation on the grounds that it was primarily being used, not to collect foreign intelligence, but to gather criminal evidence or even that FISA itself would be overturned. In practice, information collected by intelligence agencies (including the parts of the Federal Bureau of Investigation (FBI) dealing with counterterrorism and counterintelligence) was kept apart from information collected for the use of prosecutors. FISA's requirements appear not to have posed major problems until the mid-1990s, but law enforcement and intelligence agencies tended to function in separate worlds. Concern about these divisions did exist and there had been major initiatives largely as a result of concerns about the development of barriers between law enforcement and intelligence agencies in the aftermath of the controversy surrounding the illegal activities of the Banca Nazionale del Lavoro (BNL) and the Bank of Credit and Commerce International (BCCI) in the early 1990s. The controversy involved complex banking fraud and other criminal activities undertaken by the two foreign banks. Congressional investigators developed information that the CIA had obtained information indicating suspicious activities by the two banks that had not been passed to prosecutors in large measure because channels of communications had not been established between intelligence and law enforcement agencies. The Senate Intelligence Committee investigators concluded that: The fundamental policy governing the relationship between law enforcement and intelligence needs to be addressed by the Attorney General and the DCI [Director of Central Intelligence], in conjunction with the congressional oversight committees. Confusion is apparent on both sides as to what the proper role (and authority) of intelligence agencies is in circumstances like those presented in the BNL case. The reaction to the BNL/BCCI affairs reflected a shift away from emphasis on a strict separation of law enforcement and intelligence efforts to an appreciation by Congress of the need for closer cooperation. As a result of congressional concerns, the DCI and the Attorney General directed that a review of the intelligence-law enforcement relationship be conducted. The review, undertaken by a group of senior executive branch officials known as the Joint Task Force on Intelligence and Law Enforcement, submitted a report in August 1994. The Task Force described the failure by intelligence and law enforcement agencies to make use of all available information on the activities of the two foreign banks. It called for a number of bureaucratic mechanisms to ensure greater information exchanges in the future, but argued that no statutory changes were called for: What is required is not new legislation radically altering the relationship [between intelligence and law enforcement agencies], but rather a different approach to the existing relationship--one that is more interactive on a number of fronts, yet maintains the important distinctions between these two communities based on law, culture, and mission. The Joint Task Force Report led to the establishment of a series of interagency coordinative mechanisms--the Intelligence-Law Enforcement Policy Board, the Joint Intelligence-Law Enforcement Working Group (JICLE)--at various levels to encourage information exchanges and resolve difficulties. Although the Task Force provided a perceptive analysis of the difficulties that then existed and officials assigned to the resultant interagency bodies worked diligently at overcoming obstacles, progress was limited. By the 1990s, the threat of new forms of international terrorism was becoming apparent. Middle Eastern terrorists were operating against U.S. forces overseas and, occasionally, within the U.S. (as in the 1993 World Trade Center attacks). Observers believed that both intelligence and law enforcement agencies were collecting relevant information on international terrorism. Members of Congress began to seek administrative and statutory changes that could facilitate information sharing in this area. Pursuant to P.L. 105-277 , a supplemental appropriations act passed in 1998, the National Commission on Terrorism, headed by former Ambassador L. Paul Bremer, was established to review the laws, regulations, directives, policies and practices for preventing and punishing international terrorism. The Bremer Commission's June 2000 report highlighted concerns about the inadequate sharing of terrorism-related information. It recommended the elimination of barriers to the aggressive collection of information on terrorists and suggested that the FBI suffered from bureaucratic and cultural obstacles to gathering terrorism information. It found that the "Department of Justice applies the statute governing electronic surveillance and physical searches of international terrorists in a cumbersome and overly cautious manner." Although it noted that the FISA application process had been recently streamlined, it recommended that the Justice Department's Office of Intelligence Policy Review (OIPR) should not require the inclusion of information in excess of that which was actually mandated by FISA. It also recommended that OIPR be substantially expanded and that it be directed to cooperate with the FBI. The Commission further concluded: Law enforcement agencies are traditionally reluctant to share information outside of their circles so as not to jeopardize any potential prosecution. The FBI does promptly share information warning about specific terrorist threats with the CIA and other agencies. But the FBI is far less likely to disseminate terrorist information that may not relate to an immediate threat even though this could be of immense long-term or cumulative value to the intelligence community. . . . Moreover, certain laws limit the sharing of law enforcement information, such as grand jury or criminal wiretap information, with the intelligence community. These laws are subject to different interpretations, so that in some cases it is unclear whether the restrictions apply." The Commission did not indicate a need for immediate statutory changes, but recommended that the "Attorney General should clarify what information can be shared and direct maximum dissemination of terrorist-related information to policymakers and intelligence analysts consistent with the law." Members of Congress did propose various approaches to address the lack of information sharing. S. 2089 as introduced in February 2000 by Senator Specter, would have required that the Attorney General prescribe in regulations the circumstances under which information acquired pursuant to FISA "shall be disclosed for law enforcement purposes." The bill would also have required two reports addressing issues of information sharing. First, it would have tasked the Director of the FBI to submit a report on "the feasibility of establishing within the Bureau a comprehensive intelligence reporting function having the responsibility for disseminating among the elements of the intelligence community information collected and assembled by the Bureau on international terrorism and other national security matters." Secondly, the bill would have required the President to submit a report on the legal authorities that govern the sharing of criminal wiretap information with intelligence agencies and with recommendations to improve the capability of the Justice Department to share "foreign intelligence information or counterintelligence information with elements of the United States intelligence community on matters such as counterterrorism." In its report on the bill, the Senate Intelligence Committee argued: For the intelligence mission of the United States to be successful, there must be a cooperative and concerted effort among intelligence agencies. Any information collected by one agency under foreign intelligence authorities that could assist another agency in executing its lawful mission should be shared fully and promptly.... The Committee has been briefed on the recent efforts by the Federal Bureau of Investigation and the Central Intelligence Agency to enhance their ability to share valuable information collected under FISA orders. The Committee commends these efforts and expects them to continue and to be broadened to include all areas of the foreign intelligence mission. As reported to the Senate in July 2000, S. 2089 was modified to include only a request for reports from the Attorney General on mechanisms for determinations of disclosure of FISA-derived information for law enforcement purposes and on actions taken by the Department of Justice (DOJ) to coordinate the dissemination of intelligence information within DOJ. Congressional concern about the growing threat of terrorism was also demonstrated in S. 3205 , introduced in October 2000 and known as the Kyl-Feinstein Counterterrorism Act of 2000, which was based directly on recommendations of the Bremer Commission that had been released in August. The bill took notice of the attack on the U.S.S. Cole , which had occurred on October 12, 2000, and aimed to discourage financial support of terrorist organizations. This bill also addressed information sharing issues; section 9 would have required a report on the feasibility of assigning the FBI responsibility for disseminating among the elements of the Intelligence Community information collected and assembled by the FBI on international terrorism and other national security matters. Section 10 of the bill would have required a report on the legal authorities that govern the sharing of criminal wiretap information with various law enforcement agencies and intelligence agencies and "recommendations, if any," for legislative language that would improve the Justice Department's capabilities to share information on matters such as counterterrorism with intelligence agencies "with elements of the United States intelligence community on matters such as counterterrorism." Consideration of the legislation reflected many of the same privacy and civil liberties concerns that had influenced existing procedures in the Justice Department. Criticisms of the approach taken by the legislation were voiced by some civil libertarians. One group opposed the sharing of information obtained by electronic surveillance conducted under Title III authorities with intelligence agencies. Such an effort, it was argued, "breaches the well-established and constitutionally vital line between law enforcement and intelligence activities." Concern was also expressed about the potential use of such information by the CIA and other intelligence agencies: "The secretive data gathering, storage and retention practices of the intelligence agencies are appropriate only when conducted overseas for national defense and foreign policy purposes and only when directed against people who are not U.S. citizens or permanent residents." Further concern was directed at the potential use of information gathered under counterintelligence authorities (presumably FISA) in criminal proceedings: Since the period of ... the Church committee, it has been recognized that the rights of Americans are better protected (and the FBI may be more effective) when international terrorism and national security investigations are conducted under the rules for criminal investigations. Such views reflected a continuing distrust of intelligence agencies and a fear that past practices might be revived. In floor debate, Senator Leahy noted that initial drafts of S. 3205 had posed "serious constitutional problems and risks to important civil liberties we hold dear." After modifications, however, "no longer does the bill require a change in the wiretap statute allowing the permissive disclosure of information obtained in a Title III wiretap to the intelligence agencies." The Clinton Administration Justice Department took a different approach, arguing that then-current statutes and regulations provided law enforcement agencies with "authority under current law to share Title III information regarding terrorism with intelligence agencies when the information is of over-riding importance to the national security." Any change "must accommodate legal constraints such as Criminal Rule 6(e) and the need to protect equities relating to ongoing criminal investigations." Accordingly, the Justice Department specifically opposed the provision in the bill that would permit the sharing of foreign intelligence or counterintelligence information collected under Title III by investigative or law enforcement officer with intelligence agencies. The Kyl-Feinstein bill would not have changed statutory language, but only asked for reports on the issue of information. Even so, according to Senator Leahy, the initial proposal to mandate such changes "prompted a firestorm of controversy from civil liberties and human rights organizations, as well as the Department of Justice." Even though the House took no action on this bill, passage of the legislation by the Senate reflected concerns at the end of 2000 regarding the possible need to adjust information sharing mechanisms, coupled with a determination to move cautiously before implementing changes that could affect civil liberties. Ultimately, the legislation was adopted by the Senate on November 14, 2000, but it was not sent to the House before the adjournment of the 106 th Congress. The FY2001 Intelligence Authorization Act, P.L. 106-567 , signed on December 27, 2000, reflected the concerns that had inspired both S. 2089 and S. 3205 . It included a requirement for a report from the Attorney General on "the authorities and procedures utilized by the Department of Justice for determining whether or not to disclose information acquired under the Foreign Intelligence Surveillance Act of 1978 (50 U.S.C. 1801 et seq.) for law enforcement purposes." This Act also formalized procedures for authorizing FISA surveillance, expanded grounds for establishing probable cause, established new procedures for physical searches within FISA, and specified mechanisms to facilitate the use of intelligence in counterintelligence investigations. It provided increased funding for OIPR subsequent to the submission of a report indicating efforts taken to streamline and improve the FISA application process. It included a provision (in section 606) derived from S. 2089 requiring a report from the Attorney General on actions taken to "coordinate the dissemination of intelligence information within the appropriate components of the [Justice] Department and the formulation of policy on national security issues." It did not, however, address the question of making information from law enforcement sources available to the Intelligence Community. Clearly, the problems created by the existence of the "wall" had not been unrecognized prior to 9/11. The Justice Department's opposition in 2000 to legislative proposals to remove barriers has been noted. On the other hand, some argue that the primary factor in preventing statutory changes was, as one observer has claimed, that "in most instances both the Department of Justice and The White House turned down the requests because it was firmly believed by senior members of the Executive Branch that the United States Congress would not allow the IC [Intelligence Community] to have broader surveillance powers." This view would be expressed by former Attorney General William Barr in testimony to the 9/11 Commission: For three decades leading up to 9/11, Congress was at the fore of a steady campaign to curtail the Bureau's domestic intelligence activities and impose on all its activities the standards and process of the criminal justice system. These concerns made it extremely difficult for the Bureau to pursue domestic security matters outside the strictures of the criminal justice process. Prohibitions on sharing grand jury information with intelligence agencies and with using intelligence information in criminal investigations created a 'wall of separation.' It is clear in retrospect that there were those in both the Executive Branch and Congress who realized the need to lower barriers to sharing law enforcement and intelligence information, but their views did not, prior to 9/11, reflect a consensus in either branch. Those opposed to greater information sharing did so in large measure because of their awareness of the past history of domestic surveillance and a distrust of intelligence organizations. The result was a number of very tentative steps that, in the event, proved wholly inadequate to task of gathering information about al Qaeda's plot. The FY2001 Intelligence Authorization Act included some minimalist provisions, but the wall was left in place. Neither the Clinton Administration or the Bush Administration, in the first eight months of 2001, sought to amend the relevant laws. The problem was recognized but proposed solutions faced strong opposition. The attacks of September 11, 2001, destroyed the World Trade Center and a portion of the Pentagon; they also demolished the wall between U.S. law enforcement and intelligence. After 9/11, it was almost immediately accepted that counterterrorism would have to involve all parts of the U.S. Government, including law enforcement agencies and the Intelligence Community. It was agreed that the counterterrorism effort must be based on sharing information from whatever source. The problem for both Congress and the executive branch was to establish appropriate mechanisms for information sharing with adequate safeguards for using the information in future criminal trials. Congress immediately set about to consider the most appropriate legislative response that could be quickly enacted. Former Attorney General John Ashcroft writes, "The 9/11 attacks occurred on a Tuesday. By Saturday, we had a full-blown legislative proposal. Part of the reasons we were able to move so quickly was that a number of the provisions had been proposed to Congress in 1996, and Congress had rejected them." Attention focused on various proposals and recommendations of commissions that had looked at international terrorism and related issues and to earlier legislative proposals that had not been adopted. A wide number of proposals came together as the USA PATRIOT Act ( P.L. 107-56 ) that would be debated in the final weeks of September and early October 2001. The USA PATRIOT Act changed the requirement that "the purpose" of a FISA surveillance be to collect foreign intelligence information, to require that collecting such information be "a significant purpose" of FISA electronic surveillance or physical search. This provided latitude to use FISA authority for electronic surveillance or physical searches where the primary purpose was criminal investigation, as long as a significant foreign intelligence purpose was also present. The USA PATRIOT Act also addressed concerns about sharing intelligence and law enforcement information. Although a discussion of all the complex provisions that were included in the USA PATRIOT Act lies beyond the scope of this Report, several provisions address the sharing of law enforcement and intelligence information. Section 203 of the Act removed some of the restrictions on federal government attorneys sharing grand jury information. Subsection 203(a) authorized federal government attorneys to share matters occurring before the grand jury involving foreign intelligence, counterintelligence, or foreign intelligence information with a federal law enforcement, intelligence, protective, immigration, national defense, or national security official to assist that official in the performance of his or her duties. Subsection (a) authorized the sharing of grand jury information "when the matters involve foreign intelligence or counterintelligence." Subsection 203(b) permitted investigative and law enforcement officers and Government attorneys to share information acquired under or derived from the interception of a wire, oral, or electronic communication under Title III with any other federal law enforcement, intelligence, protective, immigration, national defense or national security official for use in his or her official duties to the extent that the contents of that communication include foreign intelligence or counterintelligence information. Subsection (c) provides authority for the Attorney General to establish implementing procedures. Subsection 203(d) permitted the disclosure of foreign intelligence, counterintelligence, or foreign intelligence information obtained as part of a federal criminal investigation, notwithstanding any other provision of law, to any federal law enforcement, intelligence, protective, immigrations, national defense, or national security official in order to assist that official in carrying out his or her official duties, subject to any limitations on the unauthorized disclosure of that information. Section 504 permitted federal officers conducting electronic surveillance or physical searches under FISA to consult with federal law enforcement officers or state or local law enforcement personnel to coordinate against actual or potential attacks or other grave hostile acts of a foreign power or its agent; sabotage or international terrorism by a foreign power or its agent, or clandestine intelligence activities by an intelligence service or network of a foreign power or its agent. Section 905 requires the Attorney General or heads of other Federal agencies with law enforcement responsibilities to disclose expeditiously to the DCI (later replaced by the Director of National Intelligence (DNI)), under relevant guidelines, foreign intelligence acquired in the course of a criminal investigation. Exceptions could be made where the disclosure of such foreign intelligence would jeopardize an ongoing law enforcement investigation or impair other significant law enforcement interests. In addition, Section 905 required the Attorney General, in consultation with the DCI (now the DNI), to develop procedures to give the Director timely notice of the Attorney General's decision to begin or decline to begin a criminal investigation based on information from an element of the intelligence community regarding possible criminal activity of a foreign intelligence source or potential source. The provisions included in the USA PATRIOT Act and DOJ's effort to implement them were far-reaching and to some extent were not welcomed by the FISA Court. In particular, the FISA Court in In re all Matters Submitted to the Foreign Intelligence Court found that proposed 2002 procedures issued by the Attorney General "eliminate[d] the bright line in the 1995 procedures prohibiting direction and control by prosecutors on which the Court has relied to moderate the broad acquisition[,] retention, and dissemination of FISA information in overlapping intelligence and criminal investigations." The FISA Court thus attempted to "reinstate the bright line used in the 1995 procedures, on which the Court has relied." Concerned that its proposed procedures were rejected, the Justice Department appealed the Foreign Intelligence Surveillance Court's granting of a request modified in accordance with its earlier ruling in In re All Matters Submitted to the Foreign Intelligence Surveillance Court . The appeal went to the Foreign Intelligence Surveillance Court of Review and was the first appeal to that court. In a sweeping decision, the Court of Review overruled the limitations imposed by the FISA Court, along with a considerable amount of customary FISA practice. The Court of Review expressed concern that the FISA Court had overstepped its role by prescribing the internal procedures for handling surveillances within the Justice Department. The Court of Review maintained that the FISA Court "determined an investigation became primarily criminal when the Criminal Division played a lead role. This approach has led, over time, to the quite intrusive organizational and personnel tasking the FISA [C]ourt adopted. Putting aside the impropriety of an Article III court imposing such organizational strictures ... [the wall] was unstable because it generates dangerous confusion and creates perverse organizational incentives." The Court of Review thereby gave the final blow to the legal structure supporting the wall between law enforcement and intelligence information. Implementation of the information-sharing provisions of the USA PATRIOT Act and other legislation is underway. The Homeland Security Act of 2002 ( P.L. 107-296 ) and the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) required that procedures be established under which federal agencies can share intelligence and law enforcement information about international terrorism. The Intelligence Reform Act mandated the creation of an Information Sharing Environment (ISE) that combines policies, procedures, and technologies to link information collections and users. In November 2006 the Administration released a lengthy implementation plan for the ISE. The plan sets forth procedures for sharing information among agencies at federal, state, and local levels and seeks to promote a culture of information sharing. It also provides procedures for protecting information privacy and civil liberties. Congress may choose to review the implementation of the ISE during coming months. A fundamental issue that faces both Congress and the U.S. public remains the need to balance the advantages to be gained by sharing information from all sources with the possibility that the availability of data accumulations could be used to undermine lawful political or religious activities. An unstable balance between these two separate goals--often portrayed as competing--greatly complicated the counterterrorism and counterintelligence effort prior to 9/11. The fact that public opinion appeared deeply ambivalent made procedural changes difficult and contributed to the luxuriant growth of complex regulations adopted by DOJ and endorsed by the FISA Court. After 9/11, public opinion shifted dramatically, resulting in the rapid passage of the USA PATRIOT Act and other legislation. The need to encourage the sharing of information and the connection of dots is now unquestioned, but there are lingering concerns about the risks that widespread information sharing may jeopardize civil liberties. Congress will undoubtedly seek to determine whether the new statutes, regulations, and procedures that have been adopted will prove both effective and sensitive to individual rights. The importance of sharing intelligence and law enforcement information is not limited to issues relating to international terrorism but extends to banking fraud, narcotics smuggling, and a variety of international concerns. Narcotics smuggling, for instance, can be addressed by encouraging other countries to halt the cultivation of opium poppies or coca, as well as by law enforcement in the U.S. Terrorism, of course, is uniquely threatening and in combating terrorists more vigorous non-law enforcement approaches are considered more legitimate than is the case with drug smugglers or embezzlers. What is advantageous in all cases is assembling the full range of information about the activity and subjecting it to rigorous analysis. There is, however, the possibility that the current consensus may unravel. The political controversy surrounding NSA's electronic surveillance efforts and other data mining programs may come to focus on the sharing of information that some argue was not lawfully obtained, and this concern could lead to efforts to restrict information sharing across the boards. There is also a possibility that the use of information obtained by surveillance in accordance with FISA might ultimately not be allowed in court cases out of concern that the Fourth Amendment has been bypassed. Despite the widespread acceptance of the need for information sharing, concerns that sharing information could lead to governmental abuses persists across the political spectrum. These concerns are tenaciously held, and have in the past made legislating very controversial. There is no reason to believe that they will not resurface should the threat from international terrorism seem less menacing. The potential threat to civil liberties does not, of course, represent the full extent of the issues raised by increased information sharing. Sharing sensitive information inevitably raises the danger that intelligence sources and methods may be compromised either accidentally or purposefully. For intelligence professionals, in particular, the danger to valuable sources that may have taken years to develop is a fundamental concern. Moreover, when a human source is compromised there is not only a danger to a particular individual, but also a potential loss of confidence in U.S. intelligence agencies by other actual or potential sources. The role of Congress in dealing with information sharing issues is especially important. There are delicate questions of liberty and security involved and a sensitive balance is crucial. Air Force General Michael V. Hayden, who now serves as CIA Director, in the past argued that Members of Congress are in close touch with their constituents and "What I really need you to do is talk to your constituents and find out where the American people want that line between security and liberty to be." Congress also can provide the ongoing oversight to ensure that the sorts of abuses that occurred in the 1960s and 1970s do not recur. Ultimately, an information sharing policy that is largely consistent with public opinion and is held to account by rigorous oversight should enhance the chances that the dots can be connected without jeopardizing the rights of Americans. Observers see a danger, however, that gridlock in both the Executive and Legislative Branches might inhibit the government's ability to find effective and sensible ways to acquire and analyze information on new threats to the national security.

Almost all assessments of the attacks of September 11, 2001, have concluded that U.S. intelligence and law enforcement agencies had failed to share information that might have provided advance warning of the plot. This realization led Congress to approve provisions in the USA PATRIOT Act (P.L. 107-56) and subsequent legislation that removed barriers to information sharing between intelligence and law enforcement agencies, and mandated exchanges of information relating to terrorist threats. Most experts agreed that statutory changes, albeit difficult to enact, were essential to change the approaches taken by executive branch agencies. The barriers that existed prior to September 2001 had a long history based on a determination to prevent government spying on U.S. persons. This had led to the establishment of high statutory barriers to the sharing of law enforcement and intelligence information. The statutes laid the foundation of the so-called "wall" between intelligence and law enforcement that was buttressed by regulations, Justice Department policies, and guidance from the judicial branch. Despite the widespread acceptance of a barrier between law enforcement and intelligence, by the early 1990s it had become apparent to some that the two communities could mutually support efforts to combat international criminal activities including narcotics smuggling. Later in the decade dangerous threats to the U.S. posed by international terrorists came into sharper focus. Nevertheless, efforts to adjust laws, regulations, and practices did not succeed, drawing strong opposition from civil libertarians. Only the tragedy of the 9/11 attacks overcame earlier concerns and led Congress and the executive branch to remove most statutory barriers to information sharing. Laws and regulations have changed significantly since September 2001 and an Information Sharing Executive (ISE) has been established within the Office of the Director of National Intelligence to design and implement information sharing procedures. It is clear, however, that sustaining the exchange of law enforcement and intelligence information remains a challenge. In particular, there is continued concern about sharing of information that might in some way jeopardize the rights of free speech or association of U.S. persons. This opposition has contributed to the difficulty Congress has had in addressing legislation in this area and can be expected to continue. Some argue that, given the extent of legislation enacted in recent years, extensive oversight of information sharing efforts may be an appropriate way to ensure that the balance between ensuring domestic security and protecting civil liberties can be maintained. This report will be updated as additional information becomes available.

The elderly nutrition services program, authorized under Title III of the Older Americans Act (OAA), provides grants to state agencies on aging to support congregate and home-delivered meals to people aged 60 and older. The program is the largest component of the act, accounting for $814.7 million, over 44%, of the act's total FY2014 funding of $1.871 billion. The program is designed to address problems of food insecurity, promote socialization, and promote the health and well-being of older persons through nutrition and nutrition-related services. It evolved from demonstration projects first funded in 1968. In 1972, Congress authorized the program as a separate title of the act and, in 1978, incorporated it into Title III. In 2006, Congress enacted P.L. 109-365 , which extended the act's authorizations of appropriations through FY2011. However, Congress has continued to appropriate funding for OAA activities. The 113 th Congress may consider reauthorization of the OAA and as a result may modify existing authorities, including those related to the nutrition services program. This report describes the nutrition services program authorized under Title III of the Older Americans Act. Other federal and state programs, such as the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program) and the Seniors Farmers' Market Nutrition Program, may provide similar nutrition services to older adults who meet certain income and other requirements. These programs, administered by the U.S. Department of Agriculture (USDA), are not the focus of this report. For further information on the range of domestic food assistance programs, see CRS Report R42353, Domestic Food Assistance: Summary of Programs , by [author name scrubbed] and [author name scrubbed]. The Older Americans Act Amendments of 2006, P.L. 109-365 , added a new purpose statement for the nutrition services program emphasizing its nutritional and socialization aspects, as well as its importance in promoting the health of older people. The purposes of the program as stipulated in the law are to (1) reduce hunger and food insecurity, (2) promote socialization of older individuals, and (3) promote the health and well-being of older individuals by assisting them to access nutrition and other disease prevention and health promotion services to delay the onset of adverse health conditions resulting from poor nutritional health or sedentary behavior. According to USDA analysis of Current Population Survey (CPS) data, 8.8% of U.S. households with one elderly member were food insecure in 2012, defined as households reporting low or very low food security. Households in which elderly lived alone reported a slightly higher rate of food insecurity, at 9.1% in 2012. The Administration on Aging (AOA) in the Administration for Community Living (ACL) within the Department of Health and Human Services (HHS) administers the nutrition services program, which includes (1) the Congregate Nutrition Services Program, (2) the Home-Delivered Nutrition Services Program, (3) and the Nutrition Services Incentive Program (NSIP). For the Congregate and Home-Delivered Programs, services must be targeted at persons with the greatest social and economic need, with particular attention to low-income older persons, including low-income minority older persons, older persons with limited English proficiency, older persons residing in rural areas, and older persons at risk for institutionalization. Means tests for program participation are prohibited, but older persons are encouraged to contribute to the costs of nutrition services, including meals. Older individuals may not be denied services for failure to contribute. The following describes these programs in greater detail. Congregate nutrition services provide meals and related nutrition services to older individuals at a variety of sites, such as senior centers, community centers, schools, and adult day care centers. Congregate nutrition service providers can also offer a variety of nutrition related services at meal sites, such as nutrition education and screening, nutrition assessment, and counseling as appropriate. The program also provides seniors with opportunities for social engagement and volunteer opportunities. Individuals aged 60 or older and their spouses of any age may participate in the congregate nutrition program. The following groups may also receive meals: persons under age 60 with disabilities who reside in housing facilities occupied primarily by the elderly where congregate meals are served; persons with disabilities who reside at home with, and accompany, older persons to meals; and volunteers who provide services during the meal hours. In FY2011, the most recent year for which data are available, almost 4 in 10 meals (39%) were served in congregate settings. These meals were served to two-thirds of all OAA nutrition program participants. A total of 85.9 million congregate meals were served to more than 1.6 million meal participants (see Figure 1 ). Home-delivered nutrition services (commonly referred to as "meals on wheels") provide meals and related nutrition services to older individuals with priority to homebound older individuals. According to AOA, home-delivered meals are often the first in-home service that an older adult receives, and the program is a primary access point for other home and community-based services. Like congregate nutrition service providers, home-delivered service providers can offer services such as nutrition screening and education, nutrition assessment, and counseling as appropriate. Home-delivered meals are also an important service for many family caregivers as they may assist family members with their caregiving responsibilities and, for some, help them maintain their own health and personal well-being. Individuals aged 60 or older and their spouses of any age may participate in the home-delivered nutrition program. Services may be available to individuals who are under age 60 with disabilities if they reside at home with the older individual. In FY2011, approximately 6 in 10 meals (61%) were home-delivered. These meals were delivered to one-third of all OAA nutrition program participants. A total of 137.2 million home-delivered meals were provided to just under 847,000 meal participants (see Figure 1 ). Congregate meal participants represent a larger proportion of all meal participants but a smaller proportion of total meals served. On the other hand, home-delivered meal participants are relatively fewer but likely to receive more meals. Many home-delivered meals participants receive more than one meal delivered during a week. Congregate meal settings are designed to serve many participants but may serve meals less frequently. In addition, congregate meal participants may partake in meals on a less than frequent basis, compared to home-delivered meals participants. The Nutrition Services Incentive Program (NSIP) provides funds to states, territories, and Indian tribal organizations to purchase food or to cover the costs of food commodities provided by the USDA for the congregate and home-delivered nutrition programs. Originally established by the OAA in 1974 as the Nutrition Program for the Elderly and administered by USDA, Congress transferred the administration of NSIP from USDA to AOA in 2003. However, states and other entities may still choose to receive all or part of their NSIP allotments in the form of commodities. Obligations for commodity procurement for NSIP are funded under an agreement between USDA and HHS. The AOA awards separate allotments of funds for the congregate nutrition services program and home-delivered nutrition services program to states and U.S. territories. State agencies or State Units on Aging (SUAs), in turn, award nutrition services funds to the 618 Area Agencies on Aging (AAAs) that administer the program in their respective planning and service areas. The AOA also awards a separate allotment to states, territories, and Indian tribal organizations for NSIP funds. Funds for congregate and home-delivered nutrition services are allotted to states and U.S. territories according to a formula based on each entity's relative share of the population aged 60 and over; however, the law stipulates that no entity is to receive less than it received in FY2006. States are required to provide a matching share of 15% in order to receive funds for congregate and home-delivered nutrition programs. NSIP funds are allotted to states and other entities based on each state's share of total meals served by the nutrition services program (both congregate and home-delivered meals) in all states, U.S. territories, and tribes during the prior year. As previously mentioned, entities receive their share of NSIP funds in cash, but may elect to use some or all of their funds to purchase commodities through the USDA. Most entities choose to receive their share of funds in cash, rather than commodities. There is no matching requirement for NSIP funds. In FY2014, of the total $814.7 million appropriated for the Title III nutrition services program, $438.2 million was for congregate nutrition (54%), $216.4 million for home-delivered nutrition (27%), and $160.1 million for nutrition services incentive grants (19%) ( Table 1 ). Funding for nutrition services represents 64% of FY2014 funding for Title III ($1.281 billion); Title III also funds a wide array of social services, family caregiver support activities, and disease prevention and health promotion services for older individuals. When adjusted for inflation, the total amount of funding appropriated for OAA nutrition services has decreased substantially over the past two decades ($814.7 million for FY2014 compared to $1,052.4 million in FY1990). This decline in relative funding has been experienced by the congregate meals and NSIP programs, while funding levels for the home-delivered meals programs have increased over the same time period. In constant 2014 dollars, the total appropriation for congregate meals, home-delivered meals, and NSIP fell from $1,052.4 million in 1990 to $814.7 million in 2014, a decline of $237.7 million, or 23%. The amount appropriated for congregate meals fell from $644.7 million to $438.2 million, a decline of $206.5 million, or 32%. The amount appropriated for NSIP fell from $262.9 million to $160.1 million, a decline of $102.8 million, or 39%. Only the amount appropriated for home-delivered meals increased in real terms from 1990 to 2014, rising from $144.7 million to $216.4 million, an increase of $71.7 million, or 50%. Overall, this reduction in purchasing power has affected the number of meals served, which declined by 21.1 million meals (or 8.6%) from FY1990 to FY2011, the most recent year for which data are available. Over this same time period, the number of individuals age 60 and older has increased substantially from just under 42 million in1990 to about 62 million in 2013, an increase of almost 50%. Another way to look at the decline in purchasing power compared to the potential increase in demand for services is to compare per person spending in constant 2013 dollars, which has declined by about half during this time period. In 1990, total federal funding for nutrition services was about $25 per older individual, as compared to just over $12 per older individual in 2013. It is important to note that OAA funding is not the only source of funding that state agencies use to provide nutrition services to older individuals. States rely on other funding sources, such as funding from other federal programs (e.g., Social Services Block Grant, Medicaid home- and community-based services), state and local governments, private sources, and clients. GAO found that OAA funds comprised an estimated 42% of local AAA's Title III program budgets for FY2009. In FY2011, more than 223 million meals were provided to older adults (see Table 2 ). While overall the number of meals served has declined over the past two decades, proportionately the number of home-delivered meals served has increased. In FY1990, home-delivered meals represented 42% of total meals served, but by FY2011, the share had climbed to 62% of total meals. From 1990 to 2011, the number of home-delivered meals served grew by 35%, while the number of congregate meals served actually declined by 40%. A number of reasons account for this, including the trend by states to transfer funds from their congregate services allotments to home-delivered services; greater growth in federal funding for home-delivered services relative to the congregate nutrition program funds; state initiatives to expand home care services for frail older persons; and successful leveraging of non-federal funds for home-delivered services. With respect to state transfer of funds, as previously mentioned, states receive separate allotments for congregate and home-delivered nutrition services, as well as for supportive services. However, they are allowed to transfer allotted funds among these three programs (up to 40% of funds between congregate and home-delivered nutrition services allotments with waivers for higher amounts if approved by the Assistant Secretary for Aging; and up to 30% among supportive services and congregate and home-delivered nutrition services allotments). States may not transfer NSIP allotted funds among these programs. In recent years, state funding transfers have resulted in a decrease of funds available for congregate nutrition services. In FY2012, states transferred $82.3 million out of their congregate nutrition services allotments to either the home-delivered nutrition or supportive services allotments. These funding transfers resulted in a decrease of 18.8% in funds that were originally allotted to states for the congregate program. As a result of funding transfers, available funds for home-delivered meals and supportive services increased by 14.7% and 13.8%, respectively. State initiatives to respond to the demand for home-based services by frail homebound older persons are an important factor in their decisions to transfer funds. According to GAO, state and local officials reportedly moved funds out of congregate meals because of a greater need for home-delivered meals and supportive services. AOA data show that for FY2011, the U.S. average expenditure for congregate meals was $7.31, ranging from $1.56 in Puerto Rico to $18.81 in Alaska. The average expenditure for home-delivered meals in 2011 was $5.61, ranging from $1.66 in Puerto Rico to $12.61 in Alaska. Congregate and home-delivered nutrition services providers are required to offer at least one meal per day, five or more days per week (except in rural areas where less frequency is allowed). Meals provided must comply with the Dietary Guidelines for Americans published by the Secretary of HHS and the Secretary of Agriculture. Providers must serve meals that meet certain dietary requirements based on the number of meals served by the project each day. Providers that serve one meal per day must provide to each participant a minimum of one-third of the daily recommended dietary reference intakes (DRIs) established by the Food and Nutrition Board of the Institute of Medicine (IOM). Providers that serve two meals per day must provide a minimum of two-thirds of the DRIs, and those that serve three meals per day must provide 100% of the DRIs. Providers must provide meals that comply with state or local laws regarding safe and sanitary handling of food, equipment, and supplies that are used to store, prepare and deliver meals, and must carry out meal programs using the advice of dietitians and meal participants. The law requires providers to offer nutrition screening and education to participants, and where appropriate, nutrition assessment and counseling. Providers are encouraged to make arrangements with schools and other facilities serving meals to children in order to promote intergenerational meals programs. P.L. 109-365 noted that while diet is the preferred source of nutrition, evidence suggests that the use of a single daily multivitamin-mineral supplement may be an effective way to address poor nutrition among older people. Also, it noted that Title III nutrition service providers should consider whether congregate and home-delivered participants would benefit from a multivitamin-mineral supplement that is in compliance with government quality standards and that provides at least two-thirds of essential vitamins and minerals at 100% of daily value levels as determined by the Commissioner of Food and Drugs. The act, however, did not authorize Title III providers to actually provide a daily vitamin to meals participants. A National Survey of OAA participants shows that in 2012, 53% of congregate nutrition survey respondents were age 75 and older; 46% lived alone; 11% had annual income of $10,000 or less; more than half (51%) reported that the congregate meals program provided one-half or more of their daily food intake. Furthermore, many congregate nutrition recipients reported these meals have fostered greater socialization, with 81% saying that they see friends more often due to meals. This 2012 survey found that 70% of home-delivered respondents were age 75 and older; 58% lived alone; 22% had annual income of $10,000 or less; and 54% said that the home-delivered meals program provided at least one-half of their daily food intake. According to the survey, home-delivered meals recipients are particularly frail and are at risk for institutionalization, in part due to the requirement that participants be homebound. Almost four out of ten recipients (38%) reported needing assistance with one or more activities of daily living (ADLs, such as bathing, dressing, eating, and using the toilet); 11% of these recipients needed assistance with three or more ADLs. In addition, 83% reported needing assistance with one or more instrumental activities of daily living (IADLs, such as shopping, telephoning, housework, and getting around inside the home). The last major national evaluation of the nutrition program was completed in 1996. It showed that, compared to the total elderly population, nutrition program participants were older and more likely to be poor, to live alone, and to be members of minority groups. Almost half of home-delivered meal recipients and more than one-third of congregate meal recipients had income below the federal poverty level, compared to about 15% of the total U.S. population age 60 and over (at the time of the evaluation). Recipients were also more likely to have health and functional limitations that place them at nutritional risk. The report found the program plays an important role in participants' overall nutrition and that meals consumed by participants are their primary source of daily nutrients. The evaluation also found that the program leverages a fairly significant amount of nonfederal dollars: for every federal dollar spent, the program leveraged (at that time) on average $1.70 for congregate meals, and $3.35 for home-delivered meals from a variety of sources, including state, local, and private funds as well as participant contributions toward the cost of meals. The 2006 reauthorization legislation stipulated that the Institute of Medicine (IOM) conduct an evidence-based study of the program. The study is to include (1) an evaluation of the effect of nutrition projects on the health and nutrition status of participants, prevention of hunger and food insecurity, and ability of participants to remain living independently; (2) a cost-benefit analysis of nutrition projects, including their potential to affect Medicaid costs; and (3) recommendations on how nutrition projects may be modified to improve outcomes, and the nutritional quality of meals. To date, AOA has not conducted this study. However, prior to the 2006 reauthorization AOA had begun the process to conduct a new evaluation of the Title III nutrition services program. According to AOA, this evaluation will contain (1) an evaluation of program impacts on participants' nutrition, health and well-being, socialization, and food insecurity; (2) a cost analysis that describes the cost per meal by cost categories and method of meal production; and (3) a process evaluation that examines the implementation of the program at the state and local levels and includes an assessment of the nutritional quality of the program meals. The participant outcomes component will involve a matched comparison group and similar survey methods as those used in the National Health and Nutrition Examination Study (NHANES) to allow for comparison of research results to the previous evaluation, a matched comparison group, and national estimates from NHANES and other national data. As the nation prepares for a growing older population and potential increase in demand for health and social services that can promote the well-being of older persons to assist them in living independently in the community, ensuring access to home- and community-based long-term services and supports will likely be an issue for federal policymakers. The OAA Amendments of 2006 ( P.L. 109-365 ) authorized appropriations for OAA-funded activities, including the Title III nutrition programs, through FY2011. The 113 th Congress may choose to reauthorize the act. In doing so, federal policymakers may consider amending or deleting existing authorities under the act or establishing new authorities, including those related to nutrition services. In addition, Congress will likely consider annual appropriations for these activities. The following sections discuss several issues for congressional consideration, such as measuring unmet need for nutrition services, additional funding flexibility, and increased cost-sharing. These issues were among those discussed by GAO in its February 11, 2011 report, Older Americans Act: More Should Be Done to Measure the Extent of Unmet Need for Services (GAO-11-23711), and in GAO testimony before the Subcommittee on Primary Health and Aging, Senate Committee on Health, Education, Labor, and Pensions on June 21, 2011 (GAO-11-782T). According to a national analysis by GAO, meals services provided in 2008 served some, but not most, low-income older adults who are likely in need of such services. State agency officials identified several reasons why an older adult may need but not receive meals services, including (1) greater demand for home-delivered meals than available funds can provide, (2) lack of knowledge or awareness among eligible older adults that meals services exist, and (3) lack of appeal with the meals served or the time of day meals are provided in congregate settings. Overall, GAO found that the lack of federal guidance and data make it difficult for states to estimate the full extent of need and unmet need for OAA Title III services, including nutrition services. The OAA requires that AOA design and implement uniform data collection procedures for states to assess receipt of services, as well as need and unmet need for Title III services. Although AOA does provide uniform procedures for states to measure receipt of services, the agency does not provide standardized definitions or measurement for states to use in measuring need or unmet need for services. As a result, states use a variety of approaches that are often limited in their ability to fully estimate need and unmet need among older adults. These approaches include maintaining waitlists, obtaining information and data from service providers, and surveying current recipients. GAO recommends that HHS partner with governmental agencies that provide services to older Americans and convene researchers and agency officials to develop consistent definitions of need and unmet needs for uniform data collection purposes. Most states and a number of AAAs use the statutory flexibilities under current law to transfer funding among Title III programs. According to GAO, some states recommended consolidating funding for nutrition services programs into one single funding stream. However, other state officials did not see the need to alter the current process for transferring Title III funds. The AOA also identifies consolidating nutrition program funding between home-delivered and congregate nutrition programs as a targeted change for the next OAA reauthorization, so as to allow "states more flexibility to direct services to identified needs, and allow more local input into funding allocations." Congress may consider whether additional flexibilities are necessary, possibly consolidating Title III funding streams or increasing the proportion of funds available for states and AAAs to transfer, affording those entities that choose to transfer funds greater latitude to do so. Conversely, Congress may be concerned that funding transfers provide states and AAAs the ability to reallocate funding to services at a level different than otherwise appropriated. As a result, Congress may seek to further specify or limit funding flexibility. Congress may also decide that funding flexibilities under current law are sufficient for states and AAAs current needs and choose to maintain the status quo. Clients can, and some do, contribute to the cost of their meals. GAO found that almost all local AAAs permit voluntary contributions for Title III services, including the nutrition services program. For FY2009, voluntary contributions comprised 4% of AAA budgets. Some AAAs indicated to GAO that voluntary contributions make up a significant portion of their nutrition services program budget. Although the OAA authorizes states to implement cost-sharing as a requirement for some Title III services, the act does not permit cost-sharing as a requirement for participation in congregate and home-delivered meals programs. According to GAO, additional cost-sharing arrangements could provide additional funding for Title III programs. GAO also recommends that the HHS Secretary study the implementation of cost-sharing for OAA services with respect to "the real and perceived burdens to implementing cost sharing for OAA services," which could include recommending legislative changes to the act. The AOA also identifies expanding consumer contributions as a targeted change for the next OAA reauthorization. Under this proposal, states could request a waiver to test either cost-sharing for nutrition and case management services, or to deny service to an individual for failure to make cost-sharing payments. Prior to waiver approval, states would be required to demonstrate no negative results from cost-sharing implementation. Furthermore, low-income individuals would continue to be excluded from these cost-sharing arrangements.

The elderly nutrition services program, authorized under Title III of the Older Americans Act (OAA), provides grants to state agencies on aging to support congregate and home-delivered meals (commonly referred to as "meals on wheels") programs for people aged 60 and older. The program is designed to address problems of food insecurity, promote socialization, and promote the health and well-being of older persons through nutrition and nutrition-related services. In 2012, a reported 8.8% of U.S. households with one elderly member were food insecure, defined as households reporting low or very low food security. As the largest Older Americans Act program, the Title III nutrition services program received $814.7 million in FY2014, accounting for 44% of the act's total funding ($1.871 billion). In 2006, Congress enacted the Older Americans Act Amendments of 2006 (P.L. 109-365), which extended the act's authorizations of appropriations through FY2011. However, Congress has continued to appropriate funding for OAA activities. The 113th Congress may consider comprehensive reauthorization of the OAA and as a result may modify existing authorities, including those related to nutrition services. The Administration on Aging (AOA) within the Administration for Community Living (ACL) in the Department of Health and Human Services (HHS) administers the nutrition services program, which includes (1) the Congregate Nutrition Services Program, (2) the Home-Delivered Nutrition Services Program, (3) and the Nutrition Services Incentive Program (NSIP). For the congregate and home-delivered programs, services must be targeted at older persons with the greatest social and economic need. Particular attention is paid to low-income older persons, including low-income minority older persons, older persons with limited English proficiency, older persons residing in rural areas, and those at risk for institutionalization. In FY2011, the most recent year for which data are available, more than 223 million meals were served to just under 2.5 million people; 61% were served to frail older people living at home, and 39% were served in congregate settings. Of the total $814.7 million appropriated for the nutrition services program in FY2014, $438.2 million was for congregate nutrition (54%), $216.4 million for home-delivered nutrition (27%), and $160.1 million for nutrition services incentive grants (19%). When adjusted for inflation, the total amount of funding appropriated for OAA nutrition services has decreased substantially over the past two decades ($814.7 million in FY2014 compared to $1,052.4 million in FY1990). This decline in relative funding has been experienced by the congregate nutrition and NSIP programs, while funding levels for the home-delivered nutrition programs have increased over the same time period. As a result, the number of home-delivered meals served has outpaced congregate meals, growing by 35% from FY1990 to FY2011; the number of congregate meals served declined by 40%. The faster growth in home-delivered meals is partially due to relatively higher growth in federal funding for home-delivered meals over that time period, as well as state decisions to focus funds on frail older people living at home. This report describes the nutrition services program authorized under OAA Title III, including the program's legislative history, purpose, and FY2014 funding level. It also provides information on service delivery requirements and program data regarding the number of meals served and program participation. The report briefly discusses former and more recent efforts to evaluate these programs. Finally, the report identifies selected issues for federal policymakers, including the status of Older Americans Act reauthorization, measuring unmet need for nutrition services, additional funding flexibility, and increased cost-sharing.

The United States Capitol is home to extensive art collections. These collections are considered by Congress as "an integral part of the history of this renowned building." Perhaps the most prominent collection is the National Statuary Hall Collection, which contains statues of notable citizens provided by each state. The collection was authorized in 1864, when Congress designated the large, two-story, semicircular former chamber of the House of Representatives--the Old Hall of the House--as National Statuary Hall. The first statue in the collection, depicting Nathanael Greene, was provided by Rhode Island in 1870. As the Union grew, the number of statues in the collection increased; by 1933,the hall held 65 statues, some of which stood three deep. Aesthetic and structural concerns necessitated the relocation of some statues throughout the Capitol. The collection reached 100 statues in 2005 when New Mexico, which became a state in 1912, added the statue of Po'pay. Today, 34 statues are displayed in National Statuary Hall, with the rest in the House and Senate wings of the Capitol, the Rotunda, the Crypt, and the Capitol Visitor Center (CVC). Collection statues--chosen by the states to honor prominent citizens--are furnished to Congress for display in the Capitol. In the 106 th Congress (1999-2000), for the first time, states were allowed to replace a statue previously donated to the National Statuary Hall Collection. In past congresses, legislation has been introduced to alter the size of the collection by allowing each state to contribute three statues instead of two or allow the District of Columbia, Puerto Rico, and the U.S. territories to provide one statue each. This report discusses the creation of the National Statuary Hall Collection and the redesignation of the Old Hall of the House as the National Statuary Hall. It examines the creation, design, placement, and replacement of statues in the National Statuary Hall Collection. The report then discusses recent legislative proposals to increase the size of the National Statuary Hall Collection. Finally, the report discusses potential issues for congressional consideration. On January 6, 1864, Representative Justin Morrill introduced a resolution, which was agreed to by voice vote, requesting that the House Committee on Public Buildings examine the possibility of using the Old Hall of the House of Representatives to display statues. Resolved, That the Committee on Public Buildings be requested to examine and report as to the expediency of setting apart the old hall of the House of Representatives as a hall for statuary; and also as to the cost of a new flooring and bronze railing on each side of the passage-way through the hall, preparatory to the reception of such works of arts. On April 19, 1864, Representative John Hovey Rice introduced, on behalf of the House Committee on Public Buildings, which he chaired, a joint resolution to create a statuary hall in the Old Hall of the House and to authorize existing appropriations to repair the old House chamber. The resolution called for the President to "invite each of the states to provide and furnish statues in marble or bronze, not exceeding two in number each, of men who have been citizens thereof, illustrious in their historical renown or distinguished for their civic or military services, such as each State shall determine are worthy of national remembrance.... " The joint resolution passed the House by a vote of 87 to 20 and was referred in the Senate to the Committee on Public Buildings and Grounds, where it was reported without amendment and with the recommendation that it "ought not to pass." The Senate took no further action on the joint resolution. Subsequently, in June 1864, during House consideration of a civil appropriations bill, Representative Thaddeus Stevens offered an amendment similar to the joint resolution previously passed by the House. The amendment was agreed to in the House, but was removed from the bill when it was considered in the Senate. The proposed language, however, was restored in conference committee, which stated, Sec. 2. And be it further enacted , That a marble floor, similar to that of the Congressional Library or the Senate vestibule, shall be constructed in the old Hall of the House of Representatives, using such marble as may be now on hand and not otherwise required, and that suitable structures and railings shall be therein erected for the reception and protection of statuary, and the same shall be under the supervision and direction of the Commissioner of Public Buildings; and so much of the moneys now or heretofore appropriated for the capitol extension as may be necessary, not exceeding the sum of fifteen thousand dollars, is hereby set apart and shall be disbursed for the porse [purposes] hereinbefore mentioned. And the President is hereby authorized to invite each and all the States to provide and furnish statues, in marble or bronze, not exceeding two in number for each state, of deceased persons who have been citizens thereof, and illustrious for their historic renown or from distinguished civic or military services, such as each state shall determine to be worthy of this national commemoration; and when so furnished the same shall be placed in the old hall of the House of Representatives, in the capitol of the United States, which is hereby set apart, or so much thereof as may be necessary, as a national statuary hall, for the purposes herein indicated. Pursuant to the July 1864 civil appropriations bill, each state may donate up to two statues for inclusion in the National Statuary Hall Collection. Statues donated to the collection are to be made of "... marble or bronze, not exceeding two in number for each State, of deceased persons who have been citizens thereof, and illustrious for their historic renown or for distinguished civic or military service.... " In 2005, Congress enacted a requirement that an individual depicted on a statue displayed in National Statuary Hall must be deceased for at least 10 years. Exceptions to the restrictions were provided for the two statues allowed per state pursuant to the July 1864 law, including any potential replacement statues, as well as a statue of Rosa Parks from the U.S. Capitol Art Collection that was placed in National Statuary Hall in 2013. Statues donated to the collection must be formally accepted by the Joint Committee on the Library. To assist states, the AOC has published guidelines, which are subject to modification by the Joint Committee, for creating statues for the collection. The guidelines address numerous aspects of statuary design, including subject, material, pedestal, inscriptions, size and weight, patina and coating, and other considerations. Additionally, the Architect of the Capitol (AOC), upon the approval of the Joint Committee on the Library, with the advice of the Commission of Fine Arts as requested, is authorized and directed to locate or relocate collection statues within the Capitol. The AOC, under the guidance of the Joint Committee, established a nine-step process for the acceptance of a new or replacement statute. This process is part of the statue design and placement guidelines. Since 2000, states have been allowed to replace statues donated to the collection. Regulations for the replacement of statues were established by the Consolidated Appropriations Act of 2001. To replace a statue, a state must request--through the approval of a resolution adopted by the state legislature and signed by the governor--in writing, approval from the Joint Committee; and ensure that the statue to be replaced has been displayed in the collection for at least 10 years. Upon the Joint Committee's approval of the replacement request, the AOC is authorized to enter into an agreement with the state, subject to any conditions imposed by the Joint Committee. Once accepted, the state is responsible for paying all related costs, including the design, construction, transportation, and placement of the new statue, the removal and transportation of the statue being replaced (back to the state or other location determined by the state legislature), and any unveiling ceremony. Since the authorization of replacements within the collection in 2000, Alabama, California, Iowa, Kansas, Michigan, and Ohio have sent a replacement statue. A list of statues replaced in the collection can be found in Appendix B . Legislation to increase the size of the collection might fall into two categories. The first would increase the number of statues that states are permitted to donate, from a maximum of two per state to three per state. The second would permit the District of Columbia and the U.S. territories to contribute one or more statues to the collection. Since the redesignation of the Old Hall of the House as National Statuary Hall in 1864, each state has been allowed to place two statues in the collection. Supporters of providing a third statue per state argue that additional statues could provide an opportunity to increase the diversity of the collection, which currently includes 16 statues of women or minorities. A proposal to add a third statue per state was first introduced in the 103 rd Congress (1993-1994) by Representative Douglas (Pete) Peterson. The bill ( H.R. 3368 ) would have provided a third statue to each state and restricted the ability of states to furnish an additional statue or replace an existing statue for "100 years after the date on which it furnishes its third statue.... " H.R. 3368 was referred to the Committee on House Administration but did not receive further action. Most recently, legislation was introduced in the 112 th Congress (2011-2012) by Representative Stephen Cohen ( H.R. 1289 , the Share America's Diverse History in the Capitol Act) to expand the National Statuary Hall Collection from two statues per state to three. H.R. 1289 was referred to the Committee on House Administration on March 31, 2011, and did not receive further action. If Congress were to authorize an additional statue per state, states would have the ability, but not be required, to add statues to the collection. Increasing the collection by up to 50 statues may take some time, as states debate who might be honored, raise funds, and commission artists to create new statues. Should the National Statuary Hall Collection expand to more than 100 statues, space for the additional statues in the Capitol complex could become an issue. Currently, collection statues are located in the Rotunda, the Crypt, the House wing of the Capitol in National Statuary Hall, the Hall of Columns, and adjacent to the House chamber, the Senate wing of the Capitol, and the CVC. When the CVC opened in 2008, collection statues were moved to Emancipation Hall and other CVC locations to reduce the number of statues in National Statuary Hall and other Capitol locations. The addition of 50 or more statues might require the AOC to place statues closer together in those locations. If more statues are placed in National Statuary Hall itself, some display and structural concerns that have arisen in the past may be revisited. Measures to authorize the District of Columbia and the territories to provide statues for the National Statuary Hall Collection have been introduced since at least the 93 rd Congress (1973-1974). In both the 93 rd and 94 th (1975-1976) Congresses, Senator Hubert Humphrey introduced legislation to "provide authority for the District of Columbia to place two statues in Statuary Hall of the Capitol." Both bills were referred to the Senate Committee on Rules and Administration and neither received further action. In the 111 th Congress (2009-2010), for the first time, legislation to allow statues from the District of Columbia and the territories passed the House. These bills were H.R. 5493 , introduced by Delegate Eleanor Holmes Norton to provide for statues from the District of Columbia; and H.R. 5711 , introduced by Delegate Faleomavaega to provide statues for the U.S. territories. In July 2010, the Committee on House Administration held a markup on both bills. After an amendment to merge the bills was offered by Representative Dan Lungren, then-ranking Member of the panel, was defeated, the committee reported both bills. Between the reporting of H.R. 5493 and H.R. 5711 by the Committee on House Administration and the consideration of these bills in the House, Representative Robert Brady, then-chair of the panel, helped negotiate a merger of the bills. Subsequently, H.R. 5493 was debated in the House with an amendment that would permit the District of Columbia and the U.S. territories to place statues in the collection. The bill passed the House, as amended, under suspension of the rules. In the Senate, the bill was referred to the Senate Committee on Rules and Administration, and no further action was taken. In the 112 th Congress (2011-2012), Representative Dan Lungren, then-chair of the Committee on House Administration, reintroduced a bill that is nearly identical in language to H.R. 5493 in the 111 th Congress. His bill, H.R. 3106 , would permit the District of Columbia and the territories to place statues in the National Statuary Hall Collection. Upon introduction, H.R. 3106 was referred to the Committee on House Administration. No further action was taken. While not part of the National Statuary Hall collection, in the 112 th Congress, the placement of a statue of Frederick Douglass, was donated by the District of Columbia government and accepted by Congress for placement in Emancipation Hall of the Capital Visitor Center. The statue was officially unveiled on June 19, 2013. Over the past four decades, Congress has considered several proposals to increase the number of statues in the National Statuary Hall Collection. One group of legislative proposals involves adding additional statues for each state; another would expand the collection by allowing the District of Columbia and the U.S. territories to provide statues to the collection. If either or both options were adopted, proponents argue that states could donate statues that better represent various aspects of the state's history. Increasing the number of statues in the collection, however, could result in further space issues for statue display in the Capitol. When the CVC opened, the Architect, under the direction of the Joint Committee on the Library, reduced the number of collection statues on display in National Statuary Hall as well as in the House and Senate wings of the Capitol by moving them to Emancipation Hall and other locations within the CVC. Adding additional statues to the collection might necessitate relocating existing statues. Any changes to the collection would likely be weighed against the potential costs to states, or if approved, the District of Columbia and U.S. territories, who might provide new statues. In the case of expanding the number of statues that might be added to the collection, a further concern is whether the larger collection could be displayed in the Capitol in an appropriate manner. Other considerations include structural, traffic management, and life safety constraints of the physical environment. Appendix A. National Statuary Hall Collection Statues Since 2005, when New Mexico provided its second statue--Po'Pay--the National Statuary Hall Collection has contained 100 statues. Table A -1 provides a list of statues currently in the collection, by state, with the name of the statue and the year it was placed in the collection. Appendix B. Statues Replaced in the National Statuary Hall Collection Since 2000, states have been allowed to replace statues donated to the collection. Regulations for the replacement of statues were established by the Consolidated Appropriations Act of 2001. Table B -1 provides a list of states that have replaced statues, the year of the replacement, the original statue, and the replacement statue.

The National Statuary Hall Collection, located in the United States Capitol, comprises 100 statues provided by individual states to honor persons notable for their historic renown or for distinguished services. The collection was authorized in 1864, at the same time that Congress redesignated the hall where the House of Representatives formerly met as National Statuary Hall. The first statue, depicting Nathanael Greene, was provided in 1870 by Rhode Island. The collection has consisted of 100 statues--two statues per state--since 2005, when New Mexico sent a statue of Po'pay. At various times, aesthetic and structural concerns necessitated the relocation of some statues throughout the Capitol. Today, some of the 100 individual statues in the National Statuary Hall Collection are located in the House and Senate wings of the Capitol, the Rotunda, the Crypt, and the Capitol Visitor Center. Legislation to increase the size of the National Statuary Hall Collection was introduced in several Congresses. These measures would permit states to furnish more than two statues or allow the District of Columbia and the U.S. territories to provide statues to the collection. None of these proposals were enacted. Should Congress choose to expand the number of statues in the National Statuary Hall Collection, the Joint Committee on the Library and the Architect of the Capitol (AOC) may need to address statue location to address aesthetic, structural, and safety concerns in National Statuary Hall, the Capitol Visitor Center, and other areas of the Capitol. This report provides historical information on the National Statuary Hall Collection and National Statuary Hall. It examines the creation, design, placement, and replacement of statues in the National Statuary Hall Collection. The report then discusses recent legislative proposals to increase the size of the National Statuary Hall Collection. Finally, the report discusses potential issues for congressional consideration.

No person ... shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law. U.S. Const. Amend. V. In Miranda v. Arizona , the Supreme Court held that no statement made by an individual during a custodial interrogation may be admitted into evidence against him at his criminal trial, unless he was first warned of his relevant constitutional rights and waived them. In New York v. Quarles , the Court later held that the Miranda rule was subject to a "public safety" exception. Throughout this period, federal law stated that following arrest a suspect should be presented to a magistrate and advised of his rights without "unnecessary delay." Confessions made during the course of any unnecessary delay are generally inadmissible at the suspect's subsequent criminal trial. The realities of contemporary terrorism are such that some have questioned whether these general rules can be, and should be, reexamined and adjusted. Before Miranda , the Supreme Court relied on the Fifth Amendment in federal cases, but had largely relied upon due process guarantees to exclude a defendant's involuntary confession from his criminal trial in cases that came to it from the states. Then, as now, the due process inquiry asks "whether a defendant's will was overborne by the circumstances surrounding the giving of a confession." Recourse to due process was no longer necessary in state cases once it became clear that the Fifth Amendment right was itself binding on the states through the Fourteenth Amendment. In Miranda , the Court provided a more specific standard than the "voluntary under the circumstances" due process test. Convinced that the coercive atmosphere of a law enforcement custodial interrogation could undermine the protection against self-incrimination, the Court declared that confessions that followed such interrogations could only be admitted in evidence against a defendant if he had been given explicit warnings beforehand. That is, the defendant must be warned that he "has the right to remain silent, that anything he says can be used against him in a court of law, that he has the right to the presence of an attorney, and that if he cannot afford an attorney one will be appointed for him prior to any questioning if he so desires." The warnings having been given, the defendant may explicitly waive them. When a defendant requests the presence of an attorney, questioning must stop until one is made available or until the defendant himself initiates the colloquy. Authorities may not avoid Miranda demands by extracting an unwarned confession, providing the Miranda warnings, and then eliciting the same confession, this time "for the record." Nor may authorities persistently return to questioning after an interrogation has been stopped by a defendant's claim of privilege--except upon the arrival of requested defense counsel, at the defendant's invitation, or following a break in interrogation-related custody of at least 14 days. The Court has recognized exceptions to the rule. One, discussed below in greater detail, permits admission into evidence of unwarned statements elicited in the interest of an officer's safety and that of the public. Another permits use of unwarned statements for impeachment purposes. Moreover, on a number of occasions, the Court has declined to recognize a Miranda equivalent of the Fourth Amendment's "fruit of the poisonous tree" doctrine. Shortly after Miranda was handed down, Congress sought to overturn it by statute, 18 U.S.C. 3501. For three decades, however, the provision lay dormant, for the Justice Department considered the provision constitutionally suspect, and would not assert it. Thus, when Dickerson v. United States arose in the Fourth Circuit, the Justice Department declined to defend the section's constitutionality. In spite of Justice Department reservations, the Fourth Circuit decided that Section "3501, rather than Miranda , governs the admissibility of confessions in federal court." The Supreme Court disagreed. " Miranda announced a constitutional rule," which the Court declined to overrule and which "Congress may not supersede legislatively." In Quarles , police officers pursued a rape suspect into a supermarket, frisked him, discovered he was wearing an empty holster, and handcuffed him. They asked him where the gun was; he told them, "the gun is over there" (nodding to some empty cartons); they arrested him, and then read him his Miranda warnings. The Supreme Court recognized that the "case presents a situation where concern for public safety must be paramount to adherence to the literal language of the prophylactic rules enumerated in Miranda ." It contrasted the Miranda concerns with the exigencies of the case before it. On one hand, "[t]he Miranda decision was based in large part on this Court's view that the warnings which it required police to give to suspects in custody would reduce the likelihood that the suspects would fall victim to constitutionally impermissible practices of police interrogation in the presumptively coercive environment of the station house." On the other hand, "[t]he police in this case ... were confronted with the immediate necessity of ascertaining the whereabouts of a gun which they had every reason to believe the suspect had just removed from his empty holster and discarded in the supermarket. So long as the gun was concealed somewhere in the supermarket, with its actual whereabouts unknown, it obviously posed more than one danger to the public safety." The Court perceived the exception as a "narrow" one, and believed police would have no difficulty distinguishing "between questions necessary to secure their own safety or the safety of the public and questions designed solely to elicit testimonial evidence from a suspect." The Court has yet to further refine the exception, but the lower federal appellate courts have construed it narrowly--some more narrowly than others. It has been applied in cases immediately following an arrest when officers have asked an unwarned suspect whether or where a weapon might be found in the immediate area, under circumstances when officers might reasonably believe such a weapon exists and if not secured would pose a danger to themselves or the public. Although the public safety exception, as currently understood, may only be available in limited circumstances in a terrorist context, its existence suggests that the Court might expand its application under compelling circumstances or might recognize other policy-based exceptions to Miranda . The Supreme Court has thus far not indicated to what extent, if at all, Miranda applies overseas. In fact, it has spoken only infrequently about the extent to which the Fifth Amendment applies outside the United States. The Court's most recent discussion occurred in Verdugo-Urquidez when it contrasted the difference between the extraterritorial application of the Fourth and Fifth Amendments. There, it noted a violation of the Fifth Amendment privilege against self-incrimination can only occur at trial; a violation of the Fourth Amendment occurs upon the performance of an unreasonable search or seizure--regardless of whether the fruits of the violation are ever offered at trial. For Fifth Amendment purposes, the point of violation is not the place where a statement was coerced, but the place of the criminal proceedings where the statement is offered against the defendant. The Court went on to point out that it previously "rejected the claim that aliens are entitled to Fifth Amendment rights outside the sovereign territory of the United States." Moreover, even where it had recognized that American civilians, subject to U.S. overseas court-martial proceedings, were entitled to some Fifth and Sixth Amendment protections, a majority of the Court had been unwilling to define the precise scope of such entitlement. The lower federal courts, however, have held that the Miranda warnings ordinarily do not apply to overseas custodial interrogations conducted by foreign officials. Such unwarned statements may be introduced against the defendant, if voluntary and otherwise admissible. They often identify, but rarely find, two exceptions to this general rule of admissibility--where the interrogation is a joint venture in which U.S. officials are joint participants, or where the circumstances shock the conscience of the court. Implicit in the first exception is that the privilege against self-incrimination--and the attendant Miranda requirements--apply to the admissibility in criminal proceedings in this country of statements taken overseas by U.S. law enforcement officers. A few courts have suggested that this may be said of the statements of U.S. citizens and foreign nationals alike. They have indicated, however, that "where Miranda has been applied to overseas interrogations by U.S. agents, it has been so applied in a flexible fashion to accommodate the exigencies of the local conditions." In a case in which overseas statements were offered before an overseas tribunal, a military commission tribunal has concluded that the question of the application of the Fifth Amendment extraterritorially requires a case-by-case consideration. As a general rule, Miranda applies to custodial interrogations conducted in the course of a military criminal investigation. Both by constitutional imperative and statutory command, unwarned statements are inadmissible against the defendant in any subsequent military prosecution. The statutory provisions applicable to military commissions, however, declare that the Article 831(a), (b), and (d) of the Code of Military Justice (10 U.S.C. 831(a), (b), and (d), relating to compulsory self-incrimination) shall not apply in commission trials. No one may be required to testify against himself in such proceedings. Nor may statements secured by torture or by cruel, inhuman, or degrading treatment be admitted there. Otherwise, statements of the accused may be admitted in evidence, if they are reliable, probative, and either voluntary or were "made incident to lawful conduct during military operations at the point of capture or during closely related active combat engagement, and the interests of justice would best be served by admission of the statement into evidence." One of the Guantanamo detainees, tried by military commission for the offense of providing material support for terrorism, moved to suppress statements which he contended were secured in violation of the Fifth Amendment. Based on its reading of Boumediene , the tribunal determined that when analyzing the extraterritorial application of the Constitution in Guantanamo Bay, the Commission concludes that it should consider (1) the citizenship and status of the detainee and the adequacy of the process through which the status determination was made; (2) the nature of the sites where apprehension and then detention took place; (3) whether practical considerations and exigent circumstances counsel against application of the constitutional right; (4) whether the Executive has provided the accused an adequate substitute for the Constitutional right being sought; (5) whether there is "necessity for the Constitution to apply to prevent injustice; and (6) whether application of the Constitutional right would be "impractical and anomalous." It further concluded that "[t]he preponderance of these factors analyzed weighs against application of the 5 th Amendment in Guantanamo Bay." "[T]he rule known simply as McNabb-Mallory generally renders inadmissible confessions made during periods of detention that violate the prompt presentment requirement of Rule 5(a)." In McNabb v. United States , the Supreme Court was faced with a case in which federal officers had disregarded statutory obligations to promptly present arrested defendants to a committing magistrate. The officers had instead detained and interrogated the suspects over the course of several days, until the confessions upon which the defendants' convictions were based had been extracted. The Court found it "unnecessary to reach the Constitutional issues pressed upon" it. Based instead on its supervisory authority over the federal courts, the Court announced that henceforth such confessions, voluntary or involuntary, secured without regard to prompt presentation requirements could not be admitted in evidence against a defendant. When the various statutory presentation requirements were later superseded by rule 5(a) of the Federal Rules of Criminal Procedure (requiring presentation "without unnecessary delay"), no explicit mention was made of either the McNabb exclusionary rule or any other means of enforcement. The Court, however, quickly affirmed the continued vitality of McNabb when following the promulgation of rule 5; it reiterated that McNabb applied to both voluntary and involuntary confessions. In Mallory , it made clear that any "delay must not be of as a nature to give opportunity for the extraction of confession." A second provision within Section 3501 addresses the McNabb-Mallory rule, 18 U.S.C. 3501(c). It states that a presentation delay of less than six hours does not by itself render a voluntary confession inadmissible. Recently, the question arose whether, as with Miranda , Section 3501 was intended to abrogate the McNabb-Mallory , rather than to simply limit its application to voluntary confessions made within six hours of detention. The Court held that Congress intended to modify, not repudiate, McNabb-Mallory . Thus, "[u]nder the rule as revised by SS3501(c), a district court with a suppression claim must find whether the defendant confessed within six hours of arrest (unless a longer delay was reasonable considering the means of transportation and the distance to be traveled to the nearest available magistrate)." If so, the confession is admissible as Section 3501(c) provides, "so long as it was made voluntarily and the weight to be given it is left to the jury." If not, "the court must decide whether delaying that long was unreasonable or unnecessary under the McNabb-Mallor y cases, and if it was, the confession is to be suppressed." The following Miranda -related legislative proposals were offered in the 111 th Congress. Comparable provisions do not appear to have been introduced since. Section 1040 of the National Defense Authorization Act for Fiscal Year 2010, P.L. 111-84 ( H.R. 2647 ), 123 Stat. 2454 (2009), prohibited members of the Armed Forces as well as Defense Department officers and employees from providing Miranda warnings to foreign nationals captured, or held in Defense Department custody, outside the United States as enemy belligerents. The prohibition does not apply to the Justice Department. The section also directed the Secretary of Defense to report to the Armed Services Committees within 90 days on the impact of providing the warnings to detainees in Afghanistan. Section 504 of the Intelligence Authorization Act for Fiscal Year 2010 ( H.R. 2701 ), as reported out of the House Select Committee on Intelligence ( H.Rept. 111-186 ), would have prohibited the use of funds authorized for appropriation under the bill to provide Miranda warnings to foreign nationals outside the United States who were either in the custody of the Armed Forces or believed to have terrorist-related information. The House passed H.R. 2701 , as amended and with the Miranda provisions as Section 503, on February 26, 2010, 156 Cong. Rec. H946 (daily ed. February 26, 2010). The provision was dropped before final passage of the bill as P.L. 111-259 , 124 Stat. 2654 (2010). Section 744 of Financial Services and General Government Appropriations Act, 2010 ( H.R. 3170 ), as reported out of the House Appropriations Committee ( H.Rept. 111-202 ), would have called upon the Administration to supply Congress with information relating to Miranda warnings provided by the Justice Department to foreign nationals who are either in the custody of the Armed Forces or suspected of terrorism. The Consolidated Appropriations Act, 2010 ( H.R. 2847 ), P.L. 111-117 , 123 Stat. 3034 (2009), which absorbed many of the provisions of H.R. 3170 , had no comparable provision. The National Defense Authorization Act for Fiscal Year 2011 as passed by the House would have extended the Miranda provision found in the FY2010 authorization bill. The provision was dropped before final passage of its successor ( H.R. 6523 ) as P.L. 111-383 , 124 Stat. 4137 (2011). Section 3(b)(3) of the Enemy Belligerent Interrogation, Detention, and Prosecution Act of 2010 ( S. 3081 ), as introduced, would have directed that an unprivileged belligerent, interrogated under the bill's procedures relating to high-value detainees, not be given Miranda or comparable warnings. Section 3(a)(1)(D) of the Enemy Belligerent Interrogation, Detention, and Prosecution Act of 2010 ( H.R. 4892 ), as introduced, would have required the approval of the Director of National Intelligence before Miranda warnings could have been provided to high-value detainees believed to have terrorism-related information and captured, held, or questioned by an entity with an intelligence community element. H.Res. 537 , as adversely reported by the House Judiciary Committee ( H.Rept. 111-189 ), would have called upon the Administration to supply Congress with information relating to Miranda warnings provided by the Justice Department to foreign nationals who were in the custody of the Armed Forces in Afghanistan and suspected of terrorism. H.Res. 570 would have directed the Secretary of Homeland Security to provide the House with information relating to the immigration status of any foreign national captured in Afghanistan who was given Miranda warnings by the Justice Department, was in the Defense Department's custody, was suspected of terrorism, and might have been subject to a transfer or release into the United States for civilian or military proceedings. H.Res. 602 would have called upon the Administration to provide the House with information, generated on or after January 1, 2005, and relating to the impact of providing Miranda warnings to Defense Department detainees in Afghanistan suspected of terrorism.

The Fifth Amendment to the United States Constitution provides in part that "No person ... shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law." In Miranda v. Arizona, the Supreme Court declared that statements of an accused, given during a custodial interrogation, could not be introduced in evidence in criminal proceedings against him, unless he were first advised of his rights and waived them. In Dickerson v. United States, the Court held that the Miranda exclusionary rule was constitutionally grounded and could not be replaced by a statutory provision making all voluntary confessions admissible. In New York v. Quarles, the Court recognized a "limited" "public safety" exception to Miranda, but has not defined the exception further. The lower federal courts have construed the exception narrowly in cases involving unwarned statements concerning the location of a weapon possibly at hand at the time of an arrest. The Supreme Court has yet to decide to what extent Miranda applies to custodial interrogations conducted overseas. The lower federal courts have held that the failure of foreign law enforcement officials to provide Miranda warnings prior to interrogation does not preclude use of any resulting statement in a subsequent U.S. criminal trial, unless interrogation was a joint venture of U.S. and foreign officials or unless the circumstances shock the conscience of the court. They suggest that warnings are a prerequisite for admissibility in U.S. courts following overseas interrogation by U.S. officials. Miranda applies to courts-martial that are subject to a requirement for an additional warning under the Uniform Code of Military Justice. The statutory provisions governing military commissions call for the admission of some unwarned, involuntary custodial statements. At least one tribunal operating under those provisions has concluded that the Fifth Amendment protections do not apply in the commission trial at Guantanamo Bay of an unprivileged foreign belligerent. Rule 5 of the Federal Rules of Criminal Procedure requires that federal arrestees be brought before a committing magistrate without unnecessary delay. In the McNabb v. United States and Mallory v. United States cases, the Court declared inadmissible confessions extracted during a period of unnecessary delay. The cases were decided under the Court's supervisory authority over the lower federal courts, and in Corley v. United States, the Court held that McNabb-Mallory had been statutorily supplemented with a provision that made admissible voluntary confession given within six hours of presentment. Neither Miranda nor McNabb-Mallory violations preclude the subsequent prosecution of the accused; they simply preclude the uninvited use of any unwarned, unwaived statements in such prosecutions. The 111th Congress featured a number of proposals, some of which would have prohibited the use of funds to provide Miranda warnings; others would have restricted their use in the interrogation of high-value detainees overseas; and still others would have called upon the Administration to provide Congress with information related to the use of Miranda warnings in such circumstances. No comparable proposals appear to have been introduced in later Congresses. A related discussion can be found in a Legal Sidebar entitled, Miranda Warnings: The Public Safety Exception in Boston.

O ver the past few years policymakers have shown an interest in addressing the backlog of testing of sexual assault kits (SAKs, also ref erred to as "rape kits") in many jurisdictions across the United States. The backlog of SAKs has raised concerns over justice for assault victims and that additional victimizations could have been prevented had the evidence from any given kit been tested and the perpetrator apprehended in a timely manner. This report provides background on the SAK backlog and information on federal efforts to reduce it. SAKs include tools used by a nurse examiner or another trained professional to collect evidence during a forensic medical exam of a sexual assault victim. Many jurisdictions create their own sexual assault evidence collection kits while others purchase them from commercial vendors. As such, the content of a kit can vary across jurisdictions. In general, sexual assault evidence collection kits include (1) instructions; (2) bags, sheets, and envelopes for evidence collection; (3) swabs for collecting fluids or secretions that could contain a perpetrator's DNA (deoxyribonucleic acid); (4) a comb for collecting hair samples; (5) blood collection devices; and (6) documentation forms. A forensic medical exam involves collecting a complete medical history from the victim and completing a full-body physical examination. This may include collecting blood, urine, hair, and other body secretion samples; photo documentation of any injuries sustained during the assault; collecting the victim's clothing, especially undergarments; and securing any possible physical evidence that may have transferred onto the victim from the crime scene. Upon completion of forensic medical exams, kits are transferred to law enforcement, who log the kits into evidence. Procedure and protocol regarding when and where kits are sent, however, vary across jurisdictions. Some law enforcement agencies automatically send the kits to forensic laboratories for testing while others wait for varying amounts of time, in some cases depending on when/if a police officer or prosecutor requests forensic analysis. Laboratories also vary on how items are screened, which items are tested, and the length of time taken to complete testing. In a 2007 study of crime laboratories in the United States, over 75% of laboratories reported that DNA analysis requests were completed within four months or less while the other 25% required more than four months to complete the analysis. Twenty laboratories reported that more than nine months were needed. Evidence obtained through a rape kit can be used for several criminal justice purposes. It may be used to establish elements of a crime including the time at which an alleged attack occurred. It can establish a DNA link between two individuals, and this link may help identify, convict, or exonerate an offender in court. Evidence may also be stored in DNA databases for use in other cases. Forensic testing of SAK evidence can take several days. In some cases, rape kits remain in police custody and are not submitted to a laboratory for testing. In others, kits may be submitted to the laboratory but remain untested. The latter is generally referred to as a "backlog." When people refer to a "rape kit backlog," they are referring either to untested kits that reside with law enforcement having never been submitted to a laboratory for testing, or to untested kits that have been submitted to crime labs but are delayed for testing for longer than 30 days. Some research organizations state that the problem more typically resides with those kits that were submitted to a crime laboratory but remain untested; however, the definition of backlog appears to vary across jurisdictions. For example, in a study of the Detroit rape kit backlog, over 75% of the 11,219 backlogged kits had never been submitted to a laboratory for testing (see " Detroit Project "). While the status and location of the kits vary, the binding element of the backlogged kits is that they have never been tested. Rape kits remain untested for several reasons including limited resources of laboratories and law enforcement as well as police discretion. In some cases involving older rape kits, the statute of limitations may have expired. Some forensic laboratories face backlogs not only for SAKs but also other types of DNA evidence collected at crime scenes such as hair and blood samples. As demand for DNA testing rises with increasing awareness of its potential to help solve cases, so does the increase in demand for resources from both law enforcement and laboratories. Law enforcement agencies and laboratories have a shortage of resources to manage backlogs of rape kits, and this may be magnified during times of increased fiscal austerity. There is no standard cost to test a rape kit, as this seems to vary from jurisdiction to jurisdiction. The Joyful Heart Foundation, an organization that advocates for the elimination of SAK backlogs, reports that it costs between $1,000 and $1,500 to test a rape kit. The National Center for Victims of Crime reports that it costs between $400 and $1,500 to test a kit. Police may opt not to pursue a forensic investigation due to a variety of reasons including perception of victim cooperation or consideration that the results of the kit would not be pertinent to the overall investigation. Not all evidence collected in an alleged sexual assault has probative value. If consent is an issue in a particular case (the suspect admits sexual contact but contends it was consensual), detectives may consider that the SAK does not add any essential information to the investigation. Also, evidence may not be sent to a lab for analysis if charges against the alleged perpetrator have been dropped or the suspect has pled guilty. Some law enforcement agencies might not submit SAKs to crime laboratories because the identity of the perpetrator was not in question from the beginning of the investigation, detectives identified the suspect through other evidence not included in the kit, or the victim chose not to proceed with the case. SAKs might not be submitted to a lab because police may not understand the potential value of testing SAKs. In 2009, the National Institute of Justice (NIJ) reported that 44% of law enforcement agencies did not submit SAKs for testing because a suspect had not been identified, and 15% did not submit SAKs because analysis had not been requested by a prosecutor. In addition, procedures for analyzing the evidence collected using SAKs can vary from jurisdiction to jurisdiction. In some jurisdictions, all sexual assault evidence collection kits are forwarded to a crime laboratory for analysis. In other jurisdictions, it may be months or even years before the kit is tested, if at all. Some law enforcement agencies might have a problem working through their backlog of old kits because crime laboratories are operating at full capacity analyzing DNA evidence collected from current cases. According to NIJ , "it is unknown how many unanalyzed [SAKs] there are nationwide." NIJ notes that while there are many reasons for why there are no data on the number of untested SAKs in law enforcement's possession, one contributing factor is that there is no national system for collecting these data. Also, tracking and counting SAKs is an antiquated process in many jurisdictions (often done in non-electronic formats), and the availability of computerized evidence-tracking systems has been an issue for many jurisdictions for years. One grassroots organization addressed the data void by attempting to count the backlog (through public records requests) and track data in cities and states across the country. While the organization's data are incomplete, they have some estimates of rape kit backlogs for various cities and states. Thus far, the Joyful Heart Foundation has identified approximately 40 municipal and county jurisdictions with known rape kit backlogs ranging from several hundred to thousands of rape kits. The discovery of hundreds or even thousands of untested SAKs might lead to calls for all of the kits to be tested; however, this might not be the most efficient use of limited resources. There are several issues that might be considered when working through a backlog of untested kits, including the following: Should all SAKs be tested, even the ones that might be from cases that are a couple of decades old, or should there be a triage process to determine which SAKs will be tested? Should evidence be tested in cases in which the statute of limitations has expired? Do law enforcement agencies give preference to testing kits in cases in which someone was assaulted by a stranger as opposed to sexual assaults perpetrated by an acquaintance? Do police and prosecutors have the resources they need to follow up on all of the leads that could be generated from widespread testing of backlogged SAKs? Should all victims be notified about the results of their SAK tests? If so, how and when should victims be notified? Should victims have a say in whether their SAKs will be tested? How will victims be linked with services, if needed? In recent years, the federal government has addressed the SAK backlog by providing financial support, conducting or funding research to address the backlog, and testing a limited number of SAKs from local law enforcement agencies that had not been submitted previously. In FY2015, Congress appropriated $41 million for the Community Teams to Reduce the Sexual Assault Evidence Kit Backlog and Improve Sexual Assault Investigations program. Administered by the Department of Justice, Bureau of Justice Assistance, the goal of the program is to create a "coordinated community response that ensures just resolution to these cases whenever possible through a victim-centered approach, as well as to build jurisdictions' capacity to prevent the development of conditions that lead to high numbers of unsubmitted SAKs in the future." The program provides funding to state and local governments to help address the backlog, test, and track SAKs; create and report performance metrics; access training to increase effectiveness in addressing complex issues involved with SAKs and associated cases; engage in multidisciplinary policy development, implementation, and coordination; and improve practices related to the criminal justice process and victim engagement and support. NIJ also provides funding to state and local crime laboratories through its DNA Backlog Reduction program. Funding under this program can be used to (1) process, record, screen, and analyze forensic DNA and/or DNA samples from convicted offenders or eligible arrestees; and (2) increase the capacity of public crime laboratories to process more DNA samples. While this funding cannot be used to help state and local governments work through their backlogs of SAKs that have not been submitted to a crime laboratory for analysis, it could be used to help process biological evidence collected through SAKs that have been submitted to a crime laboratory for analysis. NIJ notes that there has been little research on SAK backlogs, and there are few evidence-based "best practices" to help jurisdictions make decisions about how to work through their backlogs and prevent backlogs from developing again in the future. In 2011, NIJ funded research in Houston, TX, and Detroit, MI, to try to help address these issues. NIJ reported that one of the important lessons learned from the two projects was the value of forming multidisciplinary teams when addressing the issue of the large number of SAKs that had not been submitted. Prosecutors' offices in both jurisdictions formed multidisciplinary teams to look at this issue. The teams included police officers, crime lab analysts, prosecutors, and victim advocates. NIJ notes that solving sexual assault crimes is a complicated process--it is more than simply testing biological evidence in the SAK--and the multidisciplinary teams can help facilitate the process. For example, the multidisciplinary teams can help exchange information about Combined DNA Index System (CODIS) "hits" (e.g., a match between a sample profile from a SAK and an offender profile in the National DNA Database) among police, prosecutors, and crime labs in a seamless and real-time manner. The Detroit team conducted a census of all SAKs in the possession of law enforcement. Team members manually counted approximately 11,300 SAKs collected from 1980 through November 1, 2009, while recording the name and date of birth of the victim, and date of the assault. The census took 15 weeks and 2,365 person-hours. The team found 2,512 SAKs with lab numbers but could not determine how many of these had been tested; 8,707 had never been submitted to the lab. A total of 1,595 SAKs were tested in Detroit as a part of the NIJ-sponsored program, and nearly half (785 SAKs) yielded DNA profiles that could be uploaded to CODIS. Of the 785 profiles uploaded to CODIS, there were 455 "hits," meaning that 28% of the SAKs tested in the Detroit action-research project revealed the DNA identification of the suspect. Among these, 127 serial assaults were identified. There were an estimated 16,000 rape kits in police storage in Houston. The Houston Police Department (HPD) was already performing an audit of all SAKs in their custody because the NIJ-sponsored research was taking place when the police department was moving to a new evidence-storage facility. HPD determined that 6,663 SAKs had not been tested previously, including approximately 4,000 kits stored in the property room freezer. Of these 4,000 SAKs, the Houston team randomly selected a sample of 500 to be studied in the NIJ-sponsored project. Results from these analyses have not yet been publicly released by NIJ. NIJ has partnered with the FBI crime laboratory to process and test a limited number of SAKs from local law enforcement agencies that had not been submitted previously. NIJ will collect and analyze data about these SAKs. The goal of this partnership is to better understand the issues related to how SAKs are handled and suggest ways to improve the collection and processing of them. SAKs in the possession of law enforcement or public crime laboratories can be submitted to the FBI for analysis if the SAKs are from an incident that took place more than one year from the time of submission; no biological testing has been conducted on the SAKs; and an incident or police report is enclosed for each SAK being submitted. In February 2013, Congress passed the Violence Against Women Reauthorization Act of 2013 (VAWA 2013; P.L. 113-4 ) which, among other things, included new provisions to address the SAK backlog in states. VAWA 2013 expanded the purpose areas of several VAWA grants to address the needs of sexual assault survivors to include strengthening law enforcement and forensic response and urging jurisdictions to evaluate and reduce rape kit backlogs. It also established a new requirement that at least 20% of funds within the STOP (Services, Training, Officers, Prosecutors) program and 25% of funds within the Grants to Encourage Arrest Policies and Enforce Protection Orders program be directed to programs that meaningfully address sexual assault. In addition, VAWA 2013 incorporated the Sexual Assault Forensic Evidence Reporting Act of 2013. Congress amended the authorizing legislation for the Debbie Smith DNA Backlog Grant Program by passing the Sexual Assault Forensic Evidence Reporting Act of 2013 (the SAFER Act of 2013, Title X of P.L. 113-4 ). The SAFER Act added two new purposes for which Debbie Smith grants can be used: (1) to conduct an audit of the samples of sexual assault evidence in the possession of a state or unit of local government that are awaiting testing, and (2) to ensure that the collection and processing of DNA evidence by law enforcement is carried out in a timely manner and in accordance with the protocols and practices the FBI is required to develop under the act. Prior to the passage of the SAFER Act, Debbie Smith grants could only be used to test biological evidence that had been submitted to a crime laboratory for analysis and to enhance the capacity of crime laboratories to conduct DNA analysis. Congress may wish to assess the SAK backlog and debate if the federal response should be changed as the issue evolves and agencies, including NIJ, capture the breadth of the problem. For example, Congress may design preventative measures in attempting to prevent future backlogs. This may be done through grants to states and local entities by funding preventative measures and/or conditioning grants on the requirement that states and local governments establish a set time in which SAKs must be tested. Congress may also wish to request research on the impact of the backlog reduction and determine how efforts to address the issue have affected crime victims.

Sexual assault kits (SAKs, also referred to as "rape kits") are used by medical professionals to collect evidence during a forensic medical exam of a sexual assault victim in order to establish elements of a crime. Generally, upon completion of the medical exam the kit is transferred to an authorized law enforcement agency that logs the kit into evidence. Procedure and protocol regarding when and where kits are sent, however, vary across jurisdictions. Some law enforcement agencies automatically send the kits to forensic laboratories for testing while others wait for varying amounts of time; in some cases depending on when/if a police officer or prosecutor requests forensic analysis of the kits. Evidence from these kits may help identify, convict, or exonerate an offender. Evidence may also be stored in DNA databases for use in other cases. When people refer to a "rape kit backlog," they are referring to untested kits that either reside with law enforcement having never been submitted to a laboratory for testing, or referring to untested kits that have been submitted to crime labs but are delayed for testing for longer than 30 days. Some research organizations state that the problem more typically resides with those kits that were submitted to a crime laboratory but remain untested; however, the definition of backlog appears to vary across jurisdictions. While the status and location of the kits vary, the binding element of the backlogged kits is that they have never been tested. The backlog of SAKs has raised concerns over justice for assault victims and that evidence in untested kits could be used to prevent suspects from victimizing others. SAKs may remain untested for reasons such as limited resources of laboratories and law enforcement and police discretion. Police may opt not to pursue a forensic investigation for a variety of reasons including perception of victim cooperation or a decision that the results of the kit would not be pertinent to the overall investigation. In recent years, the federal government has addressed the SAK backlog by providing financial support, conducting or funding research to address the backlog, and testing a limited number of SAKs from local law enforcement agencies that had not been submitted previously. Congress has passed legislation that addresses aspects of the SAK backlog. In February 2013, Congress passed the Violence Against Women Reauthorization Act of 2013 (VAWA 2013; P.L. 113-4) which, among other things, included new provisions to address the backlog in the states. VAWA 2013 incorporated the Sexual Assault Forensic Evidence Reporting Act of 2013 (SAFER Act). The SAFER Act added two new purposes for which authorizing legislation for the Debbie Smith DNA Backlog Grant Program funds can be used: (1) to conduct an audit of the samples of sexual assault evidence in the possession of a state or unit of local government that are awaiting testing and (2) to ensure that the collection and processing of DNA evidence by law enforcement is carried out in a timely manner and in accordance with the protocols and practices the Federal Bureau of Investigation (FBI) is required to develop under the act. Congress may wish to assess the SAK backlog and debate if the federal response should be changed as the issue evolves and agencies, including the National Institute of Justice (NIJ), capture the breadth of the problem. For example, Congress may design preventative measures in attempting to prevent future backlogs. This may be done through grants to states and local entities by funding preventative measures and/or conditioning grants on the requirement that states and local governments establish a set time in which SAKs must be tested. Congress may also wish to request research on the impact of the backlog reduction and determine how efforts to address the issue have affected crime victims.

China's greenhouse gas (GHG) emissions have drawn attention in the United States because of their environmental and economic implications. China's actions to address climate change also hold implications for broader economic and security concerns in the United States. Scientific evidence that the Earth's climate is changing, and that human-related GHG emissions are a major driver of that change, has led to debate over whether and how to control GHG emissions. Once emitted, GHG persist in the atmosphere for years to centuries (and for some gases, millennia). They allow solar radiation to enter the Earth' system, but prevent much of the absorbed energy from escaping back out to space. Scientists agree that the Earth's atmosphere serves as a "blanket" that warms the Earth's surface and that a certain concentration of GHG is essential to maintain the planet at habitable temperatures. There is less agreement on how much warming would result from the higher atmospheric GHG concentrations expected if emissions from fossil fuel use, deforestation, and some agricultural and industrial processes continue. Scientific concerns in the 1980s led to initiation of inter-governmental discussions in 1989 to stabilize GHG concentrations and avoid potentially "dangerous" global temperature rise. These concerns led to negotiation of the United Nations Framework Convention on Climate Change (UNFCCC). In the late 1980s, climate experts broadly understood that climate change driven by human-related GHG emissions was a global challenge: all major emitting countries would need to engage in slowing then reducing their emissions of GHG as well as increasing GHG removals by "sinks" (e.g., growing forests). When the UNFCCC was opened for signature in 1992, the already industrialized countries emitted almost 80% of the global carbon dioxide (CO 2 ) from energy and industry. , The CO 2 emissions of the United States and the European Union were about 23% and 20%, respectively, of the global total. China's were about 11%. All the "developing" countries at the time contributed about one-third. Low income countries saw GHG-driven climate change as a problem made by the industrialized countries. Considering low income countries' challenged financial, technological, and governance capacities, they were not included in the UNFCCC's Annex I, which lists countries with quantitative GHG control targets for the 1990s. Nonetheless, the UNFCCC contained a principle of "common but differentiated responsibilities" among its Parties, with consensus that the already industrialized countries should lead in controlling their emissions and that all countries have obligations to address climate change. Annex I established a bifurcation between the Parties listed in Annex I and the Non-Annex I Parties. (Countries are frequently referred to as "developed" versus "developing," although the distinction is undefined and arguably a misleading simplification of the spectrum of differences among countries). Scientific analyses have concluded that rising GHG concentrations in the atmosphere cannot be stabilized unless all major emitting countries abate their net emissions to near zero. Despite efforts of many countries to reduce their GHG emissions, the continued and rapid growth of emissions from such large emitters as China and the United States has called into question the efficacy of the UNFCCC in meeting its objective of stabilizing concentrations of GHG in the atmosphere. As China's share of global GHG emissions has grown from about 11% in 1990 to about 21% today, and continues to grow, a broad set of observers have concluded that effectively slowing human-induced climate change depends on Chinese reductions of its emissions, as well as reductions from the United States and all other large emitters. U.S. congressional debate on potential climate change policies in the United States frequently invokes China's (and other emerging economies') surging greenhouse gas (GHG) emissions as well as skepticism over whether, how, and when China might alter that trend. Some are concerned that U.S. investment in GHG controls without comparable Chinese actions would unfairly advantage China in global trade, and fail to slow human-induced climate change. In contrast, others point to China's announced aggressive actions to reduce GHG emissions by deploying efficient and non-fossil fuel technologies, and warn that U.S. businesses could fall technologically and competitively behind China in the energy sector and international trade. Moreover, some suggest that Chinese policies may help buffer their production from rising and volatile fossil fuel prices, while the United States' production costs could remain subject to fluctuating world energy prices. Some experts point to the connections of China's GHG control policies to broader congressional concerns: China's role in world markets for energy, forest products, rare earth metals, and other strategic resources. Some analysts have noted that potential impacts of climate change on China's ecosystems, agriculture, water resources, and coastal zones could affect that nation's economic and political prospects, with both economic and security risks for the United States. This report lays a groundwork for congressional consideration of China's GHG policies. It describes the underlying economic and environmental context for China's GHG emissions then provides the magnitude and uncertainties of available estimates. It discusses the factors driving China's emissions and summarizes some of the best described elements of China's strategy to mitigate its GHG emissions. A brief section identifies key points on China's status in international cooperation. Over the past decade, the Chinese people and its leadership have come to view the country's economic well-being and its environmental quality as inextricably correlated. Figures for Gross Domestic Product without accounting for losses to air and water quality, human health, etc. exaggerated actual improvements in living standards. This has resulted in a shift to "harmonious growth" that tries to balance GDP growth with improving living standards. Between 1980 and 2009 the Chinese economy grew at an average annual rate of 10% (growing by factor of 16 over the period). In the past decade, China's annual growth rates varied between 8% and 14%, over which time its economy has tripled in size. China is now the second largest economy in the world, behind the United States. The country held $3.2 trillion in foreign exchange reserves by the June 2011. , Hundreds of millions of Chinese have improved their standards of living. These facts lead some to contend that China is no longer a developing country. Still, a recent World Bank report estimates that up to 200 million people (out of 1.3 billion) in China continue in poverty, living on less than $1.25 a day in 2005. The Chinese government perceives that its legitimacy depends on continuing to improve the living standards of its population. Its economic policies are stated to be strongly aimed at eliminating poverty and raising average incomes. China's achievements so far are reflected in Gross Domestic Product (GDP) per capita in 2009 of $6,800 in international dollars (int$), up 22% from 2007 and up 289% from 2000, according to the World Bank's World Development Indicators. Still, per capita incomes in China were about one-eighth those of Americans levels (respectively, int$5,594 and int$46,628). Table 1 provides selected economic, energy, and greenhouse gas statistics for China and the United States. In 2009, China's population was more than four times that of the United States, while its economy, as measured using "purchasing power parities," was just over half as large. Even with relatively slow population growth (0.5% annually) and high projected economic growth rates of at least 7% annually, it likely would take many years for the living standards of average Chinese to reach those of average Americans. China's national plans call for structural shifts in its economy. Much of China's recent growth occurred in industrial production, especially of goods for export. In the past few years, China's policies have attempted to shift from emphasizing heavy industry (such as steel) and production for export to stimulating domestic consumption and meeting domestic demands for improved quality of life. China has reduced its incentives for export-oriented production and increased incentives for investments in higher value-added goods and services. These policies, combined with increasing economic integration in Southeast Asia, could decrease the share of heavy manufacturing in China's economy, although preliminary data from early 2011 show that heavy manufacturing remains strong. Historically, China's promotion of monetary economic growth has led to severe environmental degradation. Many Chinese policymakers appear now to realize, however, that they cannot sustain an "unbalanced" approach that emphasizes industrialization at any cost, especially not in the developed regions of the country. Environmental pollution has become so bad in places that social and political stability are at risk. Officially recognized "public order disturbances" grew from 58,000 in 2003 to 87,000 in 2005, many due to environmental pollution and land-takings stemming from government corruption. Chinese officials have indicated that they seek a "harmonious society" that would entail slower GDP growth with less environmental degradation. In 2007, the World Bank, working with the Chinese government, estimated that the cost of outdoor air and water pollution to China's economy totaled around US$100 billion annually, or 5.8% of China's GDP. In other words, if non-monetized losses to China's resource assets (e.g., clean water, etc.) were netted from the current (financial) accounts, GDP would have been 5.8% lower. Related to such findings, the Chinese government raised the stated priority of environmental protection in its 11 th Five Year Plan (2006-2010). Chinese central government officials have over the past decade pursued a combination of measures to control air, water, and soil pollution, and state that they are striving to build a "recycling" industrialized economy to ease environmental pressures. Their efforts have met with mixed success. Even when national officials genuinely want to encourage environmental improvement, local officials may seek to avoid enforcement of environmental regulations (and may not report accurate data) in order to maximize industrial growth and employment. As will be reflected later in this report, the degree to which national goals and measures will be achieved remains an important question. Controlling local and regional pollutants like oxides of sulfur and nitrogen, particulates, and mercury has been difficult because of the difference in priorities of local and central government officials, as well as insufficient monitoring data and enforcement of national requirements. Controlling GHG emissions in China is even harder. For conventional pollutants (e.g., particulate matter or water contamination), both mitigation costs and impacts are local or regional; averaged nationally, polluting nations will largely pay the costs of that pollution either financially or in lower well-being. But with GHG emissions, mitigation costs may be local, while climate impacts are global. Without shared international action, this can lead to a "tragedy of the commons" phenomenon where the shared resource is not adequately stewarded, or where some people take responsibility while others, who do not control their emissions, become "free riders" on the efforts of those who do. Over the past three years, China's leadership has demonstrated an increasing realization that it has ownership in the outcomes of a warming world. Increasingly, it recognizes that it too would bear potential climate change costs--of increasing storm intensity, rising sea levels, shifting water availability, challenged agricultural productivity, changing disease patterns, as well as other anticipated impacts. China's recently announced 12 th 5-Year Plan, covering 2011-2015, says the nation should act to balance economic growth with environmental protection. How China reconciles domestic politics with international relations, and "fairness" arguments with pledges of actions to suppress its GHG emissions (to be discussed later), remains to be seen. Data from China are equivocal. No one knows precisely the scale of China's GHG emissions or its removals of CO 2 from the atmosphere by vegetation. China has not reported its emissions estimates for any year later than 1994 , although an unofficial estimate for 2004 was released ( Figure 1 ). (By comparison, the United States and most industrialized countries have been reporting officially and annually according to internationally agreed guidance since 1995.) The lack of China's reporting, transparency, and acceptance of international review of GHG emissions estimates (and underlying data) has been a major point of contention between China and the United States (and other countries) in the UNFCCC negotiations. While China may not have reliable information at this time, its insistence that reporting should be a point of "differentiation" among countries has not helped China convince others of its sincerity in undertaking domestic actions to slow its GHG emissions growth. China has alleged that international review of its emissions estimates could be "intrusive"; other countries, including the United States, already engage in such reviews, including in-country reviews and discussions with independent third-parties. Since the Copenhagen Accord in 2009, China has agreed to biannual reporting and "consultations," though the terms of those agreements are yet to be defined. The government is currently preparing its second ever GHG emissions inventory, expected to be released in 2012. Based on activity data of varying quality, estimated GHG emissions in China in 2005 were around 7-7.5 billion metric tons of CO2-equivalent, with CO 2 constituting 78-84% of the total. Methane (CH 4 ) emissions were around 11-13%, nitrous oxide (N 2 O) about 1%, and the synthetic gases (sulfur hexafluoride--SF 6 , perfluorocarbons--PFC, and hydrofluorocarbons--HFC) together less than 1%. (These are the six GHG covered by the Kyoto Protocol.) The Chinese government estimates that the country offset a portion of its GHG emissions with removals (sequestration) by forests: "from 1980 to 2005, a total of 3.0 billion tons of CO 2 were absorbed by afforestation, a total of 1.6 million tons of CO 2 were absorbed by forest management, and 0.430 million tons of CO 2 from deforestation were saved." Removals of CO 2 from the atmosphere by land use, land use change and forestry are much more difficult to quantify in all countries than emissions by other human activities. Figure 2 ranks the IEA's estimates of the world's leading GHG emitters in 2005, the latest year for which non-CO 2 GHG data are available for many countries, including China. According to IEA's estimates for the six GHG, China and the United States were each responsible for about 17% of global GHG emissions in 2005. Using data for energy and cement CO 2 only, China and the United States in 2009 emitted about 21% and 19%, respectively, of the global total. Chinese GHG emissions have grown rapidly. According to unofficial GHG estimates from China, from 1994 to 2004, China's annual average GHG growth rate was around 4%. In this period, the share of carbon dioxide in total GHG emissions increased from 76% to 83%. The most recent estimates come from BP are somewhat higher than IEA's, globally and for China. According to BP's estimates for 2010, China's and the United States' CO 2 emissions were 8,333 and 6,145 MMT CO 2 , respectively. BP estimates that China's CO 2 emissions grew 339% from 1990 to 2010 ( Figure 3 ). (This compares with U.S. CO 2 emissions growth of 13% from 1990 to 2010.) Since China has not officially released a GHG inventory since 1994, it is difficult to know how sectors contribute to national emissions. The Pew Center on Global Climate Change estimated that, in 2003, electricity and heat made up 42% of China's GHG emissions, industry 21%, agriculture 20%, households and services 9%, transportation 5%, and waste 3%. According to IEA estimates, of China's 2005 GHG emissions, about 68% came from fuel combustion in all sectors ( Figure 4 ). About 5% evaporated as methane from energy related systems. Another 10% came from industrial processes, and about 14% came from agriculture. Waste and miscellaneous sources accounted for the remaining 4% of China's GHG emissions that year. China's GHG emissions are the highest in the world because of its very large economy, the high share of the economy generated by energy-intensive (and GHG emitting) industry, and the high share of coal in China's energy mix. China's GHG emissions are the highest in the world primarily because of the size of its economy, which is, in turn, due in large part to its vast population of 1.3 billion people. (Per capita, production is much smaller than that of the United States. But multiplying China's low per capita production by its large population makes the China's economy is the second largest globally.) China exercises strong policies to slow population growth; the growth of population in 2005 was approximately 0.6%, down from an average rate of about 1.1% in the 1990s and 1.4% in the 1980s. The relatively slow rate of population growth helps to diminish the corresponding growth of national GHG emissions. China's population policies are clearly not aimed at mitigating GHG emissions, but observers note that without them emissions would have increased substantially. Though China's population has been growing relatively slowly, production per capita has grown rapidly. China's economy has experienced annual growth rates from 8 to 14% over the past decade. The Chinese economy is now the second largest economy in the world: int$9.1 trillion in 2009--two-thirds as large as the int$14.1 trillion U.S. economy (compared using Purchasing Power Parities), and more than twice the size of Japan's (the third largest economy). Figure 5 provides one estimate of the economic activities that have driven recent growth of Chinese GHG emissions. It concludes that the emissions associated with exports have grown rapidly in the past few years, as well as capital investment (construction of buildings, roads, etc.) and increasing consumption by the population and their rising incomes. Energy production and use emit roughly three-quarters of all GHG in China, as in most other countries ( Figure 4 ). China's rising GHG emissions have been primarily due to expansion of energy-intensive industrial activity--largely in manufacturing for export and in construction of new infrastructure ( Figure 5 ). China's continuing heavy reliance on coal also results in high CO 2 intensity of its economy. Chinese energy demand has surged since 1990, growing at a rate sometimes faster than the economy ( Figure 6 ). Years of government control over the energy sector, as well as incremental moves to decentralize the system, led to important distortions and inefficiencies. In the early 2000s, a decades-long reduction in energy intensity of the economy halted and reversed ( Figure 7 ), increasing China's dependence on energy to fuel its economic growth. Simultaneously, energy shortages forced stoppages at some enterprises. Though demand for oil for electricity production peaked then declined, demand by vehicle use soared, aggravating concerns about access to supplies from the Middle East and Russia, and about vulnerabilities to price fluctuations. By 2007, China became a net importer of coal. Also, choking levels of pollution, much from the energy sector, triggered public protests, while international pressure increased on China to control its related emissions of air pollutants and GHG. Though reforms were promoted from the 1990s, weak implementation, unreliable data and monitoring, and a predominant emphasis on economic expansion limited their effectiveness. These factors focused the attention of the central government on revising national energy policies in China's 11 th and 12 th (current) 5-year plans. (Policies will be discussed in " China's GHG Abatement Policies and Programs .") China uses a high portion of coal in its fuel mix ( Figure 8 )--another reason that its CO 2 emissions are high relative to the size of its economy (its CO 2 intensity). Coal emits far more CO 2 for the amount of energy it provides than other fossil fuels. Coal's "emission factor" is about 30% higher than that of crude oil, and about 70% more than natural gas, on average. So the high use of coal, and of fossil fuels more generally, in the Chinese economy explains why China's GHG emissions are proportionately high. Compare the United States and China: In 2009, the United States' fuel mix comprised about 23% coal and 37% petroleum. Nuclear, hydroelectric, and other renewable sources contributed another 13%. In China, however, coal provided 70% of total energy, with petroleum contributing 18%, gas 4%, and nuclear, hydroelectric, and renewables providing the remaining 8%. , China now consumes about three times as much coal each year as the United States, even though its total energy demand in 2009 was about 6% higher, according to BP data. The next biggest difference between China and the United States after China's greater reliance on coal is China's limited quantities of domestic natural gas, and its lower use of petroleum. (However, while oil is being backed out of electricity generation in China, demand for oil for transportation is surging with automobile use.) China also has many fewer nuclear power plants. Although not reflected in China's CO 2 emissions estimates, the energy sector also emits a large portion of methane (CH 4 ) from coal production. Due to the dangers of uncontrolled methane leaks in mines, the government has tried to force capture and abatement of those methane emissions, but rates are thought to remain high (based, in part, on continuing frequency of coal mine explosions). Agriculture is the next most significant sector for GHG emissions, although recent estimates are not available. In 1994, China's agriculture sector contributed 17% of all GHG emissions, 50% of all methane emissions (especially due to rice cultivation, and pig and sheep production), and about 92% of estimated nitrous oxide emissions (due to fertilizer application). It is likely that these percentages have shifted significantly in the intervening years, however. China has increasingly strengthened its policies and programs to curtail GHG emissions, culminating in a pledge under the 2009 Copenhagen Accord to achieve a 40 to 45% reduction in its carbon intensity by 2020. The government has sought to enforce and incentivize many programs to improve energy efficiency and expand the shares of non-emitting sources of energy. In addition, it has promoted policies in agriculture and other sectors to abate GHG emissions. Still, some critics are skeptical of China's ability to achieve its targets, while others believe that China's efforts are little more than "business-as-usual." One recent analysis concluded that achieving the carbon intensity target is feasible, but would require strengthening of existing policies to stimulate energy efficiency in multiple sectors and to increase shares of renewable and nuclear electricity generation. Under existing policies, most analysts expect China's GHG emissions to slow their rate of growth but to continue to increase until around 2030. As discussed earlier, China's government has felt pressure to abate choking levels of local pollution as well as to engage with other large GHG emitters in international cooperation to reduce its emissions. China had policies for many years to improve efficiency, and even to tax polluting emissions, but enforcement and effectiveness of those policies were less than anticipated. By 2007, when China was under strong international pressure to negotiate GHG reduction targets under the UNFCCC for the period beyond 2012, China released its National Climate Change Program, a plan to address climate change. The most challenging aspect of China's policy, arguably, was its goal to lower energy intensity 20% by 2010. By 2010, the government says the nation fell just short of that goal, with a 19.1% improvement. However, under severe scrutiny towards the end of 2010, it appears that many energy managers met their goals by stopping or slowing production rather than improving efficiency. This seems to have resulted in a slight "rebound" of energy intensity early in 2011. Chinese leadership has warned against such tactics to reduce energy intensity and tightened its objectives in the 12 th 5-Year Plan, from 2011-2015. Besides the improvement in energy intensity, measures in the 11 th 5-Year Plan resulted, according to China's claims, in the following: The closure of thousands of small, inefficient, and polluting coal-fired power plants, iron and steel mills, cement kilns, aluminum plants, and others. China reports closures of old coal-fired power plants exceeding 71 GW of capacity in 2006-2010, and another 11 GW in the first half of 2011. The government says these plants would otherwise have emitted 164 MMTCO 2 annually. The share of non-fossil energy reached 9.6% in 2010, up from about 7% in 2005. China became the largest wind power market by 2010, for both supply and use. The stock of carbon stored in forests increased by an estimated 13 billion cubic meters. The Chinese government has stated that some of the policies put in place to achieve China's targets for 2010 will likely continue into the future. Examples include investment in ultra-efficient coal fired electricity generation; improvement of existing coal-fired industrial boilers; closure of inefficient energy and industrial production capacity; expansion of combined heat-and-power; improvements of industrial motor efficiencies; standards for energy efficient lighting, buildings, and appliances; efficiency labels for appliances; improved enforcement of standards; financial incentives to build renewable energy capacity; requirements of feed-in tariffs to promote renewable energy generation; monetary awards for energy-saving achievements by companies and public institutions; vehicle efficiency standards that exceeded those of the United States; tightened efficiency standards for buildings and appliances, and forest coverage expanded to 20%. Regarding CO 2 emissions and energy policies, the details of China's 12 th 5-Year Plan (covering 2011 to 2015) and its implementing measures are still in draft. The national government has announced a number of its targets that, if achieved, would reduce growth of GHG emissions. By 2015, energy intensity should improve by 16% by 2015; carbon intensity should improve 17% by 2015, reaching 40-45% relative to 2005 levels by 2020; the share of non-fossil energy should reach 11.4% by 2015 and 15% by 2020; Forest coverage should increase by 12.5 million hectares (31 million acres) by 2015, and 40 million hectares (99 million acres) by 2020, compared to 2005 area; Nine pilot CO 2 cap and trade programs have been established across several cities; The length of high-speed railways is planned to increase to 45,000 km (27,962 miles). Comprehensive laws to facilitate meeting those targets are now under consideration by the legislature. A variety of statements from the government indicate that some of the main policies China would use to achieve its goals are continued economic restructuring toward higher value-added and less energy intensive production; financial awards to companies and public institutions for quantitative goals for saving energy and substituting alternative for fossil fuels in the transport sector; and expansion of the "energy-saving service sector" with a focus on the transport and construction sectors, making energy efficiency a "criterion for market entry" and setting benchmarks for energy performance. Just as China has not provided estimates of historical or current GHG emissions, it has not provided projections of future emissions. A variety of organizations have produced their own projections, with different assumptions about underlying "business as usual," efficacies of Chinese policies and programs, and rates of technological advance. In the longer term, Chinese officials are signaling possible absolute reductions in China's GHG emissions. As reported by the Xinhua news agency, a recent report by the Chinese Academy of Engineering concluded that "China's energy development is projected to experience a 'historic transition' around 2030 when its consumption of coal becomes restrained, the emission of carbon dioxide reaches its peak and energy-saving capacities around the world reaches an advanced level." This conclusion is consistent with other analyses and official statements suggesting that 2030 could mark the high point of Chinese CO 2 emissions if current policies continue. One analysis that seemed linked to the Chinese pledge to improve carbon intensity by 40-45% by 2020 is illustrated in Figure 9 . (A very similar figure was made available at the time China announced its pledge.) Another recent analysis by Lawrence Berkeley National Laboratory (LBNL) concludes similarly that China's CO 2 emissions could begin to level off around 2030, due to saturation of some demand for greater energy services, as well as standards and incentives for more efficiency and non-fossil technologies. An alternative view is represented by the International Energy Agency's World Energy Outlook 2009. It suggests that China's current policies (before the 12 th 5-Year Plan) would result in continually rising CO 2 emissions, reaching 12.6 MMTCO 2 by 2035. That would be almost a doubling of China's 2005 emissions. China and other countries that had low incomes in 1992 were exempted in the United Nations Framework Convention on Climate Change (UNFCCC) and the 1997 Kyoto Protocol from taking on quantified GHG reduction obligations, based on the principle of "common but differentiated responsibilities" contained in the Convention. While Parties agreed that the already industrialized Parties ("Annex I Parties") should take the first steps in abating their GHG emissions, it has been clear from a scientific standpoint that the objective of the UNFCCC--to stabilize atmospheric concentrations of GHG at a level that would avoid dangerous anthropogenic interference with the climate system (in Article 2)--could be met only when all significant emitters reduce their net emissions (i.e., emissions minus removals by photosynthesis) to near zero. China and other low income economies, however, resisted any discussion of when and how they might take on GHG obligations. At the same time, the United States and a few other countries rejected taking on GHG mitigation commitments unless all major emitters take on commitments. Impasse continued until agreement was reached on the 2009 Copenhagen Accord: countries associated with the Accord submitted pledges to GHG targets and mitigation actions they would take. These pledges are politically but not legally binding. Agreement on legally binding commitments under the UNFCCC or the Kyoto Protocol seems unlikely for the foreseeable future. China's stance against legally binding obligations rests on several points. First, China argues that the existing, elevated concentrations of GHG in the atmosphere are due to historical emissions from the already industrialized countries, such as the United States. (The "Brazil Proposal" of 1997 suggests that developing countries should not take on GHG abatement requirements until their accumulated contributions to atmospheric concentrations equally the contributions of the Annex I Parties--in other words, not for decades.) China's large and rapidly growing emissions, however, may soon places its contributions to atmospheric concentrations on a par with the historic contributions of many smaller Annex I Parties. Also, China has extended its position on differentiation of obligations to cover GHG emission reporting and review, not just abatement responsibilities. As discussed earlier in the section on China's GHG emissions, that country's reticence to be transparent about its emissions and sequestration and quantification of its policies and programs, has been an important point of conflict in the UNFCCC negotiations. Second, China and other lower income countries point out that the industrialized economies benefited from essentially unconstrained use of energy to fuel their growth; lower income countries should also be exempt from constraints on their use of energy until their incomes have caught up. They also contend that, if global carbon emissions must be limited, each person should have an equal "right" to emissions; this would imply that the "rights" of each American would be small fraction of their current actual emissions, while citizens of developing would be allowed to expand their average emissions. (Even under this line of argument, however, China would need to reduce its per capita GHG emissions in scenarios that would stabilize GHG concentrations at many moderate, proposed targets.) An "equity" proposal rumored to be forthcoming from India, China, Brazil and South Africa would set a principle in the negotiations that a country would not take on GHG abatement obligations until each of its citizens had access to energy and had emerged from poverty. Such a proposal could illuminate the widely varying conceptions of "equity" among Parties and individuals, as well as perhaps being inconsistent with achieving the UNFCCC's objective of stabilizing GHG concentrations. In addition, China and other non-Annex I Parties have underscored the greater financial capabilities of the wealthier countries to undertake GHG abatement, while China's priority must be to alleviate poverty and to raise average incomes towards those of the Annex I Parties. China, for decades, has sought financial and technological assistance as part of nearly every international issue. China's robust economy, large foreign reserves, and leading experience in manufacturing and deploying many advanced technologies have reduced the credibility of its requests. In contrast, China has increased its engagement in technology cooperation in recent years, including with the United States. For many years, China and other non-Annex I Parties allied to block discussion of new commitments for non-Annex I Parties. By 2009 and the Copenhagen negotiations, however, some countries that feel vulnerable to the impacts of climate change began to perceive that it would not be in their interests to sustain the "no new commitments for developing countries" mantra. The fractious negotiations in Copenhagen spotlighted these diverging interests and added to pressure for China and others to agree to the political pledging processes that have emerged. For the foreseeable future, however, China is likely to continue its opposition to taking on legally binding GHG targets, as well as to enhanced requirements for GHG reporting and international review of its policies and progress.

The 112th Congress continues to debate whether and how the United States should address climate change. Most often, this debate includes concerns about the effects of U.S. greenhouse gas (GHG) emissions controls if China and other major countries were not to take comparable actions. China recently surpassed the United States to become the largest emitter of human-related GHG globally, and together, the two nations emit about 40% of the global total (with shares of 21% and 19%, respectively). China's GHG emissions are growing rapidly and, even with policies adopted by China, are expected to rise until at least 2030. The emissions growth is driven by China's rapid economic and industrial growth and its reliance on fossil fuels despite measures to raise the shares of non-fossil energy sources. China requires 50% more energy to produce one billion dollars of GDP (its "energy intensity") compared with the United States. Over the past two decades, strong government directives and investments have dramatically reduced the energy and GHG intensities of China's economy, though the rates of improvement leveled off in the 2000s, and even reversed in subsequent years. A renewed emphasis on improving energy and GHG intensity emerged in the 11th 5-Year Plan, from 2006-2010, and the government says the nation nearly achieved its aggressive goal to reduce by 20% the energy required to produce GDP. In the context of China's 12th 5-Year Plan, from 2011-2015, leaders have set targets to further reduce energy intensity by 16% by 2015. Along with measures to reduce pollution and increase the shares of non-fossil fuels in the energy sector, China has set goals to improve its CO2 intensity by 40-45% by 2020, with an interim target in the 12th 5-Year Plan of 17% by 2015. Even if these targets are achieved, China's GHG emissions are expected to rise in absolute terms. In addition, the frequency, transparency, and data quality of China's reporting of its GHG emissions and mitigation actions (including underlying energy and other data) have been a challenging diplomatic issue between the United States and China and in the climate change negotiations. China has resisted reporting and reviews comparable to what other industrialized nations or what many developing countries accept. While technical bilateral cooperation on data has been productive and China has moved politically toward better information sharing, the continuing lack of transparency is apparent in uncertain emissions estimates and projections. Chinese negotiators adhere to the principle of "common but differentiated" responsibilities, agreed in the United Nations Framework Convention on Climate Change (1992). They argue that emissions per person in China are low, that raising incomes must be their highest priority, and that industrialized countries bear primary responsibility for the historical buildup of GHGs in the atmosphere; therefore the industrialized countries should lead in mitigating emissions domestically. Industrialized countries also, they say, should assist developing countries with financial and technological support to mitigate emissions and adapt to coming change. Debate on potential climate change legislation in the United States has been influenced by China's surging GHG emissions, and uncertainty over whether, how, and when China might alter that trend. There is concern that strong U.S. domestic action taken without Chinese reciprocity would unfairly advantage China in global trade, and fail to slow significantly the growth of atmospheric concentrations of GHGs. The governments of both China and the United States have indicated some closure of their gap on future actions to address climate change by agreeing on national pledges to GHG targets and mitigation actions rather than binding international obligations. China is also engaged with many other countries in bilateral programs to build its governance and technological capacities to abate its GHG emissions.

Continued revelations involving alleged disclosures of classified information to the news media or to others who are not entitled to receive it have renewed Congress's interest with regard to the possible need for legislation to provide for criminal punishment for the "leaks" of classified information. Opponents of any such legislation express concern regarding the possible consequences to freedom of the press and other First Amendment values. The current laws for protecting classified information have been criticized as a patchwork of sometimes abstruse and antiquated provisions that are not consistent and do not cover all the information the government legitimately needs to protect. Certain information is protected regardless of whether it belongs to the government or is subject to normal classification. Information related to "the national defense" is protected even though no harm to the national security is intended or is likely to be caused through its disclosure. However, nonmilitary information with the potential to cause serious damage to the national security is only protected from willful disclosure with the requisite intent or knowledge regarding the potential harm. For example, under 50 U.S.C. SS 783, the communication of classified information by a government employee is expressly punishable only if the discloser knows or has reason to believe the recipient is an agent or representative of a foreign government, but not, for example, if the recipient is an agent of an international terrorist organization. To close some perceived gaps, the 106 th Congress passed a measure to criminalize all leaks of classified information; however, President Clinton vetoed the measure. The 108 th Congress considered passing an identical provision as part of the Intelligence Authorization Act for Fiscal Year 2001, but instead directed the Attorney General and heads of other departments to undertake a review of the current protections against the unauthorized disclosure of classified information, and to issue a report recommending legislative or administrative actions by May 1, 2002. In its response to Congress, the Department of Justice concluded that existing statutes and regulations are sufficient to prosecute disclosures of information that might harm the national security. This report describes the current state of the law with regard to the unauthorized disclosure of classified information, including criminal and civil penalties that can be imposed on violators, as well as some of the disciplinary actions and administrative procedures available to federal agencies with respect to their employees, as such measures have been addressed by federal courts. The report also describes the background of legislative efforts to amend the laws, including the measure passed in 2000 and President Clinton's stated reasons for vetoing it. Finally, the report considers possible constitutional issues--in particular, issues related to the First Amendment--that may arise if Congress considers new legislation to punish leaks or if the Attorney General seeks to apply current law to punish newspapers that publish leaked classified information. The classification by government agencies of documents deemed sensitive has evolved from a series of executive orders. Congress has, for the most part, let the executive branch make decisions regarding the type of information to be subject to protective measures. The current criminal statutory framework providing penalties for the unauthorized disclosure of classified government materials traces its roots to the Espionage Act of 1917, which made it a crime to disclose defense information during wartime. The National Security Act of 1947 directed the Director of the CIA to protect "intelligence sources and methods." The Atomic Energy Act of 1954 provided for secrecy of information related to nuclear energy and weapons. The Invention Secrecy Act of 1951 gave the government the authority to declare a patent application secret if disclosure of an invention might expose the country to harm. National defense information is protected by the Espionage Act, 18 U.S.C. SS 793 et seq . The penalty for violation of 18 U.S.C. SS 793 (gathering, transmitting, or losing defense information) is a fine or imprisonment for not more than 10 years, or both. Thus, under SS 793, persons convicted of gathering defense information with the intent or reason to believe the information will be used against the United States or to the benefit of a foreign nation may be fined or sentenced to no more than 10 years imprisonment. Persons who have access to defense information that they have reason to know could be used to harm the national security, whether the access is authorized or unauthorized, and who disclose that information to any person not entitled to receive it, or willfully retain the information despite an order to surrender it to an officer of the United States, are subject to the same penalty. Although it is not necessary that the information be classified by a government agency, the courts give deference to the executive determination of what constitutes "defense information." Information that is made available by the government to the public is not covered under the prohibition, however, because public availability of such information negates the bad-faith intent requirement. On the other hand, classified documents may remain within the ambit of the statute even if information contained therein is made public by an unauthorized leak. Any person who is lawfully entrusted with defense information and who permits it to be disclosed or lost, or who does not report such a loss or disclosure, is also subject to a penalty of up to 10 years in prison. The act covers information transmitted orally as well as information in tangible form. 18 U.S.C. SS 794 (aiding foreign governments) provides for imprisonment for any term of years or life, or under certain circumstances, the death penalty. The provision penalizes anyone who transmits defense information to a foreign government (or certain other foreign entities) with the intent or reason to believe it will be used against the United States. The death penalty is available only upon a finding that the offense resulted in the death of a covert agent or directly concerns nuclear weapons or other particularly sensitive types of information. The death penalty is also available under SS794 for violators who gather or transmit information related to military plans and the like during time of war, with the intent that the information reach the enemy. Offenders are also subject to forfeiture of any ill-gotten gains and property used to facilitate the offense. Members of the military who commit espionage, defined similarly to the conduct prohibited in 18 U.S.C. SS 794, may be tried by court-martial for violating Article 106a of the Uniform Code of Military Justice (UCMJ), and sentenced to death if certain aggravating factors are found by unanimous determination of the panel. Unlike offenses under SS 794, Article 106a offenses need not have resulted in the death of a covert agent or involve military operations during war to incur the death penalty. One of the aggravating factors enabling the imposition of the death penalty under Article 106a is that "[t]he accused has been convicted of another offense involving espionage or treason for which either a sentence of death or imprisonment for life was authorized by statute." The unauthorized creation, publication, sale or transfer of photographs or sketches of vital defense installations or equipment as designated by the President is prohibited by 18 U.S.C. SSSS 795 and 797. Violators are subject to fine or imprisonment for not more than one year, or both. The knowing and willful disclosure of certain classified information is punishable under 18 U.S.C. SS 798 by fine and/or imprisonment for not more than 10 years. To incur a penalty, the disclosure must be prejudicial to the safety or interests of the United States or work to the benefit of any foreign government and to the detriment of the United States. The provision applies only to information related to cryptographic systems and information related to communications intelligence specially designated by a U.S. government agency for "limited or restricted dissemination or distribution." The provision protects information obtained by method of communications intelligence only if the communications were intercepted from a "foreign government," which, while broadly defined, may not include a transnational terrorist organization. 18 U.S.C. SS 641 punishes the theft or conversion of government property or records for one's own use or the use of another. While this section does not explicitly prohibit disclosure of classified information, it has been used for that purpose. Violators may be fined, imprisoned for not more than 10 years, or both, unless the value of the property does not exceed the sum of $100, in which case the maximum prison term is one year. 18 U.S.C. SS 952 punishes employees of the United States who, without authorization, willfully publish or furnish to another any official diplomatic code or material prepared in such a code, by imposing a fine, a prison sentence (up to 10 years), or both. The same punishment applies for materials "obtained while in the process of transmission between any foreign government and its diplomatic mission in the United States." 18 U.S.C. SS 1030(a)(1) punishes the willful retention, communication, or transmission, etc., of classified information retrieved by means of knowingly accessing a computer without (or in excess of) authorization, with reason to believe that such information "could be used to the injury of the United States, or to the advantage of any foreign nation." The provision imposes a fine or imprisonment for not more than ten years, or both, in the case of a first offense or attempted violation. Repeat offenses or attempts can incur a prison sentence of up to twenty years. 18 U.S.C. SS 1924 prohibits the unauthorized removal of classified material. The provision imposes a fine of up to $1,000 and a prison term up to one year for government officers or employees who knowingly take material classified pursuant to government regulations with the intent of retaining the materials at an unauthorized location. 42 U.S.C. SS 2274 punishes the unauthorized communication by anyone of "Restricted Data," or an attempt or conspiracy to communicate such data, by imposing a fine of not more than $500,000, a maximum life sentence in prison, or both, if done with the intent of injuring the United States or to secure an advantage to any foreign nation. An attempt to disclose or participate in a conspiracy to disclose restricted data with the belief that such data will be used to injure the United States or to secure an advantage to a foreign nation, is punishable by imprisonment for no more than 10 years, a fine of no more than $100,000, or both. The disclosure of "Restricted Data" by an employee or contractor, past or present, of the federal government to someone not authorized to receive it is punishable by a fine of not more than $12,500. 50 U.S.C. SS 421 provides for the protection of information concerning the identity of covert intelligence agents. Any person authorized to know the identity of such agents who intentionally discloses the identity of a covert agent is subject to imprisonment for not more than 10 years or a fine or both. A person who learns the identity of an agent through authorized access to classified information and discloses the agent's identity to someone not authorized to receive classified information is subject to a fine, a term of imprisonment not more than five years, or both. A person who learns of the identity of a covert agent through a "pattern of activities intended to identify and expose covert agents" and discloses the identity to any individual not authorized access to classified information, with reason to believe that such activities would impair U.S. foreign intelligence efforts, is subject to a fine or imprisonment for a term of not more than three years. To be convicted, a violator must have knowledge that the information identifies a covert agent whose identity the United States is taking affirmative measures to conceal. An agent is not punishable under this provision for revealing his or her own identity, and it is a defense to prosecution if the United States has already publicly disclosed the identity of the agent. 50 U.S.C. SS 783 penalizes government officers or employees who, without proper authority, communicate classified information to a person whom the employee has reason to suspect is an agent or representative of a foreign government. It is also unlawful for the representative or agent of the foreign government to receive classified information. Violation of either of these provisions is punishable by a fine of up to $10,000 or imprisonment for not more than 10 years. Violators are thereafter prohibited from holding public office. Violators must forfeit all property derived directly or indirectly from the offense and any property that was used or intended to be used to facilitate the violation. Disclosure of a patent that has been placed under a secrecy order pursuant to the Invention Secrecy Act of 1951 can result in a fine of $10,000, imprisonment for up to two years, or both. Publication or disclosure of the invention must be willful and with knowledge of the secrecy order to be punishable. In addition to the criminal penalties outlined above, the executive branch employs numerous means of deterring unauthorized disclosures by government personnel using administrative measures based on terms of employment contracts. The agency may impose disciplinary action or revoke a person's security clearance. The revocation of a security clearance is usually not reviewable by the Merit System Protection Board and may mean the loss of government employment. Government employees may be subject to monetary penalties for disclosing classified information. Violators of the Espionage Act and the Atomic Energy Act provisions may be subject to loss of their retirement pay. Agencies also rely on contractual agreements with employees, who typically must sign non-disclosure agreements prior to obtaining access to classified information, sometimes agreeing to submit all materials that the employee desires to publish to a review by the agency. The Supreme Court enforced such a contract against a former employee of the Central Intelligence Agency (CIA), upholding the government's imposition of a constructive trust on the profits of a book the employee sought to publish without first submitting it to CIA for review. In 1986, the Espionage Act was amended to provide for the forfeiture of any property derived from or used in the commission of an offense. Violators of the Atomic Energy Act may be subjected to a civil penalty of up to $100,000 for each violation of Energy Department regulations regarding dissemination of unclassified information about nuclear facilities. The government can also use injunctions to prevent disclosures of information. The courts have generally upheld injunctions against former employees' publishing information they learned through access to classified information. The Supreme Court also upheld the State Department's revocation of passports for overseas travel by persons planning to expose U.S. covert intelligence agents, despite the fact that the purpose was to disrupt U.S. intelligence activities rather than to assist a foreign government. Similarly, the government can enjoin publication of inventions when it is determined that the release of such information is detrimental to the national security. If an inventor files a patent application for an invention that the Commissioner of Patents believes should not be made public, the Commissioner may place a secrecy order on the patent and establish conditions for granting a patent, or may withhold grant of a patent as long as the "national interest requires [it]." In addition to criminal penalties cited previously, in the case of an unauthorized disclosure or foreign filing of the patent information, the Patent Office will deem the invention to be "abandoned," which means a forfeiture by the applicant, his successors, or assigns of all claims against the United States based on the invention. The government has had less success trying to enjoin the media from disclosing classified information. Most famously, the government failed to enjoin publication of the Pentagon Papers by a newspaper, even though the information was clearly classified and had been stolen by someone with access to it. In that case, the Supreme Court set very high standards for imposing prior restraint on the press. Yet in another case, the government was able to enjoin a newspaper from printing information about the design of an atomic bomb, even though the information did not originate from classified material and the author's purpose was not subversive. The current laws for protecting classified information have been criticized as a patchwork of provisions that are not consistent and do not cover all the information the government legitimately needs to protect. Certain information is protected regardless of whether it belongs to the government or is subject to normal classification. Technical and scientific information, for example, can be restricted regardless of source. Information related to "the national defense" is protected even though no harm to the national security is intended or is likely to be caused through its disclosure. However, nonmilitary information with the potential to cause serious damage to the national security is only protected from willful disclosure with the specific intent to harm the national interest, or with the knowledge that such harm could occur. In 2000, and again in 2002, Congress sought to create 18 U.S.C. SS 798A, subsection (a) of which would have read: Whoever, being an officer or employee of the United States, a former or retired officer or employee of the United States, any other person with authorized access to classified information, or any other person formerly with authorized access to classified information, knowingly and willfully discloses, or attempts to disclose, any classified information acquired as a result of such person's authorized access to classified information to a person (other than an officer or employee of the United States) who is not authorized access to such classified information, knowing that the person is not authorized access to such classified information, shall be fined under this title, imprisoned not more than 3 years, or both. The new provision would have penalized the disclosure of any material designated as classified for any reason related to national security, regardless of whether the violator intended that the information be delivered to and used by foreign agents (in contrast to 50 U.S.C. SS 783). It would have been the first law to penalize disclosure of information to entities other than foreign governments or their equivalent solely because it is classified, without a more specific definition of the type of information covered. In short, the provision would have made it a crime to disclose or attempt to disclose classified information to any person who does not have authorized access to such information, with exceptions covering disclosures to Article III courts, or to the Senate or House committees or Members, and for authorized disclosures to persons acting on behalf of a foreign power (including an international organization). The provision would have amended the espionage laws in title 18 by expanding the scope of information they cover. The proposed language was intended to make it easier for the government to prosecute unauthorized disclosures of classified information, or "leaks" of information that might not amount to a violation of current statutes. The language was intended to ease the government's burden of proof in such cases by eliminating the need "to prove that damage to the national security has or will result from the unauthorized disclosure," substituting a requirement to show that the unauthorized disclosure was of information that "is or has been properly classified" under a statute or executive order. The 106 th Congress passed the measure, but President Clinton vetoed it, calling it "well-intentioned" as an effort to deal with a legitimate concerns about the damage caused by unauthorized disclosures, but "badly flawed" in that it was "overbroad" and posed a risk of "unnecessarily chill[ing] legitimate activities that are at the heart of a democracy." The President explained his view that [a] desire to avoid the risk that their good faith choice of words--their exercise of judgment--could become the subject of a criminal referral for prosecution might discourage Government officials from engaging even in appropriate public discussion, press briefings, or other legitimate official activities. Similarly, the legislation may unduly restrain the ability of former Government officials to teach, write, or engage in any activity aimed at building public understanding of complex issues. Incurring such risks is unnecessary and inappropriate in a society built on freedom of expression and the consent of the governed and is particularly inadvisable in a context in which the range of classified materials is so extensive. In such circumstances, this criminal provision would, in my view, create an undue chilling effect. The 108 th Congress considered passing an identical provision as part of the Intelligence Authorization Act for Fiscal Year 2001, but instead directed the Attorney General and heads of other departments to undertake a review of the current protections against the unauthorized disclosure of classified information, and to issue a report recommending legislative or administrative actions. An identical measure was introduced late in the 109 th Congress, but was not reported out of committee. The Attorney General, in his report to the 108 th Congress, concluded that [a]lthough there is no single statute that provides criminal penalties for all types of unauthorized disclosures of classified information, unauthorized disclosures of classified information fall within the scope of various current statutory criminal prohibitions. It must be acknowledged that there is no comprehensive statute that provides criminal penalties for the unauthorized disclosure of classified information irrespective of the type of information or recipient involved. Given the nature of unauthorized disclosures of classified information that have occurred, however, I conclude that current statutes provide a legal basis to prosecute those who engage in unauthorized disclosures, if they can be identified. It may be that carefully drafted legislation specifically tailored to unauthorized disclosures of classified information generally, rather than to espionage, could enhance our investigative efforts. The extent to which such a provision would yield any practical additional benefits to the government in terms of improving our ability to identify those who engage in unauthorized disclosures of classified information or deterring such activity is unclear, however. The publication of information pertaining to the national defense may serve the public interest by providing citizens with information necessary to shed light on the workings of government, but some observe a consensus that the public release of at least some defense information poses a significant enough threat to the security of the nation that the public interest is better served by keeping it secret. The Constitution protects the public right to access government information and to express opinions regarding the functioning of the government, among other things, but it also charges the government with "providing for the common defense." Policymakers are faced with the task of balancing these interests. The First Amendment to the U.S. Constitution provides: "Congress shall make no law ... abridging the freedom of speech, or of the press...." Despite this absolute language, the Supreme Court has held that "[t]he Government may ... regulate the content of constitutionally protected speech in order to promote a compelling interest if it chooses the least restrictive means to further the articulated interest." Where speech is restricted based on its content, the Supreme Court generally applies "strict scrutiny," which means that it will uphold a content-based restriction only if it is necessary "to promote a compelling interest," and is "the least restrictive means to further the articulated interest." Protection of the national security from external threat is without doubt a compelling government interest. It has long been accepted that the government has a compelling need to suppress certain types of speech, particularly during time of war or heightened risk of hostilities. Speech likely to incite immediate violence, for example, may be suppressed. Speech that would give military advantage to a foreign enemy is also susceptible to government regulation. Where First Amendment rights are implicated, it is the government's burden to show that its interest is sufficiently compelling to justify enforcement. Whether the government has a compelling need to punish disclosures of classified information turns on whether the disclosure has the potential of causing damage to the national defense or foreign relations of the United States. Actual damage need not be proved, but potential damage must be more than merely speculative and incidental. In addition to showing that the stated interest to be served by the statute is compelling, the government must also show that the law actually serves that end. If the accused can show that the statute serves an unrelated purpose--for example, to silence criticism of certain government policies or to manipulate public opinion--a judge might be prepared to invalidate the statute. If, for example, the government releases some positive results of a secret weapons program while suppressing negative results, a person prosecuted for releasing negative information could challenge the statute by arguing that his prosecution is related to the negative content of his speech rather than to valid concerns about the damage it might cause. If he can show that those who disclose sensitive information that tends to support the administration's position are not prosecuted, while those who disclose truthful information that is useful to its opponents are prosecuted, he might be able to persuade a court that the statute as enforced is an unconstitutional restriction of speech based on impermissible content-related interests. To survive a constitutional challenge, a law must be narrowly drawn to affect only the type of speech that the government has a compelling need to suppress. A statute that reaches speech that the government has no sufficiently compelling need to regulate may be subject to attack due to overbreadth. A law is overly broad if it prohibits more speech than is necessary to achieve its purpose. If a defendant can show that a statute regulating speech is "substantially overbroad," he may challenge its validity on its face. If the law is found to be substantially overbroad, a court will invalidate the law even if the defendant's conduct falls within the ambit of conduct that the government may legitimately prohibit. For this reason, a statute that relies solely on the Executive's classification of information to determine the need for its protection might be contested as overbroad. If a challenger were able to show that agencies classify information that it is unnecessary to keep secret, he could argue that the statute is invalid as overly broad because it punishes protected speech that poses no danger to the national security Although information properly classified in accordance with statute or executive order carries by definition, if disclosed to a person not authorized to receive it, the potential of causing at least identifiable harm to the national security of the United States, it does not necessarily follow that government classification by itself will be dispositive of the issue in the context of a criminal trial. Government classification will likely serve as strong evidence to support the contention. Typically, courts have been unwilling to review decisions of the executive related to national security, or have made a strong presumption that the material at issue is potentially damaging. In the context of a criminal trial, especially in a case with apparent First Amendment implications, courts may be more willing to engage in an evaluation of the propriety of a classification decision than they would in a case of citizens seeking access to information under the Freedom of Information Act (FOIA). The Supreme Court seems satisfied that national security is a vital interest sufficient to justify some intrusion into activities that would otherwise be protected by the First Amendment--at least with respect to federal employees. Although the Court has not held that government classification of material is sufficient to show that its release is damaging to the national security, it has seemed to accept without much discussion the government's assertion that the material in question is damaging. Lower courts have interpreted 18 U.S.C. SS 798, which criminalizes the unauthorized release of specific kinds of classified information, to have no requirement that the government prove that the classification was proper or personally approved by the President. It is unlikely that a defendant's bare assertion that information is unlikely to damage U.S. national security will be persuasive without some convincing evidence to that effect, or proof that the information is not closely guarded by the government. Snepp v. United States affirmed the government's ability to enforce contractual non-disclosure agreements against employees and former employees who had had access to classified information. The Supreme Court allowed the government to impose a constructive trust on the earnings from Frank Snepp's book about the CIA because he had failed to submit it to the CIA for prepublication review, as he had agreed to do by signing an employment agreement. Although the CIA stipulated to the fact that the book contained no classified information, the Court accepted the finding that the book caused "irreparable harm and loss" to the American intelligence services. The Court suggested that the CIA did not need a signed agreement in order to protect its interests by subjecting its former employees to prepublication review and possible censorship. Haig v. Agee was a First Amendment challenge to the government's ability to revoke a citizen's passport because of his intent to disclose classified information. Philip Agee was a former CIA agent who engaged in a "campaign to fight the United States CIA," which included publishing names of CIA operatives around the world. In order to put a stop to this activity, the Department of State revoked his passport. Agee challenged that action as an impermissible burden on his freedom to travel and an effort to penalize his exercise of free speech to criticize the government. The Supreme Court disagreed, finding the passport regulations constitutional because they may be applied "only in cases involving likelihood of 'serious damage' to national security or foreign policy." United States v. Morison is significant in that it represents the first case in which a person was convicted for selling classified documents to the media. Morison argued that the espionage statutes did not apply to his conduct because he could not have had the requisite intent to commit espionage. The Fourth Circuit rejected his appeal, finding the intent to sell photographs that he clearly knew to be classified sufficient to satisfy the scienter requirement under 18 U.S.C. SS 793. The definition of "relating to the national defense" was not overbroad because the jury had been instructed that the government had the burden of showing that the information was so related. In addition to restricting the disclosure of information by prosecuting the person responsible after the fact, the government may seek to prevent publication by prior restraint (i.e., seeking a temporary restraining order or an injunction from a court to enjoin publication). The Supreme Court, however, is unlikely to uphold such an order. It has written: [P]rior restraints are the most serious and least tolerable infringement on First Amendment rights.... A prior restraint,... by definition, has an immediate and irreversible sanction. If it can be said that a threat of criminal or civil sanctions after publication "chills" speech, prior restraint "freezes" it at least for the time. The damage can be particularly great when the prior restraint falls upon the communication of news and commentary on current events. The government's ability to protect sensitive information was explored in the context of prior restraints of the media in the Pentagon Papers case. In a per curiam opinion accompanied by nine concurring or dissenting opinions, the Court refused to grant the government's request for an injunction to prevent the New York Times and the Washington Post from printing a classified study of the U.S. involvement in Vietnam. A majority of the justices indicated in dicta , however, that the newspapers--as well as the former government employee who leaked the documents to the press--could be prosecuted under the Espionage Act. A statute is unconstitutionally vague if it does not permit the ordinary person to determine with reasonable certainty whether his conduct is criminally punishable. Therefore, a statute prohibiting the unauthorized disclosure of classified information must be sufficiently clear to allow a reasonable person to know what conduct is prohibited. Where First Amendment rights are implicated, the concern that a vague statute will have a chilling effect on speech not intended to be covered may make that law particularly vulnerable to judicial invalidation. The Espionage Act of 1917 has been challenged for vagueness without success. There have been very few prosecutions under that act for disclosing information related to the national defense. The following elements are necessary to prove an unauthorized disclosure offense under 18 U.S.C. SS 793: 1. The information or material disclosed must be related to the national defense, that is, pertaining to any matters "directly and reasonably connected with the defense of our nation against its enemies" that "would be potentially damaging to the United States, or might be useful to an enemy of the United States" and are "closely held" in that the relevant government agency has sought to keep them from the public generally and that these items have not been made public and are not available to the general public. 2. The disclosure must be made with knowledge that such disclosure is not authorized. 3. There must be an "intent or reason to believe that the information . . . is to be used to the injury of the United States, or to the advantage of any foreign nation. There does not appear to be a requirement that the disclosure cause actual harm. An evil motive is not necessary to satisfy the scienter requirement; the willfulness prong is satisfied by the knowledge that the information may be used to the injury of the United States. It is irrelevant whether the information was passed to a friendly foreign nation. A patriotic motive will not likely change the outcome. The Supreme Court, in Gorin v. United States , upheld portions of the Espionage Act now codified as sections 793 and 794 of title 18, U.S. Code (communication of certain information to a foreign entity) against assertions of vagueness, but only because jury instructions properly established the elements of the crimes, including the scienter requirement and a definition of "national defense" that includes potential damage in case of unauthorized release of protected information and materials. Gorin was a "classic case" of espionage, and there was no challenge based on First Amendment rights. The Court agreed with the government that the term "national defense" was not vague; it was satisfied that it "is a generic concept of broad connotations, referring to the military and naval establishments and the related activities of national preparedness." Whether information was "related to the national defense" was a question for the jury to decide, based on its determination that the information "may relate or pertain to the usefulness, efficiency or availability of any of the above places, instrumentalities or things for the defense of the United States of America. The connection must not be a strained one nor an arbitrary one. The relationship must be reasonable and direct." As long as the jury was properly instructed that information not likely to cause damage was not "related to the national defense" for the purpose of the statute, the term was not unconstitutionally vague. No other challenge to a conviction under the Espionage Act has advanced to the Supreme Court. Under the present legal framework, the publication of national security information by non-government personnel may be prosecuted under various provisions, but only if the information meets the definition set forth by statute and the disclosure is made with the requisite knowledge or intent with regard to the nature of the damage it could cause. The First Amendment limits Congress's ability to prohibit the publication of information of value to the public, especially with regard to pre-publication injunctions against non-government employees. That the publication of some information has the potential to damage U.S. national security interests is rarely denied, but an agreement on how to protect such information without harming the public's right to know what its government is doing may remain elusive.

Recent cases involving alleged disclosures of classified information to the news media or others who are not entitled to receive it have renewed Congress's interest with regard to the possible need for legislation to provide for criminal punishment for the "leaks" of classified information. The Espionage Act of 1917 and other statutes and regulations provide a web of authorities for the protection of various types of sensitive information, but some have expressed concern that gaps in these laws may make prosecution of some disclosures impossible. The 106th Congress passed a measure to criminalize leaks, but President Clinton vetoed it. The 108th Congress reconsidered the same provision, but instead passed a requirement for the relevant agencies to review the need for such a proscription. The Department of Justice in turn reported that existing statutes and regulations are sufficient to prosecute disclosures of information that might harm the national security. This report provides background with respect to previous legislative efforts to criminalize the unauthorized disclosure of classified information; describes the current state of the laws that potentially apply, including criminal and civil penalties that can be imposed on violators; and some of the disciplinary actions and administrative procedures available to the agencies of federal government that have been addressed by federal courts. Finally, the report considers the possible First Amendment implications of applying the Espionage Act to prosecute newspapers for publishing classified national defense information.

Committee sizes and ratios are determined before Senators are assigned to committees. Although the size of each committee is set in Senate rules, changes to these rules often result from interparty negotiations before each Congress. Senate party leaders also negotiate the party ratio of each committee during the discussions of committee size. Senate rules call for the election of Senators to standing committees by the entire membership of the chamber. Senate Rule XXIV, paragraph 1 states: "In the appointment of the standing committees, or to fill vacancies thereon, the Senate, unless otherwise ordered, shall by resolution appoint the chairman of each such committee and the other members thereof." These elections are based on nominations made by the parties, but Senators do not officially take seats on committees until they are elected by the entire Senate. While Senate rules are fairly clear regarding how nominations are to be approved , they do not address how the nominations of Senators to committees are to be made . In practice, each party vests its conference with the authority to make nominations to standing committees. Senate Republicans primarily use a Committee on Committees for this purpose, although the Republican leader nominates Senators for assignment to some standing committees. Senate Democrats use a Steering and Outreach Committee to nominate Democrats for assignment to all standing committees. The processes these two panels use are distinct, but the nominations of each panel require the approval of the full party conference and, ultimately, the Senate. Senate approval of the committee nominations of its parties usually is pro forma because the Senate respects the work of each party. It has been customary for third-party and independent Senators to caucus with one of the major parties. At least for committee assignment purposes, such a Senator is considered a member of that conference and receives his or her committee assignments from that conference through its regular processes. As used in this report, the term "standing committees" refers to the permanent panels identified in Senate rules. The rules also list the jurisdiction of each committee. Within their jurisdictions, the standing committees consider bills and issues, recommend measures for consideration by the Senate, and conduct oversight of agencies, programs, and activities. Most standing committees recommend authorized levels of funds for government operations and for new and existing programs within their jurisdiction. The term "non-standing committee" is used here to describe joint committees, and select, special, and other Senate committees. Congress currently has four joint committees that are permanent and that conduct studies or perform housekeeping tasks rather than consider legislation. Members of both chambers serve on them. The assignment of Senators to conference committees (temporary joint committees formed to resolve differences in House- and Senate-passed versions of a measure) is not addressed by this report. On occasion, the Senate has created select, special, and other committees. Sometimes such panels are created for a short time to complete a specific task, as in the case of the Special Committee to Investigate Whitewater Development Corporation and Related Matters. The committee was created on May 17, 1995, and expired on June 17, 1996. Select, special, and other committees have sometimes existed for many years. Some, like the Special Committee on Aging, conduct studies and investigations. Others, such as the Select Committee on Intelligence, have legislative jurisdiction, meaning they consider measures and recommend them for action by the Senate. This report focuses primarily on how Senators are elected to standing committees. It first relates how standing committee sizes and ratios are set. It then identifies the classification of committees the Senate uses for assignment purposes, and the chamber limitations on committee service. It next describes the procedures that each party uses to recommend Senators for assignment to standing committees, and how the full chamber approves these recommendations. Finally, it summarizes the processes used to appoint Senators to non-standing committees. The report does not address how committee chairs and ranking minority members are selected, or how subcommittee members and leaders are chosen. Following general elections, one of the first orders of business for leaders of both parties in the Senate is the setting of standing committee ratios and sizes. Committee ratios and sizes usually are set simultaneously because of their interrelationship. These determinations usually are made before assigning Senators to standing committees because the party organizations that make committee assignments need to know the numbers of seats available to each party on each committee. The determination of ratios and sizes sometimes is made with an awareness of Senators' specific desires for seats on particular panels. The ratio of Republicans to Democrats on each standing committee usually is determined at early organization meetings held in the interval between the general election and the beginning of a Congress. Since the rules of the chamber do not contain provisions regarding committee ratios generally, the majority party possesses the potential to set them unilaterally. In practice, however, ratios generally are set after negotiation between leaders of the two parties. Committee ratios usually parallel the overall party ratio in the Senate, with each party occupying a percentage of seats on all committees consistent with the percentage of seats it has in the Senate. Senate Rule XXV sets out the number of Senators allowed on each committee. However, these committee sizes typically are amended at the beginning of a Congress through Senate approval of one or more resolutions. Under Senate rules, the majority and minority leaders may agree to adjust temporarily the size of one or more standing committees, by up to two members, to accord the majority party a majority of the membership of every standing committee (a "working majority"). In many cases, however, amendments to committee sizes are made to accommodate the interests and needs of Senators in serving on committees. These amendments, and therefore committee sizes, are usually the product of consultation between the party leaders. The sizes of standing committees normally differ. In the 109 th Congress, the Senate standing committees ranged from 13 to 28 members. Committees with broader jurisdictions generally are larger than those whose jurisdiction is more narrowly defined. Committees considered more prestigious or otherwise sought-after also tend to be larger. The Senate Select Committee on Ethics has an equal party ratio pursuant to the resolution which created the panel. The rules of the Senate divide its standing and other committees into categories for purposes of assigning all Senators to committees. In particular, Rule XXV, paragraphs 2 and 3 establish the categories of committees, popularly called the "A," "B," and "C" committees. The "A" and "B" categories, are as follows: " A " COMMITTEES Agriculture, Nutrition, and Forestry Appropriations Armed Services Banking, Housing, and Urban Affairs Commerce, Science, and Transportation Energy and Natural Resources Environment and Public Works Finance Foreign Relations Health, Education, Labor, and Pensions Homeland Security and Governmental Affairs Judiciary Select Committee on Intelligence " B " COMMITTEES Budget Rules and Administration Small Business and Entrepreneurship Veterans' Affairs Special Committee on Aging Joint Economic Committee The "C" category comprises three non-standing committees: the Select Committee on Ethics, the Committee on Indian Affairs, and the Joint Committee on Taxation. The Joint Committee on the Library and the Joint Committee on Printing are not listed in any category, but are treated as "C" committees for assignment purposes. Rule XXV, paragraph 4 places restrictions on Senators' committee membership based on these categories. The restrictions are intended to treat Senators equitably in the assignment process. Essentially, each Senator is limited to service on two of the "A" committees, and one of the "B" committees. Service on "C" committees is unrestricted. Exceptions to the restrictions are recommended by the pertinent party conference and then officially authorized through Senate approval of a resolution affecting one or more Senators. Sometimes these exceptions are authorized to accord the majority party a working majority on a committee, whereas at other times exceptions are made to accommodate the preferences and needs of individual Senators. The committee assignment process used by Senate Republicans involves three steps. First, the Committee on Committees and the Republican leader nominate Republican Senators for committee assignments. Second, these recommendations are submitted for approval to the Republican Conference, the organization of all Republican Senators. Third, the recommendations are incorporated into one or more Senate resolutions and approved by the full Senate. The chair and other members of the Committee on Committees are appointed by the chair of the Republican Conference, subject to confirmation by the Republican Conference. The size of the Committee on Committees fluctuates from Congress to Congress. In recent Congresses, it consisted of nine members, including the majority leader, who served on the committee ex-officio and did not chair the panel. The Committee on Committees is relatively small, in part because it relies on a seniority formula in assigning both returning and newly elected Republican Senators. The formula makes the assignment process somewhat automatic; the absence of significant debate and voting thus requires comparatively few members. Under Republican Conference rules, the Committee on Committees nominates Republicans for assignment to all category "A" committees, as well as to the Committee on Rules and Administration. According to Conference Rule V, nominations for assignment to other committees are made by the Republican leader (unless otherwise specified by law). In practice, the Republican leader also has nominated members to serve on the Committee on Rules and Administration. Following a general election, all Republican Senators are asked to submit their committee assignment preferences to the Committee on Committees. The committee prefers that these requests be listed in order of priority. It is considered useful for new Republican Senators to consult with party leaders and the chairs (or ranking members) of desired committees to assess the likelihood of receiving a desired assignment. Under the seniority system used by Senate Republicans, for example, a freshman is likely to have more success if his or her first choice is not a committee seat desired by an incumbent or a "more senior" freshman. Informing party and committee leaders of one's committee preferences also acts to alert them to one's substantive policy interests. In December or January following the general election, the Committee on Committees first meets to nominate Senators to committees. Senate Rule XXV, as described above, sets out the rules and restrictions that guide the committee in distributing standing committee seats. The Republican Conference has established additional rules and guidelines that govern the procedures of the Committee on Committees. One such rule generally prohibits any Republican from serving on more than one of the "Super A," or "big four" category "A," committees: Appropriations, Armed Services, Finance, and Foreign Relations. Conference rules also generally prohibit two Republican Senators from the same state from serving on the same panel. Republicans usually nominate Senators to "A" committees before filling vacancies on other committees. The seniority formula used by the Committee on Committees in making assignment nominations is as follows. First, in order of seniority in the chamber, each incumbent chooses two committee assignments; incumbents may decide to retain current committee seats or choose among existing vacancies. However, a Senator who has served on a committee and lost a seat due to a change in the party ratio has priority over any and all Senators to claim the first vacancy on the committee. While such instances have been rare, they have occurred when party control of the Senate has changed. Second, each newly elected Senator chooses seats in order of seniority, based on previous service in the Senate; previous service in the U.S. House of Representatives and length of service in the House; and previous service as a state governor. Ties in seniority of freshmen are broken by draw. In addition, every newly elected Senator receives one assignment before any newly elected Senator receives a second assignment. The Republican Leader has the authority to appoint half of all vacancies on each "A" committee. If there is an odd number of vacancies, the Leader can appoint half plus one of all vacancies. Effective in the 108 th Congress, all Republican Members are offered two "A" committee slots in order of seniority. Each Member can retain only one "B" committee assignment from the previous Congress. Following this process, the Republican Leader makes any remaining "A" committee assignments. Conference rules provide a guideline governing the time frame for Senators to choose among assignment options presented by the Committee on Committees. If a Senator is presented with selection options before noon on a given day, the Senator should notify the Committee on Committees of his or her decision by the close of business on that day. If a Senator is presented with selection options after noon on a particular day, then a decision should be made by noon on the next business day. This provision is designed to expedite the assignment process by preventing Senators from engaging in lengthy deliberation that could delay the assignment of Senators with less seniority. Rank on each committee generally is determined by length of continuous service on the committee. If a Senator leaves a committee and returns in a subsequent Congress, the Senator likely would lose his or her previous seniority. However, the chair (or ranking member) of a committee need not be the Member with the longest committee service. While nominations for assignment to "non-A" committees (except, officially, Rules and Administration) are at the discretion of the Republican leader, the leader generally follows the seniority formula used by the Committee on Committees. Moreover, the leader usually works in close cooperation with the chair and other members of the Committee on Committees. Through this system, the assignment process is relatively consensus-oriented and automatic, and formal votes on nominees usually are not necessary. In assigning freshmen, the Committee on Committees does not consider the multiple factors relied upon by the Senate Democrats' party organization (discussed below); instead, the most important factor appears to be Senators' requests. Personal efforts to compete for committee seats appear to be minimal (though not unknown) as compared with Senate Democrats. When the Committee on Committees and the Republican leader have finished their work, they submit their recommendations for assignment to the Republican Conference. For each committee, a slate of committee members in order of proposed seniority is presented for consideration. Voting by recorded written ballot, as specified by conference rules, ordinarily is not necessary. The conference usually adopts the recommendations by unanimous consent, presumably because they are based largely on seniority. Once accepted by the Republican Conference, the assignment recommendations are packaged into one or more Senate resolutions that are submitted to the full Senate for approval, usually by the Republican leader. Because the resolutions are privileged, they can be brought up at any time. These resolutions are amendable and any Senator may demand a separate vote on the appointment of the chair or on the other members of a standing committee. However, the resolutions usually are adopted without incident. Nominations rarely are challenged on the floor because it is in the parties where decisions are made; by custom, neither party has challenged the nominations of the other party. Indeed, the routine character of the Senate's approval of nominations highlights the importance of the nomination process. In filling vacancies that occur on standing committees after their initial organization, Senate Republicans follow the same procedure used for each new Congress. Committee vacancies may occur during the course of a Congress because party leaders decide to change a committee's size or party ratio, or because Members die, change parties, or resign from the Senate. A new Senator replacing a late or former Senator may be chosen to fill the vacated committee seats. However, if the new Senator is of the opposite party from the departed Senator, adjustments in sizes and ratios often are needed to make slots for the new Senator. Moreover, incumbents also might seek to compete for the newly open committee seats, especially if they occur on one of the more prestigious panels, such as the Appropriations Committee or the Finance Committee. When an incumbent is chosen to fill a committee vacancy, that Senator often gives up an existing assignment to comply with party or chamber assignment limitations (although a waiver might be granted). This may cause a chain reaction involving a series of shifts of committee assignments. There are three steps in the nomination and assignment process for Senate Democrats. The first is for the Democratic Steering and Outreach Committee to make nominations for committee assignments. The second consists of approval of the nominations by the Democratic Conference, which comprises all Democrats in the Senate. The final step is for the assignment rosters to be incorporated into one or more Senate resolutions and considered and approved by the full Senate. Senate Democrats do not have written rules governing this assignment process, as do Senate Republicans. The size of the Steering and Outreach Committee is set by the Democratic Conference. The Democratic leader serves on the committee and appoints its members, subject to ratification by the conference. Steering and Outreach Committee members (except party leaders) may not serve simultaneously on the Democratic Policy Committee. Instead of chairing the panel, in the past few Congresses the Democratic leader has named another Senator as chair. In appointing Senators to vacancies, the Democratic leader attempts to achieve regional balance on the committee under a system that divides the country into four regions. The Steering and Outreach Committee continues from Congress to Congress, appointing Democratic Senators to vacancies as they arise. In the 109 th Congress, the Steering and Outreach Committee had 18 members, including the Democratic leader, the Democratic whip, the chief deputy Democratic whip, and a deputy Democratic whip. While it is not composed exclusively of the most senior Democrats, the Steering and Outreach Committee includes many committee ranking members. Once elected to the Senate, it is customary for new Democratic Senators to communicate committee preferences to the Steering and Outreach Committee. While the Democratic leader and the Steering and Outreach Committee chair generally solicit committee preferences from new Senators, incumbents desiring to switch committees usually initiate contact. Democrats are encouraged to submit their requests for assignment as early as possible. A Senator who delays risks the potential of not securing primary or even secondary requests. While the Steering and Outreach Committee does not require Senators to rank order their assignment preferences, many have done so in the past to give the committee alternatives if it is unable to grant initial requests. It appears to be important for Senators-elect, in formulating their preferences, to consult with party leaders, Steering and Outreach Committee members, and the chairs (or ranking members) of preferred committees. This consultation acts both to notify senior Senators of a freshman's substantive interests and to inform the freshman Senator of the likelihood that he or she will be assigned to preferred committees. The Steering and Outreach Committee organizes, and begins the process of making committee assignments, in November or December following the general election. Unlike its Senate Republican counterpart, the committee nominates Senators for assignment to every standing committee. Given that most returning Senators choose to retain their assignments from the previous Congress, most of the committee's work involves matching freshman Democrats with vacancies created by retirement or electoral defeat, as well as by adjustments in committee sizes and ratios. In making nominations for committee assignments, the Steering and Outreach Committee is bound by the categories of committees and the limitations on committee assignments contained in Senate Rule XXV, discussed earlier. Within the confines of these restrictions, the Democratic Conference has formulated additional restrictions for its own members. One such restriction generally limits each Senator to service on no more than one of the "Super A," or "big four" "A," committees: Appropriations, Armed Services, Finance, and Foreign Relations. Senate Democrats also have an informal practice of prohibiting two Democratic Senators from the same state from serving on the same committee. In addition to these chamber and party restrictions, the Steering and Outreach Committee considers many factors. These include Senators' preferences, state demographics, length of time since the state was last represented on the committee, perceived willingness to support the party, policy views, and personal and occupational backgrounds. Personal intervention, by the requesting Senator or another Senator, is sometimes helpful. The Steering and Outreach Committee usually fills vacancies on "A" committees before slots on other panels. Because the Steering and Outreach Committee does not rely on a seniority formula in assigning Senators, its process is relatively less automatic than that of Senate Republicans. For Democrats, there are no rules guaranteeing priority in assignment to incumbents switching committees, or governing the seniority of freshmen in choosing assignments. However, a Senator who served on a committee but lost the seat due to a change in the party ratio generally receives priority in assignment to a vacancy on that committee. Nominations for assignment are made on a seat-by-seat basis, and Steering and Outreach members usually make nominations by consensus. However, if significant competition exists for a particular seat, then secret balloting usually is conducted and the majority-vote winner is granted the nomination. Senators who do not win election to their most preferred committee seat are protected by the "Johnson Rule," providing that all Democrats are appointed to one "A" committee before any Senator receives a second assignment. Rank on each committee generally is determined by length of continuous service on the committee. If a Senator leaves a committee and returns to it in a subsequent Congress, the Senator likely would lose his or her previous seniority. However, the ranking member (or chair) need not be the Member with the longest committee service. The committee rankings of Senators assigned to a committee at the same time generally are determined by their seniority in their party in the Senate. When an incumbent and a freshman are assigned to a committee at the same time, the incumbent ordinarily ranks higher than the freshman. Similarly, when elected, each freshman is given a seniority ranking among Senate Democrats, and his or her rank on committees is based on this overall chamber ranking. Once all veteran and freshman Democratic Senators have been recommended for assignment, the roster is forwarded to the Senate Democratic Conference. While separate votes are possible, the conference usually ratifies the entire slate of assignments by unanimous consent. After ratification, the assignment recommendations are packaged into one or more Senate resolutions and submitted on the Senate floor for adoption. The resolutions usually are submitted by the Democratic leader, and they can be brought up at any time because they are privileged. The resolutions also are amendable, and any Senator may demand a separate vote on the appointment of any member. However, the resolutions containing the committee rosters usually pass without debate, by voice vote. It is in the party where significant debate and decision-making already has occurred regarding committee assignments. In filling vacancies that occur on standing committees after their initial organization, Senate Democrats follow the same procedure used for each new Congress. Committee vacancies may occur during the course of a Congress because party leaders decide to change a committee's size or party ratio, or because Members die, change parties, or resign from the Senate. A new Senator replacing a late or former Senator may be chosen to fill the vacated committee seats. However, if the new Senator is of the opposite party from the departed Senator, adjustments in sizes and ratios often are needed to make slots for the new Senator. Moreover, incumbents also might seek to compete for the newly open committee seats, especially if they occur on one of the more prestigious panels, such as the Appropriations Committee or the Finance Committee. When an incumbent is chosen to fill a committee vacancy, that Senator often gives up an existing assignment to comply with party or chamber assignment limitations (although a waiver might be granted.) This may cause a chain reaction involving a series of shifts of committee assignments. Non-standing committees are divided between the so-called category "B" committees and category "C" committees. The Special Committee on Aging and the Joint Economic Committee, along with four standing committees, are included in the "B" category of committees. Under Senate rules, no Senator may serve on more than one "B" committee, whether standing or non-standing. The Select Committee on Ethics, the Committee on Indian Affairs, and the Joint Committees on Taxation, the Library, and Printing essentially are treated as "C" committees, although Joint Library and Joint Printing are not explicitly listed as such in Senate rules. The "C" committees are exempt from the assignment limitations in Senate rules, so a Senator may serve on any number of them without regard to his or her other assignments. Specific rules regarding Senate membership on and appointments to non-standing committees often are contained in the legislation creating these panels. Thus, the procedures vary from committee to committee. A review of the legislation establishing the non-standing committees, and the appointment practices that have evolved, reveal that party leaders are usually included in the process. The members of the Select Committee on Ethics and the Special Committee on Aging are elected by the Senate by resolution, essentially in the same manner as the standing committees. The Ethics Committee is the only Senate committee with an equal party ratio, consisting of three Senators from each party. Republican members of both committees are chosen by the Republican leader and confirmed by the Republican Conference before election by the full Senate. Democratic members of the Ethics Committee are selected initially by the Democratic leader. In contrast, Democrats on the Aging Committee are nominated by the Steering and Outreach Committee and confirmed by the Democratic Conference before election by the full Senate. Majority-party Senators are appointed to the Select Committee on Intelligence on the recommendation of the majority leader, and minority-party Senators on the recommendation of the minority leader. Senators are appointed to this committee from the Appropriations, Armed Services, Foreign Relations, and Judiciary Committees, as well as from the Senate "at large." The majority and minority leaders, as well as the chair and ranking member of the Armed Services Committee serve on the committee as ex-officio , non-voting members. The resolution creating the Intelligence Committee provided for a rotation of membership; no Senator could serve on the committee for more than eight years of continuous service. To the extent practicable, one-third of the Senators appointed to the committee at the outset of each Congress should be Senators who did not serve on it in the preceding Congress. S.Res. 445 , adopted October 9, 2004, ended the eight-year limitation on the Intelligence Committee. The majority and minority leaders recommend Senators for appointment to the Committee on Indian Affairs, but the members are officially appointed by the President of the Senate (the Vice President of the United States). Appointments to the Committee on Indian Affairs are announced to the Senate from the chair. Ten Senators, six from the majority party and four from the minority party, are appointed to the Joint Economic Committee by the President of the Senate. The Senate membership of the Joint Committee on Taxation consists of five Senators from the Committee on Finance, three from the majority and two from the minority, chosen by the Finance Committee. Appointments to both joint committees are announced to the Senate from the chair. The Senate participants on the Joint Committee on the Library and the Joint Committee on Printing are selected by the Committee on Rules and Administration from among the committee's members. The chair and four other members of the Rules Committee are to serve on each joint committee. However, in some Congresses, the House and Senate have agreed to a concurrent resolution allowing another member of the Senate Rules Committee to serve on the Joint Committee on the Library in place of the Rules Committee's chair. The membership of the Joint Committee on Printing typically includes not only the chair but also the ranking minority member of the Senate Rules Committee. Members of both joint committees are elected by the Senate by resolution.

Because of the importance of committee work, Senators consider desirable committee assignments a priority. The key to securing favorable committee slots is often said to be targeting committee seats that match the legislator's skills, expertise, and policy concerns. After general elections are over, one of the first orders of business for Senate leaders is setting the sizes and ratios of committees. Although the size of each standing committee is set in Senate rules, changes in these sizes often result from inter-party negotiations before each new Congress. Senate party leaders also negotiate the party ratios on standing committees. Determinations of sizes and ratios usually are made before the process of assigning Senators to committees. Once sizes and ratios of standing committees are determined, a panel for each party nominates colleagues for committee assignments. Senate Republicans primarily use a Committee on Committees for this purpose, although the Republican leader nominates Senators for assignment to some standing committees. Senate Democrats use a Steering and Outreach Committee to nominate Democrats for assignment to all standing committees. The processes these panels use are distinct. Republicans rely on a seniority formula to make nominations, while Democrats make nominations on a seat-by-seat basis, considering a variety of factors. The processes also have many common features. After the general election, each panel solicits preferences for committee assignment from party colleagues, then matches these preferences with vacancies on standing committees. Senate rules, along with party rules and practices, guide the work of the Committee on Committees and the Steering and Outreach Committee. Senate rules, for instance, divide the standing and other Senate committees into three groups, the so-called "A" "B" and "C" categories. Senators must serve on two "A" committees and may serve on one "B" committee, and any number of "C" committees. Exceptions to these restrictions are sometimes approved by the Senate. Both parties place further limitations, for example, by generally prohibiting two Senators from the same party and state from serving on the same committee. The nominations of each of these panels require the approval of the pertinent full party conference and ultimately the Senate. Approval at both stages usually is granted easily, because of the debate and decision-making earlier in the process. Specific rules regarding Senate membership on and appointments to non-standing committees vary from committee to committee, but party leaders usually are included in the process. For more information on Senate and party rules governing assignment limitations, see CRS Report 98-183, Senate Committees: Categories and Rules for Committee Assignments.

As a result of the implementation of the Making Work Pay (MWP) tax credit in the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ), some taxpayers may have unexpectedly found that their 2009 or 2010 income tax refunds were lower than anticipated or that they owed income tax instead of receiving a refund. Some taxpayers ineligible for the MWP credit had been receiving the credit but were not able to claim it when filing their 2009 and 2010 income tax returns. The IRS published an optional procedure for adjusting withholding for those making pension payments in 2009 and 2010. In addition, some pensioners may also have found that their 2011 take-home pay was different compared with the 2009 and 2010 amounts. The MWP tax credit expired on December 31, 2010. Under the MWP credit, eligible taxpayers could receive up to $400 for individuals or $800 for joint returns per year in 2009 and 2010. To qualify for the MWP credit, individuals must have had earned income and had a valid Social Security number. The MWP credit was phased out for individuals making more than $75,000 of modified adjusted gross income ($150,000 for a joint return). For the purposes of the MWP credit, ARRA used the definition of earned income in 26 U.S.C. 32(c)(2), which include wages, salaries, tips, and other compensation from work, but does not include pension income. Individuals who received income only from pensions were not be eligible for the MWP credit. In addition, noncitizens who did not have valid Social Security numbers were ineligible for the tax credit. (Noncitizens might have Individual Taxpayer Identification Numbers to comply with U.S. tax laws.) The MWP credit reduced the amount of income tax withheld from individuals' checks, resulting in higher take-home pay. On February 21, 2009, the IRS issued revised income tax withholding tables. All individuals subject to income tax withholding, including those individuals who were not eligible for the tax credit, were subject to the revised withholding tables. Taxpayers not eligible for the credit were not able to claim the credit on their 2009 tax return. If these taxpayers were advanced the credit, then they may have found that their taxes were underwithheld at the end of the tax year. In calculating their 2009 or 2010 income taxes, these taxpayers may have found their refunds to be lower than they expected or that they may have owed taxes. For example, an individual who received income entirely from a pension, normally received a $200 refund, and who received the entire $400 MWP credit could have found a tax liability of $200 for the 2009 tax year. However, because more than three-quarters of households receive income tax refunds, most affected households would likely have seen a reduction in their refunds rather than owing taxes. On May 14, 2009, the IRS issued Notice 1036-P, Additional Withholding for Pensions for 2009, which is an optional withholding schedule for those making pension plan payments. This optional withholding schedule was designed to offset the underwithholding that might have occurred. However, there may have been pension plans that did not adopt this withholding table. Pension plans were not required to use the revised withholding tables. Some continued to use the withholding table issued on February 21, 2009. For 2010, IRS Publication 15, (Circular E) Employer's Tax Guide, contained a method for calculating additional withholding amounts for pension payments. Some individuals who received pensions may have seen their withholding amounts (and hence their take-home pay) increase or decrease in 2010 compared with their amounts in 2009. The Treasury Inspector General for Tax Administration issued a report on November 4, 2009, determining that millions of taxpayers might have been negatively affected by the new withholding tables. The report estimated that 15.4 million taxpayers could be affected and identified the groups most likely to be: Dependents who receive wages --Dependents were ineligible for the MWP credit. Single taxpayers with more than one job and joint filers where one or both spouses have more than one job or both spouses work --Individuals who work multiple jobs in 2009 might have had the $400 MWP advanced to them at each job. Individuals who file a tax return with an Individual Taxpayer Identification Number --Individuals must have had valid Social Security Numbers to claim the MWP credit. Taxpayers who receive pension payments --Only taxpayers who had earned income were eligible for the MWP credit. Pension income is not classified as earned income. Social Security recipients who also receive wages --Section 2201 of the ARRA provided for Social Security recipients to receive a one-time payment of $250. The MWP credit was reduced by the amount of any payments under Sections 2201 or 2202 of the ARRA. Individuals who were advanced the $400 MWP credit and also received the Social Security economic recovery payment had to repay the excess received. The IRS's response included in the Inspector General's report indicated that the IRS had been engaging in outreach efforts to increase awareness of the MWP credit. The IRS has also indicated that it would alert taxpayers that they may request a waiver from the penalty for estimated taxes. The estimated tax penalty applies to individuals who fail to have a sufficient amount of income tax withheld throughout the year. Individuals who received income from pensions may have seen an increase in the amount of their federal income tax withholding and therefore lower after-tax income ("take home") in 2011. This was not the result of any tax increase enacted by Congress. This was a result of the expiration of the MWP tax credit on December 31, 2010. The MWP tax credit provided individuals a federal income tax credit of 6.2% of wages up to a maximum credit of $400 ($800 for married couples filing jointly) in tax years 2009 and 2010. The MWP tax credit was phased out for individuals with incomes more than $75,000 ($150,000 for married couples filing jointly). The MWP tax credit was implemented during the tax year (rather than at the end of the year only) by lowering federal income tax withholding on individuals' checks. Individuals who received income from pensions and who did not have wages were not eligible for the MWP tax credit. However, they may have seen their withholding taxes lowered in tax year 2009 or 2010 because the entity making their pension payments used the general federal withholding tables that reflected the MWP tax credit. When these individuals filed their tax returns for tax year 2009 or 2010, the additional amount they had received from the lower withholding during the tax year would have been offset by a lower income tax refund, or a larger federal income tax amount due with their tax return. With the expiration of the MWP tax credit, the federal income tax withholding had returned to the pre-MWP tax credit amounts. Assuming that their incomes remained the same in 2011 (as in 2010), these taxpayers saw higher federal withholding taxes from their pension payments. Although the MWP tax credit expired on December 31, 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ), signed by President Barack Obama on December 17, 2010, contained several tax provisions, including an extension of some tax provisions that were scheduled to expire on December 31, 2010. Among the provisions in P.L. 111-312 were (1) an extension through December 31, 2012, of certain tax provisions first enacted under the Economic Growth and Tax Relief Reconciliation Act of 2001 ( P.L. 107-16 ), the Jobs and Growth Tax Relief Reconciliation Act of 2003 ( P.L. 108-27 ), and the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ); (2) a one-year "payroll tax holiday" which for 2011 reduced the employee portion of the Social Security payroll tax from 6.2% to 4.2% of covered wages up to $106,800 in 2011; and (3) an extension of unemployment provisions. Among ARRA provisions extended include (1) the Earned Income Tax Credit for those with a third child; (2) the American Opportunity Tax Credit to support access to college education; and (3) the child tax credit for all families with incomes above even $3,000. P.L. 112-78 , signed by President Barack Obama on December 23, 2011, extended the 2% reduction in Social Security payroll taxes through February 29, 2012. The Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ) extended the 2% reduction through the end of 2012. The MWP tax credit was equal to 6.2% of wages, up to a maximum credit of $400 for single filers and $800 for married filers. The credit was not available to single filers with modified adjusted gross income of $95,000 or more or to married filers with modified adjusted gross income of $190,000 or more. Adjusted gross income (AGI) includes income that would not be eligible for the MWP tax credit. Examples include rental income, interest income, and rent and royalty income. Salaries and wages composed 72.0% of AGI for 2008 tax returns and was likely a larger percentage of income for single filers with AGI of less than $20,000 and married filers with AGI less than $40,000. Figure 1 and Figure 2 show the dollar amounts available for single filers and married filers under the MWP tax credit and the Social Security payroll tax holiday. Figure 1 shows that for individuals who made less than $20,000, the dollar amount received under the MWP tax credit in 2010 was more than the dollar amount of the reduction in payroll taxes in 2011. For an individual who had wages of $20,000, the dollar amount of the MWP tax credit exactly equaled the dollar amount of the reduction in Social Security payroll taxes. The reduction in Social Security payroll taxes plateaus at $2,136 because $106,800 was the maximum amount of wages subject to the Social Security payroll tax in 2011. Figure 2 shows that for married filers who make less than $40,000, the dollar amount received under the MWP tax credit was more than the dollar amount of the reduction in payroll taxes in 2011. For a married couple with wages of $40,000, the dollar amount of the MWP tax credit exactly equaled the dollar amount of the reduction in Social Security payroll taxes. The Social Security payroll tax holiday provided a benefit to workers with modified adjusted gross income larger than $95,000 ($190,000 for married filers) who were not eligible for the MWP tax credit. The Congressional Research Services's (CRS's) analysis of the Current Population Survey (CPS) indicated that of the 56.7 million single filers in 2009, 2.4 million (4.2%) had wage income of $95,000 or more and some would not have received the MWP tax credit, but are likely to receive the 2% reduction in Social Security payroll taxes. Of the 49.9 million married couples in 2009, 3.4 million (6.7%) had wages of $190,000 or more and some would not have received the MWP tax credit, but are likely to receive the 2% reduction in Social Security payroll taxes. Workers who made less than $20,000 in wages may find that the reduction in Social Security payroll taxes in 2011 was less than the amount they received under the MWP tax credit in 2010. For example, an individual with annual wages of $14,500 (which would be equal to a full-time job of 40 hours per week for 50 weeks at the federally mandated minimum wage) would have received a MWP tax credit of $400 in 2010, whereas their reduction in Social Security payroll taxes would have been $290 in 2011. CRS's analysis of the CPS indicates that of the 56.7 million single households in 2009, 23.5 million (41.5%) had wages of less than $20,000. Of the 49.9 million married households in 2009, 12.1 million (24.2%) had wages less than $40,000. Workers in employment that was not covered by Social Security, and therefore did not pay Social Security payroll taxes, would not have received the Social Security payroll tax reduction. In 2009 (the year of most recent data), approximately 27.4% (6.4 million) of state and local government workers worked in employment that was not covered by Social Security. The percentage varied widely by state. For example, in 2009 the percentage of state and local government workers not covered by Social Security ranged from 3.1% (54,100 workers) in New York to 97.4% (810,300 workers) in Ohio. Appendix Table A-1 contains the number and percentage of state and local government employees not covered by Social Security in each state. H.R. 772 , the Extended Tax Relief for All Act of 2011, introduced by Representative Rosa DeLauro on February 17, 2011, would have extended the MWP tax credit through December 31, 2011, and would have reduced the amount of the credit by the amount of the Social Security Payroll Tax reduction. Thus, taxpayers would have received the larger of the MWP tax credit or the Payroll Tax reduction. In a press conference on December 8, 2010, Larry Summers, then-director of the National Economic Council, indicated that while some workers might have received a greater dollar amount under the MWP tax credit than from the payroll tax holiday, P.L. 111-312 contained a number of tax credits that would have expired. Three of the expiring credits mentioned at the press conference were (1) the Earned Income Tax Credit for those with a third child; (2) the American Opportunity Tax Credit to support access to college education; and (3) the child tax credit for all families with incomes above $3,000. Larry Summers responded to a question regarding a New York Times report that indicated that "those at the lower end of the economic spectrum will actually be the only ones with less money in their pocket as a result of the deal because of the Making Work Pay elimination" as follows: It's a very good question. You have to figure out what comparison you're going to do. It is true that for a $16,000 a year--so that's an all-year, minimum-wage worker--it is true that the Making Work Pay would have given that worker $400. And this proposal, the payroll tax holiday, will give $320, and there is that $80 difference. On the other hand, the proposal such as the House bill that contained the Making Work Pay would not have included any of the three refundable tax credits that I mentioned, which cumulatively, for that family, are on average worth several hundred dollars. Obviously it depends on how many kids the family has and what the situation is--but on average would work out to about $300 for such a family, one; two, would not have included the continuation of unemployment insurance benefits, which provide $300 a week in benefits; and three, takes no account of the extra growth increment that will come from this program. If you raised GDP by 1 percent, that's $2,000 for the average family. So as I've emphasized, this was a compromise. But if you look cumulatively at the elements that were in this compromise relative to no deal, or even relative to the bill that passed through the House, that $16,000-a-year family gets much more support from this bill than it would have in its absence. And we believe you have to look at the totality of the program, not just take one provision from it and compare it with one provision in some other bill.

The Making Work Pay (MWP) tax credit provided a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns in 2009 and 2010. The MWP tax credit expired on December 31, 2010. As a result of the expiration of the MWP tax credit, some taxpayers are finding that the amount of their income tax withholding had increased in 2011. In 2009 and 2010, as a result of the implementation of the MWP tax credit, some taxpayers may have found that their 2009 and 2010 income tax refunds were lower than they anticipated or that they owed taxes when they were expecting a refund. This is because some individuals who were ineligible for the MWP tax credit nonetheless received it. The MWP credit was implemented as part of the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) and provided a temporary tax credit in 2009 and 2010. Individuals received the MWP credit through lower income tax withholding throughout the 2009 and 2010 tax years. Ineligible taxpayers were not able to claim the tax credit on their 2009 or 2010 income tax filings, resulting in higher tax liability. The change in withholding tables may affect some pensioners' take-home pay throughout the year, although their 2011 tax liability has not changed. Although the MWP tax credit was not extended, certain other ARRA tax provisions were extended and a 2% reduction in Social Security payroll taxes was implemented for 2011. H.R. 772 would have extended the MWP tax credit for 2011 and would have reduced the amount of the MWP by the amount of the reduction in payroll taxes. P.L. 112-78, signed by President Barack Obama on December 23, 2011, extended the 2% reduction in Social Security payroll taxes through February 29, 2012. The Middle Class Tax Relief and Job Creation Act of 2012 (P.L. 112-96) extended the 2% reduction through the end of 2012. This CRS report describes how some taxpayers might have been affected by the implementation and expiration of the MWP tax credit and which taxpayer groups might have had their income tax underwithheld. The report also describes the circumstances in which some workers may have received more under the Making Work Pay tax credit compared with the 2% reduction in Social Security payroll tax.

Senate and House rules place restrictions on the kinds of agreements conferees can propose to their two houses. Implicit in the rules of both chambers is the requirement that conferees resolve the differences committed to them by reaching agreements within what is known as "the scope of the differences" between the House and Senate versions of the bill. The conferees may accept the House position, the Senate position, or a position that is a compromise between them. Any position that is not within this range of options exceeds the scope of the differences between the two houses. It constitutes "matter not committed to them by either House" and makes their conference report subject to a point of order on both the House and Senate floor. In practice, these restrictions are not as stringent as they may seem on their face. The House often waives its rules that restrict the authority of conferees, and the Senate has developed precedents that grant its conferees considerable latitude in reaching agreements with the House, especially when they are in conference with a bill from one house and a single amendment from the other house that proposes to replace the entire text of the bill. Rulings and practices in the Senate have left the chamber with a body of precedents that allow the inclusion of new matter as long as it is reasonably related to the matter sent to conference. Senators can also choose not to raise a scope point of order against a conference report, allowing it to be considered regardless of its content. Paragraph 8 of Senate Rule XLIV places an additional restriction on the content of conference reports. Under the rule, a Senator can raise a point of order against provisions of a conference report if they constitute "new directed spending provisions," which are defined as any item that consists of a specific provision containing a specific level of funding for any specific account, specific program, specific project, or specific activity, when no specific funding was provided for such specific account, specific program, specific project, or specific activity in the measure originally committed to the conferees by either House. It is worth emphasizing that Paragraph 8 of Rule XLIV applies only to the conference report and not to the joint explanatory statement (also known as the statement of managers ) that accompanies it. Joint explanatory statements are signed by the conferees but, like reports of standing committees, are not voted on by the House or the Senate and cannot be changed through any formal amendment process. It is the conference report that contains the formal legislative language that will become law if both chambers agree to the report and the President then signs the measure. In contrast to Rule XXVIII, which applies to the full text of every conference report, Paragraph 8 of Senate Rule XLIV applies only to provisions of conference reports that would provide for actual spending. In other words, it applies only to discretionary and mandatory spending provisions and not to authorizations of appropriations. Discretionary spending is provided in appropriations acts, and generally funds routine operations of the federal government. Mandatory spending, also referred to as direct spending, is provided in substantive law and generally funds entitlement programs, such as Social Security and Medicare. A hypothetical example can illustrate the difference between the Rule XXVIII "scope" point of order and the Rule XLIV, Paragraph 8, "new directed spending" point of order. The House might pass an appropriations bill providing funding for several specific projects. The Senate might pass this bill with an amendment in the nature of a substitute, and the two houses then could agree to a conference. The conferees might agree to include in the conference report funding for several similar projects that were not listed in the House bill or in the Senate substitute. Under Rule XXVIII, the provision including funding for additional projects would likely be considered to be reasonably related to the matter sent to conference and therefore not subject to a point of order. Under Rule XLIV, Paragraph 8, however, provisions of this kind would likely be interpreted to be "new directed spending provisions" and therefore subject to a point of order. The procedure for disposing of a Rule XXVIII or a Rule XLIV point of order allows the Senate to strike "new matter" or "new directed spending provisions" from the conference report but agree to the rest of the terms of the compromise. Because it is not in order for either chamber to alter the text of a conference report, the rule creates a process that converts the text of the conference compromise minus the "new matter" or "new directed spending provisions" into an amendment between the houses. If the Senate agrees to this amendment, it is then sent to the House for consideration in that chamber. Under the process, a Senator can make a point of order against one or more provisions of a conference report. If the point of order is not waived (see below), the presiding officer rules on whether the provision is in violation of the rule. If a point of order is raised against more than one provision, the presiding officer can make separate decisions regarding each provision. If the presiding officer sustains a point of order against a conference report on the grounds that it violates either the prohibition of "new matter" or "new directed spending provisions," the matter is stricken from the conference recommendation. After all points of order raised under this procedure are disposed of, the Senate will proceed to consider a motion to send to the House, in place of the original conference agreement, a proposal consisting of the text of the conference agreement minus the "new matter" or "new directed spending provision" that was stricken. Amendments to this motion are not in order. The motion to agree to the bicameral compromise with the "new matter" or "new directed spending provision" stricken is debatable "under the same debate limitation as the conference report." Under the regular rules of the Senate, debate on conference reports is not limited. It is limited only if the Senate agrees to limit debate by unanimous consent, if cloture has been successfully invoked on the conference report, or if the Senate is considering the report under expedited procedures established by law (such as the procedures for considering budget resolutions and budget reconciliation measures under the Budget Act). In short, the terms for consideration of the motion to send to the House the proposal without the offending provisions are the same as those that would have applied to the conference report itself. If the Senate agrees to the motion, the conference recommendation as altered by the deletion of the "new matter" or "new directed spending provision" would be returned to the House in the form of an amendment between the houses. The House would then have an opportunity to act on the amendment. The prohibition against amendments to a conference report does not apply to amendments between the houses. Accordingly, the House could, under its procedures, agree to the modified compromise version as it was received from the Senate or offer further amendment(s) thereto. The House could also request a further conference with the Senate or choose to take no action at all on the new compromise language. The procedure for disposing of points of order under either Rule XXVIII or Paragraph 8, Rule XLIV, is similar to that currently followed for disposing of points of order against conference reports under the "Byrd rule" (Section 313(d) of the Congressional Budget Act). The Byrd rule applies only to reconciliation measures, however. Senate rules also create a mechanism for waiving the restrictions on the content of conference reports. The points of order under Rule XXVIII and Paragraph 8 of Rule XLIV can be waived with the support of three-fifths of all Senators duly chosen and sworn (60 Senators if there are no vacancies). Senators can move to waive points of order against one or several provisions, or they can make one motion to waive all possible points of order under either rule. Under these procedures, a motion to waive all points of order is not amendable, but a motion to waive points of order against specific provisions is. As a result, it is possible for a Senator to ensure a vote on waiving all points of order under each rule, and, if successful, no separate motions to waive points of order against individual provisions would be necessary. Time for debate on the motion to waive is limited to one hour and is divided equally between the majority leader and the minority leader or their designees. If the motion to waive garners the necessary support, the Senate is effectively agreeing to keep the matter that is potentially in violation of the rule in the conference report. Motions to waive "scope" (Rule XXVIII) points of order are made and considered separately from motions to waive "new directed spending" (Rule XLIV, Paragraph 8) points of order. The rules further require a three-fifths vote to sustain an appeal of the ruling of the chair and limit debate on an appeal to one hour, equally divided between the party leaders or their designees. The purpose of these requirements is to ensure that either method by which the Senate could choose to apply these rules--through a motion to waive or through an appeal of the ruling of the chair--requires a three-fifths vote of the Senate (usually 60 Senators). A simple majority (51 Senators if there are no vacancies and all Senators are voting) cannot achieve the same outcome. The effect of overturning a ruling of the chair on appeal is quite different from the effect of agreeing to a motion to waive a rule. The decision on an appeal stands as the judgment of the Senate and becomes a precedent for the Senate to follow in future proceedings. A decision to waive the rule, in contrast, does not change the interpretation of the rule in future practice.

Two Senate rules affect the authority of conferees to include in their report matter that was not passed by the House or Senate before the conference committee was appointed. Colloquially, such provisions are sometimes said to have been "airdropped" into the conference report. First, Rule XXVIII precludes conference agreements from including policy provisions that were not sufficiently related to either the House or the Senate version of the legislation sent to conference. Such provisions are considered to be "out of scope" under long-standing Senate rules and precedents. Second, Paragraph 8 of Rule XLIV establishes a point of order that can be raised against "new directed spending provisions," or provisions in a conference report that provide specific items of appropriations or direct spending that were not committed to the conference committee in either the House or Senate versions of the legislation. Both of these restrictions can be enforced on the Senate floor if any Senator chooses to raise a point of order against one or more provisions in a conference report. The process for disposing of either a Rule XXVIII or a Rule XLIV point of order allows the Senate to strike "out of scope matter" or "new directed spending provisions" from the conference report but agree to the rest of the terms of the compromise. It is not in order, however, for either chamber to alter the text of a conference report, and therefore the process converts the text of the conference compromise minus the "new matter" or "new directed spending provisions" into an amendment. If the Senate agrees to this amendment, it is then sent to the House for consideration in that chamber. The points of order under Rule XXVIII and Paragraph 8 of Rule XLIV can be waived with the support of three-fifths of all Senators duly chosen and sworn (60 Senators if there is no more than one vacancy). A figure at the end of the report outlines the procedural steps for disposing of these points of order when they are raised against conference reports.

Since the 9/11 terrorist attacks, Congress has not only focused considerable attention on how intelligence is collected, analyzed, and disseminated in order to protect the homeland against terrorism, but also what should such intelligence encompass. A discussion of what constitutes "homeland security intelligence" and how it nests within the broader intelligence discipline may be useful background as Congress continues to examine a broad range of homeland security issues. Prior to 9/11, it was possible to make a distinction between "domestic intelligence"--primarily law enforcement information collected within the United States--and "foreign intelligence"--primarily military, political, and economic intelligence collected outside the country. Today, this distinction is blurred. Threats to the homeland posed by terrorist groups are national security threats, and intelligence collected outside the United States is often very relevant to the threat environment inside the United States and vice versa. The National Commission on Terrorist Attacks Upon the United States (hereafter the 9/11 Commission) stated that one of the challenges in preventing terrorist attacks is bridging the "foreign-domestic divide." The 9/11 Commission used this term for the divide that it found not only within the Intelligence Community (IC), but also between the agencies of the IC dedicated to the traditional foreign intelligence mission, and those agencies responsible for the homeland security intelligence (HSINT) and law enforcement missions. Some might categorize security intelligence and law enforcement (criminal) intelligence as "non-traditional" intelligence. Yet, the scope and composition of this non-traditional or homeland security intelligence remains somewhat nebulous. At the broadest level, there is a plethora of definitions for intelligence. Most explain the various types of clandestine intelligence, the methods of intelligence collection (the "-Ints"), intelligence consumers, the purposes for which intelligence is collected, and the intelligence cycle. Traditional intelligence collection done clandestinely and overtly, largely at the federal level, to inform national-level policymakers is often differentiated from criminal intelligence gathered by a broader set of federal, state, and local actors generally for law enforcement purposes. Some argue that given that the end result in a criminal case is successful prosecution, that criminal intelligence gathering is largely reactive--a crime takes place, and "intelligence" or evidence is collected to support a prosecution. However, intelligence gathering can also be used to advance the causes of national security, as state and local law enforcement agencies can be viewed as the nation's counterterrorism "eyes and ears." Arguably, not all criminal intelligence gathering is reactive, as some law enforcement organizations and intelligence fusion centers use proactive intelligence gathering techniques, such as the recruitment of human assets, to prevent terrorist attacks. The terms domestic intelligence and homeland security intelligence are often used colloquially and interchangeably by some observers. Depending on how one defines "homeland security," this may be understandable. If, however, one bounds the activities associated with intelligence geographically, a systemic malady which was at least a proximate cause of the intelligence failure resulting in the terrorist attacks of September 11, 2001, the two terms are inherently distinct. That is, domestic intelligence could be defined as that which is collected, analyzed, and disseminated within the United States; yet, homeland security intelligence may be much more broadly defined without regard to the geographic origin of the intelligence collected. The rationale for the integration of what is traditionally defined as foreign intelligence with that which is thought of as domestic intelligence is concisely stated by former Director of National Intelligence (DNI) Ambassador John Negroponte: "What happens abroad can kill us at home." One of the broadest definitions of intelligence is that "intelligence is knowledge, organization, and activity." Arguably, one of the most meaningful purposes of intelligence is "to establish where the danger lies." Some would argue based on this definition that "intelligence is intelligence"--that is, differentiating traditional from non-traditional intelligence is a theoretical matter which may have little relation to the end result--protecting national security. This argument might continue that threats to U.S. national security by and large originate overseas and, since its formal and statutory inception in 1947, the U.S. Intelligence Community has always been the first line of defense in identifying and understanding these threats. Although compelling, this argument could lead some observers to conclude that the state, local, and private sector intelligence players are simply "bolt on" modules to the existing federal community. Such a status quo plus model could be interpreted by some to mean that state, local, and private sector entities are new and passive consumers of federally gathered and analyzed intelligence products, yet not necessarily full intelligence cycle partners. This may not necessarily be the case, as state, local, and private sector organizations have taken on a more activist and proactive role in protecting their populations and infrastructure, a role that includes collecting their own intelligence while working with federal law enforcement and IC partners stationed in Washington, DC, and within their respective districts. The "intelligence is intelligence" position might beg the question of what is the most appropriate strategy for homeland security intelligence--a "top-down" federally driven model where the traditional "Ints" are dominant, a "bottom-up" state, local, and private sector model where the thousands of state and local law enforcement intelligence collectors are dominant, or some unique partnership that strikes a balance between these two extreme models? To some extent, HSINT may be perceived by some as a federally led "top-down" model through which the federal government's intelligence entities provide raw intelligence and/or finished terrorism threat assessments to state, local, and tribal law enforcement entities which may make independent determinations of whether the intelligence is actionable. Another alternative is a "bottom up" model through which criminal intelligence, of the type collected long before the events of September 11, 2001, provides an assessment of the local environments in which a national security and/or a criminal threat might become a reality. A third model, among others, might envision a less hierarchical or a more decentralized structure in which roles and responsibilities of federal, state, and local players are more clearly delineated, information shared more widely, and coordination between law enforcement and traditional intelligence actors closer. These models will be highlighted below. Some perceptions of HSINT among leaders in the IC and observers of the intelligence process are illustrative. Leaders within the Intelligence and Homeland Security communities often speak openly about the responsibilities, priorities, accomplishments, and challenges their agencies face. The nation's first DNI, Ambassador John Negroponte, stated that the Intelligence Community has tasked itself with "bolstering intelligence support for homeland security as enterprise objective number one." He spoke of this priority within the context of the DNI's mandate resulting from the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA) to "integrate the foreign, military and domestic dimensions of the United States intelligence into a unified enterprise" and "connecting the dots across the foreign-domestic divide." At the aggregate level, even if it is assumed that there is one unified intelligence discipline, according to Ambassador Negroponte, there are three different dimensions of intelligence--foreign, military, and domestic. Under this school of thought, HSINT could become another dimension of intelligence that is distinct in some manners, yet overlaps with the aforementioned dimensions. At a relatively simplistic level, the relationships among the dimensions of intelligence could be depicted according to Figure 1 below. Although each of the dimensions of intelligence (referred to above) could be further subdivided, the domestic intelligence dimension, under a broad understanding of the term, would include the role state, local, tribal, and private sector entities play in collecting, analyzing, and disseminating information and intelligence within their respective areas of jurisdiction or industries. DNI Negroponte has defined the domestic agenda as "institution building and information sharing without damaging the fabric and values of our political culture." With respect to institution building, the approach remains federal-centric. Ambassador Negroponte referred specifically to the refinement of the FBI's National Security Branch, the further development of the National Counterterrorism Center (NCTC), as well as the development of the DHS Office of Intelligence and Analysis. State governments, local law enforcement, the private sector, and tribal entities were mentioned at a procedural level--that is, in the sense of "facilitating these multidirectional flow of information." Former Secretary of Homeland Security Michael Chertoff provided his insights into and thoughts about defining the scope of HSINT. Using the metaphor of intelligence as the "radar of the 21 st century" to provide early warning of terrorist attacks, he stated, Intelligence, as you know, is not only about spies and satellites. Intelligence is about the thousands and thousands of routine, everyday observations and activities. Surveillance, interactions--each of which may be taken in isolation as not a particularly meaningful piece of information, but when fused together, gives us a sense of the patterns and the flow that really is at the core of what intelligence analysis is all about ... . We (DHS) actually generate a lot of intelligence ... we have many interactions every day, every hour at the border, on airplanes, and with the Coast Guard. Some observers have characterized domestic intelligence in the following manner: Domestic intelligence entails the range of activities focused on protecting the United States from threats mostly of foreign origin. Focused narrowly, it includes the FBI's counterterrorism work with local law enforcement. On a much broader scale, however, it also involves a broader set of intelligence activities overseen by the Director of National Intelligence, the secretary of defense, the attorney general, and the secretary of homeland security. The goal is to integrate federal, state and local governments, and, when appropriate, the private sector on a secure collaborative network to stop our enemies before they act. Those enemies include individuals and groups attempting to transport weapons of mass destruction, international terrorists, organized criminals, narcotics traffickers, and countries that are working alone or in combination against U.S. interests. Another observer has defined "domestic national security intelligence" as intelligence concerning the threat of major, politically motivated violence, or equal grievous harm to national security or the economy, inflicted within the nation's territorial limits by international terrorists, homegrown terrorists, or spies of saboteurs employed or financed by foreign nations. According to Dr. Sherman Kent, security intelligence is defined as the intelligence behind the police function. Its job is to protect the nation and its members from malefactors who are working to our national and individual hurt. In one of its most dramatic forms it is the intelligence which continuously is trying to put the finger on clandestine agents sent here by foreign powers. In another, it is the activity which protects our frontiers against other undesirable gatecrashers: illegal entrants, smugglers, dope runners, and so on... By and large, security intelligence is the knowledge and the activity which our defensive police forces must have before they take specific action against the individual ill-wisher or ill-doer. Some of the similarities between these perceptions include (1) a fundamental belief that intelligence is the first line of defense for the nation, (2) threats to U.S. national security are largely, although not solely, of foreign origin, and (3) there is a national intelligence role for non-traditional players (largely state, local, tribal law enforcement, as well as the private sector), a role in which they make contributions to preventing terrorist attacks or other inimical acts directed against U.S. citizens within the United States. Others, however, may account for the difference in these perceptions as being associated with the explicit roles and responsibilities that these non-traditional entities play. Are these entities solely recipients of federally collected raw and finished intelligence products? At a policy and, importantly, local level, are non-traditional players viewed by federal personnel as equal partners, and/or "force multipliers?" At the federal level, what policies and mechanisms are in place to provide those non-traditional entities with feedback on the intelligence they collect and provide to the federal government? Although the breadth of these questions is beyond the scope of this report, it may be illustrative to view HSINT through the eyes of national strategy. According to the DNI's National Intelligence Strategy of the United States of America: Transformation Through Integration and Innovation , one of the basic objectives is to "build an integrated intelligence capability to address threats to the homeland, consistent with U.S. laws and the protection of privacy and civil liberties." The strategy stipulates that the nature of the transnational threats to the United States "force us to rethink the way we conduct intelligence collection at home and its relationship with traditional intelligence methods abroad." Moreover, the strategy states that U.S. intelligence elements must focus their capabilities to ensure that (1) Intelligence elements in the Departments of Justice and Homeland Security are properly resourced and closely integrated within the larger Intelligence Community, (2) all Intelligence Community components assist in facilitating the integration of collection and analysis against terrorists, weapons of mass destruction, and other threats to the homeland, and (3) state, local, and tribal entities and the private sector are connected to our homeland security and intelligence efforts. Any national strategy, one could argue, by definition focuses on and provides direction to only those agencies that the federal government controls. A broader reach and/or direction to entities beyond this purview might run the risk of presupposing that the affected community(ies) agree with the national strategy and/or have the resources to implement such direction. Therefore, it may be appropriate that the National Intelligence Strategy , while recognizing a homeland security intelligence role for state, local, and tribal entities, as well as the private sector, does so only in a general manner that does not stipulate the activities these communities will implement as part of the broader community of entities working to protect U.S. national security. It could also be argued, that while the National Intelligence Strategy calls for state, local, and tribal entities to be "connected to our homeland security and intelligence efforts," it nevertheless envisions homeland security intelligence as being driven, in large part, by the federal entities most associated with the domestic intelligence mission--that is, the activities undertaken by the intelligence elements of the Departments of Justice and Homeland Security. How the term "connected" is defined becomes of critical importance, as it implies communication and the sharing of information among federal, state, and local intelligence officials. The National Strategy for Homeland Security published in October 2007, is more explicit about the role of state, local, tribal, and even private sector elements. It stresses that homeland security is a shared responsibility. Consistent with this theme, the strategy highlights the importance of collaboration in the realm of homeland security intelligence. It characterizes the process of identifying, locating, and uncovering terrorist activity--the core objective of homeland security intelligence--as multifaceted. The strategy specifies the ways government at all levels and the private sector need to contribute to the homeland security effort. It also notes the importance of an "integrated Information Sharing Environment that supports the vertical and horizontal distribution of terrorism-related information.... " The sharing of homeland security intelligence has been a particular priority for the Congress, which directed the establishment of the Information Sharing Environment in the IRTP A . Later, in the Implementing Recommendations of the 9/11 Commission Act of 2007 (9/11 Act) , Congress directed DHS to undertake additional initiatives, including the following: Establish department-wide procedures for review and analysis of information provided by state, local, tribal, and private sector elements; integrate that information into DHS intelligence products, and disseminate to federal partners within the IC. Evaluate how DHS components are utilizing homeland security information and participating in the Information Sharing Environment. Establish a DHS State, Local, and Regional Fusion Center Initiative to establish partnerships with state, local, and regional fusion centers. Coordinate and oversee the creation of an Interagency Threat Assessment and Coordination Group (ITACG) that will bring state, local, and tribal law enforcement and intelligence analysts to work in the National Counterterrorism Center. The DHS intelligence strategy has four main elements: (1) vision, (2) mission, (3) definitions, and (4) goals and objectives. While the strategy does not specifically define HSINT, it provides a vision for the DHS intelligence enterprise as being "an integrated ... enterprise that provides a decisive information advantage to the guardians of our homeland security." According to the strategy, the mission of the DHS intelligence enterprise is to provide valuable, actionable intelligence and intelligence-related information for and among the National leadership, all components of DHS, our federal partners, state, local, territorial, tribal, and private sector customers. We ensure that information is gathered from all relevant DHS field operations and is fused with information from other members of the Intelligence Community to produce accurate, timely, and actionable intelligence products and services. We independently collate, analyze, coordinate, disseminate, and manage threat information affecting the homeland. Implicit in this strategy is the DHS adoption of the definition of homeland security information outlined in the Homeland Security Act of 2002. Homeland security intelligence is not a term that is as yet defined or codified in law. The term and activities associated with it include--and go beyond--the definitions of the two traditional types of intelligence commonly defined in law and executive orders: foreign intelligence and counterintelligence. And, more recently, definitions of these two types of intelligence have been supplemented by the terms "national intelligence" and "intelligence related to national security." As with most intelligence-related terms, individuals attach their own interpretations and perceptions to HSINT. While there may be some commonly held perceptions about how HSINT is defined, it is also possible that individuals use the terms freely, but without a true common understanding of the scope and breadth of activities that may be consistent with homeland security intelligence. The primary statutory definition that applies is that which appears in the Homeland Security Act of 2002 , which defines homeland security information as any information possessed by a federal, state, or local agency that (a) related to the threat of terrorist activity, (b) relates to the ability to prevent, interdict or disrupt terrorist activity, (c) would improve the identification or investigation of a suspected terrorist or terrorist organization; or (d) would improve the response to a terrorist act. The DHS Office of Intelligence and Analysis has adopted this definition of homeland security information. It is worthwhile to note that although DHS remains an organization designed to protect against "all hazards," the focus of homeland security information, at least as defined in law, is counterterrorism. As illustrated below, HSINT can be more broadly interpreted to involve intelligence designed to protect against the inimical activities of narcotics traffickers, organized criminals, and others having international support networks and seeking to engage in activities that could undermine U.S. national security. Another type of intelligence defined in statute is traditional or foreign intelligence, which means [i]nformation relating to the capabilities, intentions, and activities of foreign governments or elements thereof, foreign organizations, or foreign persons, or international terrorism activities. The methods of traditional foreign intelligence collection fall into the following five areas: imagery intelligence (IMINT), signals intelligence (SIGINT), human intelligence (HUMINT), measurement and signatures intelligence (MASINT), and open source intelligence (OSINT). While the meanings of these disciplines are relatively well known and commonly understood among intelligence professionals, HSINT is more nebulous. Because HSINT is not necessarily source-specific, some would question whether it should be referred to as a collection "discipline." Although it is true that numerous unique entities are within DHS and at the state and local government levels, as well as within the private sector, that are aggressively collecting homeland security information, it is also true that many of the traditional aforementioned "INTs" collect homeland security intelligence insofar as they provide information on terrorism threats that may originate globally, yet are potentially manifested within U.S. borders. Within DHS Intelligence itself, the OSINT and HUMINT collection methods are likely to be most prevalent. The other type of intelligence codified in law is counterintelligence, which is defined as Information gathered and activities conducted to protect against espionage, other intelligence activities, sabotage, or assassinations conducted for by or on behalf of foreign governments or elements thereof, foreign organizations, or foreign persons, or international terrorist activities. With respect to counterintelligence, DHS Intelligence has as one of its objectives to "consistent with legal authorities, establish measures to protect the Department against hostile intelligence and operational activities conducted by or on behalf of foreign powers or international terrorist activities." To some extent, however, at least for semantics if not necessarily for jurisdictional purposes, the differences between foreign intelligence and counterintelligence were attenuated with the passage of the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ). The IRTPA sought to remedy numerous problems uncovered by the 9/11 Commission, one of which was the aforementioned gap between foreign and domestic intelligence. The IRTPA amended the National Security Act of 1947 (50 U.S.C. SS401a) to read, The terms 'national intelligence' and 'intelligence related to national security' refer to all intelligence, regardless of source from which derived and including information gathered within or outside the United States that (a) pertains, as determined consistent with any guidance issued by the President, to more than one United States Government agency; and (b) that involves - (I) threats to the United States, its people, property, or interests; (ii) the development, proliferation, or use of weapons of mass destruction; or (iii) any other matter bearing on U.S. national or homeland security. As such, HSINT could be interpreted as synonymous with intelligence related to national security, or some subset thereof. A framework for outlining the scope of HSINT, or at least the criteria by which it might be framed could prove helpful. While there are numerous approaches to framing homeland security intelligence, three possible approaches are discussed below. There are at least three different constructs that could be used to frame HSINT: (1) geographic (2) structural, and (3) holistic. Table 1 summarizes some of the limits and boundaries of these three possible approaches to framing HSINT. Beyond geographic bounds, another set of differentiating factors between these approaches is the extent to which, if at all, one believes homeland security intelligence is the sole purview of the federal government, or a more inclusive and cooperative federal, state, local, tribal, and private sector model. Homeland security intelligence can be viewed, some might argue rather simplistically, in geographic and federal/state/local government terms. That is, if the intelligence collection activity takes place within the United States--whether it be by a federal agency or a state, local, tribal, or private sector actor, it would be considered HSINT. Under this approach, while HSINT's activities are constrained by borders, the yield from homeland security's collection and analysis could be combined with foreign intelligence to develop a more complete picture of homeland security threats. Others might counter that the problem with this type of approach is that, as the events of September 11, 2001, demonstrated clearly, national borders increasingly have little meaning in determining threats to U.S. national and homeland security. As has been well documented by numerous studies, the planning for the events of 9/11 took place largely overseas, but the acts were executed within U.S. borders. An intelligence approach that considered only activities associated with homegrown threats, without a more integrated, global perspective on the threat, would miss one of the central lessons learned from 9/11--the importance of integrating intelligence related to threats to national security regardless of the geographic location of the source. Homeland security intelligence could be viewed as primarily a federal activity. Geography is not as important under this approach, as the federal entities that engage in homeland security intelligence may, directly or indirectly, collect information outside the United States. For example, the FBI, through its Legal Attache (LEGAT) program, has 75 LEGAT offices and sub-offices providing coverage for over 200 countries, islands, and territories. Through these offices, it collects principally criminal information through open liaison with international law enforcement counterparts. More specifically, under this approach, HSINT is a federal activity that is engaged in by certain statutory members of the Intelligence Community. Thus, of the 16 agencies that are statutory members of the IC, under this approach perhaps only four would engage in domestic intelligence activities--the intelligence elements of the FBI; DHS I&A and the U.S. Coast Guard; the intelligence elements of the Treasury Department; and the intelligence elements of the Energy Department. Others might argue this approach is too parochial, as it discounts the important homeland security intelligence roles played by other statutory members of the IC and non-federal actors, such as state and local intelligence fusion centers and the private sector. Under this approach, HSINT is not bounded by geographic constraints, level of government, or perceived mutual mistrust between public and private sectors. That is, the approach recognizes no borders and is neither "top down" nor "bottom up." It involves and values equally information collected by the U.S. private sector owners of national critical infrastructure, intelligence related to national security collected by federal, state, local, and tribal law enforcement officers, as well as the traditional "-Ints" collected by statutory members of the IC. It involves strategic and tactical intelligence designed to prevent attacks on the U.S. homeland, as well as highly tactical and event-driven information coordination that must take place in response to a terrorist attack or national disaster. Although information sharing between levels of government is widely held to be an undisputable public "good," achieving effective levels of information exchange is a challenging goal. As former Vice Chair of the 9/11 Commission, Lee H. Hamilton, stated: "You can change the law, you can change the technology, but you still need to change the culture; you need to motivate institutions and individuals to share information." Administration officials have recognized these challenges. Ambassador Thomas E. McNamara, the Program Manager for the Information Sharing Environment (ISE), testified that "the breadth and complexity of the information sharing challenge should not be underestimated. Information silos, cultural issues, and other barriers that inhibit sharing still exist today." Under the holistic approach, the HSINT community might include the 16 statutory members of the IC (as each collects national intelligence, or intelligence related to national security which could have a profound impact on homeland security); the National Counterterrorism Center, National Counterintelligence Center, National Counter Proliferation Center, and the Open Source Intelligence Center; the 14 existing private sector Information Sharing and Analysis Centers (ISACS), scores of state and local law enforcement entities charged with gathering criminal intelligence, numerous state and regional "intelligence fusion" centers, and federal entities with law enforcement responsibilities which may collect intelligence related to national security. This holistic approach implies an interdependency between the diverse players of the statutory IC and the broader HSINT Community. As Ambassador Henry A. Crumpton, a former CIA case officer and former Special Coordinator for Counterterrorism at the State Department states, although there are differences between intelligence and law enforcement, the primary customer for domestic foreign intelligence on near-term threats is law enforcement. And law enforcement can provide valuable leads for intelligence officers. The intelligence collector and the law enforcement consumer, therefore, must strive for more than information sharing; they must seek interdependence. Calls for interdependence between foreign intelligence and security or criminal intelligence today mirror those made nearly thirty years ago by Dr. Kent, who wrote The real picture of the diversity in kinds of intelligence... lies in this truth: a very great many of the arbitrarily defined branches of intelligence are interdependent. Each may have its well-defined primary target which it makes its primary concern, but both the pursuit of this target and the byproducts of pursuing it bring most of the independent branches into some sort of relationship with the others. Intelligence as an activity is at its best when this fact is realized and acted upon in good faith. The challenge, then as now, is to implement such a vision where all players in the de facto HSINT Community would be treated as partners with value to add. What has changed substantially since Dr. Kent's seminal work is the addition of state, local, and private sector actors as both producers and consumers of intelligence. It is here--in the interaction with these relatively new players--that the DHS Intelligence Enterprise has a great role to play. The clear elucidation of HSINT role and responsibilities and implementation, particularly between the FBI and DHS Intelligence, remains an evolving process. A broader understanding of the members and functions of the HSINT Community and the DHS members of the community may be helpful in assessment of these matters. The Intelligence Community (IC) is defined in law, yet the homeland security intelligence community (HSIC) remains a somewhat nebulous entity. As defined by the DHS Intelligence Enterprise Strategic Plan , the HSIC "includes the organizations of the stakeholder community that have intelligence elements." The Homeland Security Stakeholder Community is defined broadly as all levels of government, the Intelligence, Defense, and Law Enforcement Communities, private sector critical infrastructure operators, and those responsible for securing the borders, protecting transportation, and maritime systems, and guarding the security of the homeland. Notwithstanding the fact that a HSIC is not statutorily defined, and may not necessarily be a useful construct from a managerial perspective, such a community, as traditionally defined, exists. The members and collective responsibilities of this community depend, to some extent, on how one bounds the function of HSINT. As mentioned above, the broader the definition of HSINT, the wider the range of players in the community. If one adopts the holistic model of HSINT, the HSIC would include a broad range of agencies, many of which are hybrid agencies undertaking homeland security, law enforcement, defense, and/or traditional foreign intelligence functions. These entities include, among others, the intelligence elements of the Department of Defense (DOD) U.S. Northern Command (USNORTHCOM), and Counterintelligence Field Activity; the Department of Justice's Federal Bureau of Investigation; Bureau of Alcohol, Tobacco, Firearms, and Explosives; and Drug Enforcement Administration; the Department of Treasury's Office of Terrorism and Financial Intelligence, and the Department of Energy's (DOE) Office of Intelligence and Counterintelligence. Numerous state and local law enforcement entities, and the state and regional intelligence fusion centers, would fall under a broad interpretation of homeland security intelligence. Finally, the private sector, particularly those sectors outlined as being part of U.S. critical infrastructure (as defined under HSPD-7) would also fall into a broadly defined concept of a homeland intelligence community. An interesting comparison can be drawn between the HSIC and the statutory IC, as defined in the National Security Act of 1947, as amended, and in subsequent Executive Orders. One general definition of the IC is a "federation of Executive Branch agencies and organizations that conduct intelligence activities necessary for the conduct of foreign relations and protection of national security." A federation differs from a community insofar as the constituent elements of a federation, by definition, give up some degree of authority to a more central body. A community, by contrast, implies a group of persons or entities merely having common interests, but not necessarily bound together by any formal power sharing arrangements or agreements. While the IC has arguably moved more in the direction of a federation with the establishment of a Director of National Intelligence (DNI), one could argue the HSIC, broadly defined, remains very much a community spread across federal, state, local government sectors, as well as the private sector. The diffuse nature of a broadly defined HSIC may be dictated by the very nature of the function itself. That is, if state, local, tribal and private sector members are valued and contributing members of the HSIC, an attempt at centralization may undermine the community's effectiveness and efficiency. Planned decentralization, with a clear understanding of the roles played by each level of organization, and the parameters of how information is shared bi-directionally, is one model of organization for the HSIC.

Since the 9/11 terrorist attacks, Congress has focused considerable attention on how intelligence is collected, analyzed, and disseminated in order to protect the homeland against terrorist threats. Prior to 9/11, it was possible to make a distinction between "domestic intelligence"--primarily law enforcement information collected within the United States--and "foreign intelligence"--primarily military, political, and economic intelligence collected outside the country. Today, threats to the homeland posed by terrorist groups are now national security threats. Intelligence collected outside the United States is often very relevant to the threat environment inside the United States and vice versa. Although the activities involved in homeland security intelligence (HSINT) itself are not new, the relative importance of state, local, and private sector stakeholders; the awareness of how law enforcement information might protect national security; and the importance attached to homeland security intelligence have all increased substantially since the events of 9/11. There are numerous intelligence collection disciplines through which the U.S. Intelligence Community (IC) collects intelligence to support informed national security decision-making at the national level and the allocation of tactical military and law enforcement resources at the local level. The collection disciplines are generally referred to as those which fall within national technical means or non-technical means. Technical means include signals intelligence (SIGINT), measurement and signatures intelligence (MASINT), and imagery intelligence (IMINT). Non-technical means include human intelligence (HUMINT) and open source intelligence (OSINT). Each of these collection disciplines is source-specific--that is, a technical platform or human source, generally managed by an agency or mission manager, collects intelligence that is used for national intelligence purposes. HSINT, however, is generally not source specific, as it includes both national technical and non-technical means of collection. For example, HSINT includes human intelligence collected by federal border security personnel or state and local law enforcement officials, as well as SIGINT collected by the National Security Agency. Reasonable individuals can differ, therefore, with respect to the question of whether HSINT is another collection discipline, or whether homeland security is simply another purpose for which the current set of collection disciplines is being harnessed. Homeland security information, as statutorily defined, pertains directly to (1) terrorist intentions and capabilities to attack people and infrastructure within the United States, and (2) U.S. abilities to deter, prevent, and respond to potential terrorist attacks. This report provides a potential conceptual model of how to frame HSINT, including geographic, structural/statutory, and holistic approaches. Given that state, local, tribal, and private sector officials play such an important role in HSINT, the holistic model, one not constrained by geography or levels of government, strikes many as the most compelling. The report argues that there is, in effect, a Homeland Security Intelligence Community (HSIC). Although the HSIC's members are diffused across the nation, they share a common counterterrorism interest. The proliferation of intelligence and information fusion centers across the country indicate that state and local leaders believe there is value to centralizing intelligence gathering and analysis in a manner that assists them in preventing and responding to local manifestations of terrorist threats to their people, infrastructure, and other assets. At the policy and operational levels, the communication and integration of federal HSINT efforts with these state and local fusion centers will likely remain an important priority and future challenge. This report will not be updated.

This report presents information on two federal entitlement programs administered by the Social Security Administration (SSA) that provide income support to individuals with severe, long-term disabilities: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). SSDI is a social insurance program that provides monthly cash benefits to nonelderly disabled workers who paid Social Security taxes for a sufficient number of years in jobs covered by Social Security and to their eligible dependents. In contrast, SSI is a public assistance program that provides monthly cash benefits to aged, blind, or disabled individuals (including children) who often have little or no work experience in covered employment and whose assets and other income are below certain limits. Enacted in 1956 under Title II of the Social Security Act, SSDI is part of the Old-Age, Survivors, and Disability Insurance (OASDI) program, commonly known as Social Security. OASDI is a form of social insurance designed to protect against the loss of income due to retirement, disability, or death. Like Old-Age and Survivors Insurance (OASI), SSDI replaces a portion of a worker's lost earnings based on the individual's career-average earnings in jobs covered under Social Security. Specifically, SSDI provides monthly benefits to insured workers under the full retirement age who meet the statutory test of disability and to their eligible dependents. The SSDI and OASI programs are funded primarily through a payroll tax levied on current workers who are in jobs covered by Social Security. In August 2016, 10.7 million individuals received SSDI benefits, including 8.9 million disabled workers, 137,000 spouses of disabled workers, and 1.7 million children of disabled workers. SSI, which went into effect in 1974, is a need-based program that provides cash payments assuring a minimum income for aged, blind, or disabled individuals who have limited income and assets. This program is often referred to as a program of "last resort" because individuals who apply for benefits are also required to apply for all other benefits for which they may be eligible (e.g., Social Security retirement or disability benefits, pensions, earnings). Although the SSI program is administered by SSA, it is funded through general revenues--not by payroll taxes. The federal benefit provided through this program, unlike through the SSDI program, is a flat amount (reduced by other countable income), and it is not related to prior earnings. In addition to the federal SSI payment, many states provide supplements to certain groups or categories of SSI recipients. In August 2016, 8.3 million individuals received federally administered SSI payments, including 1.2 million children under the age of 18, 4.9 million adults aged 18-64, and 2.2 million seniors aged 65 or older. SSDI benefits are based on a worker's career-average earnings in covered employment, indexed to reflect changes in national wage levels. The benefits are adjusted annually for inflation, as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Benefits are also provided to eligible spouses and children of disabled workers, subject to certain maximum family benefit rules. Benefits may be offset if the disabled worker also receives workers' compensation or other public disability benefits. In August 2016, the average monthly SSDI payment was $1,166 for disabled workers, $322 for spouses of disabled workers, and $352 for children of disabled workers. In addition to cash benefits, disabled workers and certain disabled dependents generally qualify for health coverage under Medicare after 24 months of entitlement to cash benefits. The basic federal SSI benefit is the same for all beneficiaries. In 2016, the maximum SSI payment (also called the federal benefit rate), regardless of age, is $733 per month for an individual living independently and $1,100 per month for a couple living independently if both members are SSI eligible. Federal SSI benefits are increased each year to keep pace with inflation (as measured by the CPI-W). The monthly SSI benefit may be reduced if an individual has other income or receives in-kind (non-cash) support or maintenance. Some states supplement this payment to provide a higher benefit level than specified in federal law. SSI recipients living alone or in a household where all members receive SSI benefits are also automatically eligible for the Supplemental Nutrition Assistance Program (SNAP; formerly the Food Stamp Program) and are generally eligible for Medicaid. Individuals may qualify for SSDI, SSI, or both (in addition to other benefits). However, the amount of the SSI payment may be adjusted based on receipt of other income, such as SSDI benefits. (The SSDI benefit is not reduced if the recipient also receives SSI benefits because SSDI is not means-tested.) In August 2016, the average monthly federally administered SSI payment was $540 for all recipients, $645 for children under the age of 18, $561 for adults aged 18-64, and $435 for seniors aged 65 or older. Under both SSDI and SSI, disability is defined as the inability to engage in substantial gainful activity (SGA) by reason of a medically determinable physical or mental impairment that is expected to last for at least 12 months or to result in death. The SGA earnings limit in 2016 is $1,130 per month for non-blind individuals and $1,820 per month for statutorily blind individuals. (For SSI, SGA rules do not apply to statutorily blind individuals and apply only at the time of application to disabled individuals.) In general, individuals must be unable to do any kind of substantial work that exists in the national economy, taking into account their age, education, and work experience. The definition of disability for minor children under the SSI program is slightly different from the definition for adults. Children under the age of 18 are required to demonstrate that their impairment results in marked and severe functional limitations . Child SSI claimants are also subject to slightly different criteria under SSA's medical listings. To qualify for SSDI, workers must be (1) under the full retirement age (FRA), (2) insured in the event of disability, and (3) statutorily disabled. The FRA is the age at which unreduced Social Security retirement benefits are first payable, which is currently 66. To achieve insured status, individuals must have worked in covered employment for about a quarter of their adult lives before they became disabled and for five years of the 10 years immediately before the onset of disability. However, younger workers may qualify with less work experience based on their age. In 2016, SSDI provided disability insurance coverage to more than 152 million nonelderly workers. Once an individual's application for SSDI benefits has been approved, he or she will receive benefits after a five-month waiting period from the time the disability began and will receive Medicare coverage 24 months after SSDI eligibility begins (generally 29 months after the onset of disability). Disability benefits will continue as long as the individual continues to meet SSA's disability standard, or until he or she reaches FRA, when SSDI benefits are automatically converted to Social Security retired-worker benefits. To receive SSI aged benefits , an individual must be at least 65 years old. To receive SSI disability benefits , an individual must meet the same definition of disability that applies under the SSDI program. To qualify for SSI benefits because of blindness , an individual must have visual acuity of 20/200 or less with the use of a correcting lens in the person's better eye, or tunnel vision of 20 degrees or less. In addition to age, disability, or blindness, an individual must meet income and resource tests to qualify for SSI benefits. The countable resource limit for SSI eligibility is $2,000 for individuals and $3,000 for couples. These amounts are not indexed for inflation and have remained at their current levels since 1989. Some resources are not counted in determining SSI eligibility. Excluded resources include an individual's home and adjacent land; one car, regardless of value, if it is used for transportation by the individual or a member of his or her household; property essential for self-support; household goods and personal effects; burial funds of $1,500 or less; and life insurance policies with a cumulative face value of $1,500 or less. Two types of income are considered for purposes of determining SSI eligibility and payment amounts: unearned and earned. Most income not derived from current work (including Social Security benefits, other government and private pensions, veterans' benefits, workers' compensation, and in-kind support and maintenance) is considered unearned income . In-kind support and maintenance includes food, clothing, or shelter that is given to an individual. Earned income includes wages, net earnings from self-employment, and earnings from services performed. If an individual meets all other SSI eligibility requirements, his or her total monthly SSI payment equals the maximum federal benefit rate ( plus the amount of an applicable federally administered state supplementation payment) minus countable income. Not all income is counted for SSI purposes, and different exclusions apply to earned and unearned income. Monthly unearned income exclusions include a general income exclusion of $20 per month that applies to non-need-based income. Food stamps, housing and energy assistance, state and local need-based assistance, in-kind support and maintenance from non-profit organizations, student grants and scholarships used for educational expenses, and income used to fulfill a plan for achieving self-support (PASS) are also excluded from unearned income. Once the $20 exclusion (and any other applicable exclusion) is applied to unearned income, there is a dollar-for-dollar reduction in SSI benefits (i.e., each dollar of countable unearned income reduces the SSI benefit by one dollar). Monthly earned income exclusions include any unused portion of the $20 general income exclusion, the first $65 of earnings, one-half of earnings over $65, impairment-related expenses for blind and disabled workers, and income used to fulfill a PASS. Because of the one-half exclusion for earnings, once the $65 exclusion (and any other applicable exclusion) is applied to earned income, SSI benefits are reduced by $1 for every $2 of earned income. In some cases, the income and resources of non-recipients are counted in determining SSI eligibility and payment amounts. This process is called deeming and is applied in cases where an SSI-eligible child lives with an ineligible parent, an eligible individual lives with an ineligible spouse, or an eligible non-citizen has a sponsor. In addition to the categorical and financial requirements for SSI, a person must also (1) reside in one of the 50 states, the District of Columbia, or the Northern Mariana Islands and (2) be a U.S. citizen or a noncitizen who meets a qualified alien category and certain other conditions. (SSI is not available in Puerto Rico, Guam, the Virgin Islands, or American Samoa.) Recipients who are outside the country for more than a month are ineligible for benefits. Except for situations involving certain medical facilities, residents of public institutions (such as a jail or prison) are generally ineligible for SSI. Additional requirements related to filing for other benefits and fugitive felon status also apply. The application process for SSDI and SSI disability benefits is similar. Although SSDI and SSI are federal programs, both federal and state offices are used to determine eligibility for benefits. The process begins when an individual files an initial application in person at a SSA field office, by telephone, by mail, or online (SSDI claims only). To make an initial determination, SSA employs a five-step sequential evaluation process to verify that a claimant meets the medical and other eligibility criteria for SSDI or SSI benefits (see Figure 1 ). The five steps are listed below: Step 1. Work T est . Is the individual working and earning over SGA? If yes, the application is denied. If no, the application moves to Step 2. Step 2. Severity T est . Is the applicant's condition severe enough to limit basic work activities for at least one year or to result in death? If yes, the application moves to Step 3. If not, the application is denied. Step 3. Medical Listings T est . Does the condition meet SSA's medical listings, or is the condition equal in severity to one found in the medical listings? If yes, the application is accepted and benefits are awarded. If not, the application moves to Step 4. Step 4. Previous Work T est . Can the applicant do the work he or she had done in the past? If yes, the application is denied. If not, the application moves to Step 5. Step 5. Any Work T est . Does the applicant's condition prevent him or her from performing any other work that exists in the national economy? If yes, the application is accepted and benefits are awarded. If not, the application is denied. Field offices are responsible for validating the non-medical eligibility requirements such as age, employment, marital status, income, resources, and insured status (Step 1). Field office staff will also interview claimants to obtain relevant medical and work-history information, as well as to make certain that required forms are completed. Applications that meet the non-medical eligibility criteria are then forwarded to a state Disability Determination Service (DDS) for a medical determination (Steps 2-5). DDSs, which are fully funded by the federal government, are state agencies tasked with developing medical evidence and issuing the disability determination. The medical determination for both types of disability benefits is made based on evidence gathered in an individual's case file. State disability examiners--with the help of medical and psychological consultants--typically use medical evidence collected from the claimant's treating sources (i.e., a physician, psychologist, or other acceptable medical source) to determine the severity of the claimant's impairment(s). Ordinarily, there is no personal interview with the applicant on the part of the state personnel who decide the claim. Claimants who do not meet the criteria in the medical listings (Step 3) proceed to a more individualized assessment that examines their residual functional capacity to perform work. Residual functional capacity (RFC) is a function-by-function assessment based upon all of the relevant evidence of an individual's ability to do work-related activities. At Step 4, the state DDS evaluates a claimant's RFC to complete past relevant work. If the claimant cannot perform past relevant work, his or her application is forwarded to the final step of the determination process. At Step 5, the state DDS uses a claimant's RFC along with vocational factors, such as age, education, and work experience to determine whether he or she can perform any work that exists in the national economy. Claimants who are unable to perform such work are found to be disabled. After a determination has been made, the state DDS returns the case to the field office for appropriate action. The disability determination process for child SSI claimants is similar to the one used for SSDI and adult SSI claimants, in that child claimants must have a severe impairment that prevents them from engaging in basic life activities. However, unlike adult disability claimants, child SSI claimants not approved at Step 3a are not subsequently evaluated based on their RFC to perform work. Instead, child SSI claimants proceed to an individualized assessment that examines whether their severe impairment (or combination of impairments) results in limitations that functionally equal the medical listings (see Figure 2 ). During this process (child's Step 3b), the state DDS will assess the extent to which a child's condition affects his or her functioning during day-to-day activities at home, in childcare, at school, and in the community. The state DDS evaluates a child SSI claimant's functioning across six domains: (1) acquiring and using information; (2) attending and completing tasks; (3) interacting and relating with others; (4) moving about and manipulating objects; (5) caring for yourself; and (6) health and physical well-being. A child SSI claimant's condition functionally equals the criteria in the listings if the impairment (or combination of impairments) results in marked limitations in at least two of the domains or an extreme limitation in one domain. A marked limitation in a domain occurs when a claimant's impairment interferes seriously with his or her ability to independently initiate, sustain, or complete activities. An extreme limitation in a domain occurs when a claimant's impairment interferes very seriously with his or her ability to independently initiate, sustain, or complete activities. If a claimant's application for benefits is denied at any point during the disability determination process, the claimant has the right to appeal the decision. During the appeals process, claimants may present additional evidence or arguments to support their case, as well as appoint a representative to act on their behalf (either an attorney or non-attorney). The appeals process includes three levels of administrative review through SSA before a case can be appealed to the U.S. court system, in the following order: Step 1. Reconsideration. In most states, claimants who are dissatisfied with the initial determination may request to have their case reconsidered by a different examiner from the state DDS office. The disability examiner will reexamine the evidence from the original decision, along with any new evidence submitted with the appeal. After a review of the evidence, the claimant is notified in writing of the decision. If the claimant disagrees with the reconsideration decision, he or she may proceed to Step 2. Step 2. Administrative Hearing. Claimants who are dissatisfied with the reconsidered judgment (or who disagree with the initial determination and reside in a state where the reconsideration step has been eliminated) may request a hearing before an administrative law judge (ALJ). During a hearing, an ALJ will investigate the merits of an appeal by informally questioning the claimant, as well as any scheduled witnesses such as medical or vocational experts. A claimant and his or her representative may also present additional evidence, examine evidence used in making the determination under review, introduce witnesses, question witnesses, and present oral or written arguments in support of a favorable decision. Because SSA is not represented as the hearing, the proceeding is considered non-adversarial. After the hearing, the claimant is notified in writing of the ALJ's decision. If the claimant disagrees with the hearing decision, the case can be appealed to Step 3. Step 3. Appeals Council. Claimants dissatisfied with either the ALJ's decision or the dismissal of a hearing request may request a review before the Appeals Council (AC). The AC may dismiss or deny the request for review, or the AC may grant the request and either issue a decision or remand the case to an ALJ. The claimant is notified in writing of the AC's decision or reason for denial of the review. If the claimant disagrees with the AC's decision or denial, he or she may proceed to Step 4. Step 4. U.S. District Court. If a claimant is dissatisfied with the AC's decision or if the AC decides not to review the case, the claimant may file a lawsuit in U.S. district court. A district court may issue a decision or remand the case to the AC. The AC may, in turn, either assume jurisdiction and issue a decision or remand the case to an ALJ for further proceedings and a new decision. At each stage of the appeals process, claimants or their representatives must request an appeal, in writing, within 60 days of receiving notice of the prior decision. On rare occasions, disability cases are appealed beyond U.S. district court to the U.S. court of appeals and, ultimately, the U.S. Supreme Court. SSA conducts periodic program integrity reviews to ensure SSDI beneficiaries and SSI disability recipients continue to meet each program's respective eligibility criteria. After SSA finds that a claimant is disabled, the agency must evaluate his or her impairment(s) from time to time to determine if the individual is still medically eligible for payments. This evaluation is known as a continuing disability review (CDR). The frequency of a medical CDR depends on the beneficiary's prospective medical improvement: Medical Improvement Expected (MIE). If a beneficiary's impairment is expected to improve, SSA will generally schedule a review at intervals from six to 18 months following the most recent decision that the individual is disabled or that disability is continuing. Medical Improvement Possible (MIP). If medical improvement is possible but cannot be accurately predicted based on current experience and the facts of the case, SSA will schedule a review at least once every three years. Medical Improvement Not Expected (MINE). If medical improvement is unlikely due to the severity of an individual's condition, SSA will schedule a review once every five to seven years. Under current law, SSA must find substantial evidence of medical improvement during a CDR to deem a SSDI beneficiary or SSI disability recipient no longer disabled and therefore ineligible for benefits. The legal requirement for determining if disability continues during a CDR is called the medical improvement review standard (MIRS). Under a MIRS determination for adults, the agency will generally consider an adult beneficiary no longer disabled if the review finds considerable evidence that (1) there has been substantial medical improvement in the beneficiary's impairment(s) related to his or her ability to work since the last favorable medical decision and (2) the beneficiary has the ability to engage in SGA. For a child SSI recipient, SSA will typically consider the child no longer disabled if the review demonstrates that there has been substantial medical improvement in the recipient's impairment(s) since his or her most recent favorable medical decision to the point where the recipient's condition no longer meets (or medically or functionally equals) the severity in the listings. When a SSDI beneficiary or SSI disability recipient is found no longer disabled, he or she may appeal the decision using the process described previously. SSA also reevaluates the eligibility of all child SSI recipients who attain age 18 under the adult standard for initial disability claims. These reevaluations are known as age- 18 disability redeterminations . Because such redeterminations are effectively a new disability determination under the adult criteria, the MIRS does not apply. In addition to medical CDRs, SSA conducts periodic non-medical reviews to ensure that SSDI beneficiaries and SSI disability recipients continue to meet each program's respective financial and other eligibility requirements. Under the SSDI program, SSA performs work CDRs to determine if a beneficiary's work activity represents SGA and if eligibility for benefits should continue. SSA typically will initiate a work CDR only if the agency becomes aware of a beneficiary's return to work. If a work CDR finds evidence that a recipient is engaging in SGA and is not participating in an approved SSA work incentive program, the agency may determine that the recipient's disability has ceased. Under the SSI program, SSA conducts periodic redeterminations of a recipient's non-medical eligibility factors--such as income, resources, and living arrangements--to verify that a recipient is still eligible for SSI and is receiving the correct payment amount. There are two types of redeterminations: scheduled and unscheduled. Unscheduled redeterminations are conducted based on a report of change in a recipient's circumstances that may affect program eligibility or the payment amount. Scheduled redeterminations are performed at periodic intervals, depending on the likelihood of payment error: annually if a change in a recipient's circumstances is likely to occur; or once every six years if a change in a recipient's circumstances is unlikely to occur. The SSDI program is funded primarily through the Social Security payroll tax, a portion of which is credited to a Disability Insurance trust fund. By contrast, the SSI program is funded through annual appropriations from general revenues. The Social Security payroll tax rate on covered wages and self-employment income is 12.40%, which is split equally between employees and employers, up to the taxable maximum of $118,500 in 2016 (self-employed individuals bear the full tax). Of the 12.4%, 10.03% is paid to the OASI trust fund and 2.37% is paid to the DI trust fund under current law. Funding for each trust fund is prescribed in the Social Security Act, and the two funds may not borrow from one another under current law. In addition to the payroll tax contributions, the DI and OASI trust funds receive some revenues from the taxation of Social Security benefit payments. These combined revenues are invested in special issue (non-marketable), interest-bearing U.S. government securities. (The interest earned is also deposited in the trust funds.) The resources in the DI trust fund are used to pay for SSDI benefits and the cost of administering the program. In FY2016, the DI trust fund is estimated to have paid out more than $149.2 billion in benefits. The SSI program is financed through the general fund of the U.S. Treasury. Appropriations for SSI benefits and program administration are considered mandatory spending. In FY2016, the SSI program is estimated to have paid out $59.6 billion in federal benefits.

The Social Security Administration (SSA) is responsible for administering two federal entitlement programs that provide income support to individuals with severe, long-term disabilities: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). SSDI is a social insurance program that provides monthly cash benefits to nonelderly disabled workers who paid Social Security taxes for a sufficient number of years in jobs covered by Social Security and to their eligible dependents. In contrast, SSI is a public assistance program that provides monthly cash benefits to aged, blind, or disabled individuals (including children) who often have little or no work experience in covered employment and whose assets and other income are below certain limits. To qualify for disability benefits under either program, claimants must meet the definition of disability prescribed in the Social Security Act. For both SSDI and SSI disability benefits, disability is defined as the inability to engage in substantial gainful activity (SGA) by reason of a medically determinable physical or mental impairment that is expected to last for at least one year or to result in death. In general, the individual must be unable to do any kind of substantial work that exists in the national economy, taking into account age, education, and work experience. Special rules apply to statutorily blind individuals and to children under the age of 18 applying for or receiving SSI. Both programs are administered by SSA and therefore have similar application and disability determination processes. Although SSDI and SSI are federal programs, both federal and state offices are used to determine eligibility for disability benefits. SSA determines whether someone is disabled according to a five-step sequential evaluation process where SSA is required to look at all of the pertinent facts of a particular case. Current work activity, severity of impairment, and vocational factors are assessed in that order. If SSA finds that a claimant is disabled, the agency must periodically reevaluate his or her impairment(s) to ensure that the individual continues to meet the program's respective eligibility criteria. If a claimant's application for benefits is denied at any point during the disability determination process, the claimant has the right to appeal the decision. During the appeals process, claimants may present additional evidence or arguments to support their case, as well as appoint a representative to act on their behalf. In most states, the appeals process is composed of four stages: (1) reconsideration by a different disability examiner; (2) a hearing before an administrative law judge (ALJ); (3) a review before the Appeals Council; and (4) filing suit against SSA in U.S. district court. The SSDI program is funded primarily through Social Security payroll tax revenues, portions of which are credited to the Disability Insurance (DI) trust fund. In contrast, the SSI program is financed by annual appropriations from general revenues.

Following the terrorist attacks of 2001, the federal government determined that it would need new medical countermeasures (e.g., diagnostic tests, drugs, vaccines, and other treatments) to respond to an attack using chemical, biological, radiological, or nuclear (CBRN) agents. Representatives of the pharmaceutical industry attributed the paucity of CBRN agent countermeasures to the lack of a significant commercial market. They argued that because these diseases and conditions occur infrequently, the private sector perceives little economic incentive to invest the millions of dollars required to bring treatments to market. To encourage the development of new CBRN countermeasures, President Bush proposed Project BioShield in his 2003 State of the Union address. The 108 th Congress considered this proposal and passed the Project BioShield Act of 2004 ( P.L. 108-276 , signed into law July 21, 2004). This act has three main provisions. It provides the Department of Health and Human Services (HHS) expedited procedures for CBRN terrorism-related spending, including procuring products, hiring experts, and awarding research grants. It creates a government-market guarantee by allowing the HHS Secretary to obligate funds to purchase countermeasures while they still need several more years of development. It also authorizes the HHS Secretary to temporarily allow the emergency use of countermeasures that lack Food and Drug Administration (FDA) approval. The act relaxes procedures under the Federal Acquisition Regulation for procuring property or services used in performing, administering, or supporting CBRN countermeasure research and development (R&D). These expedited procedures decrease both the amount of paperwork required for these expenditures and the potential for oversight. The act increases the maximum amount, from $100 thousand to $25 million, for contracts awarded under simplified acquisition procedures. It also allows these purchases using other than full and open competition. According to the Government Accountability Office (GAO), HHS has used the simplified acquisitions procedure authority for only five contracts. These contracts were all executed between 2004 and 2005 totaled approximately $30 million. HHS has stated that it has not used its authority to use other than full and open competition. The Project BioShield Act authorizes the HHS Secretary to use an expedited award process for grants, contracts, and cooperative agreements related to CBRN countermeasure R&D, if the Secretary deems that a pressing need for an expedited award exists. This authority is limited to awards of $1.5 million or less. This expedited award process replaces the normal peer review process. Some scientists have expressed concerns that an expedited review process will reduce research quality. The normal peer review process is designed to provide proposals with greater scientific merit a higher probability of receiving funding, a factor potentially lost in an expedited process. According to the most recent data available from HHS, it awarded 14 grants through this expedited peer review process between July 2004 through July 2007. The National Institutes of Allergy and Infectious Diseases (NIAID) awarded these grants within three to five months after the application deadline. All these awards supported research on medical countermeasures to be used following radiation exposure. The Project BioShield act is designed to guarantee companies that the government will buy new, successfully developed CBRN countermeasures for the Strategic National Stockpile (SNS). The act allows the HHS Secretary, with the concurrence of the DHS Secretary and upon the approval of the President, to promise to buy a product up to eight years before it is reasonably expected to be delivered. Originally, a company was to be paid only on the delivery of a substantial portion of the countermeasure. The Pandemic and All-Hazard Preparedness Act ( P.L. 109-417 ) modified the Project BioShield Act to allow for milestone-based payments of up to half of the total award before delivery. Therefore, this guarantee reduces the market risk for the company and the milestone payments partially reduce its exposure to development risk (i.e., the risk that the countermeasure will fail during testing and be undeliverable). The Project BioShield Act allows HHS to purchase unapproved and unlicensed countermeasures. It requires the HHS Secretary to determine that "sufficient and satisfactory clinical experience or research data ... support[s] a reasonable conclusion that the product will qualify for approval or licensing ... within eight years." Because most drugs that begin these processes fail to become approved treatments, critics of this provision suggest that the government will end up purchasing countermeasures that may never be approved. To reduce the government's financial risk associated with this provision, the act allows HHS to write contracts so that unapproved products may be purchased at lower cost than approved products. HHS used some of these authorities when structuring each of the Project BioShield contracts discussed below (" Acquisitions "). The FDA and HHS approval and licensing processes are designed to protect people from ineffective or dangerous treatments. The Project BioShield Act allows the HHS Secretary to temporarily authorize the emergency use of medical products that are not approved by the FDA or HHS. To exercise this authority, the HHS Secretary must conclude that: (1) the agent for which the countermeasure is designed can cause serious or life-threatening disease; (2) the product may reasonably be believed to be effective in detecting, diagnosing, treating, or preventing the disease; (3) the known and potential benefits of the product outweigh its known and potential risks; (4) no adequate alternative to the product is approved and available; and (5) any other criteria prescribed in regulation are met. Such emergency use authorizations (EUA) remain in effect for one year unless terminated earlier by the Secretary. The Secretary may renew expiring authorizations. The HHS Secretary has issued several EUAs. Currently, five countermeasures to the 2009 H1N1 "swine" influenza outbreak are permitted to be used under EUA: the antiviral influenza treatments Tamiflu (oseltamivir) and Relenza (zananivir), N95 respirators, and two diagnostic kits to help identify cases of this disease. The other active EUA allows the distribution of antibiotic kits containing doxycycline hyclate to certain people participating in the Cities Readiness Initiative. In January 2005, the HHS Secretary used this authority to allow the vaccination of Department of Defense (DOD) personnel with a specified type of anthrax vaccine. This EUA expired in January 2006. The Project BioShield Act of 2004 requires the HHS Secretary to report annually to Congress the use of some of the authorities granted by this law. The reports must summarize each instance that the Department used the expedited procurement and grant procedures and allowed the emergency use of unapproved products. The reports must explain why HHS needed to use these authorities. The HHS has produced two such reports to date: one covering activities from July 2004 through July 2006 and another covering August 2006 to July 2007. This act also requires the Government Accountability Office (GAO) to assess actions taken under authorities granted by the act, determine the effectiveness of the act, and recommend additional measures to address deficiencies. In July 2009, GAO published two reports in response to this requirement. The first report recommends that HHS improve some of its internal controls implemented for the expedited contracting procedures (see " Expedited Procedures " above). The second report determined that HHS has used Project BioShield to support development and procurement of CBRN medical countermeasures. This report contained no recommendations for improving Project BioShield. The Project BioShield Act did not appropriate any funds. Instead, it authorized the appropriation of up to a total of $5.593 billion for countermeasures procurement from FY2004 through FY2013. The Department of Homeland Security Appropriations Act, 2004 ( P.L. 108-90 ) appropriated this amount into a special reserve fund with explicit time windows in which the money could be obligated. P.L. 108-90 specified that $3.418 billion was available for obligation for FY2004 to FY2008. The balance of the advance appropriation plus unobligated funds remaining from FY2004 to FY2008 became available in FY2009 for obligation from FY2009 to FY2013. The Project BioShield Act specified that these funds are only for the procurement of CBRN countermeasures using the Project BioShield authorities and may not be used for other purposes, such as for grants to support countermeasure development or program administration. Congress advance-appropriated the 10-year program but retained the power to annually increase or decrease the amount in the special reserve fund. Congress removed $25 million from this account through rescissions in the Consolidated Appropriations Act, 2004 ( P.L. 108-199 ) and the Consolidated Appropriations Act, 2005 ( P.L. 108-447 ). See Table 1 . The Omnibus Appropriations Act, 2009 ( P.L. 111-8 ) transferred $412 million from the special reserve fund to HHS. Of this amount, $275 million went to fund countermeasure advanced research and development through the Biodefense Advanced Research and Development Authority (BARDA, see below), and $137 million went to help respond to and prepare for pandemic influenza. For FY2010, the Obama Administration has requested a transfer of $305 million from the BioShield special reserve fund to fund countermeasure advanced development through BARDA. See Table 2 . The Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act, 2010 ( H.R. 3293 ), which passed the House on July 24, 2009, would transfer $305 million to BARDA for advanced development activities. This act would also transfer $500 million from the BioShield special reserve fund to the National Institute of Allergy and Infectious Disease for basic research activities. The President has also requested that the remaining balances in the special reserve fund be transferred from the DHS "Biodefense Countermeasure" account into the HHS "Public Health and Social Services Emergency Fund" account. These funds would remain available for obligation through FY2013 for Project BioShield-related countermeasure purchases. The Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act, 2010 ( H.R. 3293 ) would make this transfer. The House Committee on Appropriations estimates that, after accounting for the Administration's estimated obligations from this fund in FY2009 and the transfers out of the Special Reserve Fund for other purposes, the remaining balance will be $764 million. The first Project BioShield contract was announced on November 4, 2004. The HHS contracted with VaxGen for delivery of 75 million doses of a new type of anthrax vaccine (rPA) within three years. This contract was worth $879 million. See Table 3 . On December 17, 2006, HHS terminated this contract because VaxGen failed to meet a contract milestone. Subsequent contracts include $690 million for 29 million doses of the currently approved AVA anthrax vaccine (Emergent BioSolutions); $165 million for 20 thousand doses of Raxibacumab, a treatment for anthrax (Human Genome Sciences); $144 million for 10 thousand doses of Anthrax Immune Globulin, a treatment for anthrax (Cangene); $505 million for 20 million doses of a new (MVA) smallpox vaccine (Bavarian Nordic); $416 million for 200 thousand doses of botulinum antitoxin, a treatment for botulinum toxin exposure (Cangene); $18 million for 5 million doses of a pediatric form of potassium iodide, a treatment for radioactive iodine exposure (Fleming & Company); and $22 million for 395 thousand doses of Ca-DTPA and 80 thousand doses of Zn-DTPA, two treatments for internal radioactive particle contamination (Akorn). Thus, excluding the canceled VaxGen contract, HHS has obligated approximately $1.96 billion to date. Future targets for Project BioShield procurement include countermeasures against anthrax, viral hemorrhagic fevers, and radiation. Congress has scrutinized the implementation and effectiveness of the Project BioShield Act since its enactment. In response to perceived problems with Project BioShield countermeasure procurement, the 109 th Congress created the Biodefense Advanced Research and Development Authority (BARDA) in HHS through the Pandemic and All-Hazards Preparedness Act ( P.L. 109-417 ). Congress determined that Project BioShield insufficiently encouraged the transition of promising basic research results into the product development stage. This period in development is often referred to as the "valley of death" for pharmaceuticals since some seemingly promising drugs are not developed past this point due to lack of funding. As discussed above, the Pandemic and All-Hazards Preparedness Act amended the Project BioShield Act to allow BioShield contracts to pay up to half the contract value as milestone payments. Thus companies could receive payments while continuing to develop their promising products. Additionally, Congress created in BARDA a dedicated infrastructure to manage and fund advanced development and commercialization of CBRN countermeasures. In theory, BARDA funding can take those promising drugs from the basic research through the advanced development stage, which may include clinical trials. Congress created the Biodefense Medical Countermeasure Development Fund to pay for such advanced development contracts. Although this account is separate from the Project BioShield account in DHS, Congress has funded the advanced development account through transfers from the Project BioShield account (see Table 1 and Table 2 ). Critics of government programs funding advanced development suggest that because of the high product failure rate in advanced development, the government will inevitably fund unusable products. In addition to removing the development risks traditionally borne by industry, directly funding advanced development inserts government decision makers into the countermeasure development process, a role critics argue is better suited to industry experts and entrepreneurs. Some critics would prefer to have the government set product requirements and have industry determine how best to meet them. As originally enacted, Project BioShield took this latter approach, an approach that Congress found insufficient in this particular case. Because advanced development activities generally take several years, it may take several more years to determine if this change has yielded better results than the original Project BioShield. In addition to funding the advanced development of countermeasures, BARDA manages HHS' role in Project BioShield. BARDA leads the efforts to determine countermeasure requirements and executes all Project BioShield contracts. The 111 th Congress faces several BioShield-related policy issues. These include: whether to grant the President's request to transfer the account from DHS to HHS; the diversion of BioShield funds for other purposes; how to replace stockpiled countermeasures as they expire; and whether this program has sufficiently encouraged the development of broad spectrum countermeasures. In the FY2010 budget request, President Obama has proposed transferring the entirety of the Project BioShield special reserve fund from DHS to HHS. Currently DHS manages the special reserve fund, while HHS designs and executes the Project BioShield contracts. As described above, DHS and Office of Management and Budget must approve each contract. If Congress decides to transfer the account to HHS, depending on how it is transferred, these roles may or may not be preserved. A simple transfer of the account in the absence of additional amendments of the Project BioShield Act provisions would likely maintain the current agency roles. Alternatively, Congress could amend the Project BioShield act to change the agencies' roles in contract approval. The House and Senate committees on appropriations have recommended transferring the account to HHS and otherwise maintaining the current agency roles. One of the distinguishing features of Project BioShield is the ten-year $5.6 billion advance appropriation. Potential countermeasure developers considered the establishment of an advance-funded separate account dedicated solely to countermeasure procurement as integral to their participation in this program. The advance funding helped assure developers that payment for countermeasures they successfully developed would not depend on future, potentially uncertain appropriations processes. Although advance-funding the Project BioShield account may have provided some assurance of stability to developers, in practice, these funds have been subject to the annual appropriations processes. Subsequent Congresses have removed approximately 8% of the advance appropriation through rescissions and transfers to other accounts. See Table 1 . These transfers fall into two categories: those still related to CBRN countermeasures research and development and those related to influenza pandemic preparedness. In FY2009, Congress transferred $275 million from the special reserve fund to BARDA to support CBRN countermeasure advanced research and development. President Obama has proposed a similar transfer for FY2010 of $305 million. The Administration justifies the proposed transfer by asserting that these funds will support "future successful acquisitions of medical countermeasures under Project BioShield." Thus, such transfers could be viewed as an attempt to improve the "lower than expected" rate of Project BioShield acquisitions. The House Committee on Appropriations reached a similar conclusion: H.R. 3293 would transfer the requested $305 million to BARDA and $500 million to NIAID to support basic research. If Congress agrees to this proposed transfer, the precedent set in FY2009 that research and development funding should be viewed as linked to procurement (and that such activities should be funded by transfers from the Project BioShield special reserve fund) may be reinforced. Annual transfers from this account to fund such activity would continue to lower the amounts available for procuring CBRN countermeasures, their originally intended purpose. However, if funding becomes a limitation to acquiring countermeasures, Congress could appropriate additional money for this purpose. However, such a course of events might cause potential countermeasure developers to feel dependent on the actions of future appropriators, precisely the situation that establishment of the special reserve fund was designed to ameliorate. Such funding transfers may modify the respective roles of the federal government and the private sector in Project BioShield. Congress originally designed Project BioShield to minimize the risk that the government would pay for countermeasures which fail during development (see " Market Guarantee " above). Developers were expected to manage this risk, using the government-market guarantee to entice investors to fund countermeasure development. Congress attempted to assure such potential investors that the funding of this program was not subject to the annual appropriations process by providing ten year advance funding. Industry spokespeople reportedly have asserted that transferring money from this account weakens the ability of private firms to raise capital necessary to sustain long-term research and development for countermeasures and hinders potential participation in Project BioShield. However, transferring the funds to support advanced development may reduce the amount that developers need to raise, since the government can directly fund the development. By shifting money from procurement to research and development, the government assumes more of the development risk (i.e., the government becomes more likely to spend money on developing countermeasures that will fail during development and never become available). In FY2009, Congress transferred $137 million from the Project BioShield special reserve fund to HHS for pandemic influenza preparedness and response. President Obama did not request a similar transfer for FY2010. President Obama did request that the conference committee on the Supplemental Appropriations Act, 2009 ( P.L. 111-32 ) allow the purchase of influenza countermeasures using the Project BioShield special reserve fund. Critics of such a move charged that it would damage the biodefense countermeasure industry and "severely diminish the nation's efforts to prepare for WMD events and will leave the nation less, not more, prepared." The conferees declined to provide this authority. Similarly, in the Senate report to accompany the Department of Homeland Security Appropriations Act, 2010 ( S. 1298 ), the committee "strongly urges" not using the special reserve fund to purchase influenza countermeasures. All medicines, including those added to the Strategic National Stockpile through Project BioShield, have explicit expiration dates. They are not approved for use after this expiration date. As a consequence, HHS must procure a number of doses greater than that stored in the SNS at any given time. For example, HHS had to buy 29 million doses of anthrax vaccine to maintain a stockpile of at least 10 million doses from 2006 to 2011. In 2007, the GAO suggested that HHS and DOD establish an inventory-sharing agreement that would allow DOD to use the HHS vaccines in its active troop vaccination program before expiration. These agencies subsequently implemented a shared stockpile approach for anthrax vaccines and pandemic influenza countermeasures. However, this shared stockpile solution is not applicable for countermeasures lacking other high-volume users. The HHS may require additional periodic countermeasure purchases to replenish the stockpile to maintain a consistent readiness level. Congress may consider whether such purchases should be funded through the advance appropriated Project BioShield account or through annual SNS budget authorities. Between 2005 and 2007, BARDA purchased the AVA anthrax vaccine using Project BioShield funds ( Table 3 ). However, the purchase of 14.5 million doses of AVA vaccine in 2008 used SNS funds rather than BioShield funds. BARDA adoption of this approach for all expiring stockpiled countermeasures may require increased annual appropriations for SNS procurements. Many experts contend that broad spectrum countermeasures, those that address multiple CBRN agents, would be the most valuable additions to the SNS. Such nonspecific countermeasures might be a defense against currently unknown threats, such as emerging diseases or genetically engineered pathogens. Furthermore, such countermeasures are more likely to have other nonbiodefense-related applications. The Project BioShield does not exclude procuring such countermeasures; however, it does require that the presence of another commercial market be factored into the HHS Secretary's decision to purchase the countermeasure. HHS has stated its interest in using Project BioShield to acquire new broad spectrum countermeasures. However, Project BioShield contracts to date have specifically targeted individual threat agents, a strategy commonly described as "one bug, one drug." Congress may decide that HHS needs further guidance or authorities to encourage the development and acquisition of new broad spectrum countermeasures.

Many potential chemical, biological, radiological, and nuclear (CBRN) terrorism agents lack available countermeasures. In 2003, President Bush proposed Project BioShield to address this need. The Project BioShield Act became law in July 2004 (P.L. 108-276). This law has three main provisions: (1) relaxing regulatory requirements for some CBRN terrorism-related spending, including hiring and awarding research grants; (2) guaranteeing a federal government market for new CBRN medical countermeasures; and (3) permitting emergency use of unapproved countermeasures. The Department of Health and Human Services (HHS) has used each of these authorities. The HHS used expedited review authorities to approve grants relating to developing treatments for radiation exposure and used the authority to guarantee a government market to obligate approximately $2 billion to acquire countermeasures against anthrax, botulism, radiation, and smallpox. The HHS has also employed the emergency use authority several times, including allowing young children with H1N1 "swine" influenza to receive specific antiviral drugs. The Department of Homeland Security (DHS) Appropriations Act, 2004 (P.L. 108-90) advance-appropriated $5.593 billion for FY2004 to FY2013 for Project BioShield. Subsequent Congresses have removed approximately 8% of the advance appropriation through rescissions and transfers to other accounts. In FY2004 and FY2005, Congress removed a total of approximately $25 million through rescissions. In the Omnibus Appropriations Act, 2009 (P.L. 111-8), Congress transferred $412 million to other programs supporting countermeasure advanced research and development and pandemic influenza preparedness and response. For FY2010, President Obama has proposed transferring an additional $305 million to support countermeasure advanced research and development and transferring the account from DHS to HHS. The Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act, 2010 (H.R. 3293) would make both these requested transfers. This legislation would also make a transfer that was not in the President's request: $500 million out of the Project BioShield account to support basic research in HHS. Since passing the Project BioShield Act, subsequent Congresses have considered additional measures to further encourage countermeasure development. The 109th Congress passed the Pandemic and All-Hazard Preparedness Act (P.L. 109-417) which created the Biomedical Advanced Research and Development Authority (BARDA) in HHS. Amongst other duties, this office oversees all of HHS' Project BioShield activities. The Pandemic and All-Hazard Preparedness Act also modified the Project BioShield procurement process. Questions remain regarding whether these changes have sufficiently improved countermeasure development and procurement. The 111th Congress faces several challenging policy issues. Primary among them is assessing whether Project BioShield is successfully encouraging medical countermeasure development. A second issue is whether to allow additional diversions of the Project BioShield advance appropriation, a key element of the government's market guarantee, to support other activities. A third is whether to broaden Project BioShield's mandate beyond CBRN countermeasures in the face of other threats such as pandemic influenza.

T he Animal Welfare Act (AWA; 7 U.S.C. 2131 et seq. ) is intended to ensure the humane treatment of animals that are intended for research, bred for commercial sale, exhibited to the public, or commercially transported. Under the AWA, businesses and others with animals covered by the law must be licensed or registered, and they must adhere to minimum standards of care. Farm animals are among those not covered by the act, which nonetheless provides a broad set of statutory protections for animals. The law was first passed in 1966 following several years of lobbying by animal welfare organizations and growing public outcry over allegations that large numbers of pets were being "dognapped" for sale to medical research laboratories. Congress amended the original law in 1970, 1976, 1985, 1990, and 2002. These amendments generally were intended to expand the scope of the AWA or to clarify various provisions. The U.S. Department of Agriculture's (USDA's) Animal and Plant Health Inspection Service (APHIS) administers the AWA. The House and Senate Agriculture Committees have exercised primary legislative jurisdiction over the act and its amendments. The AWA applies to any live or dead dog, cat, nonhuman primate, guinea pig, hamster, rabbit, or other warm-blooded animal determined by the Secretary of Agriculture to be for research or exhibition, or used as a pet. The AWA also excluded birds, rats, and mice bred for research; horses not used for research; and other farm animals used in the production of food and fiber. Retail pet facilities were not covered, unless they sold wild or exotic animals. Cold-blooded animals like fish and reptiles also were excluded from coverage. In 2002, an amendment to the AWA changed the definition of "animal" to include birds, rats, and mice. However, APHIS has yet to promulgate a rule to implement this change in the definition. As of late 2015, APHIS stated that it is moving forward with a final rule, but has not stated a timeline for its publication. Generally, animal dealers and exhibitors must obtain a license, for which an annual fee is charged. APHIS does not issue a license until it inspects the facility and finds it to be in full compliance with its regulations. If a facility loses its license, it cannot continue its regulated activity. Those who conduct research, and general carriers that transport regulated animals, do not need a license but must still register with APHIS and undergo periodic inspections. Specific details follow. Dealers , including pet and laboratory animal breeders and brokers, auction operators, and anyone who sells exotic or wild animals, or dead animals or their parts, must have an APHIS license for that activity. So-called Class A licensees are breeders who deal only in animals they breed and raise; all others are called Class B licensees. Exempt from the law and regulations are retail pet stores, those who sell pets directly to pet owners, hobby breeders, animal shelters, and boarding kennels. Exhibitors must be licensed by APHIS as such. These so-called Class C licensees include zoos, marine mammal shows, circuses, carnivals, and promotional and educational exhibits. The law and regulations exempt agricultural shows and fairs, horse shows, rodeos, pet shows, game preserves, hunting events, and private collectors who do not exhibit, among others. Animal transporters must be registered, including general carriers (e.g., airlines, railroads, and truckers). Businesses that contract to transport animals for compensation are considered dealers and must have licenses. Research facilities must be registered. They include state and local government-run research institutions, drug firms, universities, diagnostic laboratories, and facilities that study marine mammals. Federal facilities, elementary and secondary schools, and agricultural research institutions are among those exempt from registration. Animal fighting is prohibited by the AWA. The ban includes dogfights and bear and raccoon baiting; sponsors and exhibitors are subject to penalties. The AWA also has banned bird fights, except in the states where they are not prohibited by state law (namely Louisiana and New Mexico), and the sponsor or exhibitor was unaware that the transaction had occurred in interstate commerce. Under provisions of the 2014 farm bill, spectators at animal fighting venues are now in violation of the AWA. Retail pet stores were originally exempt from AWA licensure. Over the years, selling animals sight-un seen (often over the Internet) raised concerns about humane treatment of these unregulated retail sales. In September 2013, APHIS announced a regulatory change to redefine a retail pet store to mean a place where a buyer could personally observe the animal prior to purchase. Other retail outlets now require licensure and inspection under AWA. Retail pet stores that sell animals in face-to-face transactions remain exempt from AWA licensure. The regulation further exempts anyone selling animals (except wild or exotic animals) that derives no more than $500 gross income from the sale of such animals. The rule would also increase from three to four the number of breeding female dogs or cats, and/or small exotic or wild mammals, that a person may maintain on premises and remain exempt from AWA licensing and inspection. All licensed and registered entities must comply with USDA-APHIS regulations, including recordkeeping and published standards of care. These standards deal with humane handling, shelter, space requirements, feeding, watering, sanitation, ventilation, veterinary care, and transport. (AWA regulations are found at 9 C.F.R. SS1.1 et seq. ) APHIS's Animal Care (AC) program oversees implementation of the AWA. For 2015, AC had an annual budget of approximately $28 million. AC officials make unannounced inspections of registered and licensed facilities to ensure compliance with all rules. Under the AWA, research facilities are to be inspected at least annually. Federal research institutions are exempt from AWA licensing and inspection. Inspection frequency for other AWA-regulated facilities is based on risk; for example, moderate-risk facilities are to be visited about once yearly. APHIS inspectors also conduct searches to identify unlicensed or unregistered facilities. Failure to correct deficiencies can result in confiscation of animals, fines, cease-and-desist orders, or license suspensions. In 2010, USDA's Office of the Inspector General (OIG) released an audit of AC's investigations of large-scale dog dealers (i.e., breeders and brokers) that failed to provide humane treatment for the animals under their care. In a previous audit of laboratory animals, the OIG found that AC did not aggressively pursue enforcement actions against violators of AWA. The May 2010 audit determined that (1) AC's enforcement process was ineffective against dealers with repeated violations; (2) APHIS misused its guidelines to lower penalties for AWA violators; and (3) some large breeders circumvented AWA by selling animals over the Internet. APHIS concurred with the OIG's findings and implemented 13 of the 14 recommendations, including a change in the definition of retail pet store to no longer exempt retail pet stores that were not selling animals in face-to-face transactions. Although long known as the Animal Welfare Act, the original law was passed simply as P.L. 89-544, and referred to as the "Laboratory Animal Welfare Act" of August 24, 1966. The law requires dealers in dogs and cats for research purposes to obtain a USDA license and to abide by USDA-set humane treatment requirements. It also requires a research facility to register with USDA only if it uses dogs or cats and either (1) purchases them in interstate commerce or (2) receives federal research money. The law authorizes the Secretary of Agriculture to set humane handling standards for guinea pigs, nonhuman primates, rabbits, and hamsters as well as dogs and cats--but only dealers and research facilities with dogs and cats are subject to these standards. Farmers and pet owners are among those exempted from the law. Other provisions spell out recordkeeping requirements, enforcement authorities and penalties for noncompliance. P.L. 91-579 renamed the "Laboratory Animal Welfare Act" the Animal Welfare Act and expanded animal coverage to include all warm-blooded animals determined by the Secretary to be used for experimentation or exhibition, except horses not used in research and farm animals used in food and fiber research. The 1970 law also incorporated exhibitors; defined research facilities; and exempted from coverage retail pet stores, agricultural fairs, rodeos, dog and cat shows. The 1976 amendments ( P.L. 94-279 ) added Section 26 to the AWA. Section 26 is directed at animal fighting and made illegal (1) sponsoring or exhibiting an animal in an animal fighting venture; (2) interstate shipment of animals to be used in animal fighting ventures; and (3) use of U.S. mails or communication systems to advertise or promote animal fighting ventures. Section 26 contained its own definitions, authority for investigations, and penalty provisions. The 1976 amendments also clarified and expanded previous regulations covering animal transport and commerce. Hunting animals are generally exempt. The amendments passed over the objections of USDA and the U.S. Attorney General, who believed that animal fighting was a state and local law enforcement issue. These amendments were passed as Title XVII, Subtitle F, of the Food Security Act of 1985 ( P.L. 99-198 , the omnibus 1985 farm bill). The law directs the Secretary to set new minimum standards of care for handling, housing, feeding, water, sanitation, ventilation, and so forth. One new provision that was highly contentious at the time singles out two species by requiring standards for the exercise of dogs and the psychological well-being of primates. The law provides that research facilities must have procedures that minimize pain and stress to the animals, and describes practices considered to be painful. Each research facility must establish an Institutional Animal Care and Use Committee to review research proposals that involve animal experimentation and to provide oversight of laboratories. The amendments also increase civil and criminal penalties for AWA violations, and establish an animal welfare information center at USDA's National Agricultural Library. Section 2503 of the Food Agriculture, Conservation, and Trade Act of 1990 ( P.L. 101-624 , the 1990 farm bill) extended pet protections. It required public and private animal shelters and research facilities that acquire dogs and cats to hold them for at least five days to allow time for either adoption or recovery by the original owner before they could be sold to a dealer. Dealers are prohibited from selling dogs and cats they did not breed unless they provide certified records on, among other things, the animals' origin. Other new recordkeeping requirements also were specified. Title X, Subtitle D, of the Farm Security and Rural Investment Act of 2002 ( P.L. 107-171 , the omnibus 2002 farm bill) makes it a misdemeanor to ship a bird in interstate commerce for fighting purposes, or to sponsor or exhibit any bird in a fight with knowledge that any of the birds were so shipped (even fights within a state where the practice is permitted). The law also increases the maximum financial penalty for a violation (a misdemeanor) of the anti-fighting provisions of the AWA, to $15,000 from $5,000. The 2002 law also explicitly excludes from AWA coverage birds, rats, and mice bred for research purposes. The Secretary of Agriculture had previously published regulations excluding these animals from coverage, which the Animal Legal Defense Fund challenged in federal court. When USDA agreed to settle the case by essentially reversing its regulations, Congress (in P.L. 106-387 , the FY2001 agriculture appropriation bill) blocked the action by prohibiting funds for such a rule change. The 2002 law made the exclusion a permanent part of the AWA. The 2002 farm bill also amended the AWA's definition of "animal" to include rats, mice, and birds as animals covered under the AWA. Birds, rats, and mice bred for use in research were excluded from the amended definition. APHIS has, as of late 2015, not published its final rule implementing the definition change. P.L. 110-22 , signed into law May 3, 2007, made a violation of the animal fighting provisions of the AWA a felony punishable by up to three years in prison, under Title 18 of the U.S. Code (Crimes and Criminal Procedure). The law, based on companion bills ( H.R. 137 / S. 261 ), also made it a felony to trade, in interstate and foreign commerce, knives, gaffs, or other sharp objects designed for use in animal fighting, or to use the Postal Service or other "interstate instrumentality to trade in such devices, or to promote an animal fighting venture." Proponents of various animal fighting bills had observed that in 2001, the House and Senate approved strong animal fighting sanctions in their respective farm bills, but that conferees on the final 2002 farm bill ( P.L. 107-171 ) removed the felony language. Proponents argued that stronger deterrents were needed because animal fighting is a brutal, inhumane practice closely associated with criminal activity, endangers children where aggressive dogs are being reared, and may contribute to the spread of avian influenza in the case of live birds. Opponents countered that such measures would violate provisions in the U.S. Constitution that protect states' rights, including the Commerce Clause, and that recognize private citizens' right to travel for economic reasons. Other opponents argued that completely banning and/or stiffening penalties for all animal fighting activities would drive them further underground, undermining efforts to protect animals and the public from any disease problems created by such activities. The 2008 farm bill ( P.L. 110-246 ) contained a number of amendments to the AWA. One section (SS14207) strengthened further the definitions of, and penalties for, activities related to animal fighting. For example, the amendments increased maximum imprisonment to five years from three years. The animal fighting provision was based on language in S. 1880 and H.R. 3219 (110 th Congress)--bills introduced shortly after the July 17, 2007, indictment of National Football League quarterback Michael Vick on charges related to dog fighting--to more explicitly ban various dog fighting activities, and to define the term. The 2008 farm bill also required regulations prohibiting importation for resale of dogs unless they were at least six months of age, in good health, and had all necessary vaccinations. There were exemptions for research, veterinary treatment, or imports into Hawaii from certain countries. Another section (SS14214) increased the maximum penalty for a general violation of the act from the current $2,500 to $10,000 for each violation. The regulations require that live dogs imported into the United States for resale, research, or veterinary treatment be accompanied by an import permit issued by APHIS. APHIS published its proposed rule in September 2011, and the final rule was published August 2013. While animal fighting or hosting an animal fighting exhibit were prohibited under P.L. 110-22 , attendance at animal fighting exhibitions was not. The Animal Fighting Spectator Prohibition Act ( H.R. 366 , S. 666 ) was reintroduced in the 113 th Congress. The bill would have imposed criminal penalties for attendance at animal fighting exhibitions, or for causing a minor to attend an animal fight. This prohibition on attendance was added to both the 2013 House ( H.R. 1947 ) and Senate ( S. 954 ) farm bills and included in the final bill (Section 112308, P.L. 113-79 ). The 2014 farm bill also establishes a new "de minimis" standard for the AWA. The "de minimis" provision apples to the entire AWA and gives APHIS new discretionary authority to exclude licensing and registration requirements for animal dealers and exhibitors dealers "if the size of the business is determined by the Secretary to be 'de minimis.'" The "de minimis" provision will likely allow a large number of current dealers and exhibitors to avoid APHIS registration and licensing who otherwise would, without the "de minimis" standard, be required to have an AWA license. As of late 2015, the "de minimis" is still in the APHIS clearance process. The Horse Protection Act (HPA), enacted in 1970 (P.L. 91-540), prohibits the showing, sale, auction, exhibition, or transport of sored horses. Soring is a practice primarily used in the training of Tennessee Walking Horses, racking horses, and related breeds to accentuate the horse's gait. Horse soring is accomplished by several techniques, including the application of chemicals to irritate or blister a horse's forelegs, or the use of various mechanical devices. APHIS is responsible for administrating the HPA and for conducting inspections at horse shows, exhibitions, and auctions. In 1976, the Horse Protection Act Amendments were enacted ( P.L. 94-360 ) in response to APHIS's weak enforcement of the HPA. The act established what became the Designated Qualified Person (DQP) Program, an organizational structure that organizes inspections at horse events. The DQP program was implemented in 1979 (9 C.F.R. 11.7). A DQP is a person who, under the provisions of Section 4 of the HPA, is appointed and delegated authority by the management of a horse show or sale to detect horses that are sored. DQPs are USDA-accredited veterinarians with equine experience, or they are farriers, horse trainers, or other who have been formally trained and licensed by USDA-certified Horse Industry Organization (HIO). In 2010, USDA's Office of the Inspector General issued a report on enforcement of the HPA. The report revealed serious shortcomings in the inspection process, with lax enforcement, repeat offenders receiving little or no sanctions, and poor documentation of inspections and sanctions. In particular, the report found that the industry's self-regulation system had not been adequate to ensure that these horses were not being abused. In the wake of this report, the Animal and Plant Health Inspection Service agreed with the analysis and the need to put into place better efforts to enforce the regulations of the HPA. The Prevent All Soring Tactics (PAST) Act ( H.R. 3268 / S. 1121 ) would amend the HPA to ban "action devices" on horses, modify the existing DQP inspection system, and impose new penalties on HPA violations. The "action devices," like other soring techniques, produce a more pronounced gait in a Tennessee walking horse, a racking horse, or a spotted saddle horse. The amendments apply only these breeds and apply to the sale, showing, or transportation of such horses. The PAST Act would also end the horse industry's ability to self-police with industry-selected inspectors by creating a new licensing process requiring APHIS to appoint inspectors for HPA-regulated activities and venues. Hiring inspectors would be the responsibility of the show, sale, or auction. The definition of "event management" would be expanded to include "sponsoring organizations" and "event managers." This expansion would make them potentially liable for HPA violations. The bill would also increase the maximum fine for HPA violations from $3,000 to $5,000 as well as raise maximum prison sentence to three years. Trainers with three violations could get a lifetime ban from participating in shows, exhibitions, or auctions. These changes would be applicable to all horse breeds subject to HPA regulation. Animal welfare organizations have been active supporters of the bills (e.g., American Horse Protection Association, Humane Society of the United States, American Horse Council, and Association for the Prevention of Cruelty to Animals, Animal Welfare Institute, American Association of Equine Practitioners). Horse breeder associations have generally opposed the bill or major portions of the proposed amendments (e.g., Tennessee Walking Horse Breeders and Exhibitors Association, Tennessee Walking Show Horse Organization, Racking Horse Association of America, National Spotted Horse Breeders and Exhibitors Association). Another bill introduced in the 114 th Congress addresses some of the major concerns of those opposed to the PAST Act. The Horse Protection Amendments Act of 2015 ( H.R. 4105 / S. 1161 ) would establish how inspectors are to be appointed and the manner of conducting inspections. The bill would direct USDA to establish the Horse Industry Organization governed by a nine-member board. This board would have two members appointed by the Commissioner of Agriculture for Tennessee and two members appointed by the Commissioner of Agriculture for Kentucky. These members would serve a term of four years. Two additional members of this board would represent the Tennessee Walking Horse Industry and be appointed by the two Commissioners of Agriculture. These representatives would serve a term of three years. The remaining three members of the board would be appointed by the other six members. This proposed board would establish requirements to appoint individuals to conduct inspections of horses. USDA would certify the Horse Industry Organization for purposes of licensing inspectors. These individuals would be "qualified to detect and diagnose a horse which is sore." To address potential conflicts of interest by inspectors, the board would prohibit any potential inspector from having employment with, or providing services to any show manager, trainer, owner, or exhibitor of Tennessee Walking Horses, Spotted Saddle Horses, or Racking Horses. Nor could a potential inspector train, exhibit, show, breed, or sell Tennessee Walkers, Racking Horses, or Spotted Saddle Horses. In January 2015, the New York Times (NYT) published an expose of research activities at the U.S. Meat Animal Research Center located near Clay Center, Nebraska. The center is a USDA facility overseen by USDA's Agricultural Research Service (ARS). The news article described "unsanitary housing and brutal treatment of pigs; violent forced mating between bulls and cows; and hormonal experiments conducted on sheep," among other animal welfare issues. The research practices reported in the NYT article raised significant public concern about animal welfare standards at the center. It prompted the Secretary of Agriculture to order USDA staff to deliver an updated Animal Welfare Strategy plan for the center and other ARS laboratories within 60 days. The Secretary also announced the appointment of an animal welfare ombudsman to coordinate USDA's review of animal welfare at the center and other ARS laboratories. The AWA currently excludes farm animals from AWA coverage, and also excludes federal research institutions from AWA registration and inspection. H.R. 746 / S. 388 (the Animal Welfare in Agricultural Research Endeavors Act) would amend the AWA to require that farm animals and federal laboratories using farm animals be subject to AWA regulations. The bill was referred to the House Agriculture Committee, but no further action was taken as of late 2015. Critics have long asserted that the limited number of Class B dealers who still collect dogs and cats from random sources, including "free to a good home" classified ads, auctions, and flea markets, are more concerned about profit than animal welfare. Others have contended that passage would leave no viable sources of random source dogs and cats, which are needed by medical and veterinary researchers because of their genetic and age diversity, and that the majority of Class B dealers are in compliance with the AWA. A National Research Council (NRC) report on the issue published in May 2009 concluded that random source dogs and cats may be desirable and necessary for certain types of biomedical research but that "it is not necessary to acquire them through Class B dealers, as there are adequate numbers of such animals from shelters and other sources." The NRC noted that of the more than 1,000 Class B dealers in the United States, at last count only 11 of them acquired and sold live dogs and cats for research and teaching. The report's conclusions and recommendations applied only to these 11 dealers that may supply such animals for research funded by the National Institutes of Health. The report discussed in more detail the advantages and disadvantages of random source dogs and cats, which constitute less than 1% of all laboratory animals; evaluates the Class B dealer system, under which (it found) animal standards of care appear to vary greatly; and offers alternative options for obtaining random source animals. These alternatives include partnering with pet owners, veterinarians, breeders, and others; obtaining animals from Class A dealers and through donations from small breeders and hobby clubs; and acquiring animals directly from pounds and shelters, among others. The Pet Safety and Protection Act was reintroduced in the 114 th Congress as H.R. 2849 and would amend the AWA to limit the sources of random source dogs and cats to a licensed dealer (under Section 3 of the AWA) who has bred and raised the animal; a publicly owned or operated pound or shelter that meets certain qualifications; someone donating the dog or cat that bred and raised the animal or owned it for not less than one year; and research facilities licensed by the Secretary of Agriculture. The bill also would subject violators to a fine of $1,000 per violation, over and above any other applicable penalties. The bill was referred to committee, and no further action was taken as of late 2015. The Enforcement Transparency Act would require the Secretary of Agriculture to publish guidelines on USDA's website relating to the calculation of civil fines for violations under the AWA. The guidelines would require quarterly updates and the updates published in the Federal Register. Disasters can leave animals as vulnerable as humans. Past natural disasters such as Hurricanes Katrina and Sandy highlighted the need for planning to minimize the effects of such disasters. The Animal Emergency Planning Act would amend the AWA to require research facilities, animal dealers, handlers, exhibitors, and carriers to develop and document a contingency plan to provide for the humane handling, treatment, housing, and care of animals in the event of an emergency or disaster. Humane care and handling of marine mammals are also covered under AWA regulation. Following widespread dissemination in 2015 of a film about captive orcas at Sea World ("Black Fish"), media and public attention to captive marine mammals (e.g., porpoises, whales, orcas) increased significantly. The Orca Responsibility and Care Advancement Act would amend both the AWA and the Marine Mammal Protection Act of 1972 to prohibit the capture, importation, and exportation of orcas for purposes of public display. The bill would also amend the AWA to prohibit the breeding of orcas for exhibition purposes. Animal welfare activists have argued that hauling horses in double-decker trailers is dangerous and inhumane. Because double-deckers were designed for hauling cattle and hogs, the trailers do not provide sufficient headroom for horses to stand up straight. S. 946 and H.R. 1282 would amend the Transportation title (49 U.S.C. 80502) to prohibit interstate transportation of horses in motor vehicles containing two or more levels stacked on top of one another. The National Wildlife Refuge System, managed by the Fish and Wildlife Service, permits wildlife trapping in over half the system's refuges. Body-gripping traps such as snares and steel-jaw leg-hold traps can kill and maim non-target animals. Even when trapping target animals, the traps are considered to be cruel and inhumane by animal welfare groups. The Refuge from Cruel Trapping Act would amend the National Wildlife Refuge System Act of 1966 (16 U.S.C. 668dd et seq.) by banning the possession or use of body-gripping traps in wildlife refuges, and impose civil fines and forfeiture for violations. In March 2015, APHIS filed public notices in the Federal Register regarding the agency's consideration of two petitions they had received that could require changes to existing AWA regulations. The first petition, received in 2013, was from the Physicians Committee for Responsible Medicine. The petition requests that APHIS initiate rulemaking to add a definition of the term "alternatives" in order to define what a primary investigator at a facility using animals as research models is required to consider in lieu of a procedure that may cause more than momentary or slight pain or distress to an animal. The petition further requests that APHIS amend the existing definition of "painful procedure" to codify long-standing APHIS policy that a procedure should be considered painful if it may cause more than momentary or slight pain or distress to the animal. APHIS is currently considering public comments and supporting documents received by May 29, 2015. The second petition, published May 1, 2015, concerns the social and psychological well-being of primates in captivity. Following a decision by the National Institutes of Health in 2013 to retire most of its chimpanzees used in biomedical research, and to house them in sanctuaries suitable to their natural social groups and behaviors, animal welfare activists turned their attention to the estimated 110,000 other primates in research laboratories. These primates, like chimpanzees, are also highly social animals. The New England Anti-Vivisection Society filed a petition with APHIS asking for specific rules on the care of all primates regarding their social and psychological well-being. APHIS took public comments until June 30, 2015, and is currently considering them.

In 1966, Congress passed the Laboratory Animal Welfare Act (P.L. 89-54) to prevent pets from being stolen for sale to research laboratories, and to regulate the humane care and handling of dogs, cats, and other laboratory animals. Farm animals are not covered by the AWA. The law was amended in 1970 (P.L. 91-579), changing the name to the Animal Welfare Act (AWA). The AWA is administered by the U.S. Department of Agriculture's Animal and Plant Health Inspection Service (APHIS). Congress periodically amends the act to strengthen enforcement, expand coverage to more animals and activities, or curtail practices viewed as cruel (e.g., animal fighting), among other things. Congress also addresses animal welfare issues through other legislation (e.g., the Horse Protection Act), but the AWA remains the central federal statute governing the humane care and handling of mammals, including marine mammals. Animal welfare bills introduced in the 114th Congress include the Pet Safety and Protection Act (H.R. 2849), which would amend the AWA to ensure that all cats and dogs used in research were properly obtained. H.R. 3136, the Enforcement Transparency Act of 2015, would amend the AWA to require USDA to issue guidelines relating to civil fines imposed for violating the AWA. H.R. 3193, the Animal Emergency Planning Act of 2015, would amend the AWA to require that research facilities, animal dealers, exhibitors, handlers, and carriers under the AWA, develop and implement emergency contingency plans for animals in their charge. The Orca Responsibility and Care Advancement Act of 2015 (H.R. 4019) would amend both the AWA and the Marine Mammal Protection Act of 1972 to prohibit the capture, importation, and exportation of orcas for public display. The bill would amend the AWA to prohibit the breeding of orcas for exhibition purposes. The Safe Transport for Horses Act (S. 946) and the Horse Transportation Safety Act (H.R. 1282) would amend the Transportation title (49 U.S.C. 80502) to prohibit the interstate transportation of horses in motor vehicles containing two or more levels stacked on top of one another. The Refuge from Cruel Trapping Act (S. 1081/H.R. 2016) would ban body-gripping traps from National Wildlife Refuges. Each of these bills has been referred to committees, but no further action was taken as of late 2015. Following publication of USDA Inspector General's report on the inadequacy of the current horse soring inspection system, legislation to amend the Horse Protection Act (P.L. 91-540) was introduced. H.R. 3268/S. 1121, the Prevent All Soring Techniques (PAST) Act, would amend the current soring inspection system to place inspections under APHIS control rather than under the horse industry as it is currently. The Horse Protection Amendments Act (S. 1161) would also modify the inspection system, but retain inspection control within the horse industry. Also introduced in the 114th Congress were bills that would end the exemption of farm animals from regulation under the AWA, and bring federal research under AWA registration and inspection. H.R. 746/S. 388, the Animal Welfare in Agricultural Research Endeavors Act, is a response to a widely reviewed article in the New York Times on the research activities at the Meat Animal Research Center, a USDA Agricultural Research Serviced facility. Among APHIS regulatory actions in 2015 concerning the AWA, APHIS announced in May 2015 that it was seeking public comment on a petition from several animal welfare groups asking for specific rules on the care of all primates regarding their social and psychological well-being. APHIS also announced receiving a petition in 2013 from the Physicians Committee for Responsible Medicine to amend the AWA to define alternatives to procedures that may cause pain or distress to animals and to establish standards to consider these alternatives. APHIS is currently considering public comments that it received regarding these two petitions.

The Financial Services and General Government (FSGG) appropriations bill includes funding for the Department of the Treasury (Title I), the Executive Office of the President (EOP, Title II), the judiciary (Title III), the D istrict of Columbia (Title IV), and more than two dozen independent agencies (Title V). The bill typically funds mandatory retirement accounts in Title VI, which also contains additional general provisions applying to the funding provided agencies funds through the FSGG bill. Title VII contains general provisions applying government-wide. The House and Senate FSGG bills fund the same agencies, with one exception. The Commodities and Futures Trading Commission (CFTC) is funded through the Agriculture appropriations bill in the House and the FSGG bill in the Senate. This structure has existed in its current form since the 2007 reorganization of the House and Senate Committees on Appropriations. Although financial services are a major focus of the bills, FSGG appropriations bills do not include many financial regulatory agencies, which are instead funded outside of the appropriations process. On February 2, 2015, President Obama submitted his FY2016 budget request, which sought a total of $46.8 billion for agencies funded through the FSGG appropriations bill, including $322 million for the Commodity Futures Trading Commission (CFTC). On July 9, 2015, the House Committee on Appropriations (hereinafter "the House committee") reported the Financial Services and General Government Appropriations Act, 2016 ( H.R. 2995 , H.Rept. 114-194 ). H.R. 2995 as reported would have provided $41.6 billion for agencies funded through the House FSGG Appropriations Subcommittee bill. The House FY2016 Agriculture appropriations bill ( H.R. 3049 , H.Rept. 114-205 ) would have provided $245 million for the CFTC. Total FY2016 funding in the two House bills would have been $41.8 billion, about $4.9 billion below the President's FY2016 request. On July 30, 2015, the Senate Committee on Appropriations reported the Financial Services and General Government Act, 2016 ( S. 1910 , S.Rept. 114-97 ). S. 1910 would have appropriated $42.1 billion for FY2016, about $4.7 billion below the President's request. Neither FSGG appropriations bill was considered on the floor prior to the end of FY2015. On September 30, 2015, H.R. 719 , a continuing resolution (CR) for FY2016, was signed into law by the President ( P.L. 114-53 ). The CR generally provided budget authority for ongoing projects and activities at the rate they were funded during FY2015. Most projects and activities funded in the P.L. 114-53 were subject to an across-the-board decrease of less than 1% (0.2108%). The FSGG section of the CR also included a small number of provisions that designate exceptions to the formula and purpose for which any referenced funding is extended (referred to as anomalies ). The FSGG anomalies included in P.L. 114-53 were as follows: Section 124--District of Columbia Local Funds . This section provided the authority for the District of Columbia to expend local funds (from local tax revenues and other non-federal sources) for programs and activities funded in FY2015 at the rate set forth in the DC FY2016 Budget Request Act of 2015. Section 125--Recovery Board : Section 125 provided that no funds be included in the CR for the Recovery Accountability and Transparency Board, which was established by the American Recovery and Reinvestment Act (ARRA) to provide oversight and transparency in the expenditure of ARRA funds. The board was funded through the Financial Services and General Government appropriations bill for the first time in FY2012. Before then, the board was funded by now-exhausted ARRA appropriations. The board received appropriations of $20 million for FY2014 and $18 million for FY2015 but was slated to sunset on September 30, 2015. Section 126--Small Business Administration : This provision authorizes the apportionment of appropriations that are provided by the CR up to the rate that is necessary to allow the Small Business Administration (SBA) to continue issuing general business loans under the 7(a) loan guaranty program if "increased demand for commitments" exceeds the program's fiscal year authorization ceiling, which is currently $23.5 billion. On July 23, 2015, for just the second time since the agency began operations in 1953, the SBA suspended the consideration of 7(a) loan guaranty program applications because the demand for 7(a) loans was projected to exceed the program's then-$18.75 billion FY2015 authorization ceiling. The SBA resumed issuing 7(a) loans on July 28, 2015, following enactment of the Veterans Entrepreneurship Act of 2015, which increased the 7(a) loan guaranty program's FY2015 authorization ceiling to $23.5 billion. Previous CRs had increased the 7(a) loan program's authorization ceiling to a specified amount to reduce the likelihood that the demand for commitments would exceed the ceiling. For example, the Continuing Appropriations Resolution, 2015 ( P.L. 113-164 ) increased the ceiling from $17.5 billion to $18.5 billion, and the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ) increased the ceiling to $18.75 billion. This appears to be the first time that a CR anomaly has not specified a ceiling amount. Section 127--Internet Tax Freedom Act : Section 127 extended a moratorium preventing state and local governments from taxing Internet access or imposing multiple or discriminatory taxes on electronic commerce. The moratorium was originally enacted as the Internet Tax Freedom Act (ITFA) in 1998. The 113 th Congress enacted multiple extensions of ITFA. The Internet tax moratorium and grandfather clause were set to expire on November 1, 2014, but the Continuing Appropriations Act, 2014 ( P.L. 113-46 ) extended them through December 11, 2014. P.L. 113-235 then further extended these provisions through September 30, 2015. The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), discussed further below, made the IFTA moratorium permanent. To avoid a lapse in annual appropriations prior to the expiration of continuing appropriations, two more continuing resolutions were enacted. P.L. 114-96 continued funding through December 16, 2015, and P.L. 114-100 continued funding through December 22, 2015, under the same provisions established in the first CR. The Consolidated Appropriations Act, 2016 ( P.L. 114-113 / H.R. 2029 ) was passed by the House and Senate and signed by the President on December 18, 2015. The FSGG appropriations were included as Division E, whereas the CFTC was funded by the Agriculture appropriations in Division A. The total provided for FSGG agencies for FY2016, including the CFTC, was $44.8 billion, about $2 billion below the President's request. Division O of P.L. 114-113 also included some provisions relating to financial regulators that had appeared in the Senate FSGG bill. Table 1 reflects the status of FSGG appropriations measures at key points in the appropriations process. Table 2 lists FSGG agencies' enacted amounts for FY2015, the President's FY2016 request, the FY2016 amounts from H.R. 2995 as reported by the House Committee on Appropriations, the FY2016 amounts from S. 1910 as reported by the Senate Committee on Appropriations, and the enacted amounts from P.L. 114-113 . Although financial services are a focus of the FSGG bill, the bill does not actually include funding for the regulation of much of the financial services industry. Financial services as an industry is often subdivided into banking, insurance, and securities. Federal regulation of the banking industry is divided among the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of Comptroller of the Currency (OCC), and the Bureau of Consumer Financial Protection (generally known as the Consumer Financial Protection Bureau, or CFPB). In addition, credit unions, which operate similarly to many banks, are regulated by the National Credit Union Administration (NCUA). None of these agencies receives its primary funding through the appropriations process, with only the FDIC inspector general and a small program operated by the NCUA currently funded in the FSGG bill. Insurance generally is regulated at the state level with some oversight at the holding company level by the Federal Reserve. There is a relatively small Federal Insurance Office (FIO) inside of the Treasury, which is funded through the Departmental Offices account, but FIO has no regulatory authority. Federal securities regulation is divided between the SEC and the CFTC, both of which are funded through appropriations. The CFTC funding is a relatively straightforward appropriation from the general fund, whereas the SEC funding is provided by the FSGG bill, but then offset through fees collected by the SEC. Although funding for many financial regulatory agencies may not be provided by the FSGG bill, legislative provisions that would affect some of these agencies have often been included. Both House and Senate bills would have changed the funding procedure for the CFPB, with future funding to be provided by congressional appropriations rather than the current situation in which primary CFPB funding is provided through unappropriated funds transferred from the Federal Reserve. The Senate bill also included the full text of S. 1484 , a broad financial regulatory reform bill that was previously reported by the Senate Committee on Banking, Housing, and Urban Affairs. Many provisions of S. 1484 amend the Dodd-Frank Act and some have proven controversial in the past. P.L. 114-113 did not include the provisions relating to CFPB funding from the committee bills and included a relatively small number of the provisions relating to financial regulation from S. 1484 / S. 1910 . The House and Senate Committees on Appropriations reorganized their subcommittee structures in early 2007. Each chamber created a new Financial Services and General Government Subcommittee. In the House, the jurisdiction of the FSGG Subcommittee comprised primarily agencies that had been under the jurisdiction of the Subcommittee on Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies, commonly referred to as "TTHUD." In addition, the House FSGG Subcommittee was assigned four independent agencies that had been under the jurisdiction of the Science, State, Justice, Commerce, and Related Agencies Subcommittee: the Federal Communications Commission (FCC), the Federal Trade Commission (FTC), the Securities and Exchange Commission (SEC), and the Small Business Administration (SBA). In the Senate, the jurisdiction of the new FSGG Subcommittee was a combination of agencies from the jurisdiction of three previously existing subcommittees. The District of Columbia, which had its own subcommittee in the 109 th Congress, was placed under the purview of the FSGG Subcommittee, as were four independent agencies that had been under the jurisdiction of the Commerce, Justice, Science, and Related Agencies Subcommittee: the FCC, FTC, SEC, and SBA. In addition, most of the agencies that had been under the jurisdiction of the TTHUD Subcommittee were assigned to the FSGG Subcommittee. As a result of this reorganization, the House and Senate FSGG Subcommittees have nearly identical jurisdictions, except that the CFTC is under the jurisdiction of the FSGG Subcommittee in the Senate and the Agriculture Subcommittee in the House. Table 3 below lists various departments and agencies funded through FSGG appropriations and the names and contact information for the CRS expert(s) on these departments and agencies.

The Financial Services and General Government (FSGG) appropriations bill includes funding for the Department of the Treasury, the Executive Office of the President (EOP), the judiciary, the District of Columbia, and more than two dozen independent agencies. The House and Senate FSGG bills fund the same agencies, with one exception. The Commodities and Futures Trading Commission (CFTC) is funded through the Agriculture appropriations bill in the House and the FSGG bill in the Senate. This structure has existed since the 2007 reorganization of the House and Senate Committees on Appropriations. On February 2, 2015, President Obama submitted his FY2016 budget request. The request included a total of $46.8 billion for agencies funded through the FSGG appropriations bill, including $322 million for the CFTC. On July 9, 2015, the House Committee on Appropriations reported a Financial Services and General Government Appropriations Act, 2016 (H.R. 2995, H.Rept. 114-194). Total FY2016 funding in the reported bill would be $41.6 billion, with another $245 million for the CFTC included in the Agriculture appropriations bill (H.R. 3049, H.Rept. 114-205), which was reported on July 14, 2015. The combined total of $41.8 billion would be about $4.9 billion below the President's FY2016 request. On July 30, 2015, the Senate Committee on Appropriations reported the Financial Services and General Government Act, 2016 (S. 1910, S.Rept. 114-97). S. 1910 would appropriate $42.1 billion for FY2016, about $4.7 billion below the President's request. No full FY2016 FSGG appropriations bill was enacted prior to the beginning of the new fiscal year. In response, a number of continuing resolutions (CR) for FY2016, were enacted. P.L. 114-53 continued funding through December, 11, 2015; P.L. 114-96 continued funding through December 16, 2015; P.L. 114-100 continued funding through December 22, 2015. The CRs generally provided budget authority for ongoing projects and activities at the rate they were funded during FY2015. The Consolidated Appropriations Act, 2016 (P.L. 114-113/H.R. 2029) was passed by the House and Senate and signed by the President on December 18, 2015. The FSGG appropriations bill was included as Division E, whereas the CFTC was funded with the Agriculture appropriations in Division A. The total provided for FSGG agencies for FY2016, including the CFTC, was $44.8 billion, about $2 billion below the President's request. Although financial services are a major focus of the FSGG appropriations bills, these bills do not include many financial regulatory agencies, which are funded outside of the appropriations process. Both H.R. 2995 and S. 1910 included language that would have altered the appropriations status of the Consumer Financial Protection Bureau (CFPB), changing its primary funding source to the FSGG bill instead of unappropriated funds provided through the Federal Reserve. The Senate committee FSGG bill also included the text of S. 1484, a broad financial regulatory reform package that was previously reported by the Senate Banking Committee, but has not been considered by the full Senate. P.L. 114-113 did not change the funding structure of the CFPB, but did include some of the S. 1484 provisions in Division O.

The federal government has employed government corporations to achieve policy goals for over a century. Among Members of Congress, the executive branch, and the scholarly community, interest in the government corporation option, and variations on this class of agency, has increased in recent decades. In the typical contemporary Congress, several bills are introduced to establish government corporations. At the time of publication of this report, two bills had been introduced in the 112 th Congress to improve U.S. infrastructure by establishing government corporations-- H.R. 404 and S. 652 . Similarly, in the 111 th Congress, government corporations bills included ones that would have created an Indian Development Finance Corporation ( H.R. 1607 ), a Green Bank ( H.R. 1698 ), and a National Infrastructure Development Bank ( H.R. 2521 ). At least three factors may contribute to the interest in government corporations. First, the restrictive character of the federal budget encourages agencies to develop new sources of revenue (e.g., outsourcing services to the private sector and to other agencies) and to attempt to avoid increasing outlays. Second, experience suggests that it is politically easier for corporate bodies to be exempted by Congress from the federal government's general management laws (e.g., the Freedom of Information Act and employee compensation restrictions) than it is for traditional agencies. Finally, the corporate concept appears to many, correctly or otherwise, to be supportive of the "New Public Management" that emphasizes entrepreneurship, risk-taking, and private sector practices in federal administration. The continuing interest in the government corporation prompts questions as to their legal character, their utility vis-a-vis traditional agencies, and their limitations as units of governmental institutions. A government corporation is not always an the optimal administrative entity for achieving governance objectives. There are times when it may be an appropriate choice and times when it may not. Understanding the unique character of government management, based as it is upon tenets of public law, provides guidance in weighing these choices. What is a federal government corporation, and what are the essential characteristics of a government corporation? As defined in this report, a federal government corporation is an agency of the federal government, established by Congress to perform a public purpose, which provides a market-oriented product or service and is intended to produce revenue that meets or approximates its expenditures. By this definition, there are 17 entities that are government corporations. The U.S. Code does not provide a single definition of the term "government corporation." Title 5 of the U.S. Code defines a "government corporation" as "a corporation owned or controlled by the Government of the United States" (5 U.S.C. 103). Meanwhile, the Government Corporation Control Act ((GCCA) 31 U.S.C. 9101-10) states that the term "government corporation" means "a mixed-ownership Government corporation and a wholly-owned government corporation." It then lists 28 entities--some, like the Pennsylvania Avenue Development Corporation, now defunct--as being "government corporations" for the purposes of chapter 91 of Title 31. In addition to the enumeration of corporations provided in the GCCA, there have been several other listings of corporations available, each different and based upon the definition employed by the compiler. Corporations cover the spectrum from such large, well-known corporations as the United States Postal Service and the Federal Deposit Insurance Corporation to such small, low-visibility corporate bodies as the Federal Financing Bank in the Treasury Department and Federal Prison Industries (UNICOR) in the Justice Department. The number of federal corporations is in moderate flux. New corporations are established from time to time (e.g., the Valles Caldera Trust in 2000), and existent ones are dissolved (e.g., the Rural Telephone Bank in 2008). Government corporations should not be confused with quasi governmental entities, such as government-sponsored enterprises (GSEs). A GSE (e.g., Fannie Mae) is a privately owned, federally chartered financial institution with nationwide scope and lending powers that benefits from an implicit federal guarantee to enhance its ability to borrow money. GSEs are important institutions worthy of separate analysis, but they are not discussed, except in passing, in this report. Unlike government corporations, with GSEs and other quasi governmental entities, the legal and political lines of accountability can be ambiguous. In 1996, for instance, the Office of Personnel Management (OPM) created the United States Investigation Services Corporation as an employee stock-ownership plan (ESOP), an entry into the quasi government category that sparked debate regarding its status and authority. Historically, the federal government has been involved in few commercial enterprises. There were some early instances of the federal government participating in otherwise private corporate enterprises on a shared ownership basis, most notably the first and second Banks of the United States. This practice came into question, however, as a consequence of a Supreme Court ruling in 1819. From that time to today, the federal government has tended to avoid sharing ownership with private entities. The first time the federal government acquired a corporation outright occurred in 1903, when the Panama Railroad Company was purchased from the French Panama Canal Company. Since then, a number of corporate bodies have been established as part of the federal government, with growth in that number tending to come in spurts and generally in response to emergencies. The first large-scale use of the corporate option accompanied the mobilization for World War I. Later, the Depression of the 1930s fostered numerous corporations (e.g., the Reconstruction Finance Corporation, and the Tennessee Valley Authority). Finally, World War II prompted the establishment of additional federal corporations. After the passing of each of these emergencies, many of the corporations that dealt with them were abolished or absorbed into the permanent executive branch agencies. In 1945, partly in response to the proliferation of corporate bodies created for the war effort, Congress passed the Government Corporation Control Act (GCCA; 59 Stat. 841; 31 U.S.C. 9101-9110). The act standardized budget, auditing, debt management, and depository practices for corporations. Notwithstanding unusual provisions that may be present in their enabling statute, government corporations remain "agencies" of the United States, and are therefore subject to all laws governing agencies, except where exempted from coverage by provisions of general management laws. The GCCA is not a general incorporation act such as is in effect in the states. The charter for each federal government corporation is the separate enabling legislation passed by Congress. The GCCA also does not offer a general definition of what constitutes a government corporation. It simply enumerates the organizations covered by the act. In addition to the enumeration of corporations in the GCCA, there have been several other listings of corporations available, each different and based upon the definition employed by the compiler. The corporations cover the spectrum from such large, well-known corporations as the United States Postal Service and the Federal Deposit Insurance Corporation to such small, low-visibility corporate bodies as the Federal Financing Bank and Federal Prison Industries (UNICOR). In the absence of a general incorporation act with organizational definitions, how is one to know when a government corporation is the most suitable option, and what criteria should be met before a government corporation is established? In an effort to provide criteria to determine when the corporate option was appropriate, President Harry Truman, in his 1948 budget message, stated: Experience indicates that the corporate form of organization is peculiarly adapted to the administration of government programs which are predominately of a commercial character--those which are revenue producing, are at least potentially self-sustaining and involve a large number of business-type transactions with the public. In their business operations such programs require greater flexibility than the customary type of appropriations budget ordinarily permits. As a rule, the usefulness of a corporation rests on its ability to deal with the public in a manner employed by private enterprise for similar work. That said, Congress has created many entities titled "government corporations" and "corporations" that do not meet these criteria. The Legal Services Corporation (LSC), the Corporation for Public Broadcasting (CPB), and the newly established International Clean Energy Foundation are examples of "corporations" that do not perform commercial functions and rely upon annual appropriations. A principal intention behind assigning this status and title was to provide considerable insulation from oversight by the central management agencies and the application of the general management laws. No two federal government corporations are completely alike. However, there are sufficient commonalities among the several corporations, that it is possible to make some generalizations about their authorities, organization, mission, and behavior. Government corporations, no matter what function they perform or how "private" they may appear to the public or to themselves, are agents of the state subject to constitutional limitations. As the Supreme Court concluded in the 1995 Lebron case, a government corporation has certain inherent legal characteristics that cannot be shed simply by legislative language or by corporate fiat. The nature of the function performed (e.g., managing a railroad) has no effect upon its governmental character. The governmental and private sectors are fundamentally separate and distinct, with the distinctions based largely in legal theory, not economic theory. This understanding is essential to recognizing both the potentialities and limitations of the government corporate concept. The government corporation remains governmental in character until Congress determines it shall be fully private, thereby coming under private law. As a general proposition, the attorney general is vested with central control over the litigation to which the U.S. government is a party. Various statutes recognize that the attorney general is the chief legal officer for all departments and agencies. However, in an uneven pattern over the years, exceptions have been permitted to this central authority. The independent regulatory commissions, for instance, have some independence (although the degree of independence varies considerably from commission to commission) in their litigation authority. While the Justice Department has consistently favored central coordination of litigation, this view has been difficult to maintain in practice. With the relatively small staff of the department and its understandable reluctance to become responsible for routine litigation, there has been a trend toward awarding greater authority and flexibility to the departments and agencies in their legal affairs. With respect to government corporations, though, often their enabling legislation assigns them a legal personality distinct from that of the United States. Most are subject to, and may initiate, civil suits. Government corporations, being agencies of the United States, have their employees come under the limited waiver of immunity provided in the Federal Tort Claims Act (FTCA). Distinguished public administrator Harold Seidman notes: "As a body corporate, a government corporation has a separate legal personality distinct from that of the United States. A corporation, therefore, does not enjoy the traditional immunity of the United States from being sued without its consent." Generally, a corporation is provided authority "to determine the character and the necessity for its expenditures, and the manner in which they shall be incurred, allowed and paid." Some corporations may borrow funds through the Federal Financing Bank of the Treasury Department. In practical terms, the purpose of permitting corporations to sue and be sued in their own name is to enable a private business to contract with a government corporation under the assurance that if something goes amiss, it can go to court to settle the matter. With a regular government agency, however, a contractual dispute must normally go through a laborious process in the Court of Claims; if the contractor wins, he must wait for an appropriation; the Departments of Justice and Treasury, the Office of Management and Budget (OMB), the President, and both houses of Congress may become involved in the claim. With the government corporation, however, this process is simplified, and when a contractor prevails, he can usually obtain a prompt settlement. The budget process is a useful management tool for planning as well as for maintaining accountability. Regular agencies of the executive branch, with few exceptions, are subject to uniform rules and regulations with respect to the budgets. Both the President and Congress use agency budgets as management tools. Government corporations, on the other hand, are exempt either individually or collectively from many executive branch budgetary regulations. These exemptions are predicated, for the most part, on the idea that with the corporate structure, consumers of corporations' products and services, rather than the general taxpayer, are the principal source of revenue. The GCCA, as amended in 1982 (96 Stat. 1042), provides that each wholly owned government corporation shall prepare and submit to the President a "business-type budget" in a way and before a date the President prescribes by regulation for the budget program. This budget program shall contain estimates of the financial condition and operation of the corporation for the current and following fiscal years and the condition and results of operations of the last fiscal year. Further, it shall contain statements of financial condition, income and expense, and sources and uses of money, an analysis of surplus and deficit, and additional statements and information to make known the financial condition and operations of the corporation, including estimates of operations by major activities, administrative expenses, borrowings, the amount of U.S. Government capital that will be returned to the Treasury during the fiscal year, and appropriations needed to restore capital impairment." (31 U.S.C. 9104) The objective of the budget program is to permit the corporation sufficient financial flexibility to carry out its activities. The President, after review and revision, submits these budget programs to Congress with the executive branch budget. Under the Chief Financial Officers Act of 1990 (CFOA), government corporations must submit to Congress annual management reports, which are to include statements of financial position, operations, and cash flows, a reconciliation to the budget report of the government corporation (if applicable), and a statement on internal accounting and administrative control systems. Traditional agencies of the United States receive the preponderance of their financial support from funds appropriated by Congress. Government corporations, on the other hand, generally receive most, if not all, their funds from users of their services. Thus, the latter relationship has a business character in which it is the obligation of the corporate body to provide services as long as the buyers are willing to pay. This being the case, revenues, expenditures, and even personnel will tend to fluctuate according to consumer demand. Many Members of Congress feel somewhat uneasy with broad, "business type budgets," also referred to as "budget programs." To be sure, Congress can alter these budget programs and can limit the use of corporate funds for any purpose, but this option is seldom employed. Faced with complex projections and agencies with little direct budgetary impact, Members understandably give corporate bodies marginal attention. As a general assessment, the corporations come under comparatively little congressional scrutiny, except when there is some political or financial threat evident. As Seidman notes, "In essence, the business-type budget provides for a qualitative rather than a quantitative review of proposed corporate expenses." Until 1975, GAO was responsible under the GCCA for performing annual financial audits of government corporations. At the request of GAO, the GCCA was amended to provide for audits of the financial transactions of wholly owned corporations at least once every three years, rather than annual audits. In 1990, as part of the CFOA, GAO's recommendation that government corporations be subject once again to annual audits was accepted. Henceforth, however, the audit is to be conducted by the corporation's inspector general "or by an independent external auditor, as determined by the inspector general or, if there is no inspector general, the head of the corporation," according to accepted government auditing standards. The Comptroller General, however, continues to be authorized to review the financial statements of government corporations. The location, structure, and governance of government corporations varies greatly. Corporations have been located in executive departments (e.g., the St. Lawrence Seaway Development Corporation in the Department of Transportation), or assigned independent status (e.g., the Export-Import Bank). Government corporations have been structured so that they are but financial entities whose employees are actually employees of the parent agency (e.g., the Federal Financing Bank in the Department of the Treasury and the Commodity Credit Corporation in the Department of Agriculture). There is no one form of governance necessarily associated with government corporations. Whether a government corporation is best managed by a full-time board (e.g., TVA, formerly), a chief executive officer selected by a part-time board and responsible to it (e.g., TVA currently), a part-time board consisting of Cabinet-level officials of other agencies (e.g., Pension Benefit Guaranty Corporation), a mixed board of governmental and private appointees (e.g., Overseas Private Investment Corporation), or a single administrator responsible to a department secretary, and ultimately to the President (e.g., Government National Mortgage Association, "Ginnie Mae"), is an open question. There are positives and negatives to the various options for corporate governance. A board of directors is the trademark of a government corporation, according to many lawmakers and attorneys. Marshall Dimock, an academic writing in 1949, argued that a board of directors was considered an essential element for an "authentic" government corporation. "Being a separate and distinct entity, headed by its own board of directors, the corporation is inherently better able to succeed than the ordinary department of government." A few years later, Harold Seidman challenged the view that a board of directors was an essential and necessarily desirable element for a government corporation. Dimock's view, he asserted, was based on an inappropriate borrowing of state practice by the federal government. State incorporation laws require boards of directors for private corporations to insure representation where ownership is held by more than one party. In government corporations, under this reasoning, because ownership resides in the government alone, there is no inherent need for a board of directors. Government corporations, Seidman pointed out, have existed and operated without boards of directors. A board of directors may well be found advisable and useful under some circumstances, but, Seidman said, it is not the sine qua non of a government corporation. Whether or not a board of directors is essential or desirable for a government corporation, the fact is that all but two federal government corporations presently have boards of directors. The two exceptions are Ginnie Mae and the St. Lawrence Seaway Development Corporation. In a study published in 1981, the National Academy of Public Administration was critical of boards of directors in general: We believe that this arrangement, borrowed from the private corporation model, has more drawbacks than advantages and that in most cases the governing board would be better replaced by an advisory board and the corporation managed by an administrator with full executive powers. A governing board may cut or confuse the normal lines of authority from the President or departmental secretary to the corporation's chief executive officer. With an advisory board, the secretary's authority to give that officer policy instruction is clear, as is the officer's right to report directly to the secretary and to work out any exemptions from or qualifications of administration or departmental policies and practices which the corporation requires. There is little doubt that a board of directors, particularly a part-time, "outsiders" board, is a "buffer" between the corporation's top executive and political officials, including the President. Whether such a buffer is a desirable feature in the overall administrative system, however, is a question subject to debate. Notably, it is also argued that corporation board appointments are patronage plums for the White House since the jobs are not generally demanding. The effectiveness and utility of boards is dependent upon a number of factors: the coherency of the enabling legislation, the conceptual integrity and soundness of the program itself, and the number and quality of membership. Large boards (comprising more than 12 members), for instance, may experience difficulty in making decisions. The play of internal factors, such as the size of the board, the primary loyalties of board members (whether to the corporation or to an outside constituency group), and the relationship of the board to the corporate management all also have their place in the managerial equation. There is, at present, little central management agency oversight or supervision of government corporations as a category of agency in the executive branch. Nor is there any central unit charged with designing government corporations from the perspective of presidential or central management interests. Government corporations today are largely perceived as discrete entities, each with its own political and administrative requirements, and each with its own route and degree of political accountability. Individual corporations come under scrutiny from time to time by OMB and Congress, or more precisely, a congressional committee responsible for oversight. More often than not, the immediate impetus for the oversight follows from indications that a corporation is operating at financial risk or there is an appearance of wrongdoing. The current absence of systematic oversight of corporations as a class runs counter to the intentions of the sponsors of the GCCA. The Bureau of the Budget (BOB), predecessor organization to OMB, was instrumental in the passage of the GCCA, and created a separate office to oversee the formation, and monitor the operation, of government corporations on behalf of the President. During the 1960s, this specialized staff function atrophied until at some point in the 1970s it is fair to conclude that there was little remaining central executive staff capacity to provide information, expert advice, or oversight of government corporations or to develop and implement consistent policies governing their formation, authorities, and operations. Government corporations are not considered by OMB to be a category of organization to be supervised collectively. OMB, in support of its position, contends: The responsibility for oversight of government corporations was not changed by the OMB 2000 reorganization. That is, government corporations will continue to be reviewed by the Resource Management Office (RMO) which has responsibility for the functional area most closely associated with the corporation's mission.... OMB does not review government corporations separately from other government organizations that perform similar functions. The executive branch treatment of management responsibilities respecting government corporations as a class of organization tends to place additional burdens on Congress and its committees to determine if the corporations are respecting the provisions of the general management laws (e.g., the National Environmental Protection Act, 42 U.S.C. 4321). One corollary of limited central management oversight of government corporations is the lack of answers to fundamental issues regarding when and how government corporations ought to be created and utilized. There are at least two schools of thought respecting the proper use of the government corporation option relating to its structure, authority, and financial systems. One school holds that government corporations, including agencies called corporations but which do not perform commercial activities, should be encouraged, provided maximum policy and financial autonomy, and be subject to such oversight as is appropriate for other agencies and instrumentalities in the same policy field. The legal responsibilities of the corporation should be located in its enabling statute. The position of the second school is that government corporations should be established only when appropriate criteria and standards, developed by a central management agency, are met. Such standards should be reflected in a national incorporation law and apply to all proposed and functioning corporate bodies properly defined. Government corporations should be considered to be part of the executive branch, but with recognition of their distinctive needs and oversight requirements as a category of institutions. The government corporation concept may be considered a useful alternative to privatization of some agency, or it may be employed as a transition step toward eventual full privatization. Our interest here is limited to the corporation as a transition option. The principal utility of the transitional government corporation is that it can demonstrate marketability and asset value, critical elements in any successful privatization venture. An early successful example of the government corporation concept as a transition vehicle involved Conrail. Conrail was created by Congress as a government corporation in 1976 from the remnants of seven private, bankrupt railroads. It took some 10 years and an investment of $8 billion by the federal government to bring Conrail up to industry standards before entertaining a reasonable expectation that the railroad would be attractive to private investors. The federal government received approximately $2 billion from the sale, but the real payoff was that the northeastern region of the country was once again provided a viable freight rail system. The transition period as a government corporation was necessary to develop a record as a potentially profit-making venture prior to a successful privatization (divestiture) effort. More recently, the U.S. Enrichment Corporation (USEC) has completed its transitional process toward full privatization, with mixed results. The USEC, until 1993 a regular agency in the Department of Energy (DOE), operated uranium enrichment plants in Kentucky and Ohio. In the 1950s, the plants produced highly enriched uranium (HEU) for defense purposes. Times changed and the United States was successfully challenged by new international entrants into the market. The Energy Policy Act of 1992 ( P.L. 102-486 ; 106 Stat. 2776) established the U.S. Enrichment Corporation as a wholly owned government corporation. The general intent of the legislation was to "privatize" the two plants and let them compete in the world market. A privatization plan was delivered by the USEC to the President and Congress in 1995. The plan suggested that there were two primary methods of corporate divestiture: an initial public offering (IPO) and a merger or acquisition with another corporation or group of corporations. After considerable discussion, the IPO option was selected, as it had been with Conrail. The IPO of stock was completed on July 28, 1998, and raised an estimated $1.9 billion for the federal government. The USEC transition process highlighted, however, one of the perennial problems in privatization efforts. Congress may intend a corporation to be private, but it also may want the corporation to continue to be involved in public policy implementation. In this instance, Congress wanted the corporation to participate in implementing a foreign policy objective, which was to purchase at above market rates a substantial amount of Russian enriched uranium otherwise destined for Russian weapons. Under the HEU agreement, the USEC received enriched uranium from Russian nuclear weapons and, in addition to its payment for the material, returned an equivalent amount of natural (unenriched) uranium to Russia to sell on the world market. This arrangement, from the corporation's perspective, was not viable and in October 1999, the USEC solicited Congress for "relief." Another characteristic of a private corporation, legally organized and defined as such, is the right to cancel a program or withdraw from an activity if it is not deemed in the fiduciary interests of the shareholders. To the consternation of DOE officials, such a decision was reached recently by the USEC board of directors. One of the assets transferred from the DOE to the USEC in the divestiture was the right to commercialize a new enrichment technology called "atomic vapor laser and isotope separation" (AVLIS), a technology in which DOE had invested over $2 billion. On June 9, 1999, the board of directors of the USEC determined that AVLIS was not commercially viable and canceled the program. The board's decision made manifest the fiduciary distinctions between a government and private corporation. The federal government may, for whatever reason, choose to directly divest itself of a commercial activity or asset and not follow the transition corporation option to establish its value in the market. Although a transition corporation had been recommended by an outside study, the Department of Energy determined to directly divest itself of the California fields of the Elk Hills National Petroleum Reserves. The government corporation form of federal agency is a useful option to consider when establishing or reorganizing an agency with revenue potential. It is helpful to bear in mind, however, that there is no general provision in law that defines what, precisely, government corporations are. When writing the GCCA, Congress and the executive branch simply viewed the various corporate bodies, and defined them by enumeration, rather than by required characteristics. This relatively unstructured approach has meant that some corporate bodies (e.g., the U.S. Postal Service) are not included in the GCCA enumeration, whereas other bodies, arguably non-corporate in function and authority (e.g., the Corporation for National and Community Service) are listed. There is little managerial oversight at present of government corporations as an institutional category by either the President or Congress. What oversight there is tends to be corporation-specific. In the case of Congress, corporations are assigned to committees of subject-matter jurisdiction. A GAO report recommended that corporations properly require both subject matter and management oversight, and that the GCCA should be reconstituted to establish in law the characteristics of various types of corporate bodies. Government corporations may be viewed as permanent agencies to perform a continuing governmental function (e.g., the Federal Deposit Insurance Corporation); a temporary agency (e.g., the Pennsylvania Avenue Development Corporation); or a transition agency to facilitate the process whereby a governmental agency or program is divested and transferred to the private sector (e.g., the U.S. Enrichment Corporation). These options indicate the flexibility of the government corporation concept and may provide models for extending the corporate organization to other appropriations-funded agencies (e.g., the U.S. Patent and Trademark Office and the U.S. Mint). Both the latter agencies and their programs meet the basic criteria for a government corporation and suggestions to this effect have been made. The future of government corporations as a category of federal organization appears generally bright although they are not widely understood in executive management circles. The need for the executive branch and Congress to develop new organizational structures that take into account both the public law requirements of governmental status, and the flexibility that properly accompanies corporate bodies dependent upon revenues for services may increase. The managerial quality of the law establishing a corporation, may be a critical variable in determining the success or failure of that enterprise. If the conceptual basis of the law establishing a corporation or economic assumptions therein are faulty, as was allegedly the case with the Synthetic Fuels Corporation in the late 1970s, a government corporation may become a liability to the executive branch and face a short tenure. On the other hand, if a federal government corporation is designed to conform with public law, governmental management principles, and sound economics, a corporate agency may provide a creative instrument to promote the public policy objectives of elected officials. Although it has been the purpose of this report to emphasize the distinctive characteristics of federal government corporations, it is important to conclude with a statement of their shared characteristics with other federal agencies. The mission of both regular, appropriations-financed agencies and of government corporations is the same, to implement the laws passed by Congress.

To assist Congress in its oversight activities, this report provides an overview of the government corporation as an administrative model. As defined in this report, a government corporation is a government agency that is established by Congress to provide a market-oriented public service and to produce revenues that meet or approximate its expenditures. By this definition, currently there are 17 government corporations. In the typical contemporary Congress, several bills are introduced to establish government corporations. At the time of publication of this report, two bills had been introduced in the 112th Congress to improve U.S. infrastructure by establishing government corporations--H.R. 404 and S. 652. Similarly, in the 111th Congress, government corporations bills included ones that would have created an Indian Development Finance Corporation (H.R. 1607 ), a Green Bank (H.R. 1698), and a National Infrastructure Development Bank (H.R. 2521). The government corporation model has been utilized by the federal government for over a century. Today's government corporations cover the spectrum in size and function from large, well-known entities, such as the U.S. Postal Service and the Federal Deposit Insurance Corporation, to small, low-visibility corporate bodies, such as the Federal Financing Bank in the Department of the Treasury and Federal Prison Industries in the Department of Justice. The federal government does not possess a general incorporation statute as states do. Each government corporation is chartered through an act of Congress. The use of separate acts to charter each corporation has resulted in wide variance in the legal and organizational structure of government corporations. That said, the Government Corporation Control Act of 1945, as amended, does provide for the standardized budget, auditing, debt management, and depository practices for those corporations listed in the act. Within the executive branch, no one agency is responsible for the oversight and supervision of government corporations. Neither the House nor the Senate have single committees with the responsibility to oversee all government corporations. Instead, each corporation is overseen by the committee(s) with jurisdiction over its policy area. Many government corporations, such as the Tennessee Valley Authority, have been established to exist in perpetuity. Other government corporations, such as the U.S. Enrichment Corporation, though, have been designed to serve as transition vehicles to transform from governmental entities into private firms. Congress at times has found the government corporation an attractive governance option. A well-designed and -operated government corporation does not require annual appropriations because it generates revenues from the provision of goods and services. Moreover, each government corporation may be endowed with the administrative flexibilities required to accomplish its goals while remaining responsive to Congress and the President. Finally, as noted above, the government corporation may be established to serve an enduring purpose or may serve as a vehicle for privatization. This report will be updated in the event of a significant development.

C alculations indicating that the current Social Security program will not be financially sustainable in the long run under the present statutory scheme have fueled the current debate regarding Social Security reform. This report addresses selected legal issues that may be raised regarding entitlement to Social Security benefits as Congress considers possible changes to the Social Security program in view of projected long-range shortfalls in the Social Security Trust Funds. Social Security benefits are administered pursuant to Title II of the Social Security Act, known as the Old Age, Survivors and Disability Insurance (OASDI) program . Title II is part of a larger social insurance program in which Congress uses its power to tax and spend for the general welfare to promote the social goals of aiding the aged, survivors of workers, disabled persons, and persons of limited means. Beneficiaries under Title II have a legal entitlement to receive Social Security benefits as set forth by the Social Security Act and as administered by the Social Security Administration (SSA), an independent agency in the executive branch. An individual's right to Social Security benefits is in a sense "earned," since there is a general relationship between OASDI benefits and wages earned and the tax paid thereon. However, benefits are not directly measured by the amount of payments made through the years into the system. Thus, the fact that Social Security benefits are financed by taxes on an employee's wages does not provide a limit on Congress's power to fix the levels of benefits under the Social Security Act, or the conditions upon which they may be paid. The Supreme Court's landmark decision in Flemming v. Nestor provided an analysis of the relationship between a beneficiary's legal entitlement to receive Social Security benefits and the power of Congress to change that entitlement by amending the underlying statute. The Court in that case upheld a provision, Section 202(a) of the Social Security Act, that terminated Social Security benefits to a person deported for membership in the Communist Party. Nestor at one time had been a member of the Communist Party. Later he began receiving Social Security benefits which were cut off when he was deported to his native Bulgaria. Nestor argued that he had a "property right" in his Social Security benefits and that, by cutting off those benefits, the government had made an unlawful "taking" of his benefits that contravened the Fifth Amendment. The Court, however, disagreed. Justice Harlan wrote: To engraft upon the Social Security system a concept of "accrued property rights" would deprive it of the flexibility and boldness in adjustment to everchanging conditions which it demands.... It was doubtless out of an awareness of the need for such flexibility that Congress included in the original Act, and has since retained, a clause expressly reserving to it "[t]he right to alter, amend, or repeal any provision" of the act. SS1104, 49 Stat. 648, 42 U.S.C. SS1304. That provision makes express what is implicit in the institutional needs of the program.... We must conclude that a person covered by the act has not such a right in benefit payments as would make every defeasance of "accrued" interests violative of the Due Process Clause of the Fifth Amendment. The inherent ability of Congress to modify the provisions of Title II of the Social Security Act, even to the extent of affecting the benefits an individual is currently receiving, is thus well established. The same principle that current benefit amounts may be modified has been applied to other, similar programs involving pensions, such as Federal Civil Service Retirement. One significant example is the Supreme Court affirmance, without opinion, of a decision of a three-judge district court in National Association of Retired Federal Employees v. Horner. The district court in that case upheld a provision of the Balanced Budget and Emergency Deficit Control Act, which suspended paying a scheduled cost-of-living adjustment (COLA) for federal retirees, saying that it did not violate the Takings Clause of the Fifth Amendment, which states that private property shall not be taken for public use without just compensation. The dispute centered on whether the provision of the act, signed by the President on December 12, 1985, which suspended any automatic spending increase that first would be paid during the period beginning with the date of enactment, constituted a taking of private property of the retirees. The section providing for the COLA, 5 U.S.C. SS8340(b), provided that it would take effect on December 1 of each year. While Section 8340(b) made the COLA effective on December 1, it was not scheduled to be paid until January 2, 1986. The retirees argued that the COLA for the 12 months after December 1, 1985, became their private property on December 1, 1985, and, consequently, that the suspension signed on December 12, 1985, took their property which had accrued between December 1 and 12 without compensation in violation of the Takings Clause. The court rejected their claim, asserting that, "It is utterly clear, however, that the statute [Section 8340(b)] cannot be read as plaintiffs wish." It cited an earlier case, Stouper v. Jones , as dispositive . The appellant in the Stouper case retired in 1953 and began receiving disability annuity payments pursuant to the law then in force. In 1956, Congress amended the law to discontinue benefits to recipients whose earning capacity was restored to a level fairly comparable to the current rate of pay for the position held immediately prior to retirement. After the Retirement Division of the Civil Service Commission determined that the appellant had been restored to that earning capacity, her disability annuity was terminated. The appellant asserted that the 1956 amendment could not constitutionally be applied in her case because at the time she retired she acquired a vested right to an annuity that could not be taken from her by subsequent legislation. The U.S. Court of Appeals for the District of Columbia in Stouper said that "[I]t is well settled that a pension granted by the government confers no right which cannot be revised, modified, or recalled by subsequent legislation. United States ex rel. Burnett v. Teller , 107 U.S. 64 (1882)." The court in the Stouper case added that benefits under the Civil Service Retirement Act are similar to those under the Social Security Act; they are not based on an employee's contributions to the retirement fund, but instead on the employee's earnings record and years of service. It was noted that the Retirement Act pays higher benefits when a deceased employee is survived by a widow or widower and children, than when he or she is survived only by a widow or widower even though the employee's contribution to the Civil Service Retirement and Disability Fund had been the same in either case. "We conclude that an employee has no right under the Retirement Act based on contractual annuity principles, and hold that the appellant had no vested right to the disability annuity which was terminated." The U.S. Supreme Court also has made clear that the payment of Social Security taxes conveys no contractual rights to Social Security benefits. In 1937 the High Court upheld the constitutionality of the Social Security Act in Helvering v. Davis . In doing so, the Court held that the Social Security program is not an insurance program. The court noted, "The proceeds of both employee and employer taxes are to be paid into the treasury like any other internal revenue generally, and are not earmarked in any way." The Court, in essence, deferred to Congress on the question of which welfare schemes fall within the ambit of the Constitution's General Welfare Clause. Later, in Flemming , the Court rejected any comparison of Social Security with insurance or an annuity: It is apparent that the noncontractual interest of an employee covered by the act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments. The absence of contractual rights extends to government pensions in general. In Dodge v. Board Education , a retired school teacher challenged the constitutionality of a state statute that reduced her retirement annuity from $1,500 to $500. The statute in effect when she retired said that, "Each person so retired ... shall be paid the sum of fifteen hundred ($1500) annually and for life from the date of such retirement." The Supreme Court did not interpret this mandatory language ("shall," "annually and for life") to supersede a subsequent state statute that reduced the amount of the annual annuity, saying that, "The presumption is that a law is not intended to create private contractual or vested rights but merely declares a policy until the legislature shall ordain otherwise." The presumption that pension statutes do not preclude Congress from decreasing or eliminating benefits at a future time rests on the recognition that legislative bodies require flexibility in public welfare matters. "[O]ur cases are clear that legislation readjusting rights and burdens is not unlawful solely because it upsets otherwise settled expectations." Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15-16 (1976). While acknowledging this latitude, the Supreme Court in Flemming nevertheless indicated that congressional action may be subject to some constitutional restraint: Quoting from an earlier case, the Court in Flemming said that "Whether wisdom or unwisdom resides in the scheme of benefits set forth in Title II [of the Social Security Act], it is not for us to say. The answer for such inquiries must come from Congress, not the courts. Our concern here, as often, is with power, not with wisdom." Helvering v. Davis, [301 U.S. 619] supra, at 644 [1937]. Particularly when we deal with a withholding of a noncontractual benefit under a social welfare program such as this, we must recognize that the Due Process Clause can be thought to interpose a bar only if the statute manifests a patently arbitrary classification, utterly lacking in rational justification. Thus, only if Congress were to act in a totally irrational and arbitrary manner would due process considerations invalidate a subsequent amendment. The Court reiterated this view in United States Railroad Retirement Board v. Fritz , which upheld congressional amendments to railroad retirement benefits that reduced benefits for some beneficiaries and eliminated benefits for others. These changes were challenged under the Due Process Clause on the ground that they irrationally distinguished between classes of annuitants. The Court held that because Congress could have eliminated benefits for all classes of employees, it was not constitutionally impermissible to draw lines between groups of employees for the purpose of phasing out the benefits. The Court said, "Where, as here, there are plausible reasons for Congress' action, our inquiry is at an end." The Court added that drawing lines between categories of beneficiaries "is a matter for legislative, rather than judicial, consideration." The Social Security program has faced funding shortfalls in the past, and Congress has enacted a variety of measures to deal with financial imbalances. Given the clear judicial precedents to the effect that Social Security benefits under Title II are not property rights and cannot be categorized as contractual in nature, the question may be raised whether Congress legislatively could create a new, legally enforceable right to the receipt of a certain level of benefits by individuals eligible for Social Security benefits. A legislative guarantee of a certain level of Social Security benefit payments with a corresponding obligation upon future Congresses for payment of such benefits would require either a finding of a contractual relationship between the federal government and individual certificate holders, the modification or repeal of which would be constitutionally impermissible, or a right stemming from Congress's implied promise not to enact legislation in the future that would bind a future Congress in the sense that the legislative enactment guaranteeing Social Security benefit payments could not be repealed or altered. A legally enforceable guarantee of a certain level of Social Security benefits set forth in legislation may be argued to create a contract between the federal government and individual Social Security recipients. It may be argued further that such a contract constitutionally protects an individual's right to continue to receive full benefits, and prohibits the federal government from abrogating such a contract by reducing or otherwise modifying the full payment of benefits an individual is entitled to receive. Under Article I, SS10, cl.1, known as the Contracts Clause, the states are forbidden to pass laws impairing the obligation of contracts. Even as applied to the states, since Home Building & Loan Assn. v. Blaisdell , this restriction is not very severe, save for state efforts to void their own contracts. As for the federal government, there is no such clause, but this right is subsumed under the Fifth Amendment's Due Process Clause. And that right, as in the case of any economic right under the due process clause, is subject to standards that are not considered rigorous. Even insofar as the government's own contracts are concerned, the usual rule is that they too may be subject to alteration, especially when the right to alter laws is reserved. Thus, Congress, in Legal Tender Cases ( Knox v. Lee ) was held to have the authority to make Treasury notes legal tender in payment of debts previously contracted for payment in gold, and in Norman v. Baltimore & Ohio R. R., Congress was held to have the authority to invalidate provisions in private contracts calling for payment in gold coin. When the federal government seeks to abrogate its own contracts in order to serve its own financial purposes or to increase the public fisc, however, a more searching scrutiny, and usually invalidation, follows. The relevant distinction here is that the federal government acting as sovereign, and the federal government acting as contractor, constitute two separate roles. When the government acts as sovereign, in its legislative or executive capacity, rendering impossible the performance of its obligations, it cannot be held responsible in its capacity as a contractor. In Horowitz v. United States , the federal government contracted with the claimant for silk products and for the shipment of silk within a certain time, but the United States Railroad Administration subsequently placed an embargo on shipments of silk by freight. By the time the silk reached Horowitz, the price had fallen, rendering the deal unprofitable. The Court barred any damages award against the United States for the delay. "It has long been held by the Court of Claims that the United States as a contractor cannot be held liable for an obstruction to the performance of the particular contract resulting from its public and general acts as sovereign." If a recipient's right under law to a certain level of Social Security benefits is to be viewed as a contract between the recipient and the federal government, this contract arguably is not in the class of contracts that the federal government enters into in its proprietary capacity as a contractor. Title II recipients, whether receiving old age, survivors, or disability insurance benefits, have not, by virtue of the receipt of this promise, paid any money, provided any service or thing of value in exchange for the government's guarantee not to reduce the recipient's payments in the future. The government's commitment is unilateral, and it arguably remains subject to Section 1104 of the Social Security Act, which reserves the right of Congress to revise or modify the Social Security Act by subsequent legislation. While congressional modification of the express terms of the promise in law not to reduce benefits is limited by due process considerations, such constitutional concerns impose a bar only upon the enactment of an arbitrary modification that has no rational justification. It may be argued that Congress, by giving eligible individuals a legislative guarantee of a certain level of Social Security benefits, can legally bind itself in the future to pay the full amount of such Social Security benefits plus COLAs to certificate holders. There is no doubt that Congress may validly enact such a provision and promise to pay full Social Security benefits in the future. Congress may also provide for a funding mechanism and judicial recourse for non-compliance. Thereafter, Congress may decide to take whatever measures necessary to fulfill such a promise. The undeniably strong moral duty to do so, however, would not trump the underlying constitutional principle that a legislative enactment such as this cannot bind a future Congress in the sense that the legislative enactment cannot be repealed or altered. "The principle asserted is, that one legislature is competent to repeal any act which a former legislature was competent to pass; and that one legislature cannot abridge the powers of a succeeding legislature. The correctness of this principle, so far as respects general legislation, can never be controverted." To be sure, some congressional enactments, by their nature, are irrevocable. If Congress should admit a territory as a state, it could not subsequently repeal the law and make that state something else. Moreover, as discussed above, constitutional protection is accorded contracts when the federal government incurs financial obligations while acting in its proprietary capacity. In such cases federal efforts to avoid liabilities arising out of its own contracts have been found to deny due process. Where the federal government acts as lawmaker exercising its sovereign powers to provide for the general welfare, however, it cannot give up such powers by a binding contract. "Contractual arrangements, including those to which a sovereign itself is party, remain subject to subsequent legislation by the sovereign." Bowen v. Public Agencies Opposed to Social Security Entrapment . Illustrating this principle is the Supreme Court's holding in Stone v. Mississippi . The Mississippi legislature entered into a contract with a company to operate a lottery within the state, but the following year the state's voters adopted a constitutional amendment abolishing lotteries. Quoting a state case, the Court observed: Irrevocable grants of property and franchise may be made if they do not impair the supreme authority to make laws for the right government of the State; but no legislature can curtail the power of its successors to make such laws as they may deem proper in matters of police. These and other cases that might be cited demonstrate the limited role contract principles play in matters affecting the governmental functions, rather than the proprietary functions, of the states and the federal government. In essence, absent the kind of promise involving the essence of contracts covered by the Contracts Clause, a guarantee of the "full faith and credit" of the United States in backing bonds, for example, a statute which in fact promises future congressional action or inaction would likely not be held to constitute a contract enforceable by the courts. Legislative language that obligates the federal government to provide a guaranteed level of Social Security benefits to recipients purports to preclude the possibility that a recipient's benefits may be reduced in the future by either a repeal of the underlying law or by an amendment of the statutory provisions in Title II of the Social Security Act. The weight of judicial authority, however, suggests that Congress may not so bind itself, and that neither concepts of property rights nor contract would disable a future Congress from changing the benefits provided under Title II of the Social Security Act. The projected exhaustion of the Social Security Trust Funds, formally known as the Federal Old Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund, raises a question regarding whether that possibility would affect the legal right of beneficiaries to receive full Social Security benefits. On July 28, 2014, the Trustees of the Social Security Trust Funds stated that The Trustees project that annual OASDI cost will exceed non-interest income throughout the long-range period (2014 through 2088) under the intermediate assumptions. The dollar level of the theoretical combined trust fund reserves declines beginning in 2020 until reserves are depleted in 2033. Considered separately, the DI Trust Fund reserves become depleted in 2016 and the OASI Trust Fund reserves become depleted in 2034. The projected reserve depletion years were 2033 for OASDI, 2016 for DI, and 2035 for OASI in last year's report. Under current law, the projected cost of Social Security increases faster than projected income through about 2035 primarily because of the aging of the baby-boom generation and relatively low fertility since the baby-boom period. Cost will continue to grow faster than income, but to a lesser degree, after 2035 due to increasing life expectancy. Based on the Trustees' best estimate, cost exceeds non-interest income for 2014, as it has since 2010, and remains higher than non-interest income throughout the remainder of the 75-year projection period. Social Security's theoretical combined trust funds increase with the help of interest income through 2019 and allow full payment of scheduled benefits on a timely basis until the trust fund asset reserves become depleted in 2033. At that time, projected continuing income to the combined trust funds equals about 77 percent of program cost. By 2088, continuing income equals about 72 percent of program cost. The Trustees project that the OASI Trust Fund and the DI Trust Fund will have sufficient reserves to pay full benefits on time until 2034 and 2016, respectively. The OASDI Trust Funds are accounts maintained on the books of the U.S. Treasury. The system operates on a "pay-as-you-go" basis; current workers and their employers pay taxes on wages under the Federal Insurance Contributions Act (FICA) and the self-employed pay taxes on self-employment income under the Self-Employed Contributions Act (SECA). Taxes paid now finance benefits for today's beneficiaries. A full 100% of these payroll taxes is appropriated to the Social Security Trust Funds. Interest on and proceeds from the sale or redemption of government securities held in these funds are credited to and form a part of them. Moreover, amounts credited to the trust funds are the only source of funds to pay benefits. Social Security is a statutory entitlement program. Entitlement authority has been defined as "authority to make payments (including loans and grants) for which budget authority is not provided in advance by appropriation acts to any person or government if, under the provisions of the law containing such authority, the government is obligated to make the payments to persons or governments who meet the requirements established by law." Budget authority is the authority provided by law to enter into obligations that will result in immediate or future outlays involving federal government funds. According to a publication of the Government Accountability Office, formerly the General Accounting Office: Congress occasionally legislates in such a manner as to restrict its own subsequent funding options.... An example ... is entitlement legislation not contingent upon the availability of appropriations. A well known example here is Social Security benefits. Where legislation creates, or authorizes the administrative creation of, binding legal obligations without regard to the availability of appropriations, a funding shortfall may delay actual payment but does not authorize the administering agency to alter or reduce the "entitlement." ... Even under an entitlement program, an agency could presumably meet a funding shortfall by such measures as making prorated payments, but such actions would be only temporary pending receipt of sufficient funds to honor the underlying obligation. The recipient would remain legally entitled to the balance. An entitlement by definition legally obligates the United States to make payments to any person who meets the eligibility requirements established in the statute that creates the entitlement. A provision of the Antideficiency Act, 31 U.S.C. SS1341, however, prevents an agency from paying more in benefits than the amount available in the source of funds available to pay the benefits, in this case the Old Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund. Section 1341, in relevant part, provides that An officer or employee of the United States government or of the District of Columbia government may not-- (A) make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation; (B) involve either government in a contract or obligation for the payment of money before an appropriation is made unless authorized by law; .... The Antideficiency Act prohibits making expenditures either in excess of an amount available in a fund or before an appropriation is made. It would appear to bar paying more money in benefits than the amount of the balance in the Social Security Trust Funds primarily because, as noted earlier, disability and old-age and survivor benefit payments shall be made "only" from the Disability Insurance Trust Fund and the Old Age and Survivors Insurance Trust Fund, respectively. Violations of the Antideficiency Act are punishable by administrative and criminal penalties. An officer or employee who violates the act's prohibitions is subject to appropriate administrative discipline, including, when circumstances warrant, suspension from duty without pay or removal from office. An officer or employee who knowingly and willfully violates the act can be fined not more than $5,000, imprisoned for not more than two years, or both. If the Social Security Trust Funds should become insolvent (i.e., unable to pay scheduled benefits in full on a timely basis), it appears that beneficiaries who should file suit to be paid the difference between the amount that receipts allow paying and the full benefit amount to which they are entitled would not be likely to succeed in getting the difference. The Supreme Court in Reeside v. Walker held that no officer of the government is authorized to pay any debt due from the United States, whether reduced to a court judgment or not, unless an appropriation has been made for that purpose. To support its holding, the Court cited Article I, Section 9, clause 7 of the Constitution, which states that, "No money shall be drawn from the Treasury, but in consequence of appropriations made by law." The Court reaffirmed this principle in Office of Personnel Management v. Richmond . Consequently, unless Congress amends applicable laws, it appears that beneficiaries would have to wait until the Trust Funds receive an amount sufficient to pay full benefits to receive the difference between the amount that can be paid from the Trust Funds and the full benefit amount. The Old Age Survivors Insurance and Disability Insurance program is a statutory entitlement program. Beneficiaries have a legal right to receive benefits if they meet the Social Security Act's eligibility requirements. Congress, however, has reserved the "right to alter, amend, or repeal any provision of this (Social Security) Act" and the U.S. Supreme Court has affirmed Congress's power to modify provisions of the Social Security Act in Flemming v. Nestor and subsequent court decisions. The Social Security program does not accord individuals either vested property rights or contractual rights with regard to future benefits. Congress may modify provisions of the Social Security Act as it exercises its constitutional power to provide for the general welfare. Congress has the power legislatively to guarantee to pay eligible individuals a certain level of Social Security benefits and not to reduce that level of benefits to such individuals in the future. While Congress may decide to take whatever measures necessary to fulfill such an obligation, courts would be unlikely to find that Congress's unilateral promise constitutes a contract that could not be modified or abrogated in the future. Congressional modification of the terms of a guarantee to pay a certain level of benefits would be limited by due process considerations, but these constitutional concerns would impose a bar only upon the enactment of an arbitrary modification that has no rational justification. In addition, a congressional promise not to reduce a specific level of Social Security benefits payable to certain eligible individuals would not overcome the constitutional principle that a legislative enactment in a social welfare program cannot bind a future Congress in the sense that the legislative enactment cannot be repealed or altered. The Trustees of the Old Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund have projected that these funds on a combined basis will be exhausted (i.e., unable to pay full benefits on time) in 2033. The Social Security Administration would not be able to pay beneficiaries full benefits at that time because the Social Security Act states that benefits shall be paid only from the Social Security Trust Funds. Social Security Administration officials are bound by the Antideficiency Act, which prohibits paying amounts that exceed the amount available in the source of funds available to pay them. Although the legal right of beneficiaries to receive full benefits would not be extinguished by the insufficient amount of funds in the Social Security Trust Funds, a court suit to obtain the difference between the amount in them available to pay partial benefits and the full benefit amount would not be likely to succeed in getting the difference. The Supreme Court has held that no officer of the government may pay a debt whether reduced to a court judgment or not unless Congress has appropriated funds to pay it. Consequently, unless Congress amends applicable laws, it appears that beneficiaries would have to wait until the trust funds receive an amount sufficient to pay full benefits to receive the difference between the amount that can be paid from them and the full benefit amount.

Calculations indicating that the Social Security program will not be financially sustainable in the long run under the present statutory scheme have fueled the current debate regarding Social Security reform. This report addresses selected legal issues that may be raised regarding entitlement to Social Security benefits as Congress considers possible changes to the Social Security program in view of projected long-range shortfalls in the Social Security Trust Funds. Social Security is a statutory entitlement program. Beneficiaries have a legal entitlement to receive Social Security benefits as set forth under the Social Security Act. The fact that Social Security benefits are financed by taxes on an employee's wages, however, does not limit Congress's power to fix the levels of benefits under the Social Security Act or the conditions upon which they may be paid. Congress's authority to modify provisions of the Social Security program was affirmed in the 1960 Supreme Court decision in Flemming v. Nestor, wherein the Court held that an individual does not have an accrued "property right" in his or her Social Security benefits. The Court has made clear in subsequent court decisions that the payment of Social Security taxes conveys no contractual rights to Social Security benefits. Congress has the power legislatively to promise to pay individuals a certain level of Social Security benefits, and to provide legal evidence of Congress's "guarantee" of the obligation of the federal government to provide for the payment of such benefits in the future. While Congress may decide to take whatever measures necessary to fulfill such an obligation, courts would be unlikely to find that Congress's unilateral promise constitutes a contract which could not be modified in the future. In addition, a congressional promise not to reduce a specific level of Social Security benefits payable to certain eligible individuals would likely not overcome the constitutional principle, subject to due process considerations, that one Congress may not bind a subsequent Congress to legislative action or inaction. The calculations concerning the possible future insolvency of the Social Security Trust Funds raise a question relating to whether that result would affect the legal right of beneficiaries to receive full Social Security benefits. While an entitlement by definition legally obligates the United States to make payments to any person who meets the eligibility requirements established in the statute that creates the entitlement, a provision of the Antideficiency Act prevents an agency from paying more in benefits than the amount in the source of funds available to pay the benefits. The Social Security Act states that Social Security benefits shall be paid only from the Social Security Trust Funds, and the act appropriates all payroll taxes to pay benefits. Although the legal right of beneficiaries to receive full benefits would not be extinguished by an insufficient amount of funds in the Social Security Trust Funds, it appears that beneficiaries would have to wait until the Trust Funds receive an amount sufficient to pay full benefits in the case of a shortfall unless Congress amends applicable laws.

The Military Construction Appropriations conference report, recommending $8.834 billion,was approved by the House on June 29, 2000, and the Senate on June 30, 2000. It became P.L.106-246 on July 13, 2000. In authorization action, on May 18, 2000, the House approved its defense authorization bill ( H.R. 4205 , H.Rept. 106-616 ). The Senate substituted their version of the defenseauthorization bill - S. 2549 , S.Rept. 106-292 - in H.R. 4205 and passedthat bill on July 13, 2000. The conference report ( H.Rept. 106-945 ) was passed by the House onOctober 11, 2000 and by the Senate on October 12, 2000. The conference authorized $8.8 billion,$787 million more than the President's request. The FY2001 defense authorization bill became P.L.106-398 on October 30, 2000. The Department of Defense (DOD) manages the world's largest dedicated infrastructure,covering over 40,000 square miles of land and a physical plant worth over $500 billion. The militaryconstruction appropriations bill provides a large part of the funding to maintain this infrastructure. The bill funds construction projects and real property maintenance of the active Army, Navy &Marine Corps, Air Force, and their reserve components; defense-wide construction; U.S.contributions to the NATO Security Investment Program (formerly called the NATO InfrastructureProgram); and military family housing operations and construction. The bill also provides fundingfor the Base Realignment and Closure (BRAC) account, which finances most base realignment andclosure costs, including construction of new facilities for transferred personnel and functions, andenvironmental cleanup at closing sites. The military construction appropriations bill is only one of several annual pieces of legislation that provide funding for national defense. Other major legislation includes (1) the defenseappropriations bill, that provides funds for all military activities of the Department of Defense,except for military construction; (2) the national defense authorization bill, that authorizesappropriations for national defense, (1) and (3) theenergy and water development appropriations bill,that provides funding for atomic energy defense activities of the Department of Energy. Two otherappropriations bills, VA-HUD-Independent Agencies and Commerce-Justice-State, also includesmall amounts for national defense. In addition, the energy and water development appropriationsbill provides funds for civil projects carried out by the U.S. Army Corps of Engineers. The annual defense authorization bill authorizes all the activities in the defense appropriation measures described above. Therefore, major debates over defense policy and funding issues,including military construction can be also found in the authorization bill. Since issues in thedefense authorization and appropriations bills intertwine, this report highlights salient parts of theauthorization bill, along with the military construction appropriation process. The separate military construction appropriations bill dates to the late 1950s when a large defense build-up occurred in response to intercontinental ballistic missile threats and the Sovietlaunch of Sputnik. Defense construction spending soared, as facilities were hardened, missile siloswere constructed, and other infrastructure was built. The appropriations committees established themilitary construction subcommittees to deal with this new level of activity. Consequently, theseparate military construction bill was created. The first stand-alone military construction bill wasin FY1959, P.L. 85-852. Previously, military construction funding was provided through annualdefense appropriations or supplemental appropriations bills. Military construction appropriations are the major, but not the sole, source of funds for facility investments by the military services and defense agencies. The defense appropriations bill providessome funds for real property maintenance in operation and maintenance accounts. In addition, fundsfor construction and maintenance of Morale, Welfare, and Recreation-related facilities are partiallyprovided through proceeds of commissaries, recreation user fees, and other income. Most funds appropriated by Congress each year must be obligated in that fiscal year. Military construction appropriations are an exception, since these funds are generally made available forobligation for five fiscal years. Consideration of the military construction budget starts when the President's budget is delivered to Congress early each year. For FY2001, the President requested $8.0 billion in funding for themilitary construction program. Table 1 shows the key legislative steps necessary for the enactment of the FY2001 militaryconstruction appropriations. Table 1. Status of Military Construction Appropriations,FY2001 Conference Appropriations Action. The Military Construction Appropriations conferencereport, recommending $8.834 billion, was approved by the House on June 29, 2000,and the Senate on June 30, 2000. It became P.L. 106-246 on July 13, 2000. Theconference report debate centered on domestic and defense items in the FY2000supplemental emergency appropriations. (For more details, see SenateAppropriations Emergency Appropriations Action for FY2000 section, below.) House Appropriations Action. On May 16, 2000, the House passed the FY2001 Military Construction AppropriationsAct ( H.R. 4425 ), by a 386-22 roll call vote. The House followed theHouse Appropriations Committee's lead and passed the bill with only oneamendment. The Traficant amendment prohibits any money in the bill from goingto individuals or companies convicted of violating the "Buy American" laws. The House Appropriations Committee decided, as written in its report ( H.Rept. 106-614 ) to: reprimand the Pentagon about serious shortfalls in the militaryconstruction request and the severe backlog in readiness, revitalization, and qualityof life projects, deny the Pentagon's advance appropriations requests, direct the DOD Comptroller to monitor the impact of nocontingency funding for construction and hopes this action will improve the Services'cost estimating, and expect the Pentagon to include facility modernization programsin its Quadrennial Defense Review. The $8.634 billion bill passed by voice vote. This bill is 4% over last year's billand some $600 million more than the President's FY2001 request. The bill provides$3.9 for military construction, $3.5 million for family housing and $1.2 billion forBase Realignment and Closure costs. (2) Senate Appropriations Action. On May 18, 2000, the Senate passed S. 2521 , by a vote of 96-4. Because emergency supplemental appropriations for FY2000 was added to this bill,the debate on S. 2521 has centered on domestic and defense ridersattached on the bill. (See below.) On May 9, 2000, the Senate Appropriations Committee reported out its version ( S. 2521 ), of the FY2001 military construction appropriations bill. The Senate Appropriations Committee decided, as written in its report ( S.Rept. 106-290 ) to: chastise the Pentagon for its inadequately-fundedproposal, require the Pentagon to add 5% contingency funding in itsFY2002 request, in order to promote flexibility in completing projects (the Pentagonproposed zero in FY2001), and continue to require the Pentagon to report repair projects inOperations and Maintenance account funding to Congress. The $8.634 billion bill passed by voice vote. This bill is $292 million over last year's bill and some $600 million more than the President's FY2001 request. The billprovides $3.81 for military construction, $3.5 million for family housing and $1.2billion for Base Realignment and Closure costs. (3) Senate Appropriations Emergency Supplemental Action for FY2000. FY2000 supplemental funding was attached tothis Senate bill, S. 2521 . Defense items include: peacekeeping costs inKosovo and East Timor, counter-terrorism, growth in fuel and health-care costs forDOD dependents and retirees, and counter-narcotics costs in Columbia. (For acomplete list of supplemental items attached to S. 2521 , see Appendix1.) The debate on S. 2521 is centering on supplemental riders on guncontrol and Kosovo. The most controversial provision that would have put adeadline to have U.S. troops withdraw from Kosovo, by July 1, 2001, was voteddown by the Senate. For background and comprehensive information on the supplemental, see CRS Report RL30457(pdf) , Supplemental Appropriations for FY2000: Plan Colombia,Kosovo, Foreign Debt Relief, Home Energy Assistance and Other Initiatives , by[author name scrubbed], et al. For background on the Kosovo operations, see CRS Issue Brief IB98041, Kosovo and U.S. Policy , by Steve Woehrel, and CRS Issue Brief IB10027, Kosovo: U.S. and Allied Military Operations, by [author name scrubbed]. On May 18, 2000, the House passed the defense authorization bill ( H.R. 4205 , H.Rept. 106-616 ) Following the lead of the MilitaryConstruction Subcommittee, the House recommended $8.4 billion dollars for militaryconstruction, $400 million more than the President's request. The Senate substituted their version of the defense authorization bill - S. 2549 , S.Rept. 106-292 - in H.R. 4205 and passed thatbill by 97-3 on July 13, 2000. The Senate recommended $8.46 billion for militaryconstruction, $430 million more than the President's request. The conference report ( H.Rept. 106-945 ) was passed by the House on October 11, 2000 and by the Senate on October 12, 2000. The FY2001 defense authorizationbill became P.L. 106-398 on October 30, 2000. The conference authorized $8.8 billion, $787 million more than the President's request. The conferees added over $200 million of the service chiefs' unfundedrequirements and emphasized additions to improved living and working conditionsfor military personnel and their families. The conference also agreed to extend the alternative authority for acquisition and improvement of military housing in Section 2806 - better known as MilitaryHousing Privatization Initiative. It is extended from February 10, 2001, to December31, 2004. (For more information on this initiative, see the Key Policy Issues sectionbelow.) Long-term Planning for Military Construction. Throughout the 1990s, Congress and Administrationhave debated whether military construction funding and long-term planning areadequate. Members of Congress have complained that poor planning and insufficientfunding on the Pentagon's part have made it difficult for Congress to insure thatmilitary construction plans meet pressing priorities. The Department of Defense uses a formal process called the Planning, Programming and Budgeting System (PPBS) to create its budget for Congress. (4) ThePPBS process is also used to prepare DOD's internal, long-term financial plan. Thelong-term plan extends over a six-year period and is known as the Future YearsDefense Plan (FYDP). During the 1990s, Congress has criticized the Pentagon'slong-term planning for military construction. In hearings on the FY2001 military construction request, legislators expressedcontinuing concern over military construction planning and the sufficiency offunding. Rep. Joel Hefley, Chair of the Military Installations and FacilitiesSubcommittee of the House Armed Services Committee (HASC) argued at a hearingon March 2, 2000, that the FY2001 budget request - like the previous FY1997-00requests - continues the poor planning and downward trend for military constructionbudgets. For the FY1997-2001 military construction requests, the Administrationrequested fewer funds than it had programmed in its budget assumptions in theprevious years' FYDP. This mismatch between plans and funding was cited in thecongressional criticism of the Pentagon's military construction planning. Since theFYDP and the requested amount decreases each year for military construction, Mr.Hefley states that he is finding it difficult to take Pentagon future plans for militaryconstruction seriously. That sentiment was echoed by the Senate AppropriationsMilitary Construction Subcommittee chair - Sen. Conrad Burns - who expresseddismay at the kind of long-term planning seen in the FY2001 military constructionproposal. At the March 2nd HASC hearing, Randall Yim, Deputy Under Secretary of Defense (Installations), outlined a new DOD approach to installation management,in response to the subcommittee's concerns about planning. Yim established anInstallation Policy Board, consisting of the senior service facilities leaders, seniorservice engineers and representatives from financing and program communities. ThisBoard, chaired by Yim, meets monthly to peer review and audit installationrequirements, to develop common standards between services and to provide a forumfor DOD-wide installations issues. Yim outlined three analytical tools that the Installation Policy Board is developing for more efficient planning. The first is a facilities strategic plan, soDOD knows what type of facilities are needed in the future. The second is thefacilities sustainment model, which uses auditable data to model and identify thefunds needed to keep facilities in good working order. The final tool is aninstallation readiness reporting system, so that installation readiness can beconsidered as part of operational readiness decisions. Reauthorization of the Military Housing Privatization Initiative. DOD is requesting that Congress amendSection 2885, Title 10, U.S.C. to extend the Military Housing Privatization Initiative(MHPI) pilot program for an additional five years. The MHPI is set to expire inFebruary 2001. The DOD believes the authorities that the MHPI provides willcontribute significantly to its plan to solve its housing situation by 2010, whencombined with traditional government-funded construction. The defense authorization conference report for FY 2001 ( H.Rept. 106-945 ) approved an extension of these authorities in Section 2806 for an additional 3-yearperiod - from February 2001 to December 2004. Background on Problems in Military Family Housing. In testimony to the House Armed ServicesCommittee on March 16, 2000, the official in charge of DOD installations - Randall Yim - described the continuing problem of military family housing. Hestated that approximately two-thirds of DOD's nearly 300,000 family housing unitsneed extensive renovation or replacement. Yim also testified that fixing this problemusing only traditional military construction methods would take 30 years and cost asmuch as $16 billion. In his testimony, Yim emphasized that privatization of military family housing is just one part of a three part program to fix the DOD housing problem by 2010. Two other important components are increasing housing allowances to eliminateout-of-pocket costs for servicemembers and a strong military construction program. Increasing the housing allowance will reduce demand for on-base housing and atraditional government-funded construction program will continue to help fix on-basehousing. Definition of MHPI Authorities. Recognizing the severity of the family housing problem, Congress passed theMilitary Housing Privatization Initiative in the FY1996 Defense Authorization Act( P.L. 104-106 ). This gave the Pentagon new authorities to obtain private sectorfinancing and expertise for military housing. The authorities are: guarantees, both loan and rental; conveyance or lease of existing property andfacilities; differential lease payments; investments, both limited partnerships and stock/bondownership; and direct loans. The legislation enabled the new authorities to be used individually, or in combination. (5) History on Use of MHPI Authorities. Yim gave the history of DOD's implementation of the MHPI. In the early days ofusing these authorities (1996-1998), the Department of Defense's HousingRevitalization Support Office (HRSO) coordinated the application of the newauthorities and oversaw all aspects of the process from initial site visits to finalsolicitation. During this phase - said Yim - significant strides were made indeveloping program criteria, financial models, legal documents and budget scoringguidelines. Only two on-base projects reached the solicitation stage, however,largely due to a problems in DOD's centralized management structure. In October 1998, the Pentagon changed tactics and devolved the execution of housing privatization projects to the Services. (6) Todate, there have been four projectsawarded and/or completed, twelve projects solicited and fourteen planned, using theMHPI process. (7) Evaluation of MHPI. Progress of the privatization initiative has been slow. Representative Gene Taylor, Ranking Memberof the Military Installations and Facilities Subcommittee of the HASC stated at theMarch 16, 2000 hearing that Congress has been disappointed with the pace ofprivatization implementation. Taylor hoped that DOD will be able to find the rightmix of public and private funding and that the housing privatization concept will liveup to its promise of providing high quality housing for our troops and their families. The General Accounting Office (GAO) highlighted some concerns with the privatization initiative when it reviewed DOD's military housing situation in July1998. (8) Initial evaluation of life-cycle costs ofprivatized housing versus traditionalmilitary housing showed a potential savings of only about 10% or less. The proposedlong-term time horizons for some privatization projects of 50 years or more raised concerns that the housing might not be needed that far into future. Also, the GAOargued that Pentagon planning for military housing remains poor. GAO stated thathousing requirements are not integrated with particular facilities and communityneeds, that the plans underutilize the use of local housing and that there is poorcommunication between offices responsible for housing allowances and militaryhousing construction. GAO recommended that comprehensive, better integratedplans could help maximize the privatization initiative while minimizing total housingcosts. A March 2000 GAO follow-up study on the privatization initiative (9) reported thatsince no projects under the initiative have been fully implemented, there is little basisto evaluate whether the initiative will ultimately achieve its goals of eliminatinginadequate housing more economically and faster than could be achieved throughtraditional military construction financing. Also, the GAO points out that the DODdoes not have an evaluation plan to assess the initiative. The GAO recommended that the DOD create a privatization evaluation plan to be used consistently by all the Services. The plan should include performancemeasures, such as evaluation of each authority, comparison of actual to estimatedcosts of projects, assessment of developer performance, collection of data on the useand satisfaction of housing by service members. DOD agreed with GAO'srecommendations and has begun to create an evaluation plan. Privatization Initiative for Utility Infrastructure. Yim testified on March 16th that DOD is pursuingutility privatization through the authority of Section 2871 of Title 10 for cost savingsand recapitalization of aging infrastructure. The DOD would like to privatize 1,700utility systems by 2003, in order have public and private sector experts run andupgrade these systems according to best business practices. This authority requires that the long-term economic benefit of utilityprivatization exceeds the long-term economic and utility services costs. To date, 12systems at 7 installations have been privatized, representing a savings of more than$10 million, according to DOD. Through this authority, DOD divests ownership of the utility system (i.e. wires and pipes) where it is economically feasible. In certain locations and markets, energymanagement may be included in a proposal in order to offer the best value to thegovernment. To give incentives to DOD installations to privatize utilities, the DOD is asking Congress to amend this utility privatization authority. With the proposed change, theServices would be able to keep savings generated by utility privatization in theirinstallations, instead of the savings going to the general treasury. The Funding Pattern for Military Construction Budgets. In recent years, Congress has added significant amountsto annual Administration military construction budget requests. This has been arecurring pattern in the 1990s. The President proposes what Congress calls aninadequate military construction budget, especially for Guard and Reserve needs. Congress then adds funding for military construction, with some attention to Guardand Reserve projects. For example, Congress added $479 million in FY1996, $850million in FY1997, $800 million in FY1998, and $875 million in FY1999 to themilitary construction accounts. Congressional additions to the military construction budget have been common and controversial throughout the 1990s. Three themes explain the pattern ofrecurring congressional additions. First, some members of the military constructionsubcommittees have believed that military construction has been chronicallyunderfunded. This theme was echoed in hearings on the FY2001 budget and the reports from the House Appropriations Committee and the defense authorizingcommittees on bills for FY1998-2000. Second, often Congress has differentpriorities than the Administration, as reflected in frequent congressional cuts tooverseas construction requests and contributions to the NATO Security InvestmentProgram. Third, other Members of Congress, as Senator Bond commented duringthe floor debate on FY1996 military construction appropriations, believe that thePentagon counts on Congress to add money to Guard and Reserve programs. Inrecent years, Congress has added large amounts for National Guard and Reserveconstruction projects, including a peak amount of $451.1 million in FY2000. (See Table 5 .) Low military construction budgets has led to growing maintenance backlogs, inadequate budgets for installation maintenance, and conflict between congressional& Pentagon military construction priorities. Military construction proponents,including facility advocates in the military services, argue that military facilities havebeen systematically underfunded for many years. For example, GAO reported itsresults of a review of the management of real property assets by the DOD and theservices, at a March 1, 2000 hearing to the House Armed Services Subcommittee onReadiness. The review focused on properties that the services maintain and repairusing operation and maintenance accounts. The GAO pointed out that Congress hasbeen concerned about the DOD's real property maintenance since the 1950s. Recently, the backlog for deferred maintenance has grown from $8.9 billion in 1992to $14.6 billion in 1998. Also, DOD facility managers have not met their goal to allocate 3% of the plant replacement value of DOD facilities for annual construction and maintenance (calledreal property maintenance at the Pentagon). Although this 3% goal is below theaverage for public facilities nationwide, actual DOD funding has typically run at 1to 2% of plant replacement value. For example, the Navy testified on March 1, 2000to the House Armed Services Subcommittee for Readiness that the Navy budgeted 1.8% for real property maintenance. As a result, facility proponents welcome anycongressional additions. Finally, congressional military construction subcommittees - authorization as well as appropriations subcommittees - have frequently taken issue withAdministration military construction priorities. In the early 1990s, for example, thecommittees frequently reduced amounts requested for construction overseas - on thegrounds that troop levels abroad should be reduced and that allied burden-sharingcontributions should increase - and reallocated the funds to domestic projects. Inaddition, congressional committees have added unrequested funds for quality of lifeimprovements, such as day care centers and barracks renovation. Congress hasargued that the military services have tended to neglect these areas in favor ofwarfighting investments. The Debate Over Added Projects. Since Congress has added significant amounts to military construction budgets overthe last 10 years, congressional debate has centered on how to prioritize worthyadditional projects. In 1994, the Senate debate on the military construction appropriations bill focused on the amount of congressional additions to the request despite constraintson overall defense spending. Senator McCain, in particular, objected to the provisionof substantial amounts for projects that the Administration had not requested. Heargued that such projects largely represented "pork barrel" spending, and came at theexpense of higher priority defense programs. In Senate floor consideration of themilitary construction bill that year, the managers accepted a McCain amendment thatcalled for criteria to be applied to additional projects. His amendment included aprovision that any added project should be on the military lists of critical yetunbudgeted projects. The McCain amendment was not incorporated into the finalconference version of the bill, however, and the conference agreement provided over$900 million for unrequested construction projects. The National Defense Authorization Act for FY1995 ( P.L. 103-337 ), however, incorporated Senator McCain's criteria as a "Sense of the Senate" provision, (10) providing that the unrequested projects should be: 1. essential to the DOD's national security mission, 2. not inconsistent with the Base Realignment and Closure Act, 3. in the services' Future Years Defense Plan (see above), 4. executable in the year they are authorized and appropriated, and 5. offset by reductions in other defense accounts, through advice from theSecretary of Defense. Since the 104th Congress, the House military construction authorizing and appropriations committees have also used similar criteria, in collaboration with thePentagon, to add projects to the military construction budget. Each potential projectneeds to pass the following criteria, similar to the McCain criteria: Is the projectessential to the DOD mission, consistent with BRAC plans, in the Future YearsDefense Plan and "executable" in the coming fiscal year? If the project can meetthose criteria, the military construction authorizing and appropriations committeesmay add the project. Debate over congressionally-added projects continues. In debate on the FY2000 military construction appropriations conference report, Senator McCaincontinued to discuss projects added by Congress. He noted that Congress addednearly $975 million of extra projects. Senator McCain presented his list ofquestionable projects in the Congressional Record , in a letter to the President and onhis web page http://www.senate.gov/~mccain/mil00cf.htm. The Administration has proposed $8.0 billion for the FY2001 militaryconstruction request. The conference report approved $8.8 billion. This totalcontinues a downward trend from the FY1996 level of $11.2 billion, the FY1997level of $9.8 billion, the FY1998 level of $9.3 billion, the FY1999 level of $9.0billion. The FY2001 enacted amount of $8.8 billion is more than the FY2000enacted amount of $8.4 billion. Table 2 shows overall military construction program funding since FY1996. Table 3 breaks down the FY2001 request by appropriations account and comparesit to FY1999 and FY2000 levels. Table 4 shows congressional action on militaryconstruction appropriations by account. Table 5 shows congressional militaryconstruction add-ons for Guard and Reserve projects from FY1985-2000. P.L. 106-246 , H.R. 4425 (Hobson) Making appropriations for military construction, family housing, and baserealignment and closure for the Department of Defense for the fiscal year endingSeptember 30, 2001, and for other purposes. The House Committee onAppropriations reported an original measure, H.Rept. 106-614 , May 11, 2000. Passed House, 386 - 22 (Roll No. 184) (text: CR H3074-3076), May 16, 2000. Conference report ( H.Rept. 106-710 ) filed June 29, 2000. Mr. Young (FL) broughtup conference report by previously agreed to special order, June 29, 2000. Conference report passed House, 306 - 110 (Roll no. 362), June 29, 2000; passedSenate, by voice vote, June 30, 2000. Signed into law July 13, 2000. S. 2521 (Burns) An original bill making appropriations for military construction, family housing,and base realignment and closure for the Department of Defense for the fiscal yearending September 30, 2001, and for other purposes. Committee on Appropriationsordered to be reported an original measure, May 9, 2000. By Senator Burns fromCommittee on Appropriations filed written report, H.Rept. 106-290 , May 11, 2000. Measure laid before Senate, May 11, 2000. Considered by Senate, May 15-18, 2000. Senate incorporated this measure in H.R. 4425 as an amendment, May18, 2000. Senate passed companion measure H.R. 4425 in lieu of thismeasure (96 - 4) on May 18, 2000. H.R.4205 (Spence) To authorize appropriations for fiscal year 2001 for military activities of theDepartment of Defense and for military construction, to prescribe military personnelstrengths for fiscal year 2001, and for other purposes. Reported (amended) by theCommittee on Armed Services ( H.Rept. 106-616 ), May 12, 2000. Considered bythe House, May 17-18, 2000. Passed House (353-63), May 18, 2000. Conferencereport H.Rept. 106-945 passed the House (382 - 31) on October 11, 2000. TheSenate agreed to conference report (90 - 3) on October 12, 2000. Became P.L.106-398 on October 30, 2000. S. 2549 (Warner) To authorize appropriations for fiscal year 2001 for military activities of theDepartment of Defense, for military construction, and for defense activities of theDepartment of Energy, to prescribe personnel strengths for such fiscal year for theArmed Forces, and for other purposes. Committee on Armed Services ordered to bereported an original measure, May 9, 2000. Report filed ( S.Rept. 106-292 ), May 11,2000. Considered by the Senate, June 6-8, June 14, and June 19-20, 2000. Senatestruck all after the Enacting Clause for H.R. 4205 and substituted thelanguage of S. 2549 as amended and this passed the Senate in lieu of S. 2549 with an amendment by Yea-Nay Vote, 97 - 3, on July 13, 2000. Table 2. Military Construction Appropriations,FY1996-2000 (budget authority in millions of dollars) Source: Actual FY1996-99 data, Estimate FY2000 and Request 2001 fromDepartment of Defense (DOD), Financial Summary Tables , Feb. 2000 & previousyears' reports. Enacted FY2001 data from H.Rept. 106-710 . Table 3. Military Construction Appropriations by Account:FY1999-2001 (in thousands of dollars) Source: FY1999-FY2001 Request from DOD, Financial Summary Tables , February2000. Table 4. Military Construction Appropriations by Account -Congressional Action (in thousands of dollars) Source: H.Rept. 106-614 , S.Rept. 106-290 , H.Rept. 106-710 . Table 5. Congressional Additions to Annual DOD BudgetRequests for National Guard and Reserve Military Construction,FY1985-2000 (current year dollars in thousands) Source: Department of Defense, Financial Summary Tables, successive years. CRS Issue Brief IB96022. Defense Acquisition Reform: Status and Current Issues , by [author name scrubbed]. CRS Report RL30002(pdf) . A Defense Budget Primer , by [author name scrubbed] and [author name scrubbed]. CRS Report RL30505 . Appropriations for FY2001: Defense , by [author name scrubbed]. CRS Report RL30447(pdf) . Defense Budget for FY2001: Data Summary , by [author name scrubbed] and [author name scrubbed]. U.S. Department of Defense, Office of the Under Secretary of Defense (Comptroller), FY2001 Budget Materials http://www.dtic.mil/comptroller/fy2001budget/ U.S. Department of Defense, Installations Home Page http://www.acq.osd.mil/installation House Committee on Appropriations http://www.house.gov/appropriations Senate Committee on Appropriations http://www.senate.gov/~appropriations/ CRS Appropriations Products Guide http://www.loc.gov/crs/products/apppage.html#la Congressional Budget Office http://www.cbo.gov General Accounting Office http://www.gao.gov Office of Management & Budget http://www.whitehouse.gov/OMB/

The military construction (MilCon) appropriations bill finances (1) military construction projects in the United States and overseas; (2) military family housing operations and construction;(3) U.S. contributions to the NATO Security Investment Program; and (4) most base realignment andclosure costs. This report reviews the appropriations and authorization process for military construction. The congressional debate perennially centers on the adequacy of the President's budget for militaryconstruction needs and the necessity for congressional add-ons, especially for Guard and Reserveprojects. In recent years, Congress has frequently complained that the Pentagon has not adequatelyfunded military construction. The Administration's FY2001 budget request for military construction is $8.0 billion, which is 5.5% below the level provided in FY2000. This continues a downward trend from the peakFY1996 level of $11.2 billion, the FY1997 level of $9.8 billion, the FY1998 level of $9.3 billion,the FY1999 level of $9.0 billion and the FY2000 level of $8.4 billion. On May 16, 2000, the House passed the Military Construction Appropriations Act FY2001 ( H.R. 4425 ), by a 386-22 roll call vote. The House followed the House AppropriationsCommittee's lead and passed the $8.634 billion bill with only one amendment. On May 18, 2000, the Senate passed S. 2521 , their version of the FY2001 Military Construction Appropriations bill, on a 95-4 vote. Because emergency supplemental appropriationsfor FY2000 was added onto this bill, the conference debate has focused on domestic and defenseissues outside of military construction. For background and comprehensive information on theFY2000 supplemental funding, see CRS Report RL30457(pdf) , Supplemental Appropriations forFY2000: Plan Colombia, Kosovo, Foreign Debt Relief, Home Energy Assistance and OtherInitiatives , by [author name scrubbed], et al. The Military Construction Appropriations conference report, recommending $8.834 billion, was approved by the House on June 29, 2000, and the Senate on June 30, 2000. It became P.L. 106-246 on July 13, 2000. In authorization action, on May 18, 2000, the House approved its defense authorization bill ( H.R. 4205 , H.Rept. 106-616 ). The Senate substituted their version of the defenseauthorization bill - S. 2549 , S.Rept. 106-292 - in H.R. 4205 and passedthat bill on July 13, 2000. The conference report ( H.Rept. 106-945 ) was passed by the House onOctober 11, 2000 and by the Senate on October 12, 2000. The conference authorized $8.8 billion,$787 million more than the President's request. The FY2001 defense authorization bill became P.L.106-398 on October 30, 2000. Key Policy Staff Division abbreviations: FDT = Foreign Affairs, Defense, and Trade.

Members of Congress and the Obama Administration are engaged in debate over short- and long-term efforts to reduce the federal deficit and stabilize the national debt. Within that debate, attention has focused on proposals to alter the overall size and composition of total federal spending. The bipartisan National Commission on Fiscal Responsibility and Reform issued recommendations for both spending reductions and revenue increases on December 1, 2010. On February 14, 2011, President Obama submitted his detailed FY2012 budget request to Congress, and two months later he released a set of deficit reduction policies intended to build on his February proposal. Unlike the February budget submission, the President's April Framework for Shared Prosperity and Shared Fiscal Responsibility does not include detailed proposals and has not been scored by the Congressional Budget Office (CBO). The House Budget Committee reported a concurrent resolution on the FY2012 budget ( H.Con.Res. 34 ) that was based on a document titled Path to Prosperity , released by Budget Committee Chairman Paul Ryan on April 5. The full House passed H.Con.Res. 34 on April 15 after defeating substitute versions offered by the Congressional Black Caucus ( H.Amdt. 256 ), the Congressional Progressive Caucus ( H.Amdt. 257 ), the Republican Study Committee ( H.Amdt. 258 ), and the Democratic Caucus ( H.Amdt. 259 ). The Senate has not yet acted on a budget resolution for FY2012. This CRS report highlights spending trends and key policy initiatives in the President's February budget and April F ramework , and in the House-passed budget resolution, for the six functional categories of the federal budget that comprise the human resources "superfunction." The six human resources functions (and their function codes) are education, training, employment, and social services (Function 500); health (primarily Medicaid) (Function 550); Medicare (Function 570); income security (Function 600); Social Security (Function 650); and veterans benefits and services (Function 700). As shown in Figure 1 , the human resources superfunction accounts for the majority of federal spending, with nearly 70% of federal outlays in FY2010. This report does not discuss the broad outlines of the FY2012 budget proposals, such as their projected levels of total spending, revenues, or deficits. Moreover, the report does not attempt to quantify the costs or savings associated with specific proposals. The purpose of the report is to give a very broad overview of the spending trends and policy recommendations proposed by the Administration and the House budget resolution--specifically, for the human resources budget functions--as background for the detailed budget and appropriations discussions that are taking place this year. For more information on the budget process itself and the status of the FY2012 budget, see CRS Report 98-721, Introduction to the Federal Budget Process , coordinated by [author name scrubbed]; CRS Report R40472, The Budget Resolution and Spending Legislation , by Megan Suzanne Lynch; and CRS Report R41685, The Federal Budget: Issues for FY2011, FY2012, and Beyond , by [author name scrubbed]. The federal budget is divided into 20 functional categories (e.g., national defense, health, energy, transportation), which are further divided into subfunctions. These functional categories provide a broad statement of budget priorities and facilitate the analysis of trends in related programs; they are used for informational purposes in the congressional budget process. For purposes of analysis, some budget functions are grouped together into budget "superfunctions" (e.g., national defense, human resources, physical resources). Congress begins formal consideration of the annual budget resolution after the President submits his detailed budget request for the coming fiscal year. (For example, as noted, President Obama submitted his FY2012 budget to Congress in February and the House passed a budget resolution in April.) The congressional budget resolution is not signed by the President and does not become public law. Rather, it is an internal blueprint for Congress to use in its consideration of legislation and spending for the coming fiscal year. The resolution establishes target levels for spending (budget authority and outlays) and revenues, along with an estimate of the deficit (or surplus) and the national debt. The resolution includes targets for the coming fiscal year and projected levels for subsequent years. Unlike the President's budget request submitted in February, the congressional budget resolution does not specify spending levels by program but instead establishes aggregate spending targets for each of the functional categories referred to above. These aggregate amounts are based on certain "assumptions" about spending for specific programs, but the assumptions are not typically specified in the resolution, nor are they binding on the appropriations committees or committees with jurisdiction over mandatory spending programs or tax provisions. Key assumptions are sometimes identified in the Budget Committee report that accompanies the concurrent resolution. The congressional budget process allows for several enforcement mechanisms to ensure compliance with overall targets established in the resolution. This report continues with a brief overview of the human resources superfunction as a whole, looking at long-term historical and future projected trends in spending under current law, in comparison with other major components of the federal budget. The section compares human resources spending under current law, as estimated by CBO, with the President's February budget request and amounts included in the House budget resolution. The next section identifies selected overarching policies included in the Administration and House budgets that are intended to reduce spending and/or stabilize the national debt; these policies could directly or indirectly result in lower spending across budget functions. The remainder of the report focuses on the six individual categories that comprise the human resources superfunction. Each section compares the CBO current law baseline for FY2011 through FY2021 with the President's February proposal (as re-estimated by CBO) and the House budget resolution, in constant FY2011 dollars. An Appendix to the report includes a table showing each of the human resources budget functions as a percentage of GDP, and two tables showing federal budget authority and outlays (in nominal dollars) for each of the six functions. Sources of information used in this report include the following: The Obama Administration's FY2012 budget documents: http://www.whitehouse.gov/omb/budget . White House fact sheet on The President's Framework for Shared Prosperity and Shared Fiscal Responsibility : http://www.whitehouse.gov/the-press-office/2011/04/13/fact-sheet-presidents-framework-shared-prosperity-and-shared-fiscal-resp . An Analysis of the President's Budgetary Proposals for Fiscal Year 2012 , by the Congressional Budget Office: http://www.cbo.gov/doc.cfm?index=12130 . The Path to Prosperity: Restoring America's Promise , House Budget Committee: http://budget.house.gov/UploadedFiles/PathToProsperityFY2012.pdf . H.Con.Res. 34 , as passed by the House, and the accompanying House Budget Committee report ( H.Rept. 112-58 ). Long-Term Analysis of a Budget Proposal by Chairman Ryan , by the Congressional Budget Office: http://www.cbo.gov/doc.cfm?index=12128 . Figure 2 shows the trend in federal outlays for major categories of the federal budget, as a share of the national economy, from FY1962 through FY2010. The figure also shows CBO's projections for these categories, assuming no change in current law, through FY2021. The figure illustrates the growth in spending for human resources over the last five decades, and shows the importance of this component of the budget, in relation to other government spending. Specifically, the figure shows that outlays for human resources, as a percentage of Gross Domestic Product (GDP), have grown substantially since 1962, when they accounted for 5.6% of GDP. CBO expects they will have peaked in FY2010, at 16.4%, and will fall to 14.8% in FY2014. This pattern reflects the assumed economic recovery, lower spending for programs that respond automatically to economic conditions such as Unemployment Insurance and the Supplemental Nutrition Assistance Program (SNAP), and the expiration of all stimulus funding. Beginning in FY2015, however, human resources spending would rise again as a share of GDP, according to CBO, reaching 15.7% by FY2021. While this is lower than the FY2010 level of 16.4% of GDP, it still exceeds the pre-recession (2007) level of 12.7%. Fueling this increased spending are several factors, including the continuing effects of the baby boom generation's retirement and increased enrollment in Medicare and Social Security, certain program design features such as wage indexing in Social Security (which allows initial monthly benefits to replace a constant proportion of pre-retirement earnings and keep pace with rising living standards), medical cost inflation in excess of general inflation, and new spending attributable to implementation of the health care reform law of 2010. The effect of these factors can be seen in Figure 3 , which shows the trend in outlays for each of the six human resources budget functions, as a share of GDP, from FY1962 through FY2010 and then projected through FY2021. The figure illustrates that spending in the human resources superfunction has been increasingly dominated by four categories: health (Function 500, which primarily consists of Medicaid), Medicare (Function 570), income security (Function 600), and Social Security (Function 650). With no change in current law, CBO projects that spending for income security as a share of GDP will contract over the next decade, as will spending for the two smallest functions--education, training, employment, and social services (Function 500), and veterans benefits and services (Function 700). On the other hand, CBO projects that spending for three functions--health (mostly Medicaid), Medicare, and Social Security--will increasingly consume more of the economy as the population ages and the cost of health care continues to rise. Most federal low-income programs are included in one of the human resources budget functions, most likely Function 500 (education, training, employment, and social services) or Function 600 (income security), in addition to Function 550, which includes Medicaid and the State Children's Health Insurance Program (CHIP). A review of these programs shows the same trend discussed above; that is, health care is growing as a share of the economy while spending for other services (other than Social Security) contracts. A CRS analysis of federal outlays for major federal low-income programs shows aggregate spending for these programs, as a share of GDP, will have peaked in FY2010 but will rise again starting in FY2013. However, all projected growth in spending for these low-income programs will be for health programs (specifically Medicaid, CHIP, and the refundable portion of a health insurance tax credit created under the 2010 health care reform law, which is scheduled to begin in 2014). With no change in current law, spending for non-health low-income programs will increasingly diminish as a share of the economy over the next decade. Figure 4 compares total estimated outlays for the human resources superfunction, as a share of GDP, under CBO's baseline, President Obama's February request, and the House budget resolution, from FY2011 through FY2021. The figure shows that the President's budget closely follows and slightly exceeds the CBO baseline, while the House budget resolution would result in significantly lower spending as a share of the national economy. All three budgets project an immediate drop in spending. Under the CBO baseline and Administration budget, spending would then be relatively flat for most of the period before gradually increasing in the final years of the decade. Under the House budget resolution, spending would continue a gradual decline throughout most of the period, but would also rise slightly at the end of the decade. As stated earlier, CBO projects that human resources spending will equal 15.7% of GDP in FY2021 with no change in policy. This compares with 15.9% under the Administration's budget and 13.5% under the House resolution. Later sections of this report discuss each of the human resources functional categories specifically, and show trends in projected outlays under the CBO baseline, the President's February request, and the House resolution. As discussed above, CBO expects continued growth in the two health-related functions as well as Social Security. While the House budget resolution assumes dramatically lower spending for the health function that includes Medicaid, it would result in no significant changes in spending for Medicare or Social Security over the next 10 years. Instead, H.Con.Res. 34 sets targets that would lower spending from the current law baseline in two additional functions: education, training, employment, and social services, and income security. As noted in the beginning of this report, policymakers are concerned about the current and projected future size of the federal deficit, or the gap between spending and revenues. Both the Administration and House budget proposals include overarching policies intended to constrain growth in federal spending, among other deficit-reduction proposals. These policies, summarized below, would affect spending in most of the functional categories that are the focus of this report. In its February budget submission, the Administration proposed to freeze non-security discretionary spending through FY2015 at FY2010 levels. This would not be an across-the-board reduction (affecting all programs equally) but rather an overall freeze with critical areas singled out for increased spending. Specific amounts are identified in the Administration's budget documents. In his April Framework , President Obama proposed additional reductions in non-security discretionary spending, beyond those included in the February budget. According to a White House fact sheet, these reductions would be consistent with the spending recommendations of the National Commission on Fiscal Responsibility and Reform over the next decade. Also in the April Framework , President Obama announced a "debt failsafe" that would trigger further reductions in spending (including mandatory spending and tax expenditures). This provision would establish that if, by 2014, the projected ratio of debt to GDP is not stabilized and shown to be declining during the second half of the decade, automatic across-the-board spending cuts would be triggered. The White House fact sheet notes that this trigger would not apply to Social Security, low-income programs, or benefits for Medicare enrollees. The House budget resolution establishes spending targets that assume a reduction in discretionary non-security spending to below FY2008 levels and a five-year freeze. As noted earlier, the congressional budget resolution does not establish spending levels for individual programs; these decisions are made through the appropriations process, within the overall spending targets set by the budget resolution. The House budget resolution also calls for a series of steps intended to enforce both the discretionary spending and the total spending caps included in the resolution. These mechanisms would trigger automatic across-the-board spending reductions unless Congress moves to avoid such across-the-board reductions through enactment of legislation under expedited procedures. Social Security would be exempt from these enforcement mechanisms. These overarching proposals are key components of both the Administration and House budget plans. They are reflected in the trend lines shown above in Figure 4 and in the following sections, which illustrate and discuss the trends in projected outlays for each of the six functions categorized as human resources. Function 500 includes funding for the Department of Education (ED), social services programs within the Department of Health and Human Services (HHS), and employment and training programs within the Department of Labor (DOL). It also contains funding for the Library of Congress and independent research and art agencies such as the Corporation for Public Broadcasting, the Smithsonian Institution, the National Gallery of Art, the John F. Kennedy Center for the Performing Arts, the National Endowment for the Arts, and the National Endowment for the Humanities. Most spending under Function 500 is discretionary. However, mandatory spending includes student financial assistance, some training and employment services, and Social Services Block Grants. Spending under this function is divided among the following six subfunctions: elementary, secondary, and vocational education; higher education; research and general education aids; training and employment; other labor services; and social services. Figure 5 shows estimated outlays for Function 500 programs, from FY2011 through FY2021 in constant FY2011 dollars, under the CBO baseline, the Administration's February budget request, and the House budget resolution. As illustrated, the Administration's February request exceeds the CBO baseline for most of the period by a relatively small and gradually diminishing amount, while the House resolution envisions spending at substantially lower levels than the CBO baseline. By FY2021, Function 500 spending under the Administration's February budget would be virtually identical to the CBO baseline (1% higher), while the House budget resolution assumes spending would be 36% below the baseline. (Note that the President's April Framework proposes additional reductions in discretionary spending that presumably would lower estimated spending under the Administration's budget for Function 500.) As a function dominated by discretionary spending, Function 500 would be affected by the Administration's proposals to reduce and freeze overall discretionary non-security spending through FY2015; however, Function 500 also includes several policy areas identified by the White House as critical investments for the future. These include education and workforce development, where the Administration has proposed a variety of reforms and program consolidations, as well as increased spending for certain programs, offset by termination of others. Certain savings would be achieved from changes to Pell grants and student loans, which would help offset the cost of maintaining the current maximum Pell grant award. The Administration also proposes to permanently extend and index the American Opportunity Credit, a partially refundable tax credit for the costs of higher education that was originally created by the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ). As displayed in Figure 5 , spending for Function 500 under the House budget resolution would drop sharply in FY2013 and stay relatively constant for the rest of the decade. This trend reflects the deeper overall discretionary spending cuts and freeze assumed by the House resolution, including consolidation and termination of various job training, elementary and secondary education, and cultural programs. The House resolution also assumes certain changes to Pell grants and student loans, but would adopt a "sustainable" maximum Pell grant award rather than the current maximum level. Function 550 includes most direct health care services programs, most notably Medicaid. Other health programs in this function fund anti-bioterrorism activities, national biomedical research, activities to protect the health of the general population and workers in their places of employment, health services for under-served populations, and training for the health care workforce. Some of the HHS agencies funded in this function include the National Institutes of Health, Centers for Disease Control and Prevention, Health Resources and Services Administration, and the Food and Drug Administration. The major mandatory programs in this function are Medicaid, the State Children's Health Insurance Program (CHIP), federal and retirees' health benefits, and health care for Medicare-eligible military retirees. Spending under this function is divided among the following three subfunctions: health care services, health research and training, and consumer and occupational health and safety. Figure 6 shows estimated outlays for Function 550 programs, from FY2011 through FY2021 in constant FY2011 dollars, under the CBO baseline, the Administration's February budget request, and the House budget resolution. The difference in trends is stark. The Administration budget would track closely with CBO, which expects an initial drop in Medicaid spending in FY2012, due to the scheduled expiration of enhanced federal matching to states initially authorized by ARRA, and the effects of the economic recovery on the Medicaid caseload. However, spending would then climb sharply, starting in FY2013, under both the CBO baseline and the Administration's February budget. The House budget resolution, on the other hand, envisions a decrease in spending until FY2014, followed by a relatively flat line through FY2018, and a slight increase for the balance of the decade. In FY2021, the Administration's February budget would result in estimated outlays only slightly (2%) lower than the CBO baseline, while outlays would be 50% lower under the House budget resolution's spending targets. Medicaid is the primary driver of spending in Function 550. In its request for Medicaid and Medicare (discussed below), the Administration cites the major changes to both programs already enacted in the Patient Protection and Affordable Care Act of 2010 (PPACA, P.L. 111-148 , as amended by P.L. 111-152 ). The Administration's FY2012 budget includes additional Medicaid proposals intended to improve program integrity (reduce fraud, waste, and abuse), limit reimbursement rates for durable medical equipment, simplify the federal-state matching formulas under Medicaid and CHIP, and improve patient safety. The President's Framework also expresses support for proposals to reform service delivery to high-cost beneficiaries, including those eligible for both Medicaid and Medicare (dual eligibles), and calls on the National Governors Association to make additional recommendations for Medicaid reform. The House Budget Committee, in its accompanying report, notes that the budget resolution assumes a "fundamental reform" of Medicaid. The report lists a series of "potential approaches," including conversion of the federal share of Medicaid spending into an allotment (a block grant), which would be indexed for inflation and population growth. The committee advocates repealing the Medicaid expansions enacted in PPACA, which are scheduled to begin in 2014, and the PPACA provisions authorizing subsidies to help low-income individuals purchase health insurance through exchanges. The resolution also assumes elimination of the individual mandate to purchase insurance, established under PPACA. The House budget resolution further assumes savings would be achieved by repealing any unspent funds provided under ARRA and other associated provisions in PPACA. Function 570 includes only the Medicare program, which provides health insurance to individuals age 65 or older and certain persons with disabilities. Nearly 99% of spending in this function is mandatory, and almost all of the mandatory spending consists of payments for Medicare benefits. Congress provides an annual appropriation for the costs of administering and monitoring the Medicare program. Figure 7 shows estimated outlays for Medicare, from FY2011 through FY2021 in constant FY2011 dollars, under the CBO baseline, the Administration's February budget request, and the House budget resolution. The figure illustrates relatively little difference between the three, which all show significantly increasing spending for Medicare throughout the decade, caused by an aging population and rising health care costs. Estimated spending in FY2021 would exceed the CBO current law baseline by 5% under the President's February budget and would be 3% lower than CBO's projections under the House resolution. As noted above, the Administration's budget cites changes to Medicare already enacted in PPACA, and includes various proposals intended to build on these provisions. In addition, the February budget proposed a 10-year freeze on physician payment rates under Medicare at FY2011 levels (the so-called "doc fix"), which would otherwise decline under the sustainable growth rate formula in current law. The increased cost of this proposal would be offset by specified savings during the first two years. The April Framework assumes, but does not specify, additional aggregate savings that would fully pay for the "doc fix" provision over the 10-year budget window. The Framework says the Independent Payment Advisory Board (IPAB), created by PPACA, will set a lower target of Medicare growth per beneficiary and be given additional tools to promote quality care and reduce costs. The Administration's budget also includes proposals to cut prescription drug costs, and reduce Medicare waste, fraud, and abuse. One of the most widely reported provisions in the House budget resolution assumes enactment of legislation to convert Medicare into a "premium subsidy" program. However, as envisioned in the budget resolution, this change would not take effect until FY2022, which is beyond the resolution's 10-year budget window and is therefore not reflected in Figure 7 . The resolution assumes additional changes affecting Medicare, including enactment of a long-term solution to the physician payment rate formula. The resolution contains a "reserve fund" to accommodate the SGR fix; this provision would allow for consideration of legislation that would reform SGR, as long as the legislation did not increase the deficit for the period FY2012-FY2021. The resolution also assumes a requirement that any potential savings in Medicare be reinvested into the program; elimination of the IPAB; and enactment of changes to laws governing medical liability, including limits on noneconomic and punitive damages. Function 600 includes a range of income security programs that provide cash or near-cash assistance (e.g., housing, nutrition, and energy assistance) to low-income persons, and benefits to certain retirees, persons with disabilities, and the unemployed. Housing assistance programs account for the largest share of discretionary funding in this function. Major federal entitlement programs in this function include Unemployment Insurance, Trade Adjustment Assistance income support, the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps), Temporary Assistance for Needy Families (TANF), foster care, and Supplemental Security Income (SSI). The refundable portion of the Earned Income Tax Credit (EITC) and the refundable Additional Child Tax Credit (ACTC) are also included in this function. Federal and other retirement and disability programs comprise approximately one-third of funds in Function 600. Spending under this function is divided among the following six subfunctions: general retirement and disability insurance (excluding Social Security), federal employee retirement and disability, unemployment compensation, housing assistance, food and nutrition assistance, and other income security. Figure 8 shows estimated outlays for Function 600 programs, from FY2011 through FY2021 in constant FY2011 dollars, under the CBO baseline, the Administration's February budget request, and the House budget resolution. The figure shows the Administration's budget is identical to the CBO baseline until FY2013. Both lines then show decreased spending through FY2018, but outlays would decline at a slower rate under the Administration's February proposals. The CBO baseline assumes recession-related spending will decline, and also assumes expiration of certain temporary provisions, including expansions of the EITC, ACTC, and extended Unemployment Insurance. The House budget resolution shows a sharper drop in spending continuing through FY2015, with outlays leveling off and staying relatively constant through FY2021. The President's budget projects FY2021 outlays would be 6% higher than the CBO baseline, while they would be 11% lower than CBO under the House budget resolution. Like the CBO baseline, the Administration's budget assumes reduced recession-related spending for UI and SNAP as the economy recovers. The Administration's proposals to reduce discretionary spending also would apply to certain programs in this function, and include a relatively deep cut in the Low-Income Home Energy Assistance Program (LIHEAP). However, the Administration also proposes to permanently extend certain tax provisions, including expansions of the EITC and the ACTC, which were initially authorized under ARRA and are scheduled to expire under current law. The President's budget includes provisions intended to address the unfunded liabilities in the UI system and the Pension Benefit Guaranty Corporation. As shown in the figure, the House budget resolution assumes lower spending for Function 600 programs, at least partially due to deeper cuts in discretionary non-security spending. In its accompanying report, the House Budget Committee also cites conversion of SNAP (food stamps) into a block grant to states as a possible policy option in this category, with state allotments indexed for food inflation and eligibility, starting in FY2015. The report also refers to a welfare reform provision that is discussed more fully in Chairman Ryan's Path to Prosperity . The 1996 welfare reform law applied work requirements and time limits to recipients of cash aid under TANF; such requirements would also be applied to recipients of SNAP benefits and housing assistance, according to Chairman Ryan's description of the budget resolution. The resolution assumes enactment of a provision that would require federal employees to contribute a greater share toward their retirement; elimination of the Home Affordable Modification Program (HAMP), which was intended to help homeowners avoid foreclosure; and reform of the PBGC. Function 650 consists of the payroll tax-financed programs that are collectively known as Social Security: Old-Age and Survivors Insurance and Disability Insurance (OASDI). This function includes both Social Security benefit payments (mandatory) and funds to administer the program (discretionary). Figure 9 shows estimated outlays for Function 650, from FY2011 through FY2021 in constant FY2011 dollars, under the CBO baseline, the Administration's February budget request, and the House budget resolution. The figure shows virtually no difference between the three lines, as neither the Administration nor the House budget resolution assumes significant policy changes in Social Security within the 10-year budget window. Note that Figure 9 shows outlays for both the on-budget and off-budget portions of Social Security. Although the Administration's budget contains no specific Social Security proposals, President Obama expressed support for bipartisan efforts to strengthen Social Security for the long term and put forth a set of principles to govern these reform efforts. These principles were reiterated in the April Framework and include strengthening retirement security for low-income and vulnerable beneficiaries and maintaining "robust" disability and survivors' benefits; no "privatization" of Social Security; restoration of long-term solvency; and no reduction in basic benefits for current beneficiaries or "slashing" of benefits for future generations. In its report on the budget resolution, the House Budget Committee refers to the December 2010 recommendations of the President's Commission on Fiscal Responsibility and Reform as demonstration "that there is a bipartisan way forward" on Social Security reform. In the interim, the resolution would require the Social Security Board of Trustees to recommend statutory reforms to the President in any year when the Trustees find the 75-year actuarial balance and the annual balance in the 75 th year are in deficit. The President would be required to submit legislation to implement these recommendations by a certain deadline and congressional committees would be required to report legislation under expedited procedures. Function 700 covers the programs of the Department of Veterans Affairs (VA), including veterans' medical care, compensation and pensions, education and rehabilitation benefits, and housing programs. It also includes the Department of Labor's Veterans' Employment and Training Service, the United States Court of Appeals for Veterans Claims, and the American Battle Monuments Commission. This function includes both mandatory and discretionary spending accounts. Mandatory funding supports disability compensation, pension benefits, education, vocational rehabilitation, life insurance, and burial benefits, among other benefits and services. Discretionary funding supports a broad array of benefits and services; almost 90% of appropriated funding in Function 700 goes to veterans' health care. Spending under this function is divided among five subfunctions: income security for veterans; veterans education, training, and rehabilitation; hospital and medical care for veterans; veterans housing; and other veterans benefits and services. Figure 10 shows estimated outlays for Function 700 programs, from FY2011 through FY2021 in constant FY2011 dollars, under the CBO baseline, the Administration's February budget request, and the House budget resolution. The Administration and House budgets for veterans benefits and services are virtually identical, and both very slightly exceed the CBO baseline. Programs categorized as "human resources" comprise the majority of federal outlays and have grown over the last five decades as a share of the overall national economy. CBO expects that spending for these programs will have peaked in FY2010 and will fall through FY2014, although spending levels will remain higher than they were before the recent recession. CBO further expects that overall human resources spending will begin to climb again starting in FY2015; however, all of the projected growth will be in health care (Medicaid and Medicare) and Social Security. All other components of the human resources superfunction will diminish as a share of the economy over the coming decade, according to CBO's current law baseline. The Administration and Congress are engaged in a debate over reducing the federal deficit and stabilizing the national debt; proposals to reduce and change the composition of federal spending are a major part of this debate. In February, the Administration gave Congress a detailed budget request for FY2012, which includes proposals to reduce spending for certain programs and increase spending for others; the February budget request was followed in April with an additional set of deficit reduction principles. Based on an analysis of the February budget, the Administration proposes no overall reduction in outlays for the human resources superfunction, although some of the proposals included in the April Framework would further lower spending for this portion of the budget. The budget resolution passed in April by the House, on the other hand, sets spending targets that would reduce outlays in the human resources superfunction to a level that would be 14% below the CBO baseline by FY2021. Within the human resources category, the House resolution would reduce spending primarily in three functions. By FY2021, the resolution would result in spending for Function 500 (education, training, employment, and social services, or ETESS) that is 36% below the CBO baseline. The largest reduction from the CBO baseline, if all provisions in the House resolution were enacted, would occur in Function 550 (health, including Medicaid); the House spending target for this function in FY2021 would be 50% below the baseline. Finally, spending for Function 600 (income security) in FY2021 would be 11% below the baseline under the House resolution. As noted earlier in this report, most federal programs specifically directed to low-income populations are in the human resources superfunction and are most likely to be included in the three specific functions just mentioned. In comparing these proposals, it is important to note the significant difference in size among the functions. For example, while the House budget resolution envisions a relatively large reduction in spending for Function 500 (ETESS) than would otherwise occur under current law, this proposal would contribute relatively little toward deficit reduction because of the small size of the function overall. On the other hand, with no change in current law CBO expects the function that includes Medicaid will be more than six times larger than Function 500 in FY2021 and the income security function will be more than four times larger; thus, reductions from the baseline in these functions would yield greater savings. Although the House resolution assumes conversion of Medicare into a premium subsidy program, this would not take effect until FY2022, which is beyond the 10-year budget window and therefore not reflected in the spending trends displayed in this report. Likewise, neither the Administration's budget nor the House budget resolution includes specific changes to Social Security or veterans benefits and services. Social Security is currently the largest of the human resources functions under current law, and would remain so under both the Administration and House proposals, with projected spending in FY2021 that is 10 times that of Function 500 (ETESS) and more than twice that of Function 600 (income security). Projected Medicare spending would be more than seven times that of Function 500 in FY2021 and more than 50% larger than Function 600.

The 112th Congress is focusing attention on short- and long-term efforts to reduce the federal deficit and stabilize the national debt, including proposals to alter the overall size and composition of total federal spending. Components of the federal budget categorized as "human resources" account for the majority of federal outlays (70% in FY2010) and would be affected by these proposals. Six functional categories comprise the human resources "superfunction": education, training, employment, and social services; health (primarily Medicaid); Medicare; income security; Social Security; and veterans benefits and services. President Obama submitted a detailed FY2012 budget request to Congress on February 14, and in April, he released a set of deficit reduction policies intended to build on the February proposal called the President's Framework for Shared Prosperity and Shared Fiscal Responsibility. On April 15, the House passed a concurrent resolution on the FY2012 budget (H.Con.Res. 34) that was based on a document called Path to Prosperity, released by Budget Committee Chairman Paul Ryan on April 5. The Senate has not yet acted on a budget resolution for FY2012. As a share of the national economy, spending for human resources is expected to have peaked at 16.4% of Gross Domestic Product (GDP) in FY2010 and, according to the Congressional Budget Office (CBO), will fall to 14.8% in FY2014. This decline reflects the assumed economic recovery, lower spending for programs that respond automatically to economic conditions (e.g., Unemployment Insurance, Supplemental Nutrition Assistance Program), and expiration of stimulus funding under the American Recovery and Reinvestment Act of 2009 (P.L. 111-5). However, CBO estimates that, with no changes in current law, human resources spending will rise again as a share of GDP and reach 15.7% by FY2021 due to the continuing effects of the baby boom generation's retirement and increased enrollment in Medicare and Social Security, real growth in initial Social Security benefits, medical cost inflation in excess of general inflation, and new spending related to the health care reform law of 2010. Reflecting these trends, all projected growth in the human resources budget will occur in three functional categories: health (primarily Medicaid), Medicare, and Social Security. CBO estimates that spending for income security will contract as a share of GDP over the next decade, as will spending for the two smallest human resources categories (i.e., education, training, employment, and social services; and veterans benefits and services). Both the President's budget and H.Con.Res. 34 include provisions intended to reduce spending overall. However, the President's February proposals would result in spending for human resources that would closely follow, and slightly exceed, the CBO current law baseline, while the House resolution sets spending targets that are significantly lower. Specifically, human resources spending would equal 15.9% of GDP in FY2021 under the Administration's February budget and 13.5% under the House resolution, compared to CBO's baseline estimate of 15.7%. The most significant reductions from the CBO baseline, if all provisions assumed in the House resolution were enacted, would occur in three categories: education, training, employment, and social services (the smallest human resources category); Medicaid; and income security. As widely reported, the House resolution assumes enactment of legislation to convert Medicare into a "premium subsidy" program; however, this change would not occur until FY2022, which is after the resolution's 10-year budget window. Thus, the House resolution sets spending targets for the next 10 years that are relatively close to CBO's baseline projections for Medicare, Social Security, and veterans benefits and services.

Policymakers are dedicating considerable attention to greenhouse gas emission reduction, primarily discussing options for carbon dioxide (CO 2 ) emission reduction. Less frequently addressed in proposed legislation is emission reduction for non-CO 2 greenhouse gases, such as nitrous oxide (N 2 O). However, N 2 O reduction efforts have the potential to mitigate climate change. Moreover, N 2 O emission sources may be regulated under the existing Clean Air Act as a class I or class II ozone-depleting substance at the discretion of the Environmental Protection Agency (EPA) Administrator. No new legislation needs to be passed to regulate N 2 O for climate protection and ozone recovery. The five non-CO 2 greenhouse gases regularly monitored but not entirely regulated by EPA (methane, nitrous oxide, hydroflourocarbons, perflourocarbons, and sulfur hexaflouride) accounted for approximately 17% of U.S. greenhouse gas (GHG) emissions in 2009, as measured by total tons of CO 2 equivalent. Nitrous oxide--the third-most abundant greenhouse gas--was responsible for roughly 4% of total U.S. GHG emissions in 2009 by weight. Although they comprise a smaller portion of GHG emissions, non-CO 2 greenhouse gases, including N 2 O, are more potent than CO 2 . The gases identified above are 21 to 23,900 times more effective than an equivalent weight of CO 2 at trapping heat in the atmosphere, with N 2 O being 310 times more potent by weight. In addition to being one cause of greenhouse gas emission growth, N 2 O is an ozone-depleting substance (ODS). Indeed, scientific analysis suggests that N 2 O is now the leading ODS being emitted, as emissions of other substances have been reduced significantly owing to regulations enacted in the late 1980s, in the Montreal Protocol on Substances that Deplete the Ozone Layer. N 2 O emission reduction could thus play a compelling role in recovery of the ozone layer as well as in greenhouse gas emission reduction. The agriculture sector is the primary anthropogenic source of nitrous oxide. The bulk of U.S. N 2 O emissions stem from fertilizing agricultural soils for crop production. Strategies or technologies designated for N 2 O emission reduction are limited. This is partly due to the dispersed nature of N 2 O emission sources. In the agriculture sector, the majority of N 2 O is released as a consequence of specific nitrogen cycle processes (nitrification and denitrification) when large amounts of synthetic nitrogen fertilizers are used for crop production. More efficient application of synthetic fertilizers (e.g., precision agriculture, nitrogen inhibitors, nitrogen sensors, controlled-release fertilizer products) is one way to reduce excess amounts of nitrogen available for bacterial processing and eventual release to the atmosphere as N 2 O. High costs and difficulty in measuring these products' efficacy, among other deterrents, have hampered widespread adoption of practices to reduce N 2 O emissions. This report focuses on the contributions of N 2 O to alteration in the Earth's climate and ozone depletion. Policy options for N 2 O emission reduction, sources of N 2 O, and federal support to lower N 2 O emissions are discussed. Nitrous oxide (N 2 O), familiar to some as "laughing gas," contributes to climate change and ozone depletion. Once released, N 2 O lingers in the atmosphere for decades (its atmospheric lifetime is approximately 114 years) and is 310 times more effective at trapping heat in the atmosphere over a 100-year time frame than carbon dioxide (CO 2 ). N 2 O emission quantity estimates remained fairly constant from 2005 to 2007, hovering around 325 million metric tons carbon dioxide equivalent (CO 2 e). N 2 O emission quantity estimates dropped in 2009 to below 300 million metric tons CO 2 e. See Table 1 . Nitrous oxide is emitted from anthropogenic (manmade) and natural sources. Oceans and natural vegetation are the major natural sources of N 2 O. Agricultural soil management (e.g., fertilization, application of manure to soils, drainage and cultivation of organic soils) is responsible for more than two-thirds of anthropogenic U.S. N 2 O emissions. In 2009, N 2 O emissions from agricultural soil management totaled more than 200 million metric tons of CO 2 e. Other anthropogenic sources of N 2 O are combustion by mobile sources (cars, trucks, etc.), manure management, and nitric acid production. Figure 1 depicts the origination and passage of nitrogen (N) that leads to N 2 O emissions from agricultural soil management. The amount of N 2 O emitted from cropland soils largely depends on the amount of nitrogen applied to a crop, weather, and soil conditions. Corn and soybean crops emit the largest amounts of N 2 O, respectively, due to vast planting areas, plentiful synthetic nitrogen fertilizer applications, and, in the case of soybeans, high nitrogen fixation rates ( Figure 2 ). Comprehension of the nitrogen cycle ( Figure 3 ) is beneficial when crafting policy to reduce N 2 O emissions from anthropogenic sources. Nitrogen, an essential element required by organisms to grow, is found throughout the atmosphere in various forms. The nitrogen cycle portrays the routes in which nitrogen moves through the soil and atmosphere in both organic and inorganic form. Certain processes within the nitrogen cycle convert the nitrogen into a form that can be taken up by plants. Four of the major processes are: nitrogen fixation--conversion of nitrogen gas (N 2 ) to a plant-available form; nitrogen mineralization--conversion of organic nitrogen to ammonia (NH 3 ); nitrification--conversion of ammonia (NH 3 ) to nitrate (NO 3 -) via oxidation (that is, by being combined with oxygen); and denitrification--conversion of nitrates back to nitrogen gas. Nitrous oxide is a byproduct of nitrification and denitrification. Both processes occur naturally. Excess application of nitrogen fertilizer can lead to increased nitrification, which can cause nitrate to leach into groundwater or surface runoff (in turn, this causes eutrophication, which can damage aquatic environments). N 2 O emission mitigation options are available for agricultural soil management and nitric acid production. Nitric acid is a chemical compound used to make synthetic fertilizers. N 2 O abatement options for nitric acid production include a high-temperature catalytic reduction method, a low-temperature catalytic reduction method, and nonselective catalytic reduction. The estimated reduction efficiencies (the percentage reduction achieved with adoption of a mitigation option) are 90%, 95%, and 85%, respectively. Agricultural soil management mitigation options recommended by researchers and technology transfer specialists to discourage excess application of nitrogen fertilizers and soil disturbance ( Table 2 ) are not generally being practiced. Fertilizer and soil best-management practices aim to provide the crop with the nutrient and soil conditions necessary for crop production, and prevent nutrient and soil loss from the crop field (e.g., erosion, leaching). Some may consider less money spent towards fertilizer use an economic incentive for agricultural producers. Others may want to ensure that crop yields meet expected feed, fiber, and fuel mandates (e.g., for corn ethanol), which may be difficult to attain with less fertilizer use. Monitoring reduced nitrogen fertilization applications on a large scale for greenhouse gas emission reduction purposes may be difficult; it is not clear how such a program could be managed at a national level. Enforcement options could include voluntary verification, third-party verifiers, or government intervention. Reporting N 2 O emissions from agricultural soil management was not included in the Final Mandatory Reporting of Greenhouse Gases Rule issued by EPA on September 22, 2009. EPA's reasoning behind this decision was that no low-cost or simple direct N 2 O measurement methods exist. Additionally, EPA released a proposed rule requiring new or modified facilities that could trigger Prevention of Significant Deterioration (PSD) permitting requirements to apply for a revision to their operating permits to incorporate the best available control technologies and energy efficiency measures to minimize GHG emissions. USDA provides some financial and technical assistance for nutrient management through its conservation programs. Moreover, USDA's Agricultural Research Service (ARS) is studying the relationship between agricultural management practices and nitrous oxide emissions. In addition to the agriculture sector, work is being done in the transportation sector to reduce N 2 O emissions. Mobile combustion was responsible for roughly 8% of N 2 O emissions reported in 2009. One N 2 O emission reduction effort, proposed by EPA and the Department of Transportation, is a per-vehicle N 2 O emission standard of 0.010 grams per mile effective in model year 2012 for all light-duty cars and trucks as part of a wider effort to reduce greenhouse gas emissions and improve fuel economy in tandem. EPA has allocated financial resources to quantify N 2 O emissions for the greenhouse gas inventory (e.g., DAYCENT model). Congress has begun to investigate the reduction of non-CO 2 greenhouse gas emissions, including N 2 O emissions, as one strategy to mitigate climate change. Some contend that N 2 O emissions reduction could serve as a short-term response in the larger, long-term scheme of mitigation and adaptation efforts. It may be viewed as a short-term response because N 2 O emissions make up a small amount of the GHG inventory compared to CO 2 emissions. Any substantial approach to mitigate climate change is likely at some point to have to address sources that emit CO 2 . Congress could approach N 2 O emissions reduction as part of a comprehensive GHG emission strategy offering economically attractive abatement alternatives to discourage actions leading to climate change. For example, a cap or fee on N 2 O emissions could spur innovative methods for agricultural producers to limit excess synthetic fertilizer application. Congress could also examine the tools necessary to identify N 2 O emission abatement options, assess their cost, and determine their economic impact for full incorporation into climate change legislation. Besides greenhouse gas emission reduction, reducing N 2 O emissions could lead to ozone recovery. Congress could explore the co-benefits that may arise from restricting N 2 O emissions for climate change purposes. N 2 O is not regulated as an ODS under the Clean Air Act, Title VI, Stratospheric Ozone Protection (as guided by the Montreal Protocol). As emissions of other ODSs (e.g., chlorofluorocarbon-11, halon-1211) have declined due to regulation, N 2 O has emerged as the dominant ODS emission. The first-ever published ozone depletion potential (ODP) value assigned to N 2 O, 0.017, is less than the ODP value of 1.0 for the reference gas chlorofluorocarbon 11 (CFC-11). While some may not see a cause for alarm based on the ODP value alone, the quantity of N 2 O emissions and its potency as a GHG can lead to serious harm (see Table 1 ). The ODP value for N 2 O does not allow for its mandatory inclusion as a class I substance for regulation under the Clean Air Act. However, N 2 O could be listed as a class II substance at the direction of the EPA Administrator or regulated under Section 615 of the act. Class I substances have an ODP of 0.2 or more and are more harmful to stratospheric ozone molecules than Class II substances, which have an ODP of less than 0.2. With or without ODP substance listing, Congress may find it useful to incorporate the ozone depletion impacts of N 2 O into its climate change policy proposals both to reduce greenhouse gas emissions and to further ozone recovery achievements. Classifying N 2 O emission reduction as an eligible offset type, including N 2 O as a covered entity within a cap-and-trade program, or directing EPA to use existing authority under the Clean Air Act to regulate N 2 O are other available options to reduce N 2 O emissions for ozone or climate protection. Any option chosen to reduce N 2 O emissions will more than likely require an improvement of N 2 O estimation, measurement, and reporting methods and possible financial incentives. Congress could apply lessons learned from previous international agreements that are intended to abolish harmful compounds. The outcomes of the Montreal Protocol, put into action in the late 1980s, may prove useful to Congress in understanding the long-term implications of certain climate change policy options, specifically cap-and-trade. A number of gases were phased out under the Protocol, which allowed for each country to establish a regulatory framework to monitor and reduce ODSs. Certain ozone-depleting substances, such as N 2 O, were not included in the Protocol partly because their threat was not perceived as urgent at the time. However, one unintended consequence of the success of the Protocol reducing targeted ODSs is that N 2 O has emerged as the leading ODS.

Gases other than carbon dioxide accounted for approximately 17% of total U.S. greenhouse gas emissions in 2009, yet there has been minimal discussion of these other greenhouse gases in climate and energy legislative initiatives. Reducing emissions from non-carbon dioxide greenhouse gases, such as nitrous oxide (N2O), could deliver short-term climate change mitigation results as part of a comprehensive policy approach to combat climate change. Nitrous oxide is 310 times more potent than carbon dioxide in its ability to affect the climate; and moreover, results of a recent scientific study indicate that nitrous oxide is currently the leading ozone-depleting substance being emitted. Thus, legislation to restrict nitrous oxide emissions could contribute to both climate change protection and ozone recovery. The primary human source of nitrous oxide is agricultural soil management, which accounted for more than two-thirds of the N2O emissions reported in 2009 (approximately 205 million metric tons CO2 equivalent). One proposed strategy to lower N2O emissions is more efficient application of synthetic fertilizers. However, further analysis is needed to determine the economic feasibility of this approach as well as techniques to measure and monitor the adoption rate and impact of N2O emission reduction practices for agricultural soil management. As the 112th Congress considers legislation that would limit greenhouse gas emissions, among the issues being discussed is how to address emissions of non-CO2 greenhouse gases. Whether such emissions should be subject to direct regulation, what role EPA should play using its existing Clean Air Act authority, and what role USDA should play in any N2O reduction scheme are among the issues being discussed. How these issues are resolved will have important implications for agriculture, which has taken a keen interest in climate change legislation.

H.R. 157 / S. 160 , the District of Columbia House Voting Rights Act of 2009 introduced in the 111 th Congress, provided for a permanent increase in the size of the U.S. House of Representatives, from 435 seats to 437 seats. The bills specified that one of the additional seats was to be allocated to the District of Columbia while the other seat was to be assigned either by using the normal apportionment formula allocation procedure ( H.R. 157 ) or specifying that the seat would be allocated to Utah, the state which would have received the 436 th seat under the 2000 apportionment process. Thus, this would add a fourth seat to Utah's three ( S. 160 ). While both versions treated the District of Columbia as if it were a state for the purposes of the allocation of House seats, each bill restricted the District of Columbia to a single congressional seat under any future apportionments. Similar bills had been introduced in the 110 th Congress. On April 19, 2007, the House approved H.R. 1905 (a revised version of H.R. 1433 ) by a vote of 241 to 177 (Roll Call vote 231) and sent it to the Senate for consideration. On June 28, 2007, S. 1257 was reported out of the Senate Committee on Homeland Security and Governmental Affairs with amendments. On September 18, 2007, cloture on the motion to proceed to consideration of the measure was not invoked in the Senate on a Yea-Nay vote, 57 - 42, leaving the measure pending. No further action occurred on the legislation. The 435 seat limit for the size of the House was imposed in 1929 by statute (46 Stat. 21, 26-27). Altering the size of the House would require a new law setting a different limit. Article I, SS2 of the Constitution establishes a minimum House size (one Representative for each state), and a maximum House size (one for every 30,000 persons, or 10,306 representatives based on the 2010 Census). For the 2010 apportionment, a House size of 468 would have resulted in no state losing seats held from the 112 th to the 116 th Congresses. However, by retaining seats through such an increase in the House size, other state delegations would become larger. At a House size of 468, California's delegation size, for example, would be 56 instead of 53 seats, Texas's delegation size would be 38 instead of 36 seats, and Florida's delegation size would be 29 instead of 27 seats. General congressional practice when admitting new states to the Union has been to increase the size of the House, either permanently or temporarily, to accommodate the new states. New states usually resulted in additions to the size of the House in the 19 th and early 20 th centuries. The exceptions to this general rule occurred when states were formed from other states (Maine, Kentucky, and West Virginia). These states' Representatives came from the allocations of Representatives of the states from which the new ones had been formed. When Alaska and Hawaii were admitted in 1959 and 1960 the House size was temporarily increased to 437. This modern precedent differed from the state admission acts passed following the censuses in the 19 th and early 20 th centuries which provided that new state representatives would be added to the apportionment totals. The apportionment act of 1911 anticipated the admission of Arizona and New Mexico by providing for an increase in the House size from 433 to 435 if the states were admitted. As noted above, the House size was temporarily increased to 437 to accommodate Alaska and Hawaii in 1960. In 1961, when the President reported the 1960 census results and the resulting reapportionment of seats in the reestablished 435-seat House, Alaska was entitled to one seat, and Hawaii to two seats. Massachusetts, Pennsylvania and Missouri each received one less seat than they would have if the House size had been increased to 438 (as was proposed by H.R. 10264, in 1962). Table 1 , below displays the apportionment of the seats in the House of Representatives based on the 2000 Census apportionment population (the current House apportionment) and the apportionment of seats in the House based on the 2010 Census apportionment population (the distribution of seats among the states for the 113 th Congress). In addition, Table 1 also shows the impact on the distribution of seats in the House if the District of Columbia were to be treated as if it were a state for apportionment purposes for both a House size of 435 seats and a House size of 437 seats. First, due to population changes between the 2000 Census and the 2010 Census, Table 1 shows a shift of 12 seats among 18 states for the 113 th Congress (beginning in January 2013). Illinois, Iowa, Louisiana, Massachusetts, Michigan, Missouri, New Jersey, and Pennsylvania will each lose one seat; New York and Ohio will each lose two seats. Arizona, Georgia, Nevada, South Carolina, Utah, and Washington will each gain one seat; Florida will gain two seats; and Texas will gain four seats. These are the actual seats to be allocated based on the results of the 2010 Census. Second, if the District of Columbia were to be given a vote in the House of Representatives and treated as if it were a state in the reapportionment of congressional seats following the 2010 census, and the House size remained at 435, Minnesota would lose a seat relative to what it is scheduled to get as a result of the 2010 Census. Thus, Minnesota's delegation would fall to seven Representatives if the District of Columbia were to given a vote and the House size remained at 435 Representatives. Third, if, on the other hand, the District of Columbia were to be given a vote in the House of Representatives and treated as if it were a state and the House size were to be increased to 437, the District of Columbia would receive one Representative and North Carolina would be entitled to fourteen Representatives, one more than the state is scheduled to receive in the apportionment following the 2010 census. Also, Minnesota would retain its eighth seat and no other state would be affected by the change. Another way to see the impact is to examine the allocation of the last seats assigned to the states when the District of Columbia is allocated a seat (presumably the 51 st seat). The actual apportionment is done through a "priority list" calculated using the equal proportions formula provided in 2 U.S.C. SS2a.(a). Table 2 , below, displays the end of the priority list that was used to allocate Representatives based on the 2010 Census, including the District of Columbia. The law only provides for 435 seats in the House, but the table illustrates not only the last seats assigned by the apportionment formula (ending at 435), but the states that would just miss getting additional representation. Table 3 is similar to Table 2 , in that it displays the end of the priority list, but the last seat is 437 instead of 435. The priority values and the population needed to gain or lose a seat do not change if DC is treated like state, as DC is entitled the constitutional minimum of one Representative.

Two proposals (H.R. 157/S. 160, District of Columbia House Voting Rights Act of 2009) were introduced in the 111th Congress to provide for voting representation in the U.S. House of Representatives for the residents of the District of Columbia (DC). H.R. 157/S. 160, for purposes of voting representation, treated the District of Columbia as if it were a state, giving a House seat to the District, but restricting it to a single seat under any future apportionments. The bills also increased the size of the House to 437 members from 435, and gave the additional seat to the state that would have received the 436th seat under the 2000 apportionment, Utah. This report shows the distribution of House seats based on the 2010 Census for 435 seats and for 437 seats as specified in the proposal. North Carolina, which would receive the 436th seat in the 2010 apportionment is substituted for Utah, assuming that any new, similar legislation would adopt the same language as H.R. 157.

Congressional authorization of federal assistance to state and local governments can be traced as far back as 1808, when the first federal grant program was adopted to provide funds to states to support the National Guard. Since that time, there has been significant growth in the number of federal assistance programs to state and local government. There are currently over 2,321 congressionally authorized federal assistance programs. The growing number, perceived fragmentation, and complexity of these programs create challenges for federal agencies and congressional stakeholders in standardizing various financial and administrative aspects of federal grant program management. Federal agencies administering grant programs face challenges in providing timely, accurate, and detailed information on federal grant awards. This can be attributed, in part, to the way grant funds are distributed from the federal to the local level. This may also be attributed to the limitations of the databases used to track the distribution of federal grant funds. These limitations include questions regarding the validity of the data, and the limited ability to track the distribution of grant funds to the subgrant recipient level. Without complete and valid information about the distribution of federal grant funds, Congress may have a diminished capacity to engage in effective oversight of federal grants. Federal grant recipients are currently required to report grant project related information to federal agencies. This information is contained within a number of federal grant databases with limited public accessibility. The information reported by grant recipients varies depending on the federal program and the individual grant award. Federal grants are available for a variety of purposes. Federally funded grant projects may include purchasing fire and police equipment, constructing housing for low-income populations, providing disaster recovery assistance and other social services, and funding educational activities. Organizations generally coordinate the application and administration of federal grants, and individuals are beneficiaries of the grant projects and services provided by organizations. Organizations seeking federal grant funds are required to register in federal grant systems prior to applying for federal grants. Once grant funds are awarded, recipients are required to report information to federal agencies regarding the use of the federal grant funds. The information provided to the federal government by federal grant recipients is contained in several different federal databases. The general public has access to selected information contained in these databases. This report provides an introduction to reporting requirements placed on federal grant recipients, including requirements that must be met to seek federal grant funds. It also describes the types of information collected on grant recipients, the databases containing information about grant awards, and the availability of that information to the public. The reporting requirements discussed in this report are financial reporting requirements for grant recipients and do not include performance related reporting. To comply with guidance issued by the Office of Management and Budget (OMB), federal agencies that administer federal grant programs must collect and report financial grant data to federal grant databases. Federal agencies collect the grant data by requiring federal grant recipients to submit financial and performance data to the federal agency administering the grant program. These reporting requirements are set forth in the authorizing statutes and regulations for each individual grant program. Some reporting requirements, such as post-award audit requirements, are set forth in legislation that applies to almost every federal grant program. A federal grant seeker must provide information about their organization when they obtain a DUNS number and register with SAM. Grant seekers must provide the following information to obtain a DUNS number: legal name of the company, organization, or entity; entity headquarters name and address; secondary, or tradestyle, name of the company or the "Doing Business As" (DBA) name; physical address of the entity including city, street, and zip code; mailing address; telephone number; point of contact name and title; and, number of employees at the physical location. To register with SAM, grant seekers must provide the following information: DUNS number; business information, including the taxpayer identification number (TIN); Commercial and Government Entity (CAGE) code; business type and organization structure; financial information including electronic funds transfer (EFT) information for federal government payment purposes; answers to executive compensation questions; and, Point of Contact (POC) information including name, title, physical address, and email address. Federal agencies use a number of systems to track federal grant recipient data. Before a federal grant is awarded, officials seeking federal grants for their organization are required by law to obtain a unique identifier assigned and maintained by Dun and Bradstreet (D&B). This unique identifier is known as a Data Universal Numbering System (DUNS) number. Federal agencies use the DUNS number to identify federal grant applicants. Once a grant seeker obtains a DUNS number, the organization must register in the System for Award Management (SAM) in order to be eligible to apply for federal grants. Federal agencies use SAM to collect additional information on potential federal grant recipients. Each federal grant award is assigned a number that is then associated with the grant recipient. Federal agencies use the award number to track grant data in agency grant management and financial management systems. When Congress authorizes a federal grant program, the federal agency administering the grant program reports grant program information to the Catalog of Federal Domestic Assistance (CFDA). After a federal grant award is made, the federal agency that made the award collects information about the grant recipient and the grant project. The information provided in a federal grant application is inputted by the federal agency into the grant management system within the agency and a unique grant award number is created. A single entity who has received more than one award under the same grant program may have several grant award numbers. Additionally, a federal agency may have a separate grant management system for each grant program it administers. When the grant agreement is executed, the federal agency also creates a grant account in the agency's cash management system for each individual grant award, which may mean that a single entity that receives more than one grant award by an agency may have several different grant account numbers. Federal grant recipients are required to report financial information pursuant to the conditions contained in the grant agreement executed at the time of the grant award. This information includes financial information, such as expenditures, about the project or services funded by the federal grant award. The financial information is reported periodically to the federal agency administering the grant program. Financial data on the grant award are reported into several federal grant databases, including the following: federal agency cash management systems; Federal Assistance Award Data System PLUS (FAADS-PLUS); Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS); USAspending.gov; and, Federal Audit Clearinghouse (FAC). As detailed in Figure 1 , federal grant data are located in several databases at both the grant recipient and federal government level. A Data Universal Numbering System (DUNS) number is a unique nine-digit identifier for each government contractor and federal grant applicant. The federal government has contracted with D&B since 1978 to provide proprietary DUNS numbers for use in government-wide data systems, and since October 1, 2003, the OMB policy requires the use of a DUNS number on any application for federal grants or cooperative agreements. DUNS numbers are associated with contractor and grant recipient information and are required for each listed organization address. The System for Award Management (SAM) is the federal government's primary contractor and federal grant applicant database used by agencies to validate grantee information. Current and potential government contractors and grant applicants are required to register with SAM in order to be awarded federal government contracts or grants. SAM requires a one-time registration from each potential government vendor, and collects basic procurement and financial information from contractors and grant applicants. SAM consolidates government-wide acquisition and grant award support systems into one new system. The consolidation is planned for four phases. In 2012 the first phase of SAM was launched and phase one systems continue to be consolidated. The first phase of the consolidation included nine information databases: Central Contractor Registration (CCR), Federal Agency Registration (FedReg), Online Representations and Certifications Application (ORCA), and Excluded Parties List System (EPLS). Once completed, the consolidation will also include: Electronic Subcontracting Reporting System (eSRS); FFATA Sub-award Reporting System (FSRS); Catalog of Federal Domestic Assistance (CFDA); FedBizOpps.gov (FBO); Wage Determination Online (WDOL); Federal Procurement Data System-Next Generation (FPDS-NG); Past Performance Information Retrieval System (PPIRS); Contractor Performance Assessment Reporting Systems; and Federal Awardee Performance and Integrity Information System (FAPIIS). Some of the systems that will be consolidated by SAM include data on federal contractors and may not necessarily contain information on federal grant recipients. The Catalog of Federal Domestic Assistance (CFDA) is a publicly searchable reference source for federal grants and nonfinancial assistance programs. The CFDA lists and describes over 2,300 federal programs and includes program-specific information such as program objectives, eligibility requirements, application and award processes, program contact information, and related CFDA assistance programs. CFDA is continuously updated and enables information seekers to search assistance programs by keyword, subject, funding department or agency, and other criteria. Additionally, CFDA provides sources of information on developing and writing grant applications, guidance to review processes, and links to agency and department websites for more in-depth program information and eligibility explanations. The CFDA is maintained by the General Services Administration (GSA) pursuant to the Federal Program Information Act. However, OMB is responsible for the collection of assistance program information from federal agencies. OMB also issues guidance to federal agencies for establishing procedures to ensure accurate and timely data is contained within CFDA. Cash management in this context refers to the methods and procedures used by grant recipients and federal agencies to transfer grant funds. Financial management systems of federal agencies and grant recipients are payment and cash management systems used to track the flow of cash between the federal government and primary grant recipients and sub-grant recipients. As detailed in Figure 1 , each federal agency and each grant recipient may have separate cash management systems, resulting in limited interoperability between cash management systems. The Federal Funding Accountability and Transparency Act of 2006 (FFATA, P.L. 109-282 ) requires that federal contract, grant, loan, and other financial assistance awards of more than $25,000 be displayed on a searchable, publicly accessible website, USAspending.gov. USAspending.gov provides information on grant awards, including the amount of the award, name and location of the recipient, and the name and authorization of the federal program used to make the award. The Digital Accountability and Transparency Act of 2014 (DATA Act, P.L. 113-101 ) amended FFATA, transferring responsibility for USAspending.gov from OMB to the Department of Treasury, Bureau of the Fiscal Service. On March 31, 2015, USAspending.gov was re-launched with changes to the site's usability, presentation, and search functions. The Federal Assistance Awards Data System (FAADS) was established by the Consolidated Federal Funds Report Act of 1982 ( P.L. 97-326 ) and was maintained by the Bureau of the Census in the Department of Commerce. FAADS was a central collection source of Federal financial assistance awards transactions. FAADS-PLUS was introduced in 2007, a result of passage of the FFATA, and is an expanded version of FAADS. FFATA requires prime subgrant recipients receiving a grant award greater than $25,000 to report subaward financial information. The FFATA Subaward Reporting System (FSRS) is the reporting tool used by prime awardees to meet FFATA sub-award reporting requirements. The reported subaward FSRS information is then displayed on USAspending.gov under the prime award information. The Single Audit Act Amendments of 1996 ( P.L. 104-156 ) and OMB guidance stipulate that all grant recipients expending $750,000 or more in federal awards be required to submit an annual single audit detailing award expenditures. The Federal Audit Clearinghouse (FAC) serves as a public database of all audits conducted and submitted and is maintained by OMB. Within the FAC, audits detailing award and expense information are searchable by organization or institution, geographic location, or CFDA program number. As shown in Figure 1 , several databases contain federal grant information. However, grant data contained within cash management systems, grant management systems, FAADS-PLUS, and FSRS are not accessible or searchable by the general public. The federal government has created several data systems and websites to access the systems that are accessible and searchable by the public. These include the following: Catalog of Federal Domestic Assistance ( http://www.cfda.gov ); USAspending.gov ( http://www.usaspending.gov ); Dun and Bradstreet ( http://fedgov.dnb.com/webform ); System for Award Management ( http://www.sam.gov ); and Federal Audit Clearinghouse ( https://harvester.census.gov/fac/ ). Of the above reporting requirements for federal grant applicants, two databases allow opting out of providing publically searchable information: the Dun and Bradstreet (D&B) DUNS number database and SAM. To avoid having a public DUNS number, applicants must first obtain a DUNS number, and then discuss their individual privacy concerns with the D&B government support desk. D&B can withhold the DUNS number from their public database. However, the applicant's DUNS number remains visible to any institution with a DUNS Business Locator subscription, as well as within the required SAM grant application record, unless the opt-out process for SAM is also completed. Grant applicants can opt out of the requirement that information collected during the SAM registration be visible to the public, though the information may still be viewable by certain users: Entities that have opted out will be removed only from the SAM public search, but will still be visible to users with For Official Use Only data access and will be provided in accordance with Freedom of Information Act (FOIA) requests. Please note that your banking information is treated as sensitive data and will not be displayed to the public regardless of your selection.

Congress and federal agencies frequently undertake initiatives to conduct oversight of federal grant programs and expenditures. The ability to oversee is influenced by the existing reporting requirements placed on recipients of federal grant funds. Limitations in accessing information contained in federal databases used to collect grant data also influence the level of transparency into the use of federal grant funds. Congress has also debated the reporting burden placed on federal grant recipients and how to balance grant recipient capacity with the desire for transparency into the use of federal grant funds. This report provides an introduction to reporting requirements placed on federal grant recipients, including requirements that must be met to seek federal grant funds. It also describes the databases containing information about grant awards, the types of information collected on grant recipients, and the availability of that information to the public. Several grant reporting questions are answered, including the following: Why are federal agencies and grant recipients required to report grant data? What information is a federal grant recipient required to report and to whom? How does a federal agency track federal grant data? What is the Data Universal Numbering System (DUNS) number? What is the System for Award Management (SAM)? What is the Catalog of Federal Domestic Assistance (CFDA)? What are cash management systems? What is USAspending.gov? What is the Federal Assistance Award Data System PLUS (FAADS-PLUS)? What is the Federal Funding Accountability and Transparency Act Subaward Reporting System? What is the Federal Audit Clearinghouse (FAC)? What grant data are accessible by the public? Federal grant reporting requirements fall into two categories: financial reporting and program performance reporting. This report focuses on financial reporting requirements and does not address program performance reporting. This report will be updated should significant legislative activity regarding federal grant recipient reporting occur.

Figure 1 and Table 1 show bankruptcy filings since 1980. Business filings peaked in 1987, but the number of consumer filings continued to grow through 2005. In that year, the number of filings surpassed 2 million--there was a "rush to the courthouse" before the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA; P.L. 109-8 ) took effect in October 2005. In 2006, filings dropped sharply, suggesting that the new law caused many to accelerate their filings, and that many petitions that would have been filed in 2006 (or later) were pushed forward by bankruptcy reform. Whether BAPCPA will reduce filings in the long run is still unclear. Filings rose steadily from the 2006 lows until 2010, when they exceeded 1.5 million, which was approximately the level during the four years before BAPCPA. Over the first three quarters of 2011, there was a slight decline from the year-earlier numbers. Table 2 shows figures on household debt. The major categories of household debt are mortgage debt and consumer credit, which together comprise about 97% of all household indebtedness. Consumer credit consists of (1) revolving credit, or credit card debt, and (2) non-revolving debt, which is dominated by auto and college loans (though it also includes loans for boats, mobile homes, vacations, and so on). Mortgage debt is borrowing secured by real estate. A subcategory within mortgage debt, home equity lending, is broken out in the table because it may substitute for consumer credit in many cases. Table 2 also includes Federal Reserve estimates of the burden of debt service--that is, the percentage of household disposable income that goes to repay loans. Over the past decade, this measure rose steadily (but not dramatically), until the recession and financial crisis that began in 2007. The debt burden figures in Table 2 fluctuate within a fairly narrow range: from 10.80% to 13.93%. (During the 1980s, the range was similar: from 10.6% to 12.5%.) Although the burden of debt has risen since the 1980s, the increase has been gradual and would not appear to explain much of the fivefold increase in personal bankruptcy filings over the past two decades. Moreover, the decline in the debt service ration since 2007 has not been accompanied by a significant reduction in bankruptcy rates. Interest rates paid by consumers--particularly mortgage rates--declined in recent years to the lowest levels since the 1950s, and they remain low. The relative stability of the debt burden in the face of falling and historically low interest rates implies that the ratio of debt outstanding to income has been rising. This ratio--the sum of consumer and mortgage debt expressed as a percentage of disposable personal income--is shown in the far right column of Table 2 . The increases in this figure, which between 1990 and 2007 rose more than twice as fast as the debt burden, suggest that further increases in bankruptcy filings (and perhaps problems for lenders) may lie ahead if interest rates should rise suddenly or unexpectedly. Since 1980, however, declining interest rates have permitted households to take on more debt without a comparable increase in the interest payments required to service that debt. The aggregate household debt numbers mask important differences among families: some have done very well in the long booms of the 1980s and 1990s, while others have taken on debt that they have difficulty repaying. Table 3 below, based on the Federal Reserve's Survey of Consumer Finances, shows the percentages of families at various income levels that devote more than 40% of their income to debt service, for selected years from 1995 through 2007. Two noteworthy facts emerge from the data in Table 3 . The first is the high rate of distress among lower-income families, who are the most likely to file for bankruptcy. Second, like the debt burden figures shown in Table 2 , there is no sharply rising trend that would explain the dramatic increase in personal bankruptcy filings. The percentage of all families in distress in 2007 was little changed from the 1998 level. The 2007 figures do show a notable increase among families in the upper income percentiles; this may be attributable to increased mortgage debt taken on during the housing boom that ended in that year. The question remains why so many families at or below the national median income take on high levels of debt and end up in bankruptcy court. Some explanations focus on particularly vulnerable populations: the sick and uninsured (or underinsured), the divorced, or residents of states without mandatory uninsured motorist coverage. Supporters of the bankruptcy reform measure finally enacted in 2005 argued that the bankruptcy code was too debtor-friendly and created an incentive to borrow beyond the ability to repay, or in some cases without the intention of repaying. Opponents of reform claimed that financial distress is often a by-product of the marketing strategies of credit card issuers and other consumer lenders. Lack of a consensus explanation for the rise in consumer bankruptcy filings suggests that the issue will remain controversial. In December 2007, the U.S. economy went into recession, in the midst of global financial panic. Household debt levels began to fall in three of the four categories shown in Table 2 . The decline in debt balances continued for 11 calendar quarters, until debt outstanding rose slightly in the second quarter of 2011. In the third quarter, debt levels fell again. On a percentage basis, home equity and credit card debt led the decline, as shown in Table 4 . In dollar terms, however, mortgage debt (other than home equity loans) accounted for most of the drop. Several factors appear to have contributed to the fall in debt balances. Some households may be paying down their debt, others may be borrowing less, and the amount of debt written off by lenders as uncollectible has increased. Some lenders have tightened their credit standards for new loans. Mortgage balances have fallen because of mortgage modifications or other negotiations that reduce principal outstanding, and because foreclosed homes are often sold for less than the amount of the old mortgage. Causes and implications of deleveraging are discussed in CRS Report R41623, U.S. Household Debt Reduction , by [author name scrubbed].

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA; P.L. 109-8) included the most significant amendments to consumer bankruptcy procedures since the 1970s. Bankruptcy reform was enacted in response to the high number of consumer bankruptcy filings, which in 2004 and 2005 reached five times the level of the early 1980s. Why did filings increase so dramatically during a period that included two of the longest economic expansions in U.S. history? Because bankruptcy is by definition a condition of excessive debt, many would expect to see a corresponding increase in the debt burden of U.S. households over the same period. However, while household debt has indeed grown, debt costs as a percentage of income have risen only moderately. What aggregate statistics do not show is that the debt burden does not fall evenly on all families. Financial distress is common among lower-income households: in 2007, 27% of families in the bottom fifth of the income distribution spent more than 40% of their income to repay debt. Following the effective date of BAPCPA, in October 2005, there was a sharp reduction in the number of bankruptcy filings, reflecting the "rush to the courthouse" in the months before the new law took effect. Since the 2006 lows, the number of filings has risen steadily. In 2010, personal bankruptcy filings reached 1.5 million, roughly equal to the pre-BAPCPA level. It appears that BAPCPA has not produced the effect its supporters hoped for--a substantial and permanent reduction in the rate of consumer bankruptcy. With the recession that began in December 2007, the long-term upward trend in consumer indebtedness was interrupted. Beginning in the middle of 2008, the amount of debt held by U.S. households declined for 11 consecutive quarters. Through the third quarter of 2011, households reduced their debt burden by $853 billion, or 6.5%. Causes and implications of this trend are discussed in CRS Report R41623, U.S. Household Debt Reduction, by [author name scrubbed]. This report presents statistics on bankruptcy filings, household debt, and families in financial distress. It will be updated as new statistics become available.

The genesis of the Religious Freedom Restoration Act (RFRA) lies in the Supreme Court's decision in Employment Division, Oregon Department of Human Resources v. Smith . In that case, decided in 1990, the Court narrowed the scope of the Free Exercise Clause of the First Amendment, which provides that "Congress shall make no law ... prohibiting the free exercise [of religion]." The specific issue before the Court in Smith was whether two Native Americans who had been fired from their jobs as drug counselors after they were discovered to have ingested peyote in a ritual of the Native American Church were eligible for state unemployment benefits. The Court determined that they were not, and in so doing also altered the standard of review generally used for free exercise cases. Before Smith , the Court had generally applied a strict scrutiny test to government action that allegedly burdened the exercise of religion. That test required the government to show that an action burdening religion served a compelling government interest and that no less burdensome course of action was feasible. If the government could not so demonstrate, the test required that the religious practice be exempted from the government regulation or prohibition at issue. In Smith , the Court abandoned the strict scrutiny test and held that religiously neutral laws may be uniformly applied to all persons without regard to any burden or prohibition placed on their exercise of religion. The Free Exercise Clause, the Court said, never "relieves an individual of the obligation to comply with a 'valid and neutral law of general applicability' on the ground the law proscribes (or prescribes) conduct that his religion prescribes (or proscribes)." In the case at hand, that new standard meant that the Free Exercise Clause mandated no religious exemption from Oregon's drug laws for Native American use of peyote in a sacramental ceremony and, consequently, no eligibility for unemployment benefits of the two Native Americans who lost their jobs because of their participation in such a ceremony. More generally, the Court asserted that the question of whether religious practices ought to be accommodated by government was a matter to be resolved by the political process and not by the courts, although it admitted that "leaving accommodation to the political process will place at a relative disadvantage those religious practices that are not widely engaged in...." In 1993, Congress enacted the Religious Freedom Restoration Act (RFRA) to restore the compelling interest test set forth in earlier cases in all circumstances where the freedom of religious exercise is being burdened and to provide a claim for relief when the government substantially burdens the religious exercise. Thus, RFRA granted government the right to substantially burden a person's exercise of religion only if it demonstrates that application of the burden to the person is (1) in furtherance of a compelling governmental interest and (2) the least restrictive means of furthering that compelling governmental interest. O Centro Espirita Beneficente Uniao do Vegetal (UDV) is a religious sect with origins in the Amazon Rainforest in which members of the church receive communion by drinking a sacramental tea containing a hallucinogen ( hoasca ) regulated under the Controlled Substances Act by the federal government. In 1999, federal agents seized a shipment of hoasca from Brazil that was to be used in UDV ceremonies. The church challenged the seizure and requested a preliminary injunction to prevent the further seizure of hoasca or the arrest of any UDV members using the drug. The complaint alleged that the application of the Controlled Substances Act to the church's sacramental use of hoasca violated RFRA. At a hearing on the preliminary injunction, the government conceded that the application of the Controlled Substances Act would substantially burden a sincere exercise of religion by the UDV, but argued that there was no RFRA violation because the application of the Controlled Substances Act was "the least restrictive means of advancing three compelling governmental interests: protecting the health and safety of UDV members, preventing the diversion of hoasca from the church to recreational users, and complying with the 1971 United Nations Convention on Psychotropic Substances, a treaty signed by the United States and implemented by the [Controlled Substances] Act." The district court found that the government had failed to "demonstrate a compelling interest justifying what it acknowledged was a substantial burden on the UDV's sincere religious exercise." The court entered a preliminary injunction prohibiting the government from enforcing the Controlled Substances Act with respect to the UDV's importation and use of hoasca . The injunction required the church to import hoasca pursuant to federal permits, to restrict control of the church's supply of hoasca to persons of church authority, and to warn members of the dangers of hoasca . The government appealed the issuance of the injunction, and a panel of the United States Court of Appeals for the Tenth Circuit affirmed, as did a majority of the Circuit sitting en banc. The government appealed to the Supreme Court. In making its appeal, the government put forth three arguments challenging the lower court's decision. First, it challenged the preliminary injunction itself, alleging that the court used the wrong test for determining whether a preliminary injunction was proper. Second, it argued that enforcement of the Controlled Substances Act precluded any type of waiver for UDV. Third, it argued that compliance with the United Nations Convention on Psychotropic Substances also prevented it from allowing UDV to use hoasca , a substance covered under the convention. The government did not challenge the district court's factual findings or its conclusion that the evidence presented at the hearing regarding health risks and risk of diversion was "in equipoise" and "virtually balanced." Rather, the government challenged the district court's determination that evidence "in equipoise" was sufficient for issuing a preliminary injunction against enforcement of the Controlled Substances Act. On appeal, the government noted "the well-established principle that the party seeking pretrial relief bears the burden of demonstrating a likelihood of success on the merits." The government argued that a "mere tie in the evidentiary record" was insufficient for issuing a preliminary injunction. Along with a majority of the en banc Court of Appeals, the Supreme Court rejected this argument, finding that the government "failed to demonstrate that the application of the burden to the UDV would, more likely than not, be justified by the asserted compelling interest." The Court also rejected the government's contention that the UDV bore the burden of disproving the asserted compelling interests at the hearing on the preliminary injunction, citing another recent case which held that "respondents must be deemed likely to prevail unless the government has shown that respondents' proposed less restrictive alternatives are less effective than [enforcing the Act]." The Court stated that "Congress' express decision to legislate the compelling interest test indicates that RFRA challenges should be adjudicated in the same manner as constitutionally mandated applications of the test, including at the preliminary injunction stage." The government also challenged the district court's determination that it failed to articulate a compelling governmental interest to justify its burden on the UDV's religious practices by arguing that the Controlled Substances Act "precludes any consideration of individualized exceptions such as [those] sought by the UDV." The Supreme Court summarized the government's position, saying that "under the government's view, there is no need to assess the particulars of the UDV's use or weigh the impact of an exemption for that specific use, because the Controlled Substances Act serves a compelling purpose and simply admits of no exceptions." However, the Court rejected the government's assertion that Congress's classification of hoasca as a Schedule I substance "relieves the government of the obligation to shoulder its burden under RFRA." The Court noted that the Controlled Substances Act authorizes the Attorney General to "waive the requirement for registration of certain manufacturers, distributors, or dispensers if he finds it consistent with the public health and safety," and that an exception has been made for the religious use of peyote by the Native American Church and all members of every recognized Indian Tribe. The Court found that "[i]f such use is permitted ... for thousands of Native Americans practicing their faith, it is difficult to see how [the government] can preclude any consideration of a similar exception for the 130 or so American members of the UDV who want to practice theirs." The Court held that the peyote exemption not only undermined the government's contention that the Act admits no exceptions under RFRA, but that it also found that the government failed to provide evidence of how such an exemption has "undercut" the government's ability to enforce the law with respect to nonreligious uses. The Court rejected the government's reliance on other cases where the Court found that the government had a compelling interest in the uniform application of a particular program, finding that in this case the government's claim was not based on the administration of a statutory program, but rather on "slippery-slope concerns that could be invoked in response to an RFRA claim for an exception to a generally applicable law." In so doing, the Court stated that "RFRA operates by mandating consideration, under the compelling interest test, of exceptions to 'rule[s] of general applicability,'" and noted that it had recently reaffirmed "the feasibility of case-by-case consideration of religious exemptions to generally applicable rules." With respect to its obligation to comply with the United Nations Convention on Psychotropic Substances, the Court also rejected the government's contention that compliance with the treaty itself was enough to justify the burden on the UDV's religious exercises. In so doing, the Court stated that it did "not doubt the validity of [the government's] interests [in complying with the treaty], any more than [it] doubt[ed] the general interest in promoting public health and safety by enforcing the Controlled Substances Act, but under RFRA invocation of such general interests, standing alone, is not enough." The Court proceeded to affirm the judgment of the United State Court of Appeals for the Tenth Circuit and remanded the case for further proceedings. Presumably, the remand leaves open the possibility that the government could at some point establish a compelling interest that justifies the burden on the UDV. It should also be noted that the Court did not address the constitutionality of RFRA as it applies to the federal government, as this was not a question presented to it on appeal. The potential impact of the Court's decision is uncertain because the Court focused on the importance of a case-by-case approach with respect to religious exemptions from generally applicable rules. The Court's decision does not establish a broad precedent for religious exemptions from criminal statutes. It does, however, appear to establish a precedent with respect to the type of evidence that must be presented by the government to establish a compelling interest. The Court made it clear that the government could not establish a compelling interest in simply enforcing an existing statute; there must be some other justification for the burden on religious expression.

On February 21, 2006, the Supreme Court issued an opinion in Gonzales v. O Centro Espirita Beneficente Uniao do Vegetal (UDV), a case addressing the use of an hallucinogenic tea in the context of religious ceremonies conducted by a religious sect in New Mexico. In its decision, the Court determined that under the Religious Freedom Restoration Act (RFRA), the federal government could not prohibit the sect's use of the tea absent a compelling government interest in doing so, and that the federal government had failed to establish a compelling interest. This report provides an overview of RFRA and the O Centro Espirita case.

S ection 401 of Federal Food, Drug and Cosmetic Act (FFDCA) grants the Food and Drug Administration (FDA) the authority to promulgate regulations that create "standards of identity" for certain foods. These standards establish the composition of the food, including mandatory and optional ingredients. Industry participants who do not follow the standard of identity for a particular food may be liable for misbranding under the FFDCA, which could lead to FDA enforcement action. FDA creates standards of identity through the administrative rulemaking process, with opportunity for public notice and comment. While Congress has not modified FDA's authority for promulgating standards of identity, it has called for FDA to promulgate specific standards for certain foods. For example, the proposed Trade Facilitation and Trade Enforcement Act of 2015 ( H.R. 644 ) includes a provision that would encourage a standard of identity for honey. This report discusses various legal issues related to food standards of identity. These issues include the legal authority for the FDA to promulgate regulations creating standards of identity, FDA's administrative rulemaking process to create standards of identity, and FDA's enforcement of these standards. This report also provides an overview of related legislation in the 114 th Congress. A standard of identity establishes the composition of a food, including mandatory and optional ingredients, and fixes the amounts or relative proportions of each ingredient or a specific method of manufacture. Congress intended that standards of identity would resemble "recipes" for specific foods. These standards of identity seek to prohibit economic adulteration and mislabeling of food by providing consumers with the "assurance that they will get what they may reasonably expect to receive." Section 401 of the FFDCA provides the primary statutory authority for the FDA to promulgate standards of identity for food via regulation. The provision states that [w]henever in the judgment of the Secretary such action will promote honesty and fair dealing in the interest of consumers, he shall promulgate regulations fixing and establishing for any food, under its common or usual name so far as practicable, a reasonable definition and standard of identity, a reasonable standard of quality, and/or reasonable standards of fill of container. Thus, an appropriate standard of identity for a particular food is one that "will promote honesty and fair dealing in the interest of consumers." Once the FDA creates a standard of identity, no product that fails to meet the composition requirements of that standard may be marketed under the name the FDA has appropriated to that particular standard. Section 403(g) of the FFDCA states that the FDA shall deem a food misbranded if "it purports to be or is represented as" a food for which the FDA has established a standard of identity and whose composition deviates from the standard. After the enactment of the Nutrition Labeling and Education Act (NLEA), the FDA promulgated regulations that allow for the addition of safe and suitable ingredients to a "standardized" food. Under these regulations, a manufacturer may refer to the adapted standardized food by the nutrient content claim and the original standardized food term. For example, under FDA regulations, a manufacturer may use safe and suitable artificial sweeteners that are not expressly listed in a particular standard of identity. According to the FDA, these regulations "assist consumers in maintaining healthy dietary practices by providing for a modified version of a traditional standardized food to achieve a nutritional goal ... [while maintaining] a descriptive name that is meaningful to consumers." The FDA relies on concepts like "safe and suitable" when regulating food to allow for technological flexibility with food development. Permitting such flexibility, according to the FDA, encourages oversight of food "without adversely affecting the characteristics of food" and "minimizes any future amendment of the standards for additional specific ingredients." The FDA also adopts food standards established by the Codex Alimentarius Commission, formed by the World Health Organization and the Food and Agriculture Organization of the United Nations. The Codex Alimentarius is a collection of international recognized food standards and guidelines promoting food safety. The FDA publishes these food standards in the Federal Register for public review and comment before accepting the standard with or without any changes. Congress first authorized the promulgation of standards of identity for foods with the Federal Food, Drug, and Cosmetic Act of 1938. The Pure Food and Drugs Act of 1906, the predecessor of the 1938 act, did not provide the legal authority for the government to promulgate such food standards, leaving the federal government with limited oversight of "imitation" products. During the 1920s and 1930s, the U.S. government brought adulteration and misbranding claims under the 1906 act against a product called "Bred Spred," a fruit product containing 20% fruit. The government claimed that consumers regarded the product as jam, but the product did not have the 45% fruit content generally associated with jam. The manufacturer argued that Bred Spred was not misbranded as it did not purport to be jam. The courts agreed with the manufacturer, holding that the product was not misbranded under the 1906 act because the government did not offer any evidence of false or misleading statements on the label. For the court, the imitation of a product was not sufficient evidence of misbranding under the act. Leading up to the passage of the 1938 act, Congress faced concerns about products such as Bred Spred and the potential fraud and the subsequent loss of consumer confidence that may follow from the purchase of similar foods. According to the legislative history of the 1938 act, Congress primarily authorized the creation of standards of identity as a regulatory tool "under which the integrity of food products can be effectively maintained." During the passage of the 1938 act, Congress acknowledged that "one great weakness in the present food and drugs law [1906 Act] is the absence of authoritative definitions and standards of identity." Referring to the Bred Spred cases, the House report for the 1938 act stated that "the government repeatedly has had difficulty in holding such articles as commercial jams and preserves and many other foods to the time-honored standards employed by housewives and reputable manufacturers." The report also claimed that the government lost these cases because the courts held that these "home" standards are not legally binding under existing law. Thus, Congress intended that the authorization of standards of identity would "meet[] the demands of legitimate industry[,]... [would] effectively prevent the chiseling operations of the small minority of manufacturers, [would] in many cases expand the market for agricultural products, particularly for fruits, and finally [would] insure fair dealing in the interest of the consumer." The Supreme Court has interpreted this legislative history as Congress's recognition of the inability of consumers to determine the relative merits of similar products solely on the basis of the labeling information. The FDA promulgates standards of identity for food through the rulemaking process. The formal rulemaking procedure followed by the FDA in adopting a standard of identity can be organized into three stages. First, the FDA or any "interested person" via a citizen petition may propose a standard of identity for adoption. A private petitioner must state "reasonable grounds" for the proposal in order for the FDA to publish the order and proceed with the process. Thus, a successful petition must assert provable facts demonstrating that the proposal, if adopted, "would promote honesty and fair dealing in the interest of consumers." The petitioner must also assert that he commits himself to substantiate the information in the petition with additional evidence in a public hearing, if such a hearing becomes necessary. If the proposal satisfies this requirement, the FDA publishes the proposal in the Federal Register as a "Notice of Proposed Rulemaking," and all interested persons are invited to file comments orally or in writing. After the agency studies the public comments submitted, the agency can decide to reject the proposal or to accept the proposal by publishing an order. The agency is not bound to issue the order within a specific timeframe after the comment period. Generally, the order, which establishes the standard of identity, is effective on the date specified in the order. Within 30 days of the order's publication, the agency begins the second stage of the rulemaking process. During this stage, all persons adversely affected by the order may submit objections and demand a public evidentiary hearing to resolve disputed factual issues that the objections have raised. The filing of such objections serves as a stay of the disputed provisions in the order, until the FDA takes final action. The public hearing is open to all interested persons and is on the record. The participants of the hearing may present documentary evidence and oral testimony and have the ability to cross-examine the witnesses. Following the hearing, the final stage of the process involves the agency issuing a tentative order, including detailed findings of fact and conclusions upon which the order is based. Any party of record may object to this proposed order and request an oral argument before the FDA. The FDA then publishes the final order setting forth the standard of identity. The FDA's final standard of identity constitutes a final agency action that is eligible for judicial review. A party adversely affected by the standard of identity order may seek judicial review in the U.S. Court of Appeals for the circuit in which the party resides or has a principal place of business. An adverse effect that is too remote or indirect generally does not provide a petitioner sufficient standing to petition a review of the order. Upon such a petition for judicial review, the court then has jurisdiction to affirm the order, or to set the order aside in whole or in part, temporarily or permanently. In reaching such a decision, the court considers whether the FDA's findings regarding the standard of identity order are supported by substantial evidence. According to the FFDCA, the FDA's findings of fact relating to the particular standard up for review "if supported by substantial evidence ... shall be conclusive." According to the Supreme Court, this scope of judicial review is appropriate for the review of "regulations of general application adopted by an administrative agency under its rulemaking power in carrying out the policy of a statute with whose enforcement it is charged." The Supreme Court reviewed the FDA's authority to promulgate regulations fixing standards of identity in Federal Security Administrator v. Quaker Oats Co. In this case, the Quaker Oats Company petitioned for review of the standards of identity for farina, enriched farina, and other flour mill products. The U.S. Court of Appeals for the Seventh Circuit set aside the standards of identity for these products, holding that the evidence on which the standards were based was "entirely speculative and conjectural" and would not justify the conclusion that such regulations would "promote honesty and fair dealing in the interest of consumers." Furthermore, the Court of Appeals held that there was no evidence of consumer confusion to justify the particular standards for farina and enriched farina. The Supreme Court disagreed and upheld the standards of identity. The Court stated that the FFDCA does not permit courts to "substitute their own judgment" for that of the agency promulgating the standards, but Section 401 instead emphasizes that the standards of identity are based on the "judgment of the Administrator." Thus, deferring to the Administrator promulgating the standards, the Court concluded that there was sufficient evidence "to support the Administrator's judgment that, in the absence of appropriate standards of identity, consumer confusion would ensue." Thus, the Supreme Court has concluded that the agency's determination, "if based on substantial evidence of record, and if within statutory and constitutional limitations, is controlling even though the reviewing court on the same record might have arrived at a different conclusion." In order to amend or to remove an existing standard of identity, the agency follows the same formal rulemaking procedures as it does when creating a new standard of identity. Amendments may include allowing a new ingredient or method of manufacture. The amendment process begins with the FDA or an interested person filing a petition to amend or to revoke the standard of identity. Like the test for promulgating standard of identity regulations, a revocation or amendment of a standard must also promote honesty and fair dealing in the interest of consumers. The FDA enforces standards of identity through the misbranding provision in the FFDCA (Section 403). Once the agency deems a food to be misbranded under this provision, then the agency can exercise various enforcement options against the manufacturer or other industry representatives. A food is deemed misbranded "[i]f it purports to be or is represented as a food for which a definition and standard of identity has been prescribed ... unless (1) it conforms to such definition and standard, and (2) its label bears the name of the food specified in the definition and standard, and, insofar as may be required by such regulations, the common names of optional ingredients (other than spices, flavoring, and coloring) present in such food." The FDA has not provided any formal guidance on when a product "purports to be" a food for which there is a standard of identity. In the past, the agency has read the "purports to be or is represented as" language broadly to challenge in a judicial enforcement action food that resembles in appearance, packaging, or taste, a food for which there is a standard of identity. Courts have relied upon the ordinary meaning of "purport" as "to convey, imply, or press outwardly ... to have the appearance... of being, intending, claiming" when interpreting this statutory language. A court generally does not require evidence of consumer deception under this misbranding provision. For example, the U.S. government took enforcement action against food sold as "tomato catsup with preservative." The product did not conform to the standard of identity for catsup because it contained sodium benzoate. The Second Circuit concluded that the product at issue "purports to be tomato catsup" even though the manufacturer added "mere words of qualification or description." For the court, the fact that this was "a product that looks, tastes, and smells like catsup, which caters to the market for catsup, which dealers bought, sold, ordered, and invoiced as catsup, without reference to the preservative, and which substituted for catsup on the tables of low priced restaurants" was sufficient evidence that the product violates the standard of identity for catsup, and thus was misbranded. The court dismissed an alternate inquiry into "whether the ultimate purchaser will be misled" as an unnecessary approach in standards of identity cases. The FDA may exercise discretion in its enforcement of the misbranding provision for standards of identity, Section 403(g). Thus, when the FDA finds that a food qualifies as misbranded under the FFDCA, the agency may then pursue several different enforcement options. First, the FDA may issue a warning letter to alleged violators of the misbranding provision. FDA warning letters are informal and advisory. A warning letter may communicate the FDA position on a certain issue, but does not commit the agency to take any further enforcement action. Thus, the FDA has concluded that a warning letter does not qualify as a final agency action subject to judicial review under the Administrative Procedure Act. The FDA may issue a warning letter for "minor violations of this [act] whenever [the agency] believes that the public interest [would] be adequately served by a suitable written notice or warning." These warning letters give the recipients, such as manufacturers or other industry representatives, an opportunity to take voluntary corrective actions before the FDA initiates a more formal enforcement action. The agency may favor a warning letter over other types of enforcement action as a more efficient enforcement option if the agency reasonably expects that the responsible firm or persons would take prompt corrective action after receiving such a letter. Under Section 304(a)(1) of the FFDCA, the government may also seize a misbranded article of food in interstate commerce. A seizure is a civil action used by the federal government when the removal of misbranded goods from interstate commerce is necessary to reduce consumer accessibility to those goods in order to protect public health. Generally, a seizure includes two steps: the U.S. government's physical seizure of the adulterated or misbranded articles of food followed by the judicial condemnation proceeding. The U.S. district court where the article is found has jurisdiction over the seizure proceeding. After a hearing on a seizure action, a district court may decree the "condemnation" of seized articles of food and order the destruction, sale, reconditioning, or export of such food. While Congress has not amended the FDA's legal authority to create standards of identity, Congress has introduced legislation in the past to encourage FDA's promulgation of specific standards of identity. For example, the Trade Facilitation and Trade Enforcement Act of 2015 includes a provision declaring that it "is the sense of Congress that the Commissioner of Food and Drugs should promptly establish a national standard of identity for honey for the Commissioner responsible for U.S. Customs and Border Protection to use to ensure that imports of honey are (1) classified accurately and for purposes of assessing duties; and (2) denied entry into the United States if such imports pose a threat to the health or safety of consumers in the United States." In support of this provision, Senator Gillibrand has stated the United States should adopt a national standard of identity for honey in order to protect consumers and to safeguard the integrity of honey products by preventing unscrupulous importers from flooding the market with misbranded honey products. If such a provision becomes law, the FDA may then promulgate a standard of identity for honey through the administrative rulemaking process.

Standards of identity for foods overseen by the Food and Drug Administration (FDA) generally define the composition of a food, prescribing both mandatory and optional ingredients and fixing the relative proportions of each ingredient. This report addresses the following legal issues associated with the promulgation and enforcement of standards of identity for foods. Section 401 of the Federal Food, Drug, and Cosmetic Act (FFDCA) establishes the legal authority for the FDA to promulgate standards of identity for food. According to this statutory authority, a standard of identity for a particular food is necessary if such a standard would "promote honesty and fair dealing in the interest of consumers." Congress first authorized the promulgation of standards of identity for foods in 1938 in response to the failure of the federal government's enforcement actions to regulate "imitation" foods. The FDA creates standards of identity for food through the rulemaking process. The FDA or an interested person via a citizen petition may propose a standard of identity for adoption. After the FDA publishes the proposed standard of identity in the Federal Register, members of the public may submit objections and demand a public hearing. The standard of identity is effective once the FDA publishes the final order in the Federal Register. The FDA's promulgation of a final standard of identity constitutes a final agency action that is eligible for judicial review. The FDA enforces standards of identity through the misbranding provision in the FFDCA, which states that a food is misbranded if "it purports to be or is represented as" a food for which the FDA has established a standard of identity and deviates from that standard. Once the agency deems a food to be misbranded under this provision, then the agency can exercise various enforcement options. Congress generally has not modified FDA's authority for promulgating standards of identity. However, Congress has introduced legislation calling for the FDA to promulgate standards for specific foods. For example, the Trade Facilitation and Trade Enforcement Act of 2015 (H.R. 644, S. 1269) of the 114th Congress includes a provision to encourage a standard of identity for honey.

In FY2017, the federal government obligated approximately $500 billion to procure goods and services. Federal procurement statutes and regulations--notably the Competition in Contracting Act of 1984 (CICA) and the Federal Acquisition Regulation (FAR), the government-wide regulation that generally applies to acquisitions by executive branch agencies--establish largely uniform policies and procedur es for how federal executive agencies acquire goods and services. The purpose of these standards is to guide the acquisition system "to deliver on a timely basis the best value product or service to the [government], while maintaining the public's trust and fulfilling public policy objectives," such as the promotion of competition. In an effort to advance the transparency, fairness, and integrity of the procurement system, federal law provides mechanisms for contractors to "protest" (i.e., object to) contract awards and solicitations for failing to comply with federal law. However, empowering contractors to protest procurement decisions has the potential to delay agency acquisitions of goods and services. In recent years, Congress has paid increasing attention to achieving and maintaining the appropriate balance between these competing interests, particularly regarding defense acquisition. For example, the FY2017 National Defense Authorization Act (NDAA) required the Department of Defense (DOD) to contract for a comprehensive study on the impact of bid protests on acquisitions, which was released in December 2017. Congress authorizes bid protests in three separate forums: (1) the procuring agency, (2) the Government Accountability Office (GAO), or (3) the U.S. Court of Federal Claims (COFC). This report briefly analyzes the varying legal procedures applicable to bid protests under each forum, which may be relevant to Congress as it assesses potential reforms to the bid protest process. First, the report provides an overview of bid protests generally and the legal procedures applicable to bid protests made in each forum. Next, the report analyzes the legal distinctions among these forums. Finally, the report discusses recent legislative developments affecting bid protest procedures and potential considerations for Congress. Generally, a bid protest is a written objection to the conduct of a government agency in acquiring supplies and services for its direct use or benefit. Among other things, this conduct can include violations of law or regulation in the way in which an agency solicits offers for a contract, cancels such a solicitation, awards a contract, or cancels a contract. As previously mentioned, bid protests can be filed with the procuring agency, GAO, or the COFC. The three forums share some common features. For example, they each utilize the same definition of "interested party" to govern who may file a valid protest. However, as discussed in more detail below, the applicable legal procedures and available remedies vary considerably under each forum. Parties generally consider these distinctions when choosing the forum or forums in which to file a protest, and as a result, often begin a protest in one of the nonjudicial forums. In addition, contractors may request, and for certain procurements procuring agencies must provide, pre-award and post-award "debriefings" through which the contractor may acquire certain information about how the agency decided to make an award or to eliminate the contractor from competition for a contract prior to the award decision. Debriefings can help inform an interested party's decision on whether to initiate a protest and through which forum or forums to raise claims. Although there are scant reliable data on the number of protests filed with procuring agencies, public data demonstrate that substantially more protests are filed with GAO on average each year than with the COFC. Parties that disagree with the outcome of a bid protest before a procuring agency or GAO often can still bring claims before the COFC, but the reverse route (filing a protest with a procuring agency or GAO after an adverse COFC decision) is generally not permitted . For example, GAO generally dismisses protests that are currently pending before or have been previously resolved by the COFC. Provisions of the FAR, which were implemented pursuant to a 1995 Executive Order and several broad procurement-related statutory authorities, require executive branch procuring agencies to "provide for inexpensive, informal, procedurally simple, and expeditious resolution of protests." There are no comprehensive publicly available data on protests before procuring agencies; agency protest decisions are not published; and the relevant FAR provisions, which stress speed and simplicity, provide limited guidance for how agencies are expected to implement these "informal" protest procedures. Given the dearth of publicly available data, it is difficult to draw firm conclusions regarding the consistencies and differences of procuring agency protest processes across the government. The relevant FAR provisions provide some standard procedures applicable to agencies hearing a bid protest. For example, only an "interested party" may file a valid protest with a procuring agency. The term "interested party" is defined as an "actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract." Interested parties that file a protest with a procuring agency generally do not have a legal right to compel discovery from the procuring agency, although agencies could voluntarily share certain information. In addition, agencies are expected to resolve a protest within 35 days of its receipt. When a procuring agency receives a protest from an interested party, the agency must halt (i.e., "stay") the award or implementation of the relevant contract until the protest is resolved, unless the agency concludes that there are "urgent and compelling reasons" or where moving forward with the contract is "in the best interest of the Government." The purpose of this "automatic stay" is to ensure that agencies have sufficient opportunity to remedy legal violations before the contract moves forward. Procuring agencies are expected to provide parties a "well-reasoned" explanation of the agency's protest decision. Procuring agencies may provide the same relief that GAO is authorized by law to recommend, which, as discussed below, includes canceling or reissuing a contract or solicitation. The primary recourse for parties that are unsatisfied with how the procuring agency resolved the protest generally is to file a protest with either GAO or the COFC. Under certain limited circumstances, protests also can be filed with specialized agencies. For example, small business size certification determinations can be protested with the Small Business Administration. GAO has been a forum for resolving protests for nearly a century and is the only agency with the authority to hear protests from across the federal government. Federal law, primarily through CICA, authorizes "interested parties" to file a protest with GAO regarding a federal agency's procurement contract solicitation or award. More specifically, federal law provides that these parties can argue that a federal agency violated a statute or regulation in the way in which the agency defined who may be eligible for a contract in the solicitation, canceled a contract solicitation, or determined who is awarded a contract. The term "interested party" has the same meaning for the purposes of a GAO bid protest as it does for a protest before the procuring agency, i.e., the contractor must be "an actual or prospective bidder" with "a direct economic interest" in the challenged procurement action. Thus, contractors who simply desire to bid for a contract can qualify as an "interested party" when they challenge a pre-award solicitation. However, GAO often will limit post-award protests to parties that both bid on the contract and were next in line to win the contract, unless the challenging party raises a claim that, if ultimately successful, would allow it to jump ahead of multiple parties. Additionally, potential subcontractors generally do not qualify as interested parties because they are not "actual or prospective bidder[s] or offeror[s]." Federal law generally requires protests before GAO to be "inexpensive and expeditious" and establishes time limits for filings by the parties and for rulings by GAO that are shorter than those that are applicable to a typical judicial process, but longer than those applicable to protests before a procuring agency. GAO protests normally must be filed within 10 days of the time in which the violation "is known or should have been known." Absent extenuating circumstances, GAO dismisses untimely protests. GAO also must inform the relevant agency of a protest within one day of the protest being filed. This notice typically triggers a 30-day window for the procuring agency to respond, unless GAO provides an extension. The procuring agency generally must provide GAO and the protestor all documents "relevant" to the protest for GAO's consideration. GAO generally has 100 days from the day on which the protest was originally filed to issue a recommendation in a matter, although GAO may also consider protests pursuant to an "express" proceeding for cases that GAO determines may be feasibly resolved within 65 days. Upon receiving notice from GAO, the procuring agency typically must implement an automatic stay , thus halting the award or performance of a contract until GAO issues a recommendation on the protest. By statute, the procuring agency generally may only lift, or "override," the automatic stay prior to GAO's recommendation for a limited number of reasons, such as if "performance of the contract is in the best interests of the United States" or there are "urgent and compelling circumstances which significantly affect interests of the United States [that] will not permit waiting for the decision of [GAO]." Agencies that override an automatic stay must justify the decision in writing and provide notice to GAO. GAO does not have legal authority to reverse an automatic stay override or to review the decision. However, the COFC, upon a motion from an interested party, can review an agency's decision to override the stay. The COFC may reverse the agency's decision to override the stay through the issuance of a temporary restraining order or preliminary injunction that requires an agency to halt performance of the contract. After considering the legal basis for the protest, GAO may issue a decision either denying the protest and recommending that the agency move forward with the award or performance of the contract, or sustaining the protest and recommending further action by the procuring agency. In the latter scenario, GAO may recommend that agencies reissue a solicitation, rebid a contract, cancel a contract, or take certain other steps outlined in Section 3554(b) of Title 31. If GAO concludes that an agency failed to comply with a procurement law or regulation, GAO may recommend that the agency pay the challenging party's attorneys' fees and certain other costs associated with filing the protest. Although GAO recommendations are explicitly established by statute as nonlegally binding on the procuring agency, GAO must "promptly" inform Congress of any instance in which a federal agency does not comply with a GAO bid protest recommendation. GAO must further advise Congress whether it believes the noncompliance warrants a congressional investigation or some other legislative response "in order to correct an inequity or to preserve the integrity of the procurement process." In practice, executive agencies almost always implement GAO recommendations, and the COFC, while not bound by GAO interpretations of law, "gives due weight and deference to GAO recommendations" when assessing challenges from parties unhappy with the outcome of a GAO bid protest. The COFC is the only judicial forum authorized by Congress to hear bid protests. Parties to protests filed with the COFC must comply with the court's rules of practice (Rules of the Court of Federal Claims (RCFC)), which are modeled after the Federal Rules of Civil Procedure. Additionally, the challenging party must demonstrate that it qualifies as an "interested party." The COFC and its appellate court, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit), have interpreted the term "interested party" consistent with the CICA definition of the term discussed above. The COFC reviews final agency procurement actions in accordance with the Administrative Procedure Act (APA) and will only set aside an agency's action if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." The COFC generally requires the procuring agency to provide the full administrative record associated with the protested procurement, including all of the agency's correspondence with the protestor and the contractor that won the procurement contract as well as internal evaluations of contract offers. The COFC "may award any relief that the court considers proper, including declaratory and injunctive relief except that any monetary relief shall be limited to bid preparation and proposal costs." COFC-issued remedies are legally binding and may be enforced through contempt of court, among other legal powers. Parties may file bid protest lawsuits with the COFC before or after filing protests with the procuring agency or GAO. In contrast to the processes applicable to the two nonjudicial forums, parties that initiate a bid protest through the COFC do not gain the benefit of an automatic stay. Instead, parties may request that the procuring agency voluntarily impose a stay, or they may petition the court to issue a preliminary injunction or temporary restraining order. These "extraordinary remed[ies]" generally enjoin or restrain a party from taking certain actions, and, thus, can provide similar protections as an automatic stay. Nevertheless, the COFC will only issue these remedies "in extremely limited circumstances" where a petitioner is able to meet exacting standards, including demonstrating that the petitioner will likely suffer irreparable harm in the absence of such relief and succeed on the merits of its claims. Subsequent to a 2007 opinion of the Federal Circuit Court of Appeals, the COFC generally reviews protests based on solicitations in the same time frame as that applicable to GAO. However, in contrast to the 10-day filing deadlines applicable to GAO post-award protests discussed above, post-award protests at the COFC generally are not subject to specific initial filing deadlines other than potentially the general six-year statute of limitations applicable to claims against the federal government. In practice, however, procurement decisions typically are made well before the end of this six-year period, and the COFC can bar claims on equitable grounds (e.g., laches, equitable estoppel) when, for instance, a "protester's delay in filing was unreasonable and prejudicial to the agency or other parties." COFC bid protest opinions also do not have to be issued within a specific time frame like those before the procuring agency and GAO. Consequently, the COFC often takes longer to issue a ruling on the merits of a protest than the procuring agency and GAO. COFC rulings, like TROs and similar remedies discussed above, are legally enforceable, and they may be appealed to the Federal Circuit. As the foregoing indicates, although the three bid protest forums share some common features, the legal processes applicable to and remedies available under the forums vary considerably. These distinctions arguably seek to further Congress's desire to maintain balance between an efficient and timely, yet fair and transparent, procurement system. Congress may consider the unique aspects of each forum and how each contributes to that balance when evaluating potential reforms to the bid protest process. Generally, protests before the procuring agency and GAO tend to be resolved faster and less expensively than challenges before the COFC because they are subject to specific resolution timetables and less formal procedures. Additionally, parties that file a protest with either the procuring agency or GAO generally gain the benefit of an automatic stay that bars an agency from awarding or implementing a contract while a protest is pending. In contrast, while filing a protest with the COFC is frequently more time-consuming and expensive and does not trigger an automatic stay, protests before the COFC have the potential to result in legally binding and conclusive judicial decisions and orders. Procuring agency decisions and GAO bid protest recommendations, on the other hand, are not legally binding. Furthermore, interested parties that disagree with GAO or procuring agency decisions generally can still bring claims before the COFC, whereas the reverse route is generally not permitted. Another important distinction among the forums is that the scope of discovery is potentially broader in a protest before the COFC because the court generally reviews the entire administrative record of a procurement. In contrast, procuring agencies generally are not compelled to produce documents, and GAO typically reviews only those documents that are relevant to the particular protest. Furthermore, while GAO and the procuring agency are limited to a finite list of statutorily authorized remedies, the COFC may "award any relief that the court considers proper" with the exception of certain monetary relief. Congress likely intended to further a number of objectives by statutorily authorizing contractors to challenge federal procurement solicitations and awards through the bid protest process described above. Allowing protests can help ensure that procuring agencies comply with federal law and, consequently, advance congressional prerogatives. The bid protest system also can help promote fairness and transparency in the procurement process, which arguably encourages participation and increases competition for federal procurement awards. This, in turn, has the potential to improve the quality and reduce the costs of goods and services purchased by the government. Similarly, the absence of a protest system might undermine public confidence that contract award decisions are based on merit and in compliance with the law, which could discourage participation by qualified and reputable parties and result in wasteful government spending. Although few are likely to argue with these general benefits, protests arguably may impede the timely acquisition of goods and services, at least in certain circumstances. In particular, some commentators have expressed concern that contractors are filing protests that are highly unlikely to be successful, if not entirely baseless, as a way to harm competitors or extend the performance of existing contracts. Even if these protests ultimately prove to be unsuccessful, they often force procuring agencies to expend time and money defending their actions and can hold up the agency's ability to acquire goods and services needed to implement their congressionally mandated operations. Furthermore, the expectation of protests might drive up the administrative costs of soliciting and awarding contracts as agencies defensively go beyond their legal requirements to ensure that their procurement decisions are sufficiently documented and justified. According to a congressionally mandated report, some stakeholders believe that, while the potential for a bid protest generally does not have a significant effect on an agency's overall operations, it could cause an agency to fail to meet programmatic deadlines, which might lead to a loss of appropriations. Some have also noted that the fear of a potential protest can impact an agency's procurement contract decision making by, for instance, causing acquisition personnel to prioritize price over quality. In light of the competing interests discussed above, some in Congress have expressed a need for procurement reform, generally, and bid protest procedural reform, specifically. In recent years, Congress has passed several provisions intended to address concerns with the bid protest process, which largely have been focused on increasing Congress's understanding of how legislative amendments to bid protest procedures could enhance the efficiency of the procurement process, discourage unwarranted protests, and generally improve procurement outcomes for the federal government. Most of these recently enacted procurement protest reform provisions have been related specifically to defense acquisition enacted through annual NDAAs. For example, Section 822 of the FY2019 NDAA requires DOD to study and report on (1) the establishment of "an expedited bid protest process" for defense procurement contracts valued under $100,000; and (2) "the frequency and effects of bid protests involving the same contract award or proposed award that have been filed at both [GAO and COFC]." The FY2018 NDAA established a three-year pilot program, to begin in December 2019, to assess and issue a report on "the effectiveness of requiring [certain] contractors to reimburse the Department of Defense for costs incurred in processing covered protests" that are denied by GAO. Additionally, Section 818 of FY2018 NDAA enhanced debriefing rights for prospective DOD contractors by allowing them to submit debriefing questions and receive written responses to those questions from the procuring agency. Section 818 also authorizes prospective DOD contractors to file bid protests with GAO up to five days after they receive DOD's written responses to submitted debriefing questions. Of relevance to the procurement system, generally, a provision of the FY2013 NDAA requires GAO to include in its annual report to Congress a summary of the most common grounds for sustaining protests during the year. GAO has included this information in each annual report it has submitted to Congress beginning in FY2013. Congress might utilize the information gained from these studies, reports, and pilot programs to inform its consideration of substantive legislative reforms to the bid protest system. For instance, reforms could include implementation of certain recommendations in the RAND report or making permanent, expanding, or eliminating the pilot program that requires certain contractors to reimburse the government for the costs associated with adjudicating unsuccessful protests.

In FY2017, the federal government obligated approximately $500 billion to procure goods and services. Federal procurement statutes and regulations--notably the Competition in Contracting Act of 1984 (CICA) and the Federal Acquisition Regulation (FAR), the government-wide regulation that generally applies to acquisitions by executive branch agencies--establish largely uniform policies and procedures for how federal executive agencies acquire goods and services. The purpose of these standards is to guide the acquisition system "to deliver on a timely basis the best value product or service to the [government], while maintaining the public's trust and fulfilling public policy objectives," such as the promotion of competition. In an effort to advance the transparency, fairness, and integrity of the procurement system, federal law provides mechanisms for contractors to "protest" (i.e., object to) contract awards and solicitations for failing to comply with federal law. Generally, a bid protest is a written objection to the conduct of a government agency in acquiring supplies and services for its direct use or benefit. Among other things, the challenged conduct can include violations of law or regulation in the way in which an agency solicits offers for a contract, cancels such a solicitation, awards a contract, or cancels a contract. Congress authorizes bid protests in three separate forums: (1) the procuring agency, (2) the Government Accountability Office (GAO), or (3) the U.S. Court of Federal Claims (COFC). The three forums share some common features. For example, they each utilize the same definition of "interested party" to govern who may file a valid protest. However, the applicable legal procedures and available remedies vary considerably under each forum. Parties generally consider these distinctions when choosing the forum or forums in which to file a protest. These distinctions arguably seek to further Congress's desire to maintain balance between an efficient and timely, yet fair and transparent, procurement system. Generally, protests before the procuring agency and GAO tend to be resolved faster and less expensively than challenges before the COFC because they are subject to specific resolution timetables and less formal procedures. Additionally, parties that file a protest with either the procuring agency or GAO generally gain the benefit of an "automatic stay" that bars an agency from awarding or implementing a contract while a protest is pending. In contrast, while filing a protest with the COFC is frequently more time-consuming and expensive and does not trigger an automatic stay, protests before the COFC have the potential to result in legally binding and conclusive judicial decisions and orders. Procuring agency decisions and GAO bid protest recommendations, on the other hand, are not legally binding. Furthermore, interested parties that disagree with GAO or procuring agency decisions generally can still bring claims before the COFC, whereas the reverse route is generally not permitted. Another important distinction among the forums is that the scope of discovery is potentially broader in a protest before the COFC because the court generally reviews the entire administrative record of a procurement. In contrast, neither GAO nor the procuring agency hearing a bid protest typically compels a procuring agency to produce documents, and GAO typically reviews only those documents that are relevant to the particular protest. Furthermore, while GAO and the procuring agency are limited to a finite list of statutorily authorized remedies, the COFC may "award any relief that the court considers proper" with the exception of certain monetary relief. Some in Congress have expressed a need for procurement reform, generally, and bid protest procedural reform, specifically. In recent years, Congress has passed several provisions intended to address concerns with the bid protest process, such as Section 822 of the FY2019 John S. McCain National Defense Authorization Act (NDAA), which largely have been focused on increasing Congress's understanding of how legislative amendments to bid protest procedures could enhance the efficiency of the procurement process, discourage unwarranted protests, and generally improve procurement outcomes for the federal government.

American Indians in general are victims of violent crimes at a rate much higher than the general population. This trend carries over to domestic violence: American Indian women are victims of domestic and dating violence at more than twice the rate of non-Indian women. It is reported that most of this violence involves an offender of a different race. This fact creates a jurisdictional problem because tribal courts do not have criminal jurisdiction over crimes committed within the tribe's jurisdiction by non-Indians. States generally do not have jurisdiction over such crimes either. Although such crimes are subject to federal jurisdiction, frequently overburdened federal prosecutors are not able to prosecute them. Thus, it appears that American Indian women are left with a higher risk of domestic violence and less protection than non-Indian women. In the 112 th Congress, the Senate passed S. 1925 , which included proposed amendments to the Violence Against Women Act (VAWA) aimed at remedying this practical jurisdictional void. S. 47 and H.R. 11 , the Violence Against Women Reauthorization Act (VAWA Reauthorization) are nearly identical to S. 1925 and have been introduced in the 113 th Congress. Section IX of these bills would, among other things, expand the inherent jurisdiction of tribal courts to include non-Indian-on-Indian crimes of domestic and dating violence committed within the tribes' jurisdictions. Opponents of the proposed amendments in S. 1925 were concerned that, under current law, tribal courts are not required to provide the identical constitutional protections to criminal defendants as state and federal courts. The VAWA Reauthorization would provide that courts exercising special domestic violence criminal jurisdiction shall provide to defendants "all other rights whose protection is necessary under the Constitution of the United States in order for Congress to recognize and affirm the inherent power of the participating tribe to exercise criminal jurisdiction over the defendant." As discussed below, it is not clear what protections the tribes must provide to exercise this power. Criminal jurisdiction in Indian country is complex. Indian country is defined by 18 U.S.C. Section 1151 as Indian reservations, dependent Indian communities, and allotments. Depending on the crime and the identities of the victim and the perpetrator, there can be exclusive tribal jurisdiction, exclusive federal jurisdiction, concurrent tribal and federal jurisdiction, or exclusive state jurisdiction. The following chart sets forth which governments have jurisdiction over crimes in Indian country. In cases of dating and domestic violence where the offender is non-Indian and the victim is Indian, which appear to constitute the greatest percentage of domestic and dating violence involving Indians, tribal and most state courts do not have jurisdiction. Federal jurisdiction is exclusive, unless a state has criminal jurisdiction under P.L. 280. As a practical matter, there is a jurisdictional void for domestic and dating violence between non-Indians and Indians because federal prosecutors frequently cannot make such crimes a priority for prosecution on account of the demands of their workload and the difficulty of investigating such crimes, which usually occur far away from federal investigators. Therefore, it is argued that domestic violence between non-Indian perpetrators and Indian victims frequently goes unprosecuted and unpunished, and the victims of such violence go unprotected. To address the jurisdictional issue concerning domestic and dating violence involving non-Indians and Indians, the VAWA Reauthorization would give tribal courts jurisdiction over domestic and dating violence between non-Indians and Indians that occur within the tribes' jurisdiction, provided there are sufficient ties to the Indian tribes. Special domestic violence criminal jurisdiction would be limited to "act[s] of domestic or dating violence that occur[] in the Indian country of the participating tribe" and violations of protection orders. The VAWA Reauthorization does not purport to delegate federal authority to the tribes. Rather, it would declare that the tribes' "powers of self-government ... include the inherent power of that tribe, which is hereby recognized and affirmed, to exercise special domestic violence criminal jurisdiction over all persons." The Senate Report on S. 1925 explains that this special domestic violence criminal jurisdiction would apply "in a very narrow set of cases over non-Indians who voluntarily and knowingly established significant ties to the tribe." In an effort to ensure that this is the case, the VAWA Reauthorization, like S. 1925 , provides that Indian tribes may not exercise special domestic violence jurisdiction if both the victim and the defendant are non-Indians or the defendant lacks sufficient ties to the Indian tribe. A tribe may exercise special domestic violence jurisdiction only if the defendant lives in the Indian country of the tribe; is employed in the Indian country of the tribe; or is a spouse or intimate partner of a member of the tribe or an Indian residing within the tribe's territory. Therefore, the tribes' special domestic violence criminal jurisdiction would be limited to domestic and dating violence occurring within a tribe's jurisdiction by a non-Indian against an Indian when the non-Indian lives or works in the tribe's Indian country or the non-Indian is married to, or in an intimate relationship with, a tribal member or other Indian residing within the tribe's jurisdiction. Additionally, the VAWA Reauthorization would purport to give tribes criminal jurisdiction over domestic violence committed by non-Indians if the tribes provide to the defendant "all other rights whose protection is necessary under the Constitution of the United States in order for Congress to recognize and affirm the inherent power of the participating tribe to exercise special domestic violence criminal jurisdiction over the defendant." The meaning of this phrase is not clear, but there are two plausible interpretations. The Senate Committee on the Judiciary proposed in the VAWA Reauthorization Report that this provision would require tribes to "to protect effectively the same Constitutional rights as guaranteed in State court criminal proceedings." Stepping back for a moment, as originally conceived, the federal Bill of Rights did not apply against the states. It was not until passage of the Fourteenth Amendment, and subsequent incorporation by the Supreme Court, that protections in the Bill of Rights were applied against the states. To determine which rights should be "incorporated," the Court asks whether the right is "implicit in the concept of ordered liberty" or required to ensure the "fundamental fairness essential to the very concept of justice." Under incorporation, all criminal procedure safeguards contained in the Bill of Rights have been applied against the states except for the grand jury clause of the Fifth Amendment. It is plausible that the above phrase from the VAWA Reauthorization was intended to encompass this same set of rights. If so, Indian tribes would be required to guarantee all the rights contained in the Bill of Rights except for a grand jury. This would mean the addition of several protections not currently accorded all defendants in tribal court prosecutions. Alternatively, this "recognize and affirm" provision may merely require tribes to provide those protections that are currently available under the Indian Civil Rights Act and the Tribal Law and Order Act. The Senate Report states that these statutes "protect individual liberties and constrain the power of tribal governments in much the same ways that the Constitution limits the powers of Federal and State governments." This could mean that all the rights in these two statutes are deemed sufficient to permit Congress to "recognize and affirm the inherent power" of the tribes to exercise criminal jurisdiction over non-Indians. As discussed below, this could hinder several protections accorded under the U.S. Constitution as applied against the states. As mentioned above, the VAWA Reauthorization would extend the tribes' inherent sovereignty to include criminal jurisdiction over non-Indians committing domestic or dating violence against Indians. "The powers of Indian tribes are, in general, inherent powers of a limited sovereignty which has never been extinguished. Before the coming of the Europeans, the tribes were self-governing sovereign political communities." The Supreme Court has recognized that "[a] basic attribute of full territorial sovereignty is the power to enforce laws against all who come within the sovereign's territory." Although tribes once enjoyed full sovereignty, since their incorporation into the United States, aspects of their full sovereignty have been restricted or lost, including the authority to punish non-Indians. The Supreme Court has stated, however, that Congress has authority to relax restrictions on the tribes' inherent sovereignty. For example, in Duro v. Reina , the Supreme Court held that Indian tribes had lost the inherent authority to try nonmember Indians. The Court wrote that prosecution of a nonmember Indian was "inconsistent with the Tribe's dependent status and could only have come to the Tribe by delegation from Congress, subject to the constraints of the Constitution." Congress passed an amendment to the Indian Civil Rights Act to provide tribes with jurisdiction to try nonmember Indians. However, rather than delegating federal authority to the tribes, as the Supreme Court suggested, Congress "recognize[d] and affirm[ed] in each tribe the inherent tribal power (not delegated federal power) to prosecute nonmember Indians." In United States v. Lara , the Court considered whether a nonmember Indian defendant who was tried and convicted in tribal court could be tried for the same conduct in federal court or whether the double jeopardy clause prohibited the federal prosecution. Based on the language of the statute and its legislative history, which indicated congressional intent to affirm and acknowledge the tribes' inherent authority, the Court concluded the tribal court exercised its own non-federal authority in trying the defendant. Because the tribe and the federal government were exercising different authorities in prosecuting the defendant, the double jeopardy clause did not apply. The majority also wrote broadly that the Constitution authorized Congress to relax the restrictions on the tribes' inherent authority to allow tribes to try nonmember Indians. The VAWA Reauthorization would purport to exercise this congressional authority and expand the inherent sovereign authority of tribes to include the authority to try defendants involved in non-Indian on Indian domestic and dating violence. It is unclear whether the Supreme Court would find that Congress has this authority. In Oliphant v. Suquamish Indian Tribe , the Supreme Court implicitly recognized that prior to "submitting to the overriding sovereignty of the United States" Indian tribes possessed the power to try non-Indians. The power to try non-Indians, therefore, is an aspect of inherent sovereignty which the tribes lost, like the power to try nonmember Indians. In Lara , the majority opinion concluded that the Constitution authorized Congress to relax the restrictions on tribes' inherent authority to try nonmember Indians. It could be argued that because nonmember Indians and non-Indians are both outsiders to the tribe, there appears to be no reason to distinguish Congress's authority to relax restrictions on the tribes' inherent sovereignty to try nonmember Indians from its authority to relax restrictions on the tribes' authority to try non-Indians. In other words, if the tribe can exercise inherent authority over nonmember Indians, it appears it would be able to exercise inherent authority over non-Indians. However, it is not clear whether the Court would adopt that reasoning. In his concurrence in Lara , Justice Kennedy took issue with the majority's statement that the Constitution authorized Congress to relax the restrictions on the tribes' inherent authority and subject nonmembers to inherent tribal criminal authority. He questioned whether Congress has authority to subject citizens to a sovereign outside the structure of the Constitution. The Constitution is premised on consent of the governed, he wrote. The Constitution established a system of two sovereigns--the nation and the state--to which the citizen owes duties and against which the citizen has rights. Justice Kennedy wrote that by amending the Indian Civil Rights Act to extend inherent tribal criminal jurisdiction over nonmember Indians, "the National Government seeks to subject a citizen to the criminal jurisdiction of a third entity to be tried for conduct occurring wholly within the territorial borders of the Nation and one of the States. This is unprecedented. There is a historical exception for Indian tribes, but only to the limited extent that a member of a tribe consents to be subjected to the jurisdiction of his own tribe." Justice Kennedy, therefore, seems to believe that Congress may not have authority to subject nonmember citizens to the criminal jurisdiction of tribes, extra-constitutional sovereigns, to which they have not consented. Further, the Supreme Court considered the issue of tribal court civil jurisdiction over nonmembers in a case that, although it did not concern criminal jurisdiction, may be informative with regard to jurisdiction generally in tribal courts. In Plains Commerce Bank v. Long Family Land and Cattle Co. , decided four years after Lara , the majority held that the tribal court did not have civil jurisdiction over a non-Indian bank that had allegedly discriminated against a tribal member in connection with the sale of a parcel of non-Indian land on the reservation. The majority opinion, which cites Justice Kennedy's concurrence, notes that an exercise of tribal court jurisdiction must be based on the consent of the nonmember: Not only is regulation of fee land sale beyond the tribe's sovereign powers, it runs the risk of subjecting nonmembers to tribal regulatory authority without commensurate consent. Tribal sovereignty, it should be remembered, is "a sovereignty outside the basic structure of the Constitution." United States v. Lara , ... (Kennedy, J., concurring in judgment). The Bill of Rights does not apply to Indian tribes. Indian courts "differ from traditional courts in a number of significant respects." And nonmembers have no part in tribal government--they have no say in the laws and regulations that govern tribal territory. Consequently, those laws and regulations may be fairly imposed on nonmembers only if the nonmember has consented, either expressly or by his actions. Even then, the regulation must stem from the tribe's inherent sovereign authority to set conditions on entry, preserve tribal self-government, or control internal relations. Although the Supreme Court stated in Lara that Congress has authority to relax restrictions on the tribes' inherent authority so that they may try nonmember Indians, it is not clear whether today's Court would reach the same result. Of the five Justices signing on to that statement, only Justice Breyer and Ginsburg are on the Court today. Justice Kennedy expressed doubt about whether Congress had that authority. Justice Thomas questioned whether tribes had inherent sovereignty at all and stated that he believed tribes did not have inherent authority to try their own members, but that under existing precedent, he believed Congress had the authority to change the contours of the tribes' inherent sovereignty. Justice Scalia, in signing on to Justice Souter's dissent, apparently believed Congress did not have authority to expand the inherent sovereignty of Indian tribes to try nonmember Indians. Indian law is full of contradictions and confusion, making it difficult to predict how the Court will decide. As Justice Thomas wrote in his concurrence in Lara , "Federal Indian policy is, to say the least, schizophrenic. And this confusion continues to infuse federal Indian law and our cases." Therefore, it is not clear whether the Court considering a tribal court conviction under the VAWA Reauthorization would find that Congress has the authority to expand the inherent sovereignty of tribes to try non-Indian defendants. If Congress does not have authority to subject citizens to inherent tribal criminal authority, it is possible that the courts would uphold tribal authority to try defendants involved in non-Indian on Indian domestic and dating violence as a delegation of federal authority. This is what Justice Souter would have done in Lara . He, with Justice Scalia, dissented because they believed that prior precedent referring to the need for Congress to delegate authority to the tribes to try nonmember Indians was binding and that, by virtue of their dependent status, tribes simply cannot exercise inherent authority to try nonmembers. To fulfill Congress's intention to fill the jurisdictional void created by Duro , they would have found that Congress delegated federal authority to the tribes to try nonmember Indians. The dichotomy between delegated and inherent power of tribes has important constitutional implications. If Congress is deemed to have delegated to the tribes Congress's own power to prosecute crimes, the whole panoply of protections accorded criminal defendants in the Bill of Rights will apply. If, on the other hand, Congress is permitted to recognize the tribes' inherent sovereignty, so that the tribes are exercising their own powers, the Constitution will not apply. Instead, criminal defendants must rely on statutory protections under the Indian Civil Rights Act or those protected under tribal law. Although the protections found in federal statutory and constitutional sources are similar, there are several important distinctions between them. Most importantly, if inherent sovereignty is recognized and only federal statutory protections are triggered, defendants (1) may be subjected to double jeopardy for the same act; (2) may not be able to exercise fully their right to counsel; (3) may have no right to prosecution by a grand jury indictment; (4) may not have access to a representative jury of their peers; and (5) may have limited federal appellate review of their cases. Additionally, although the Indian Civil Rights Act (ICRA) covers many of the same protections found in the U.S. Constitution, the same protections are not always given the same meaning. For instance, the terms "due process" and "equal protection" are construed with regard to the "historical, governmental and cultural values of an Indian tribe." As such, these rights may function much differently than they do in federal courts. The Double Jeopardy Clause of the Fifth Amendment provides: "[N]or shall any person be subject for the same offence to be twice put in jeopardy of life or limb[.]" In general, the Double Jeopardy clause protects an individual from being subjected twice to the perils of trial for the same offense. The purpose of the Double Jeopardy Clause was best framed by Justice Black in Green v. United States : The underlying idea, one that is deeply ingrained in at least the Anglo-American system of jurisprudence is that the State with all its resources and power should not be allowed to make repeated attempts to convict an individual for an offense, thereby subjecting him to embarrassment, expense, and ordeal and compelling him to live in a continuing state of anxiety and insecurity, as well as enhancing the possibility that even though innocent he may be found guilty. There are three broad classes of cases to which the clause applies: (1) a second prosecution for the same offense after an acquittal; (2) a second prosecution for the same offense after a conviction; and (3) multiple punishments for the same offense. To determine if two prosecutions are for the "same offense" (and thus barred by the clause), a court will ask whether the elements of the two crimes are the same. However, even in instances in which two acts constitute the "same offense" under this elements test, separate prosecutions are not prohibited when different sovereigns exert criminal jurisdiction. Under this dual sovereignty doctrine, the Supreme Court has ruled that "an act denounced as a crime by both national and state sovereignties is an offense against the peace and dignity of both and may be punished by each." As such, a defendant may be subjected to two prosecutions for the same offense by two different sovereign governments. This doctrine was extended to the tribal context in United States v. Wheeler . There, the Court had to determine if the Double Jeopardy Clause barred the prosecution of an Indian in federal court when he had previously been convicted in tribal court for a lesser included offense arising out of the same incident. This question hinged on whether the tribe's authority to prosecute its own members was inherent or delegated. If it were exercising inherent authority, the tribe would be deemed a sovereign, the dual sovereignty rule would apply, and the Double Jeopardy Clause would not bar a second prosecution for the same offense. However, if the tribe were exercising delegated authority from the federal government, its power would not be sovereign, but merely derivative of Congress's power. Under this approach, the dual sovereignty rule would not apply, and a second prosecution would be barred. The Court ultimately recognized that Indian tribes may have been divested of some powers of sovereignty, but have retained certain aspects of sovereignty, including criminal jurisdiction over their own members. Because of this dependent status, the Court explained, the tribes' sovereignty "exists only at the sufferance of Congress." Because Congress had been silent as to tribal jurisdiction over their own members, the Court concluded that they retained this power. Additionally, the Court relied on the fact that there was no express grant of criminal jurisdiction to the tribes to try their own members, further supporting the theory that the tribes were exercising pre-existing sovereign powers rather than powers delegated from Congress. By deeming this inherent power, the tribe's prosecution of the defendant did not violate the Double Jeopardy Clause. There are various double jeopardy implications for accepting either the inherent sovereignty or delegation theories. If tribal jurisdiction is extended to non-Indians under inherent sovereignty, any non-Indian may be subject to multiple prosecutions in tribal and federal courts, as the dual sovereignty doctrine will preclude application of the Double Jeopardy Clause. Conversely, as observed in Wheeler , under the delegation theory, a prosecution by a tribe for a minor offense may bar prosecution by the federal government for a more serious federal crime. If a tribal prosecution were to conclude before a federal case, under the delegation theory, this would preclude an imposition of sentence in the federal prosecution, usually for a more serious punishment under federal law. Further complicating the issue, under the Indian Civil Rights Act, tribes may only sentence a defendant for a maximum prison term of three years for any one offense or nine years total. If that prosecution concludes first, that will be the maximum penalty to which the defendant may be sentenced (as long as both prosecutions would be for the "same offense"). The Sixth Amendment requires that "[i]n all criminal prosecutions, the accused shall enjoy the right ... to have the Assistance of Counsel for his defense." The primary purpose of the right to counsel is to ensure the defendant is accorded a fair trial. The Sixth Amendment right to counsel is not limitless, but attaches when criminal proceedings have been initiated against the defendant "by way of formal charge, preliminary hearing, indictment, information, or arraignment." The right to counsel under the Sixth Amendment, however, does not cover police interrogations. To protect this fundamental right, the Supreme Court has required that both federal and state governments provide counsel when the defendant cannot afford one. The Court observed that this "noble ideal cannot be realized if the poor man charged with crime has to face his accusers without a lawyer to assist him." However, counsel need not be provided at no cost in every case. The court must determine if the case will result in actual imprisonment. If so, the defendant is entitled to counsel. If the criminal offense permits imprisonment, but the judge determines that such an imposition will not occur in that case, the defendant is not provided free counsel. In tribal prosecutions, the Indian Civil Rights Act requires that Indian tribes may not "deny to any person in a criminal proceeding the right ... at his own expense to have the assistance of counsel for his defense." Because the United States Constitution does not apply to Indian tribes, the tribal courts are not required under the Sixth Amendment to provide indigent defendants counsel in all cases where the defendant faces actual imprisonment. The Tribal Law and Order Act of 2010, however, requires Indian tribes to provide free counsel to defendants for crimes with a sentence of more than one year. Additionally, the VAWA Reauthorization would require tribes to provide counsel to defendants if any term of imprisonment may be imposed. There is, however, some question whether tribes have the resources to provide all defendants counsel when required to do so. If tribes are unable to provide counsel in some instances, evidence obtained in these cases might be inadmissible in a later federal prosecution. In United States v. Ant , for example, the defendant pleaded guilty to manslaughter in tribal court and was sentenced to six months' imprisonment. A federal indictment was then brought against him for the same crime. The prosecution sought to admit into evidence his guilty plea from the tribal prosecution. The U.S. Court of Appeals for the Ninth Circuit ruled that the plea was inadmissible, as it was obtained in violation of the defendant's Sixth Amendment right to counsel. In particular, Ant was not afforded the opportunity to have appointed counsel; did not make a knowing and intelligent waiver of that right; and was not made aware that his guilty plea could be used in a later prosecution. Although the Court left untouched the tribal prosecution, it would not permit evidence obtained in violation of the Constitution into evidence. In addition to the Sixth Amendment right to counsel, a distinct and separate right to counsel has been implied from the Fifth Amendment right against self-incrimination. Likewise, the Indian Civil Rights Act contains a nearly identical provision prohibiting the tribes from compelling any person "to be a witness against himself." In construing the Fifth Amendment right against self-incrimination, the Supreme Court held in Miranda v. Arizona that before questioning a suspect in custody, police are required to warn him that he has the right to have an attorney present and will have one appointed for him if he cannot afford one. As the Court noted in Miranda : If an individual indicates that he wishes the assistance of counsel before any interrogation occurs, the authorities cannot rationally ignore or deny his request on the basis that the individual does not have or cannot afford a retained attorney. The financial ability of the individual has no relationship to the scope of the rights involved here. The privilege against self-incrimination secured by the Constitution applies to all individuals. Once the accused invokes his right to counsel under Miranda , interrogation should stop until an attorney is present. As the Court observed in Miranda , the police are not required to keep a station house lawyer on hand at all times to advise suspects. However, if the tribes are unable to provide suspects with counsel, Miranda requires that the police not question the suspects unless they waive their right to counsel. Accordingly, if a suspect invokes his right to counsel, but the tribe does not provide one, any uncounseled statements would be inadmissible in a tribal or federal prosecution. As one observer has noted, over the years, Congress and the executive branch have made efforts to increase tribal prosecutions. With this increase may come a greater need for public defenders who can practice in tribal courts. If Congress expands tribal jurisdiction over non-Indians, it may want to consider additionally expanding resources for tribes in order to provide such counsel. The Fifth Amendment provides: "No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment of indictment of a Grand Jury." A grand jury is an investigatory body of citizens who are brought together to decide whether there is enough evidence to bring formal charges against an individual. Historically, grand juries were seen as a buffer between the accuser and the accused, preventing the arbitrary exercise of government power. As apparent from the constitutional text, not all criminal cases must be initiated by a grand jury, but only those for "infamous crimes." Rule 7 of the Federal Rules of Criminal Procedure requires that any crime that is punishable by death or imprisonment for more than one year (felony) must be prosecuted by a grand jury indictment. Unlike in federal court, in tribal prosecutions there is neither a constitutional nor federal statutory right to a grand jury indictment. In the seminal case Talton v. Hayes , the Supreme Court held that the right to prosecution by grand jury indictment contained in the Fifth Amendment did not apply against the tribes. The Court reasoned that because the Cherokee nation was constituted before the founding of America, protections in the United States Constitution could not logically apply to the tribes. Likewise, the Indian Civil Rights Act does not contain a statutory requirement for a grand jury indictment for felonies. With neither constitutional nor statutory protections, the accused in tribal court must submit to the criminal practices of that particular tribe. However, in the context of jurisdiction over non-Indians, if Congress is deemed to have delegated its power to the tribes, the grand jury requirement along with the other safeguards of the Constitution will apply in tribal prosecutions. The right to a jury trial has a long historical pedigree in Anglo-American tradition, dating back to the Magna Carta and before. This right was imported from England by the American colonists, and found its place in the Sixth Amendment, which provides: "In all criminal prosecutions, the accused shall enjoy the right to a ... public trial, by an impartial jury of the State and district wherein the crime shall have been committed." Like the right to a grand jury, the right to a jury trial relied on a body of one's peers to protect them against unrestrained and arbitrary government power. Not long after passage of the Fourteenth Amendment, the accused began attacking the racial composition of juries as a violation of the Equal Protection Clause. In Strauder v. West Virginia , the Supreme Court held that West Virginia's statute that required that a jury consist of only white men was a violation of the black defendant's right to equal protection of the law. Since then, there have been innumerable equal protection challenges concerning the racial make-up of juries. Along these lines, in 1942, the Court observed that "the proper functioning of the jury system, and, indeed, our democracy itself, requires that the jury be a 'body truly representative of the community.'" This has come to be known as the "fair cross-section" requirement. Generally, the prosecution and defense may remove an individual from the jury using a peremptory challenge without having to explain the reason for doing so. But the Court in Batson v. Kentucky held that peremptory challenges based solely on account of race are prohibited by the equal protection clause. Under the Indian Civil Rights Act, "[n]o Indian tribe in exercising powers of self-government shall ... deny to any person accused of an offense punishable by imprisonment the right, upon request, to a trial by jury of not less than six persons." This requirement meets the constitutional minimum of a six-member jury, but it does not require an impartial one. This could pose equal protection problems. For example, as one observer notes, some tribal courts are not required to allow nonmembers to sit on juries. To provide vastly different forms of constitutional protections to similarly situated people simply based on race is the problem the equal protection clause was designed to prevent. The Court's hesitation to submit non-Indians to an Indian jury was evident in Oliphant . In commenting on the inverse situation--Indians being tried by a non-Indian jury--the Court noted that Indians were being tried "not by their peers, nor by the customs of their people, nor the law of their land, but by ... a different race, according to the law of a social state of which they have an imperfect conception." Although these possible equal protection problems have been raised, the Supreme Court has yet to squarely address this issue in the tribal context. S. 47 and H.R. 11 include specific protections to address this issue. The bill requires the tribe to provide defendants "the right to a trial by an impartial jury that is drawn from sources that--(A) reflect a fair cross section of the community; and (B) do not systematically exclude any distinctive group in the community, including non-Indians." If tribal criminal jurisdiction is extended to cover non-Indians under the VAWA Reauthorization, some tribes may have to reconstitute their jury systems to provide more representative juries for non-Indian defendants. There are significant differences in appellate review of criminal prosecutions between tribal and federal courts. Although in 1894 the Supreme Court held in McKane v. Durston that the due process clause does not create a constitutional right to appeal in a criminal case, there are numerous statutory avenues for appellate review in federal prosecutions. For example, under 18 U.S.C. Section 3742, a defendant may appeal a decision of a federal trial court if the sentence was imposed in violation of the law or an incorrect application of the sentencing guidelines. Criminal decisions in tribal courts, on the other hand, are not subject to direct federal appellate review. In Santa Clara Pueblo v. Martinez , the Supreme Court was asked to determine what forms of review may be granted from a tribal court ruling. The Court observed that, after balancing the competing interests of "preventing injustices perpetrated by tribal governments" with "avoiding undue or precipitous interference in the affairs of the Indian people," Congress chose habeas review as the sole form of relief. Generally speaking, the writ of habeas corpus requires any government authority who is holding (habeas) a person (corpus) in custody to produce that person to the court in order to determine the legality of his detention. In addition to the traditional custody requirement, ICRA requires that defendants may only seek federal habeas review when they have exhausted all tribal remedies. There are several potential defects with applying the habeas approach to cases over non-Indians. First, a writ of habeas corpus, as pointed out by Justice White's dissent in Santa Clara Pueblo , can only be invoked when the defendant is in custody. This will preclude any appeal to federal court that entails a fine or where the prison term has already been served. Second, protections under ICRA will primarily be construed and enforced in tribal forums. Important civil rights such as equal protection and due process will be construed by tribal courts, which may not be bound by the U.S. Constitution. With habeas as the only avenue of review, federal oversight accorded criminal defendants might be limited. In light of this, Congress may want to reconsider using habeas as the sole form of review if tribal criminal jurisdiction is extended over non-Indians under the VAWA Reauthorization. Authorizing the same federal appellate review as is received in federal courts could close this gap. Supporters of the VAWA Reauthorization assert there is a significant problem of domestic and dating violence against American Indian women. Currently, although tribes may prosecute Indian perpetrators, they may not prosecute non-Indian perpetrators. In addition, most states do not have jurisdiction to prosecute non-Indians who commit domestic and dating violence against Indians. Usually, the federal government has exclusive jurisdiction to try such non-Indian perpetrators. However, because federal prosecutors usually are located a long distance from reservations and have heavy workloads, investigation and prosecution of non-Indian on Indian domestic and dating violence are said to be inadequate. The VAWA Reauthorization would provide tribal courts with criminal jurisdiction to prosecute non-Indians charged with domestic or dating violence against an Indian that occurs within their jurisdictions. With the VAWA Reauthorization's tribal jurisdiction provisions, there are two fundamental legal questions that must be asked: (1) If Congress grants Indian tribes criminal jurisdiction over non-Indians, would this be a recognition of inherent sovereignty or a delegation of federal prosecutorial power?; and (2) Depending on which form of authority is employed, what procedural safeguards will be accorded criminal defendants? Through a series of cases and federal statutes, Indian tribes exercise their inherent sovereignty over member Indians and nonmember Indians. It is not clear from the Supreme Court case law whether this theory would be extended to prosecutions of non-Indians. If it is extended under an inherent sovereignty theory, it appears that tribes will not be bound by the Constitution but only by protections in the Indian Civil Rights Act, Tribal Law and Order Act, and the individual tribal laws. If, on the other hand, the tribes are exercising delegated federal authority, it appears the full catalog of protections in the Bill of Rights would apply against the tribes.

Domestic and dating violence in Indian country are reportedly at epidemic proportions. However, there is a practical jurisdictional issue when the violence involves a non-Indian perpetrator and an Indian victim. Indian tribes only have criminal jurisdiction over crimes involving Indian perpetrators and victims within their jurisdictions. Most states only have jurisdiction over crimes involving a non-Indian perpetrator and a non-Indian victim within Indian country located in the state. Although the federal government has jurisdiction over crime committed by non-Indians against Indians in Indian country, offenses such as domestic and dating violence tend to be prosecuted with less frequency than other crimes. This creates a practical jurisdictional problem. S. 47 and H.R. 11, the Violence Against Women Reauthorization Act, would recognize and affirm participating tribes' inherent sovereign authority to exercise special domestic violence jurisdiction over domestic violence involving non-Indian perpetrators and Indian victims occurring within the tribe's jurisdiction. It is not clear whether Congress has the authority to restore the tribes' inherent sovereignty over nonmembers, or whether such authority would have to be a delegation of federal authority. The tribal jurisdiction provisions of S. 47 and H.R. 11 are nearly identical to the tribal jurisdiction provisions of S. 1925, which passed the Senate in the 112th Congress. In a series of cases, the Supreme Court outlined the contours of tribal criminal jurisdiction. In United States v. Wheeler, the Court held that tribes have inherent sovereign authority to try their own members. In Oliphant v. Suquamish Indian Tribe, the Court held the tribes had lost inherent sovereignty to try non-Indians. The Court in Duro v. Reina determined that the tribes had also lost the inherent authority to try nonmember Indians. In response to Duro, Congress passed an amendment to the Indian Civil Rights Act that recognized the inherent tribal power (not federal delegated power) to try nonmember Indians. S. 47 and H.R. 11 would apparently supersede the Oliphant ruling and "recognize and affirm the inherent power" of the tribes to try non-Indians for domestic violence offenses. The Supreme Court stated in United States v. Lara that Congress has authority to relax the restrictions on a tribe's inherent sovereignty to allow it to exercise inherent authority to try nonmember Indians. However, given changes on the Court, and, as Justice Thomas stated, the "schizophrenic" nature of Indian policy and the confused state of Indian law, it is not clear that today's Supreme Court would hold that Congress has authority to expand the tribes' inherent sovereignty. It may be that Congress can only delegate federal power to the tribes to try non-Indians. The dichotomy between delegated and inherent power of tribes has important constitutional implications. If Congress is deemed to delegate its own power to the tribes to prosecute crimes, all the protections accorded criminal defendants in the Bill of Rights will apply. If, on the other hand, Congress is permitted to recognize the tribes' inherent sovereignty, criminal defendants would have to rely on statutory protections under the Indian Civil Rights Act or tribal law. Although the protections found in these statutory and constitutional sources are similar, there are several important distinctions between them.

Check cashers are nonbank businesses that cash checks for a fee. Check cashing businesses may offer additional fee-based products and services including money orders, processing utility bill payments, pre-paid phone cards, and funds transfers. These enterprises often operate in neighborhoods not well served by banks. Check cashers provide access to financial services for individuals without accounts at conventional banks. To provide these services, a check cashing enterprise establishes a business relationship with a bank to clear checks, transfer funds, and open lines of credit for liquidity purposes. The Bank Secrecy Act regulations define check cashers as money services businesses (MSBs). Both banks and nonbank MSBs must have written anti-money laundering programs, file currency transaction reports (CRTs) and supicious activity reports (SARs), and maintain certain records. MSBs, including check cashers, must register with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury. Banks providing services to check cashers are expected to have systems to manage the risks associated with these accounts. The following developments created difficulties to obtaining and maintaining access to banking services. The Office of the Comptroller of Currency (OCC) a federal bank regulatory agency included check cashers and other MSBs in a list of inherently high-risk businesses in its Bank Secrecy Act/ Anti-Money Laundering Manual. The OCC has also stated that the risk profiles of individual businesses can vary widely based on the variety and range of financial services offered. FinCEN strengthened BSA enforcement after the enactment of the USA PATRIOT Act and with the increased focus on terrorism financing after 9/11. Banker's compliance costs were affected by the risks associated with a check cashing business. Substantial fines were levied by bank regulators on banking institutions for BSA non-compliance. The potential price of doing business proved to be prohibitive for a number of banks, resulting in discontinuance of services to check cashers. In April 2005, bank regulators issued interagency guidance in response to concerns over the loss of access to banking services by check cashers and other MSBs. Concern is twofold: (1) widespread termination of account relationships could result in the loss of access to financial services and products by the significant market segment currently served by check cashers and (2) if these businesses are consequently forced "underground" the potential loss of transparency could damage ongoing efforts to safeguard the U.S. financial system. The guidance addressed both the ability of check cashers and other MSBs to obtain services and the caution to be maintained by banks dealing with these businesses. The goal was to clarify the regulatory expectations for banking institutions providing services to domestic businesses. It is generally acknowledged that the trend of individual banks terminating account relationships with check cashers has continued. On June 21, 2006, the Subcommittee on Financial Institutions and Consumer Credit of the House Financial Services Committee held an oversight hearing to assess the impact of the BSA obligations on check cashers and other MSBs. The nonbank check cashing industry can trace its origins back to the 1930's when employers began paying workers by check as opposed to cash. Workers without traditional bank accounts used check cashers, where an account relationship is not required, to convert those paychecks into cash for a fee. Today's check cashing enterprise may offer additional fee-based products and services including money orders, processing utility bill payments, pre-paid phone cards and funds transfers. Money transfers may include foreign worker remittances (money sent back to the workers' home countries). Some also offer credit products such as payday loans, where customers are given cash for a postdated personal check for the amount of cash requested plus the check casher's fee. Check cashing services can be offered as an ancillary component of a business, such as a liquor stores that cashes payroll checks. Items cashed are primarily payroll checks, government checks, personal checks, cashier's checks, money orders, and traveler's checks. The typical value of a cashed item ranges from $300 to $600. Most fees range from 1% to 12% of the check's value. The main financial risk for the check casher is a returned check unpaid by the bank on which it was drawn. Fees vary by type of check. For example, the fee for a personal check is usually greater than for a government check. Many states require a license for check cashing enterprises and/or regulate their fee structures. Some states have additional restrictions for pay day lending. The check cashing industry has experienced a period of significant growth since the early 1990's. One estimate for 1990 indicated that the check cashing industry comprised approximately 4,250 businesses that cashed 128 million checks with a total face value of $38 billion. In 2002, an estimated 11,000 check cashing enterprises cashed approximately 180 million checks with a total face value of $55 billion. Customers are drawn to check cashers for a variety of reasons. Check cashers typically offer convenient hours of service that extend beyond the normal hours of operation found at mainstream banking institutions. The barriers involved with opening an account at a bank such as minimum account balances, specific identification requirements, and credit checks are not encountered. In addition, the check holder is not subject to the variety of fees and services charges typically associated with a bank account. A customer's funds are immediately available while banks may impose check clearing holds. Customers of check cashing businesses tend to be low and moderate income consumers. The so called "unbanked" consumers rely on alternative financial services offered by nonbanks. There are a significant number of unbanked families in the United States; they do not hold a checking or savings account at a federally insured financial institution. Studies vary, but it is generally estimated that about 10 million U.S. households do not own a bank account. The costs associated with maintaining accounts, dislike of banking institutions, and the convenience offered by alternative nonbank service providers are among the more frequently given reasons for their popularity. Conversely, it is estimated that 58% of the check cashing industry's clientele are bank account holders. In 1970, the Bank Secrecy Act was enacted to create a federal anti-money laundering program. In 2001, Title 111 of the USA PATRIOT ACT amended the BSA with provisions to strengthen the existing program and to counter terrorist financing. The Financial Crimes Enforcement Network, a bureau of the U.S. Treasury Department, administers and issues regulations pursuant to the BSA. Check cashing enterprises that meet the definition of a money service business are required to register with FinCEN. Banks providing services to check cashers are expected to have in place systems to manage the risks associated with these accounts. BSA reporting and record keeping requirements apply to both banks and MSBs. Both must establish anti-money laundering programs commensurate with the risks posed by their size, location and financial activities. Both are required to file currency transaction reports (CTRs) for cash transactions over $10,000 and to maintain a log on the sale of financial products such as money orders or travelers checks valued from $3,000 to $10,000. Information must also be maintained on funds transfer of $3,000 or more. Finally, MSBs are required to file suspicious activity reports (SARs). FinCEN has delegated the authority to examine check cashers for BSA compliance to the Internal Revenue Service (IRS). The intent of the interagency guidelines was to clarify the supervisory expectations of banks to remain in compliance with the requirements of the BSA while providing services to check cashers and other MSBs. The guidance was issued to assist banks in developing appropriate BSA risk assessments. Another goal was to help ensure check cashers and other MSBs have reasonable access to banking services. Concurrent with the 2005 guidance, an advisory was issued addressing the BSA obligations of check cashers and outlining the documentation an MSB may be expected to provide when establishing an account relationship at a bank. The advisory was issued as part of an ongoing campaign to inform MSBs about their BSA requirements. FinCEN has recognized that outreach to the MSB industry is essential; they found that many of the businesses, especially the smaller operations, are unfamiliar or unaware of their obligations. The 2005 interagency guidance directed banks opening and maintaining accounts for MSBs to apply the requirements of the BSA on a risk-assessed basis. Five minimum due diligence expectations are presented: (1) apply the bank's Customer Identification Program, (2) confirm FinCEN registration, (3) confirm compliance with state or local licensing requirements, (4) confirm agent status (many MSBs operate through a system of agents), and (5) conduct a basic Bank Secrecy Act/Anti-Money Laundering risk assessment to determine the level of risk associated with the potential account and whether further due diligence is necessary. The guidance outlines further due diligence criteria, beyond the minimum expectations, that may be called for by the risk profile of the individual money service business. Check cashers require specific banking services to operate. These financial services include depository accounts, check collection and clearing operations, funds transfer, and access to lines of credit for liquidity purposes. Banks generate fee income for financial services provided. An individual banking institution's experience with check cashers is often dependent on the proximity between the two. Some banks specialize in servicing check cashers. Consequently, the decision of an individual bank to discontinue services to check cashers could have a significant impact. For example, according to the Financial Services Center of America (FISCA), in New York 12 banks currently provide services to check cashers but 87% of the 640 licensed check cashers do business with only two of these banks. BSA compliance requirements and supervisory expectations are viewed as burdensome and have caused banks to re-evaluate the costs and benefits of opening and maintaining accounts for check cashers. Banking representatives testifying at the June 2006 oversight hearing stated that the level of BSA risk assessment and monitoring required of them by the regulatory agencies remains burdensome and costly despite the 2005 guidance. Of particular concern is determining the delineation between low and high risk profiles and the corresponding due diligence expectations. In addition, bankers suggested that regulators should not expect a bank's monitoring activity to extend beyond the check cashing business to the activity of the check casher's customers. They argue FinCEN should further clarify that banks are not expected to be de facto regulators of check cashers by instituting a system that more clearly defines the responsibility for oversight of the BSA obligations of check cashers and other MSBs. In March 2006, a FinCEN news release acknowledged the ongoing concerns of both the banking industry and money service businesses relating to BSA regulations despite the previous steps taken (including the April 2005 guidance) to address the issues. The difficulties involve how to minimize the resources and costs borne by financial institutions while ensuring the effective administration of the anti-terrorism financing and anti-money laundering programs. The news release announced an Advanced Notice of Proposed Rulemaking seeking input on what additional guidance or regulatory action would be appropriate to address the ongoing concerns about check casher's and other MSB's access to banking services. The news release emphasized the important role of MSBs and the negative effect on the health and safety of the U.S. financial system if these businesses are driven underground. Comments received by FinCEN are under review and potential next steps are being considered. On June 21, 2006, the Subcommittee on Financial Institutions and Consumer Credit of the House Committee on Financial Services held an oversight hearing on the Bank Secrecy Act's impact on money services businesses. There was general agreement that banks were re-evaluating their businesses strategies in light of BSA due diligence costs. There were reports of individual institutions concluding that opening and maintaining accounts for MSBs did not make economic sense. Regulatory and supervisory adjustments were discussed as a means of easing the burden on banks. Stronger state MSB regulatory oversight was encouraged. Joint industry/government training on BSA obligations for banks, bank examiners, and MSBs was suggested. In addition, FiSCA (the trade association, representing 6,000 check cashing operations and nonbank financial service centers), suggested the need for legislation that would remove state regulated check cashers from "high risk" categories. In its view, legislation could also limit administrative enforcement actions against banks that service check cashers in good faith.

A check cashing enterprise is a fee-based business that will cash a customer's check without requiring an account relationship. The U.S. check cashing industry underwent a significant expansion in the 1990s. Customers are attracted by the immediate access to funds, availability of service without a bank account, and convenience of extended hours of operation. In general, the industry is viewed as a provider of valuable financial services to an under served market segment. Check cashers are dependent on access to bank services to operate. Banks provide depository accounts, check collection and clearing operations, funds transfer, and access to lines of credit for liquidity purposes. Banks and check cashers are both subject to Bank Secrecy Act (BSA) regulations. The BSA is an anti-money laundering and anti-terrorism financing statute. Federal regulators have cautioned banks that nonbank money service businesses (an umbrella term that includes check cashing enterprises) can present heightened money laundering risks. Consequently, some banks have discontinued their business relations with check cashers. The discontinuance of services to check cashers brought about complaints to regulators and increased lobbying of Congress. Bank regulators have issued guidance to clarify BSA compliance expectations. Congress held hearings on the concerns of banks and check cashers. This report will be updated as events and legislation warrant.

Medicaid, authorized under Title XIX of the Social Security Act, is a federal-state program providing medical assistance for low-income individuals who are aged, blind, disabled, members of families with dependent children, or who have one of a few specified medical conditions. The Balanced Budget Act of 1997 established SCHIP under a new Title XXI of the Social Security Act. SCHIP builds on Medicaid by providing health insurance to uninsured children in families with income above applicable Medicaid income standards. Section 1115 of the Social Security Act provides the Secretary of Health and Human Services (HHS) with broad authority to conduct research and demonstration projects under several programs authorized by the Social Security Act including Medicaid and SCHIP. Section 1115 also authorizes the Secretary to waive certain statutory requirements for conducting these projects without congressional approval. For this reason, the research and demonstration projects are often referred to as Section 1115 "waiver" projects. Under Section 1115, the Secretary may waive Medicaid requirements contained in Section 1902 (including but not limited to what is known as, freedom of choice of provider, comparability of services, and state-wide access). The Secretary may also use the Section 1115 waiver authority to provide Federal financial participation (FFP) for costs that are not otherwise matchable under Section 1903 of the Social Security Act. For SCHIP, no specific sections or requirements are cited as "waiveable." Section 2107(e)(2)(A) of the Social Security Act states that Section 1115 of the act, pertaining to research and demonstration waivers, applies to SCHIP. States must submit proposals outlining terms and conditions for proposed waivers to CMS for approval before implementing these programs. In recent years, there has been increased interest among states and the federal government in the Section 1115 waiver authority as a means to restructure coverage, control costs, and increase state flexibility. Under current law, states may obtain waivers that allow them to provide services to individuals not traditionally eligible for Medicaid (or SCHIP), cover non-Medicaid (or SCHIP) services, limit benefit packages for certain groups, among other purposes. Whether large or small reforms, Section 1115 waiver programs have resulted in significant changes for Medicaid and SCHIP recipients nationwide, and may serve as a precedent for federal and state officials who wish to make statutory changes to these healthcare safety net programs. While Section 1115 is explicit about provisions in Medicaid law that may be waived in conducting demonstration projects, a number of other provisions in Medicaid law and regulations specify limitations on how a state may operate a waiver program. For example, one provision restricts states from establishing waivers that fail to provide all mandatory services to the mandatory poverty-related groups of pregnant women and children; another provision specifies restrictions on cost-sharing under waivers. Other features of the Section 1115 waiver authority include: Federal Reimbursement for Section 1115 Demonstrations . Approved Section 1115 waivers are deemed to be part of a state's Medicaid (or SCHIP) state plan for purposes of federal reimbursement. Project costs associated with waiver programs are subject to that state's FMAP (or enhanced-FMAP) . Financing and Budget Neutrality . Unlike regular Medicaid, CMS waiver guidance specifies that waiver costs are budget neutral to the federal government over the life of the waiver program. To meet the budget neutrality test, estimated spending under the waiver cannot exceed the estimated cost of the state's existing Medicaid program under current law program requirements. For example, costs associated with an expanded population (e.g., those not otherwise eligible under Medicaid), must be offset by reductions elsewhere within the Medicaid program. Several methods are used by states to generate cost savings for the waiver component: (1) limiting benefit packages for certain eligibility groups; (2) providing targeted services to certain individuals so as to divert them from full Medicaid coverage; and (3) using enrollment caps and cost-sharing to reduce the amounts states must pay. Financing and Allotment Neutrality . Under the SCHIP program, a different budget neutrality standard applies. States must meet an "allotment neutrality test" where combined federal expenditures for the state's regular SCHIP program and for the state's SCHIP demonstration program are capped at the state's individual SCHIP allotment (i.e., original allotments and funds made available through the redistribution of unspent SCHIP funds). This policy limits federal spending to the capped allotment levels. Application and Approval Process. There is no standardized process to apply for a Section 1115 demonstration, but CMS has issued program guidance that impacts the approval process. States often work collaboratively with CMS to develop their proposals. Project proposals are subject to approval by CMS, the Office of Management and Budget (OMB), and the Department of Health and Human Services (DHHS), and may be subject to additional requirements such as site visits before the program may be implemented under the agreed upon terms and conditions. Duration. Waiver projects are generally approved for a five-year period, however, states may seek up to a three-year extension for their existing waiver program under the same special terms and conditions (STC), and an additional extension(s) under revised STC for the continuation of a waiver project operating under an initial three-year extension. Relationship of Medicaid/SCHIP Demonstration Waivers to Other Statutes . Section 1115 waiver projects may interact with other program rules outside of the Social Security Act; for example, employer-sponsored health insurance as described by the Employee Retirement Income Security Act (ERISA), or alien eligibility as contained in immigration law. In cases like these, the Secretary does not have the authority to waive provisions in these other statutes. Program Guidance. The Secretary can develop policies that influence the content of demonstration projects and prescribe approval criteria in three ways: (1) by promulgating program rules and regulations; (2) through the publication of program guidance (e.g., waivers must be budget neutral); and (3) waiver policy may also be implicitly shaped by the programs that have been approved (e.g., CMS approval of benefit specific waivers). Legislative action may be required if Congress chooses to further shape the Secretary's authority over the content of the demonstration programs, dictate specific Section 1115 waiver approval criteria, or otherwise limit the Secretary's waiver authority. As of July 1 2008, there were 94 operational Medicaid and SCHIP Section 1115 waivers in 43 states and the District of Columbia. In FY2006 (the most recent data available), Section 1115 waiver federal expenditures (for Medicaid and SCHIP) totaled approximately $42.4 billion. Section 1115 waiver programs represented approximately 24% of all federal Medicaid spending in the 50 states and the District of Columbia for FY2006 (19% for SCHIP), and provided coverage to approximately 11.5 million enrollees. Of the 11.5 million total Medicaid and SCHIP waiver enrollees, 2.5 million were only eligible for a targeted benefit package such as family planning benefits. There are several types of operational waiver programs including: Comprehensive demonstrations. These demonstrations provide a broad range of services that are generally offered statewide. Many of the comprehensive waivers operate under combined title XIX and title XXI authority and are financed with federal Medicaid and SCHIP matching funds. Several also include a family planning and/or Health Insurance Flexibility and Accountability (HIFA) component (see below). In FY2008, there were 32 operational comprehensive state reform waivers in 26 states. FY2006 state-reported enrollment estimates for these waivers totaled approximately 8.1 million, at a federal cost of approximately $38.4 billion. The SCHIP-financed portion of these waivers extended coverage to approximately 475,376 enrollees at a federal cost of $330 million. FY2006 enrollee estimates for the limited benefits offered under a FP component totaled approximately 104,990. Family planning demonstrations (FP) . In FY2008, there were 22 states with stand-alone FP waivers to provide a limited benefit package including family planning services and supplies for certain individuals of childbearing age. FY2006 enrollment estimates for stand-alone FP waivers totaled 2.4 million at a federal cost of approximately $1.4 billion. Just over 1,000 of FY2006 enrollees were SCHIP-eligible with care financed out of the SCHIP allotments. SCHIP and HIFA Waivers . Of the 20 states with SCHIP waivers in FY2008, 14 have SCHIP waivers that were granted under the HIFA initiative. HIFA demonstrations are designed to encourage states to extend Medicaid and SCHIP to the uninsured, with an emphasis on approaches that maximize private health insurance coverage and target populations with incomes below 200% of the federal poverty level (FPL). Under HIFA, states were encouraged to finance program expansions using unspent SCHIP funds to, for example, extend coverage to one or more categories of adults with children (typically parents of Medicaid/SCHIP children, caretaker relatives, or legal guardians), and/or pregnant women. Four states (i.e., Arizona, Michigan, New Mexico, and Oregon) have approval to cover childless adults under their HIFA waivers. The Deficit Reduction Act of 2005 prohibits new waivers that would use SCHIP funds to provide coverage to nonpregnant, childless adults. Recently the Administration has not renewed existing waivers that permitted coverage of adults through SCHIP. In addition to expanding coverage to new populations under SCHIP, some states use the SCHIP Section 1115 authority for other purposes including modifying cost-sharing rules (e.g., New Mexico), and requiring periods of no insurance prior to SCHIP enrollment (e.g., Alaska and New Mexico). As of FY2006, approximately 925,196 enrollees accessed services under SCHIP and HIFA demonstrations at a federal cost of $675 million. Specialty services and population demonstrations . These demonstrations generally include programs that provide cash to enrollees so that they may directly arrange and purchase services that best meet their needs. In addition, they include waivers to provide pharmacy benefits to persons with specific conditions, such as HIV/AIDS. As of FY2008, there were 20 such operational programs in 15 states and the District of Columbia. In FY2006, these demonstrations covered approximately 37,473 individuals at a federal cost of approximately $441 million. Federal costs for Pharmacy-only demonstrations totaled $1.5 billion in FY2006. Katrina/Multi - state Demonstrations. In response to the Hurricane Katrina disaster, CMS allowed states to provide temporary eligibility for specified Katrina evacuees so that such individuals could obtain state plan services in a host state (i.e., a state that has been granted an emergency Section 1115 waiver). Between September 2005 and March 2006 CMS approved 32 Katrina waivers that extended coverage to an estimated 118,602 individuals at a federal cost of $1.63 billion.

Section 1115 of the Social Security Act provides the Secretary of Health and Human Services (HHS) with broad authority to waive certain statutory requirements for states to conduct research and demonstration projects that further the goals of Titles XIX (Medicaid) and/or XXI (the State Children's Health Insurance Program; SCHIP). States use the Section 1115 waiver authority to cover non-Medicaid and SCHIP services, limit benefit packages, cap program enrollment, among other purposes. As of July 1 2008, there were 94 operational Medicaid and SCHIP Section 1115 waiver programs in 43 states and the District of Columbia. In FY2006 (the most recent data available), Section 1115 waiver federal expenditures (for Medicaid and SCHIP) totaled approximately $42.4 billion. Section 1115 waiver programs represented approximately 24% of all federal Medicaid spending in the 50 states and the District of Columbia for FY2006 (19% for SCHIP), and provided coverage to approximately 11.5 million enrollees--2.5 million of whom were eligible only for a targeted benefit package such as family planning or pharmacy benefits. FY2006 waiver expenditure and enrollment estimates from the Centers for Medicare and Medicaid Services (CMS) based on state-reported data, and are subject to change. Between FY2001 (the earliest year for which CRS has access to Section 1115 expenditure estimates) and FY2005, federal Medicaid waiver expenditures as a percentage of total Medicaid spending were steady at approximately12-14%. In FY2006, there was a substantial increase in federal waiver spending as a percentage of total Medicaid spending (i.e., almost 60% increase over the FY2005 totals). While there are several plausible explanations for this increase (e.g., ramp up of new and renegotiated waivers, prior period adjustments, etc.) because waiver financing arrangements are negotiated over a 5-year budget window it is hard to determine if the jump in federal expenditures represents a step increase in overall federal waiver spending, or a one-time increase that will be mitigated over the budget authority window. Analysis of future waiver expenditure trends will help to clarify this question. Estimates do not include state experience under the 5 month temporary Katrina waivers (described below).This report provides background information on the waiver authority, and will be updated when new data are available.

To qualify for Medicaid, potential beneficiaries generally must be a member of a covered group and meet certain financial criteria. Although all poor (i.e., below 100% of the federal poverty level, FPL) American children and pregnant woman are eligible for Medicaid or the State Children's Health Insurance Program (CHIP), other populations' upper-income eligibility threshold for Medicaid is often well below poverty. In some cases, individuals are ineligible for Medicaid regardless of their income. Some health reform proposals include provisions to expand traditional Medicaid--to 100% of poverty, for example--regardless of whether one is a member of a covered group, such as children, pregnant women, the aged, and the disabled. This report briefly describes two key aspects of current Medicaid eligibility--(1) categorical eligibility (i.e., membership in a covered group) and (2) income eligibility. The report then discusses some policy and legislative considerations in expanding mandatory Medicaid eligibility to 100% of poverty (regardless of category) through federal legislation. There are approximately 50 different eligibility "pathways" into Medicaid. The primary eligibility criteria include (1) categorical eligibility (if an individual is a child, pregnant, disabled, etc.) and (2) income-related eligibility. Income eligibility varies by category. Although federal Medicaid statute sometimes specifies that a category's income eligibility may go up to a certain income threshold, some states use statutory flexibility to go higher by using income counting rules that permit, for some eligibility pathways, disregarding various amounts and types of income. Many states also allow certain persons with long-term care needs to qualify for institutional and home and community-based services under Medicaid with income up to, and sometimes above, 222% of FPL; and others with high medical expenses to qualify via federal and state "spend down" rules. Finally, states may use flexibility in Section 1115 of the Social Security Act to waive eligibility and other requirements in the Medicaid statute--for example, to expand eligibility to categories of people not otherwise coverable under Medicaid. Table 1 illustrates income eligibility levels for some of the major categories of Medicaid enrollees. It excludes eligibility levels for persons who qualify for Medicaid because they need long-term care or become eligible via spend down. As shown in Table 1 , American children (under age 19) and pregnant women are already eligible for Medicaid if their family is in poverty. Thus, certain individuals in the following groups who currently are not eligible for Medicaid up to 100% of poverty in all 50 states and the District of Columbia could be affected by an expansion, depending on its structure: (1) parents, (2) childless adults, (3) the aged (age 65+) and disabled, and (4) certain non-citizens. Under current law (Section 1931 of the Social Security Act), parents are eligible for Medicaid if they would have been eligible for the former federal cash welfare program Aid to Families with Dependent Children (AFDC) as of July 1, 1996. The upper-income threshold for AFDC eligibility in 1996 ranged across states from 11% to 68% of poverty. However, Section 1931 gives states the flexibility to disregard income to effectively expand coverage as high up the income scale as they wish through the regular Medicaid State Plan Amendment (SPA) process, which 16 states, as of January 2009, used to cover parents up to 100% of poverty or higher. States have even greater flexibility if they obtain federal Section 1115 waivers, which are used by an additional seven states to cover parents up to 100% of poverty or higher. Through existing Section 1931 authority and Section 1115 waivers, a total of 23 states currently use federal funds to cover parents up to 100% of poverty or higher. There is no existing categorical pathway into Medicaid for these individuals based solely on income. However, states can obtain federal Section 1115 waivers to cover such adults. Currently, 14 states use such waivers to cover childless adults up to 100% of poverty (or higher) with a comprehensive benefit package. States are generally required to cover in their Medicaid programs the aged and disabled who receive SSI. The upper income eligibility thresholds for SSI in all of the lower 48 states ranges from 75% of poverty (for an individual who has no income from wages) to 174% of poverty (for a couple whose income is all from wages). Persons receiving SSI may also receive state supplemental payments (SSP), raising income levels of these beneficiaries. Some states also allow individuals who meet SSI's resource, or asset, test (i.e., $2,000 for individuals and $3,000 for couples) and disability criteria but who have higher income levels as a result of work to qualify for Medicaid. Although some of the aged and disabled may be "income eligible" for SSI, not all of these individuals are enrolled in SSI or Medicaid because they do not meet SSI's resources and/or disability criteria. As of 2003, 16 states and the District of Columbia have expanded up to 100% of poverty for the aged and disabled using an optional eligibility pathway authorized under the Omnibus Reconciliation Act of 1986 (OBRA 86). There are essentially three subpopulations of aged and disabled who could be newly eligible under an expansion of Medicaid based solely on income up to 100% of poverty: (a) those with income levels between the SSI and, for some, SSI plus SSP, and the upper income threshold of 100% of poverty; (b) those who meet SSI's resources test but not its income test and do not already qualify under Medicaid's special rules applying to disabled beneficiaries who work; and (c) those SSI beneficiaries who are not Medicaid eligible because the state uses more restrictive income criteria (would apply only to a subset of section 209(b) states). For purposes of determining eligibility for Medicaid, CHIP and other federal programs, non-citizens are categorized in several different groups, discussed in detail in other CRS reports. Three of these groups are (1) unauthorized aliens, sometimes referred to as "illegal immigrants"; (2) legal permanent residents (LPRs) who have been in the country for less than five years; and (3) LPRs who have been in the country for five years or more. Federal law prohibits unauthorized aliens from being enrolled in full-benefit Medicaid, regardless of income. LPRs who have been in the country for less than five years are generally ineligible for Medicaid, although there is a new option for states to cover such children and pregnant women under CHIP. For years, states have had the option to extend Medicaid eligibility to LPRs who have been in the country for five years or more. In spite of these limitations, Medicaid can pay for treatment for emergency medical conditions if these individuals would otherwise qualify for Medicaid if not for their legal or residency status. In addition, several states have solely state-funded programs that offer coverage to some of these individuals. The addition of a mandatory eligibility group to 100% of poverty in federal Medicaid statute would not automatically alter the treatment of these non-citizens. To alter the treatment of these non-citizens, additional amendments to federal statute would be required. A new mandatory group up to 100% of poverty could require states to amend their state Medicaid plans to cover parents, childless adults, and others through the regular SPA process -- without requiring waivers or, for parents, the use of "block of income" disregards. Currently, the commonwealths and territories receive capped annual funding for Medicaid, which they exhaust. Unlike states, they are permitted to define poverty at relatively low levels in order to control enrollment and thus their spending. For the poor, is the proposal simply intended to ensure that no one is uninsured, or is it also intended to ensure a certain comprehensiveness and generosity of coverage? The latter part of this question is particularly relevant for those aged and disabled in poverty who are not eligible for Medicaid but are enrolled in Medicare. Expanding full-benefit Medicaid to these Medicare enrollees (a) would not reduce the number of uninsured, (b) would entail additional costs to both federal and state governments, but (c) could expand the services offered to Medicare beneficiaries to include such benefits as home or personal care, care management, transportation, vision and dental care, among others. These issues are similar for the following group as well. Will the new group be open to parents and childless adults who already have health insurance -- from their employer, for example? If so, the additional Medicaid coverage could be beneficial if individuals needed health care not covered by their existing plan; however, coverage for such an individual would not reduce the number of uninsured and would entail additional costs to both federal and state governments. An additional concern is "crowd-out"--that individuals who would otherwise be covered by private health insurance would obtain public coverage instead. This was also a concern when CHIP was enacted in 1997 and was partly addressed by requiring that children be uninsured. CHIP also permits states to impose a waiting period (that is, minimum periods of uninsurance before being eligible for CHIP). Section 1115 waivers are also used by states to apply waiting periods, cost-sharing and other methods in Medicaid and CHIP for the purpose of reducing or preventing crowd-out. However, under traditional Medicaid (e.g., excluding states operating under an 1115 waiver), such waiting periods are not permitted, because individuals are entitled to Medicaid. Under current law, for Medicaid-covered populations, states receive federal funds at the Federal Medical Assistance Percentage (FMAP), which averages 57% but ranges across states from 50% to 76%; states are required to come up with the remaining share of program costs. If this new poverty-related group were simply added as a mandatory group with no other changes, this would likely entail automatically increased federal and state spending, based on the number of new enrollees and the states' FMAP, further straining federal and state budgets. In response, states may consider other ways to reduce spending if necessary. For example, they could cut provider payment rates, reduce enrollment by making the application and renewal processes for individuals more burdensome, or cut back on benefits offered for some or all groups. To lower states' apparent financial burden attributable to the new group, there are a number of questions to answer: Will the federal government cover (1) all of the costs of the new group (100% FMAP), (2) some amount above the regular FMAP but less than 100%, or (3) just the regular FMAP? If the federal government will pay a larger percentage than the regular FMAP, will it be (1) temporary or (2) permanent? If the federal government will pay a larger percentage than the regular FMAP, will it be (1) for those below poverty who are newly eligible (i.e., not eligible under former rules), (2) for those below poverty who were eligible under former rules but are newly enrolled, and/or (3) for those below poverty who were already enrolled? If the federal government will pay a larger percentage than the regular FMAP, will the federal funding be (1) capped, perhaps as a separate program like CHIP, or (2) open-ended? Is the new eligibility group (1) wholly in place as of a certain date or (2) phased in over time? Will states face a maintenance of effort (MOE) requirement (1) for the dollars (e.g., must not spend less than what they spent on Medicaid before a particular date) and/or (2) for the people (e.g., if people would have been eligible under an already existing eligibility group, they might still be treated as enrolled through that pathway, especially if benefits to individuals or states differ as a result). There are some additional considerations in adding a new mandatory eligibility group that may overlap with current eligibility groups, particularly along the following key dimensions. Approximately 50 eligibility pathways into Medicaid currently exist in federal law. States have their own methodologies for counting income for many of these pathways. To promote equity and consistency across states, Congress could require a single federal standard for counting income for the new group. However, would it correspond with the income methodologies of any existing group(s)? If not, it would likely entail greater administrative burdens on states (and perhaps also on applicants) who would be subject to new rules, although it would provide greater uniformity across states in terms of eligibility criteria for the new group. Similarly, although the legislative language may state that eligibility extends up to 100% of poverty, would states be permitted to effectively raise the group's income eligibility to as high a level as they wish through income counting rules? Medicaid statute permits states (and requires some) to allow individuals in certain categorical groups to "spend down" income on health care to the point they are considered eligible for Medicaid. That is, health care expenses are deducted from income, and the resulting net income is used to determine financial eligibility for Medicaid. Would "spend down" be permitted for the new eligibility group, thus effectively raising the income threshold above 100% of FPL for those with certain health care expenses? States also use resource/asset tests, which they have the flexibility to alter or waive for some pathways (e.g., families under Section 1931). What would be the resource test associated with the new group, if any? Currently the only federal means-tested benefit provided regardless of category is nutrition assistance through the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps. The purpose of SNAP is to ensure that a nutritional safety net exists for all poor Americans. Extending Medicaid to 100% of poverty regardless of category would ostensibly ensure a health insurance safety net for all poor Americans. However, having Medicaid (or any other type of health insurance) does not necessarily guarantee access to health care. State Medicaid programs sometimes struggle to maintain adequate access to primary care and dental care, for example, for their beneficiaries. Thus, the adequacy of provider payments and provider supply in state Medicaid programs are additional issues to consider. Arguments could also be made for circumstances in which potential beneficiaries should have additional or fewer eligibility requirements. For example, should eligibility for certain adults be tied to work requirements, as is the case in the federal cash welfare assistance program, Temporary Assistance for Needy Families (TANF)? On the other hand, should financial eligibility requirements be more flexible so that individuals who apply to renew their Medicaid coverage are not deemed ineligible because of a small wage increase, for example? In current Medicaid statute, states define the "amount, duration and scope" of covered benefits for both mandatory and optional services. These benefits vary by eligibility group. Would this new group of enrollees be able to access all benefits available under the Medicaid program, or would access be limited to a more restrictive benefit package? What, if any, additional flexibility would states have in defining these benefits for the new group? Generally "nominal" cost-sharing is the maximum that can apply in Medicaid for those below 100% of poverty. The Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) provided states with flexibility in cost-sharing not previously permitted without a waiver. However, a later law ( P.L. 109-432 ) clarified that the additional flexibility is not available to those "with family income not exceeding 100 percent of the poverty line." What, if any, additional flexibility would states have in defining cost-sharing for the new group? Although federal Medicaid financing is generally open-ended for defined eligibility categories and benefits, current administrative policy is that federal financing under Section 1115 waivers is capped so that they are budget neutral over the life of the waiver, with savings permitted by potentially reducing benefits, capping enrollment, etc. The new mandatory group might have a number of potential impacts on new and existing waivers. For example, would the new group's impact on budget neutrality be specified in legislation or left to regulation? For states already covering the group through a waiver, would their current flexibility (a) terminate, (b) last until the waiver's expiration but without ability to renew the waiver, or (c) last in perpetuity? The Medicaid statute (Title XIX of the Social Security Act) includes some eligibility groups that are no longer relevant. For example, one mandatory pathway in Medicaid statute is "qualified children, a group "no longer needed for any purpose" because of other, more expansive eligibility pathways for children. Expanding to 100% of poverty irrespective of category could make additional groups obsolete as well. Thus, adding this mandatory population in Title XIX (1) could be as simple as adding a new eligibility group under Section 1902(a)(10)(A)(i)(VIII), plus conforming amendments; or (2) could be used as an opportunity to also "clean up" the statute of some obsolete groups by requiring that this new group supersede eligibility groups and rules that are currently used to allow persons with lower income levels to qualify. Although adding a new group to the statute, as described in the former option, would add more complexity to an already somewhat convoluted Medicaid statute, it might also provide states with an opportunity to streamline some of their income counting methodologies. Rather than apply burdensome income counting methodologies to applicants who would otherwise qualify through lower income eligibility pathways, the former method would enable states to simply enroll higher income applicants through the 100% of FPL group and avoid having to calculate income disregards. This could somewhat lighten states' administrative burden. The latter option would standardize eligibility rules across the nation and could improve equity and consistency among the states. However, it could be problematic if the new group has a specified income-counting methodology that is inconsistent with what states currently do. For example, Medicaid currently requires states to cover children age 6-18 up to 100% of poverty, and states are required to disregard certain amounts of income and some types of income entirely. The legislation for the new eligibility group could require an income-counting methodology different than states use. For example, a child who is currently covered as a "poverty-related child" at 95% of poverty (FPL) may be at 105% of poverty under a new methodology with fewer or less generous disregards. Thus, although it might seem to simplify the situation for the state to not determine the child's eligibility under the prior income-counting rules, it could lead to some individuals losing eligibility if those existing eligibility categories were dropped. However, the legislation could require states to ensure that no current enrollee lost coverage and/or that no applicant was deemed ineligible because of the change, which raises the next point. The latter could also be problematic if the legislation called for the state to make assessments based on its income-counting methods prior to the new group's addition. This is also likely to be the case if the legislation calls for additional federal funds (1) for those below poverty who are newly eligible (i.e., not eligible under prior rules), and/or (2) for those below poverty who were eligible before but are newly enrolled. Regardless, the state would have to maintain its ability to determine whether these individuals would have been eligible before the addition of the new group. As a result, removing these categories from the statute would provide no meaningful benefit to states in terms of administrative ease, since they would have to process eligibility determinations for those groups as if the prior rules were still in existence. According to analyses by the Agency for Healthcare Research and Quality (AHRQ), there were 39.6 million adults without health insurance in 2005, of whom approximately 16% (6.1 million) were eligible for Medicaid, CHIP, or a solely state-financed program. As shown in Figure 1, if Medicaid eligibility had been expanded to cover nonaged adults up to 100% of poverty, then another 8.3 million uninsured adults would have been eligible in 2005; approximately 25.1 million uninsured adults (63%) would still have been ineligible. Medicaid coverage is not provided for individuals in certain subgroups under 100% of poverty: Parents (23 states currently at 100%+ FPL through Section 1931 or an 1115 waiver; all states cover some parents, with lowest eligibility level at 11% FPL) Childless adults (14 states currently at 100%+ FPL with an 1115 waiver; without a waiver, no Medicaid pathway exists for these individuals) Aged and disabled (many are enrolled in Medicare, except for the disabled in the two-year waiting period--16 states currently at 100% FPL; all states cover some aged and disabled, based on SSI receipt, which has a minimum upper-income eligibility threshold of 75% FPL) Certain non-citizens Additionally, should uninsurance be a requirement for this pathway, in order to exclude individuals already enrolled in health insurance (e.g., aged and disabled in Medicare, individuals with employer-sponsored health insurance)? What about those eligible for employer-sponsored health insurance? Will the federal government cover (1) all of the costs of the new group (100% FMAP), (2) some amount above the regular FMAP but less than 100%, or (3) just the regular FMAP? If the federal government will pay a larger percentage than the regular FMAP, will it be (1) temporary or (2) permanent? If the federal government will pay a larger percentage than the regular FMAP, will it be (1) for those below poverty who are newly eligible (i.e., not eligible under prior rules), (2) for those below poverty who were eligible before but are newly enrolled, and/or (3) for those below poverty who were already enrolled? If the federal government will pay a larger percentage than the regular FMAP, will the federal funding be (1) capped or (2) open-ended? Is the new group (1) wholly in place as of a certain date or (2) phased in? Will the state face a maintenance of effort (MOE) requirement (1) for the dollars (e.g., must not spend less than what they spent on Medicaid before a particular date) and/or (2) for the people (e.g., if individuals would have been eligible under an already existing eligibility pathway, states could be required to enroll them through that pathway, especially if the benefits to individuals or the financial impact on states differ for the new eligibility group). Eligibility. (1) A federal standard for counting income for the new group or state-based standards? (2) If state-based standards, how much flexibility to use income disregards? (3) Allow states to deduct medical expenses from income for eligibility determinations (i.e., "spend down") or not? (4) Assets test or not? (5) If additional individuals are made eligible, are provider payments and provider supply adequate to ensure beneficiaries' access to needed care? Benefits. Provide standard Medicaid benefits already offered in each state or permit additional state flexibility? Cost-sharing. Generally only "nominal" amounts currently required or permit additional state flexibility? Section 1115 waivers. (1) Is the new group's impact on budget neutrality specified in legislation or left to regulation? (2) For states already covering the group through a waiver, would their current flexibility (a) terminate, (b) last until the waiver's expiration but without ability to renew the waiver, or (c) last in perpetuity?

All poor American children and pregnant woman are eligible for Medicaid or the State Children's Health Insurance Program (CHIP), although millions are not enrolled. However, some other populations' upper income eligibility threshold for Medicaid is often well below the federal poverty level. For working parents of dependent children, for example, the median Medicaid upper income eligibility threshold among the states is 68% of poverty--less than $10,000 a year for a single parent with a child. (For parents who are not working, the median Medicaid upper income eligibility threshold among the states is even lower, at 41% of poverty--less than $6,000 a year for a single parent with a child.) Adults under age 65 who are not disabled, not pregnant and not custodial parents of dependent children--often referred to as "childless adults"--are generally ineligible for Medicaid, regardless of their income. Some health reform proposals include provisions to expand traditional Medicaid--to 100% of poverty, for example--regardless of whether one is in a covered "category," such as children, pregnant women, the aged or disabled, as generally required for Medicaid coverage today. This report briefly describes current Medicaid eligibility and presents some policy and legislative considerations if Congress decided to expand mandatory Medicaid eligibility to 100% of poverty through federal legislation.

Enactment of the Unfunded Mandates Reform Act of 1995 (UMRA) culminated years of effort by nonfederal government officials and their advocates to control, if not eliminate, the federal imposition of unfunded mandates. Supporters contend that the statute is needed to forestall federal legislation and regulations that impose questionable or unnecessary burdens and have resulted in high costs and inefficiencies. Opponents argue that mandates may be necessary to achieve results in areas in which voluntary action may be insufficient or state actions have not achieved intended goals. Since the mid-1980s, Congress debated legislation to slow or prohibit the enactment of unfunded federal mandates. The inclusion of the issue in the Contract with America, the blueprint of legislative action developed by the House Republican leadership when it gained the majority, practically guaranteed that action would be taken. UMRA was signed into law early in the 104 th Congress, on March 22, 1995. Under UMRA, federal mandates include provisions of law or regulation that impose enforceable duties, including taxes. They also include provisions that reduce or eliminate federal financial assistance available for carrying out an existing duty. UMRA distinguishes between "intergovernmental mandates," imposed on state, local, or tribal governments, and "private sector mandates." Intergovernmental mandates include legislation or regulations that would (1) reduce certain federal services to state, local, and tribal governments (such as border control or reimbursement for services to illegal aliens); and (2) tighten conditions of assistance or reduce federal funding for existing intergovernmental assistance programs with entitlement authority of $500 million or more. Exclusions and exemptions outside the reach of the statute are discussed later in this report. Under UMRA, an intergovernmental mandate is considered unfunded unless the legislation authorizing the mandate meets its costs by either (1) providing new budget authority (direct spending authority or entitlement authority) or (2) authorizing appropriations. If appropriations are authorized, the mandate is considered unfunded unless the legislation ensures that in any fiscal year (1) the actual costs of the mandate will not exceed the appropriations actually provided; (2) the terms of the mandate will be revised so that it can be carried out with the funds appropriated; (3) the mandate will be abolished; or (4) Congress will enact new legislation to continue the mandate as an unfunded mandate. The act consists of five prefatory sections and four titles. The prefatory sections address matters such as the purpose, short title, and exclusions from coverage of the act. Title I amends the Congressional Budget and Impoundment Control Act, as amended, to permit Congress to (1) identify legislation proposing mandates, and (2) decline to consider legislation proposing unfunded intergovernmental mandates. Title I also sets forth thresholds for action, authorizations, and definitions. Title II requires that federal agencies assess the financial impact of proposed rules on nonfederal entities, determine whether federal resources exist to pay those costs, solicit and consider input from affected entities, and generally select the least costly or burdensome regulatory option. Title III called for a review of federal mandates to be completed within 18 months of enactment. This statutory requirement was not completed. UMRA assigned the study to the Advisory Commission on Intergovernmental Relations (ACIR), which no longer exists. The ACIR completed a preliminary report in January, 1996, but the final report was not released. Title IV authorizes judicial review of federal agency compliance with Title II provisions. The remainder of this report summarizes the requirements set forth in Titles I, II, and IV of the act. Referred to as "Legislative Accountability and Reform," Title I establishes requirements for committees and the Congressional Budget Office (CBO) to study and report on the magnitude and impact of mandates in proposed legislation. Title I also creates point-of-order procedures through which these requirements can be enforced and the consideration of measures containing unfunded intergovernmental mandates can be blocked. Under UMRA, congressional committees have the initial responsibility to identify federal mandates in measures under consideration. Committees may have CBO study whether proposed legislation could have a significant budgetary impact on nonfederal governments, or a financial or employment impact on the private sector. Also, committee chairs and ranking minority members may have CBO study any legislation containing a federal mandate. When an authorizing committee orders reported a public bill or joint resolution containing a federal mandate, it must provide the measure to CBO. CBO must report to the committee an estimate of mandate costs. The office must prepare full quantitative estimates if costs are estimated to exceed $59 million (for intergovernmental mandates) or $117 million (for private sector mandates) in any of the first five fiscal years the legislation would be in effect. Below these thresholds, CBO must prepare brief statements of cost estimates. For each reported measure with costs over the thresholds, CBO is to submit to the committee an estimate of the direct costs of federal mandates contained in it, or in any necessary implementing regulations; and the amount of new or existing federal funding the legislation authorizes to pay these costs. If reported legislation authorizes appropriations to meet the estimated costs of an intergovernmental mandate, the CBO report must include a statement on the new budget authority needed, for up to 10 years, to meet these costs. For a measure that reauthorizes or amends an existing statute, the direct costs of any mandate it contains are to be measured by the projected increase over those costs required by existing law. The calculation of increased costs must include any projected decrease in existing federal aid that provides assistance to nonfederal entities. The committee is to include the CBO estimate in its report or publish it in the Congressional Record . The committee's report on the measure must also identify the direct costs to the entities that must carry out the mandate; assess likely costs and benefits; describe how the mandate affects the "competitive balance" between the public and private sectors; and state the extent to which the legislation would preempt state, local, or tribal law, and explain the effect of any preemption. These requirements apply to all proposed mandates, both intergovernmental and private sector. For intergovernmental mandates alone, the committee is to describe in its report the extent to which the legislation authorizes federal funding for the direct costs, and details on whether and how funding is to be provided. UMRA establishes that when any measure is taken up for consideration in either house, a point of order may be raised that the measure contains unfunded intergovernmental mandates exceeding the $59 million threshold. This point of order applies to the measure as reported, including, for example, a committee amendment in the nature of a substitute. The point of order may also be raised if CBO reported that no reasonable estimate of the cost of intergovernmental mandates was feasible. A point of order also may be raised against consideration of a measure reported from committee if the committee has not published a CBO estimate of mandate costs. This point of order applies to both intergovernmental and private sector mandates. In the Senate, either point of order may be waived by majority vote. Otherwise, if the chair sustains the point of order, the measure may not be considered. In ruling on these points of order, the chair is to consult with the Committee on Governmental Affairs on whether the measure contains intergovernmental mandates. Also, the unfunded costs of the mandate are to be determined based on estimates by the Committee on the Budget (which may draw for this purpose on the CBO estimate). For the House, UMRA provides that if either point of order is raised, the chair does not rule on it. Instead, the House votes on whether to consider the measure despite the point of order. To prevent dilatory use of the point of order, the chair need not put the question of consideration to a vote unless the Member making the point of order meets the "threshold burden" of identifying specific language that is claimed to contain the unfunded mandate. Also, if several points of order could be raised against the same measure, House practices under UMRA afford means for all to be consolidated in a single vote on consideration. Finally, if the Committee on Rules proposes a special rule for considering the measure that waives the point of order, UMRA subjects the special rule itself to a point of order, which is disposed of by the same mechanism. These procedures are intended to insure that the House, like the Senate, will always have an opportunity to determine, by vote, whether to consider a measure that may contain an unfunded mandate. Also, if the House votes to consider a measure in spite of the point of order, UMRA protects the ability of Members to offer amendments in the Committee of the Whole to strike out unfunded intergovernmental mandates, unless the special rule specifically prohibits such amendments. A point of order under the UMRA mechanism may be raised not only against initial consideration of a bill or resolution, but also against consideration of an amendment, conference report, or motion (e.g., a motion to recommit with instructions or a motion to concur in an amendment of the other house with an amendment) that would cause the unfunded costs of intergovernmental mandates in a measure to exceed the specified threshold. UMRA does not require amendments or motions to be accompanied by CBO mandate cost estimates, but a Senator may request CBO to estimate the costs of mandates in an amendment he or she prepares. If an amended bill or resolution or a conference report contains a new mandate or other new increases in mandate costs, the conferees are to request a supplemental estimate, which CBO is to attempt to provide. UMRA requires no publication of these supplemental estimates. The UMRA points of order are not applicable against consideration of appropriations bills. However, if an appropriation bill contains legislative provisions that would create unfunded intergovernmental mandates in excess of the threshold, the UMRA point of order may be raised against the provisions themselves. In the Senate, if this point of order is sustained, the provisions are stricken from the bill. Legislation pertinent to the following subject matters remains exempt from the UMRA point-of-order procedures: individual constitutional rights, discrimination prohibitions, auditing compliance, emergency assistance requested by nonfederal government officials, national security or treaty obligations, emergencies as designated by the President and the Congress, and Social Security. The provisions of Title I pertinent to federal agencies (for example, the requirement that agencies determine whether sufficient appropriations exist to provide for proposed costs) do not apply to federal regulatory agencies. Also, provisions establishing conditions of federal assistance or duties stemming from participation in voluntary federal programs are not mandates. Title II requires that federal agencies prepare written statements that identify costs and benefits of a federal mandate to be imposed through the rulemaking process. The requirement applies to regulatory actions determined to result in costs of $117 million or more in any one year (2003 figure, as adjusted for inflation). The written assessments to be prepared by federal agencies must identify the law authorizing the rule, anticipated costs and benefits, the share of costs to be borne by the federal government, and the disproportionate costs on individual regions or components of the private sector. Assessments must also include estimates of the effect on the national economy, descriptions of consultations with nonfederal government officials, and a summary of the evaluation of comments and concerns obtained throughout the promulgation process. Impacts of "any regulatory requirements" on small governments must be identified; notice must be given to those governments; and technical assistance must be provided. Also, UMRA requires that federal agencies consider "a reasonable number" of policy options and select the most cost-effective or least burdensome alternative. The requirements in Title II pertaining to the preparation of a mandate assessment statement and notification of impact on small governments remain subject to judicial review. A federal court may compel a federal agency to comply with these requirements, but such a court order cannot be used to stay or invalidate the rule.

This summary of the Unfunded Mandates Reform Act (UMRA) of 1995 will assist Members of Congress and staff seeking succinct information on the statute. The term "unfunded mandates" generally refers to requirements that a unit of government imposes without providing funds to pay for costs of compliance. UMRA establishes mechanisms to limit federal imposition of unfunded mandates on other levels of government (intergovernmental mandates) and on the private sector. The act establishes points of order against proposed legislation containing an unfunded intergovernmental mandate, requires executive agencies to seek comment on regulations that would constitute a mandate, and establishes a means for judicial enforcement. This report will be updated if the act is amended.

O ne of the more controversial tax laws enacted in recent years is the Foreign Account Tax Compliance Act (FATCA). FATCA is intended to curb U.S. tax evasion occurring through the use of offshore accounts. While the law was enacted in 2010 with a 2013 effective date, the IRS delayed FATCA's implementation for several years in order to give entities time to comply. The law is now fully in effect. Key among FATCA's provisions is the requirement that foreign financial institutions (FFIs) report information on their U.S. account holders to the Internal Revenue Service (IRS). In order to implement this requirement, the United States has entered into bilateral agreements with numerous countries. Under some of these agreements, FFIs report the information to their home country, which then provides the information to the IRS. For those FFIs that are not covered by such an agreement, FATCA generally requires they report the information directly to the IRS. This report provides an overview of the FFI reporting requirements and examines the role of the intergovernmental agreements (IGAs) in implementing them. The report then discusses the confidentiality protections provided to the information reported by FFIs and litigation in which plaintiffs have raised concerns about privacy and the use of IGAs. It ends with a summary of FATCA legislation introduced in the 114 th Congress. For further discussion of FATCA, as well as the related requirements known as Foreign Bank Account Reporting (FBAR), see CRS Report R43444, Reporting Foreign Financial Assets Under Titles 26 and 31: FATCA and FBAR . FATCA generally requires that FFIs enter into agreements with the IRS under which the FFIs agree to report information about their U.S. account holders and comply with other requirements. The financial institutions subject to these requirements include foreign banks, investment funds, hedge funds, private equity funds, broker-dealers, and certain types of insurance companies. The requirements apply to the depository and custodial accounts maintained by the FFI, as well as equity and debt interests in the FFI (except publicly traded interests). FFIs that fail to comply will have tax withheld at a rate of 30% on many payments made to them from U.S. sources, including interest and dividends. The withholding provision's relatively high rate and broad reach is significant because, as one commentator has explained, "[f]rom a practical perspective and due to the importance of U.S. banks to the global financial community, most foreign banks must comply or they may be effectively prevented from conducting business in many circumstances." The reporting and withholding requirements are summarized in Table 1 . The United States has entered into bilateral intergovernmental agreements (IGAs) with numerous countries in order to implement the above FFI reporting requirements. In general, an FFI that is resident in, or organized under the laws of, a country that has entered into an IGA will be deemed to comply with FATCA's requirements so long as the terms of the agreement are met. This section examines the IGAs. Since FATCA's passage, there has been criticism of the FFI provisions and their application to entities outside the United States, generally focused on whether the United States was correct to take FATCA's unilateral approach. Questions have arisen about whether FATCA's requirements are inconsistent with existing U.S. treaty obligations; how to handle potential conflict of law issues arising when an FFI is faced with complying with FATCA or its home country's domestic (e.g., banking and privacy) laws; and whether the United States has intruded into other countries' sovereignty. These concerns, and the extent to which they may influence international views of FATCA, could be particularly important because it has been argued that FATCA's successful implementation will likely require the assistance of other countries. In order to address these concerns, the Treasury Department and IRS developed the IGAs to provide other countries with a role in implementing the FFI reporting requirements. The Treasury Department and IRS have developed two model IGAs, which are used as the basis for all the IGAs currently in effect. The main differences between the two models are summarized in Table 2 . A list of the countries with IGAs in effect and whether they use a Model 1 or Model 2 agreement is found in the Appendix . There are different versions of each model to account for whether the United States has an existing income tax treaty or tax information exchange agreement (TIEA) with the other country. In cases in which there is an existing tax treaty or TIEA, the model IGA generally uses the treaty or TIEA as the authority for the IGA's requirements and links its practices and procedures to those developed under the treaty or TIEA. If there is no existing treaty or TIEA, then the agreement creates its own practices and procedures based on FATCA's reporting requirements. Additionally, there are different versions of Model 1, depending on whether the agreement calls for the reciprocal exchange of information between the United States and the other country. Model 2 has no reciprocal exchange provision. As of August 1, 2016, there are 63 IGAs that are in force. Additionally, the Treasury Department and the IRS treat certain countries as having an IGA in effect even though the country has not taken all the necessary steps to actually bring the agreement into force. Such a country will be treated as having an IGA in effect if (1) it has signed an IGA and is taking steps to bring it into force within a reasonable time; or (2) it reached an agreement in substance with the United States on the terms of an IGA prior to November 30, 2014, and it continues to demonstrate intent to sign the IGA as soon as possible. Table 3 lists all the countries that the Treasury Department and IRS recognize as having an IGA in effect--either because the IGA is actually in force or because the country is treated as such under the above circumstances. (The Appendix provides more information about each of these countries, including the dates on which IGAs went into force, if applicable.) In July 2016, the IRS made a significant announcement regarding the treatment of those countries without an IGA actually in force: such countries will stop being treated as having an IGA in effect in 2017 unless they comply with certain requirements by December 31, 2016. Specifically, if any country in the final two columns of Table 3 wants to continue to be treated as having an IGA in effect, it must provide the Treasury Department with a detailed explanation of why it has not yet brought the IGA into force and a step-by-step plan for doing so. The Treasury Department will then decide whether it is appropriate to continue to treat the country as having an IGA in effect, considering the explanation and plan, as well as the country's prior conduct. If the agency determines that such treatment is not appropriate, then any affected FFI in that country will have at least 60 days to enter into the IRS agreement that is required in order to comply with FATCA (discussed above in Table 1 ) or be subject to withholding. In those cases in which the Treasury Department decides it is appropriate to continue to treat the country as having an IGA in effect, the agency will monitor the country's progress toward bringing the IGA into force and will reconsider the country's treatment if it fails to comply with the step-by-step plan. Some have expressed concerns about the privacy of the information that FFIs are required to collect and report under FATCA. This section discusses the confidentiality protections contained in FATCA and the IGAs. FATCA expressly provides confidentiality protections to the information obtained or used in connection with the FFI reporting requirements. Specifically, no person may inspect or use any information obtained under the FFI reporting provisions for any purpose other than complying with the FATCA requirements or for purposes permitted under IRC Section 6103 (which allows the disclosure of taxpayer information collected by the IRS in certain circumstances, such as sharing it with law enforcement). If a person knowingly or negligently violates these confidentiality protections, the individual or entity whose information was inspected or used may bring a suit for civil damages against such person in U.S. district court. The law provides for damages in an amount equal to the greater of (1) $1,000 per unlawful act or (2) the plaintiff's actual damages plus, if available, punitive damages. The defendant may also be liable for court costs and attorney's fees. Any such suit must be brought within two years of the plaintiff discovering the unlawful activity. With respect to the confidentiality provisions contained in the IGAs, there are two basic frameworks. If the United States and the country in question have an existing income tax treaty or tax information exchange agreement (TIEA) in place, then the IGA refers to the confidentiality protections in that treaty or TIEA and may further address such protections. For example, one model IGA provides: All information exchanged shall be subject to the confidentiality and other protections provided for in the [Treaty/TIEA], including the provisions limiting the use of the information exchanged. Following entry into force of this Agreement, each Competent Authority shall provide written notification to the other Competent Authority when it is satisfied that the jurisdiction of the other Competent Authority has in place (i) appropriate safeguards to ensure that the information received pursuant to this Agreement shall remain confidential and be used solely for tax purposes, and (ii) the infrastructure for an effective exchange relationship.... When there is no existing treaty or TIEA, the IGAs provide express confidentiality protections. For example, one of the model IGAs to be used when there is no treaty or TIEA provides that: The [FATCA Partner] Competent Authority shall treat any information received from the United States pursuant to Article 5 of this Agreement as confidential and shall only disclose such information as may be necessary to carry out its obligations under this Agreement. Such information may be disclosed in connection with court proceedings related to the performance of the obligations of [FATCA Partner] under this Agreement. Information provided to the U.S. Competent Authority pursuant to ... this Agreement shall be treated as confidential and may be disclosed only to persons or authorities (including courts and administrative bodies) of the Government of the United States concerned with the assessment, collection, or administration of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, U.S. federal taxes, or the oversight of such functions. Such persons or authorities shall use such information only for such purposes. Such persons may disclose the information in public court proceedings or in judicial decisions. The information may not be disclosed to any other person, entity, authority, or jurisdiction. Notwithstanding the foregoing, where [FATCA Partner] provides prior, written consent, the information may be used for purposes permitted under the provisions of a mutual legal assistance treaty in force between the Parties that allows for the exchange of tax information. U.S. law, meanwhile, expressly requires that tax treaty information be kept confidential unless such disclosure is permitted under the treaty's terms. Protected information includes information exchanged under the treaty, applications for relief under the treaty, and documents relating to the treaty's implementation. There are limited exceptions in which disclosure is permissible, such as providing information to law enforcement regarding terrorist activities. If information is impermissibly disclosed, the individual disclosing it is subject to a penalty of up to $5,000 and imprisonment for up to five years. Additionally, the person whose information was disclosed may sue for damages under the same authority discussed above. While some argue that the use of IGAs may have positive outcomes, including reduced compliance costs for foreign entities and avoidance of international conflict of law issues, others have taken issue with them. Concerns about IGAs are illustrated in two lawsuits--one in the United States and one in Canada. These are discussed below. The case in the United States is Crawford v. De partment of the Treasury . It was brought in 2015 by several U.S. citizens living abroad and Senator Rand Paul, who argue that IGAs are unconstitutional, among other claims. The plaintiffs characterize IGAs as sole executive agreements (in contrast to treaties submitted to the Senate for its advice and consent) that are only permissible if they "fall within the President's independent constitutional authority to make international agreements." As such, the plaintiffs argue that the President is without such authority here because IGAs deal with tax issues and thus fall within the taxing power reserved to Congress under the Constitution. The plaintiffs further argue that IGAs are unconstitutional because they override the statutory provisions passed by Congress in FATCA. Their argument is that FATCA and IGAs are incompatible because (1) FATCA requires FFIs to report directly to the IRS, while IGAs allow FFIs to report to their home government; and (2) FATCA requires FFIs to get a waiver of local privacy laws from account holders, which IGAs circumvent by having foreign governments collect the information. In April 2016, a U.S. district court in Ohio dismissed the case after determining that the plaintiffs lacked standing. Standing is required by Article III of the U.S. Constitution, which provides that federal courts may only decide actual cases or controversies. The Supreme Court has interpreted this provision to mean that, in order to bring suit in federal court, a plaintiff must establish that (1) he or she suffered an injury; (2) there is a causal connection between the injury and the defendant's action; and (3) it is likely the injury will be redressed by a favorable court decision. The court in Crawford ruled that none of the plaintiffs had met all three requirements. For example, the court determined that injuries based on privacy concerns were insufficient because the reporting requirements were not "an invasion of a legally protected interest," and that none of the plaintiffs had alleged a concrete, non-hypothetical injury because none had actually been subject to the 30% withholding or any other penalty. Plaintiffs have appealed the decision to the U.S. Court of Appeals for the Sixth Circuit, and that court has not yet issued a decision. If a court were to rule in the plaintiffs' favor on the merits of the IGA issue, such a ruling would likely affect the way in which FATCA is administered but might not change the law itself. FATCA's reporting and enforcement provisions are not legally dependent on the use of IGAs, and these provisions would appear to still have legal force even if IGAs were found to be unconstitutional. Thus, FFIs and other entities would still be subject to FATCA, but would no longer be able to report information to their home country under the IGA or take advantage of other provisions in the IGAs. Possible implications for Congress of a ruling that IGAs are outside the President's authority could include passing legislation to authorize these types of agreements; potentially reexamining FATCA, particularly in light of compliance issues that might arise without the use of IGAs; or taking no action and letting the law continue without IGAs. If Congress chose not to make any legislative changes, possible options for the Treasury Department and IRS, should they conclude that IGAs are a useful tool, might include implementing the agreements through the regular treaty process, which would require the Senate's approval. The litigation in Canada concerns the validity of that country's FATCA IGA. In the case, Hill is v. Attorney General of Canada , dual U.S.-Canadian citizens have raised two arguments against the Canadian legislation implementing the IGA: (1) the information exchange authorized by the IGA is inconsistent with the U.S.-Canada income tax treaty and Canadian tax law; and (2) it runs afoul of Canada's constitution. In September 2015, the Federal Court of Canada held that there was no legal impediment to implementation of the IGA under the income tax treaty or Canadian tax law, and allowed the first exchange of information under the IGA. The court permitted the plaintiffs to continue to assert their constitutional claim, but the status of such claim is unclear. If the court were to hold that the IGA is invalid under Canada's constitution, this would not appear to change FATCA's underlying requirements. That is, banks and other financial entities in Canada would still be subject to FATCA reporting requirements, which might then lead to potential conflict of law questions. One possible outcome of such a ruling might be for the United States and Canada to attempt to find a mechanism that would be consistent with both countries' laws (e.g., amending the existing income tax treaty, which would require U.S. Senate approval). Another possible consequence of such a ruling is that it might encourage U.S. expatriates living in other countries to challenge those countries' IGAs, particularly since many have similar bilateral income tax treaties with the United States. Several bills have been introduced in the 114 th Congress that would amend or otherwise address FATCA. First, S. 663 , whose stated purpose is "[t]o repeal the violation of sovereign nations' laws and privacy matters," would repeal many of FATCA's provisions, including the FFI reporting and withholding requirements. The Stop Tax Haven Abuse Act ( H.R. 297 and S. 174 ) includes a provision with the stated purpose of "strengthening" FATCA. Among other things, the bill provision would expand the reporting requirement for passive foreign investment companies; expand the definition of "financial account" to include transaction accounts; expressly include entities engaged in investing in derivatives and swaps in the definition of "financial institution"; and include beneficial owners within the definition of "substantial U.S. owner." The provision would also make it easier for information to be disclosed in certain circumstances. Finally, the Commission on Americans Living Abroad Act ( H.R. 3078 ) would establish a commission to study how federal laws and policies, including FATCA, affect U.S. citizens living in foreign countries. The countries that have IGAs in effect--either because the IGA is actually in force or because the country is treated as such--are listed in Table A-1 . As discussed above, Treasury and the IRS treat certain countries as having an IGA in effect even though the country has not taken all the steps necessary to actually bring the agreement into force under two circumstances: (1) it has signed an IGA and is taking steps to bring it into force within a reasonable time; or (2) it has reached an agreement in substance with the United States on the terms of an IGA prior to November 30, 2014, and it continues to demonstrate intent to sign the IGA as soon as possible. In addition to providing such status information for each country, Table A-1 also notes whether each country uses a Model 1 or Model 2 IGA and provides relevant dates.

Enacted in 2010, the Foreign Account Tax Compliance Act (FATCA) is intended to curb U.S. tax evasion occurring through the use of offshore accounts. Key among its provisions is the requirement that foreign financial institutions (FFIs), such as foreign banks and hedge funds, report information on their U.S. account holders to the Internal Revenue Service (IRS). FFIs that fail to comply will have tax withheld at a rate of 30% on many payments made to them from U.S. sources, including interest and dividends. Since FATCA's passage, there has been international criticism of the FFI provisions, generally focused on whether the United States was correct to take FATCA's unilateral approach. Questions have arisen about whether FATCA's requirements are inconsistent with existing U.S. treaty obligations; how to handle potential conflict of law issues arising when an FFI is faced with complying with FATCA or its home country's domestic (e.g., banking and privacy) laws; and whether the United States has intruded into other countries' sovereignty. Recognizing that these concerns could affect the success of FATCA, the United States has entered into bilateral intergovernmental agreements (IGAs) with numerous countries in order to implement the FFI requirements. Under some of these agreements, FFIs report information on their U.S. account holders to their home country, which then provides the information to the IRS. In general, for those FFIs that are not covered by such an agreement, FATCA requires that they report the information directly to the IRS. As of August 1, 2016, there are 63 IGAs that are currently in force. Additionally, the United States treats certain countries as having an IGA in effect even though the country has not taken all the steps necessary to actually bring the agreement into force. In July 2016, the IRS made a significant announcement regarding these countries: they will stop being treated as having an IGA in effect in 2017 unless they comply with certain requirements by December 31, 2016. Among other things, the country must explain why the IGA is not yet in force and provide a step-by-step timeline for doing so. The Treasury Department and the IRS will then decide whether it is appropriate to continue to treat the country as having an IGA in effect. Some praise the FFI reporting requirements as an effective tool to combat tax evasion and argue that using the IGAs leads to positive outcomes, including reduced compliance costs for FFIs and avoidance of international conflict of law issues. Others, meanwhile, have expressed concerns about the privacy of information reported by FFIs and the appropriateness of the IGAs. These concerns are illustrated in an ongoing lawsuit, Crawford v. Department of the Treasury, in which the plaintiffs argue that the executive branch does not have the power to enter into IGAs and that the FFI reporting requirements violate the Fourth Amendment's protections against unreasonable search and seizures by requiring FFIs to report information about U.S. account holders without any judicial oversight. In April 2016, a U.S. district court in Ohio dismissed the case after determining that the plaintiffs lacked standing. The plaintiffs have appealed the decision to the U.S. Court of Appeals for the Sixth Circuit, which has not yet issued a decision. Finally, legislation has been introduced in the 114th Congress that would repeal much of FATCA (S. 663); modify FATCA with the intent of "strengthening" it (Stop Tax Haven Abuse Act, H.R. 297 and S. 174); or require that its effects on U.S. citizens living overseas be studied (Commission on Americans Living Abroad Act, H.R. 3078).

Established in 1971 at the request of the SEC, the Nasdaq stock market is an all-electronic trading facility, which, unlike traditional exchanges like the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX), has no trading floors and facilitates the trading of over-the-counter (OTC) stocks through a network of market makers connected by telephone and computer. Nasdaq stock market was originally a wholly-owned for-profit subsidiary of the nonprofit NASD, which also served as its direct regulator or self-regulatory organization (SRO). In the mid-1990s, NASD's integrity as a self regulator was called into question when Nasdaq market makers were accused of manipulating stock prices. After a federal investigation, the NASD Regulation (NASDR) was established in 1996 as an independent subsidiary of the NASD. The main purpose was to separate the regulation of the broker/dealer profession from the operation of the Nasdaq. The NASDR became the primary regulator of broker-dealers and of the Nasdaq. All broker-dealers who are registered with the SEC, except those doing business exclusively on a securities exchange, are required to join the NASD. The NASDR's regulatory budget is derived solely from fees and fines imposed on NASD member firms. When it began, Nasdaq was regarded as a technological innovator because it did not rely on a physical trading floor. But over the last decade, both Nasdaq and traditional exchanges have faced growing competition from two principal sources: First, global stock markets that compete with U.S. markets for multinational corporate listings have grown dramatically. Second, continuous technological change has led to automated, computer-matching, trading platforms called electronic communication networks (ECNs). Indeed, Nasdaq has developed its own ECN, the SuperMontage and has acquired another one, Brut. To help themselves remain competitive, the world's major stock markets are reexamining their governance and capital structures with an eye toward changes that would enable them to react more deftly to the rapidly changing securities marketplace. Conversion from privately-held (mutual) status to shareholder-owned status known as demutualization, has become an increasingly attractive strategic response to the changing market dynamics. Many international and domestic stock exchanges have demutualized over the last decade or so, including the London, Tokyo, Philadelphia, and the New York Stock Exchange (in early 2006 after merging with Archipelago, the electronic communication trading network). Key reasons for demutulization have included that (1) it enables exchanges to more immediately raise capital and provide better regular access to capital markets; (2) it makes exchanges better able to align their interests with those of their key participants; and (3) it provides exchanges with greater flexibility and speed in adapting to changing market conditions. In the summer of 1999, the Nasdaq announced its intent to demutualize. This change raised a number of policy concerns that largely involved demutualized stock markets' ability to effectively discharge their SRO duties. Among the key questions raised by the prospect of demutulization were (1) Is there a cause for concern when a for-profit, shareholder-owned SRO regulates entities like broker-dealers who in turn have ownership stakes in competitive rivals such as electronic communication networks? and (2) Would the altered economics of being a for-profit, shareholder-owned exchange affect an exchange's ability to effectively regulate itself? After announcing its interest in pursuing demutualization, the NYSE cited other pressing concerns and put the process on hold. In April 2000, however, the NASD membership approved spinning off the for-profit Nasdaq from the non-profit NASD and converting it into a shareholder-owned market. The process was initially envisioned to have three broad stages: (1) issuing privately placed stock; (2) converting to technical exchange status; and (3) issuing public stock. The private placement took place in two sub-stages. In the initial sub-stage, the private placement, which was completed in June 2000, the NASD sold shares and issued warrants on shares of Nasdaq that it owned, and Nasdaq also issued and sold additional shares. The NASD's ownership interest in Nasdaq was reduced from 100% to 60%. The second sub-phase of the private placement was completed on January 18, 2001, with NASD's ownership interest then falling to 40% or about 77 million Nasdaq shares. The NASD, however retained 51% of the actual voting interest in Nasdaq. On February 21, 2002, Nasdaq acquired 13.5 million shares held by the NASD. On March 8, 2001, Nasdaq acquired 20.3 million shares from the NASD, leaving 43.2 million shares still owned by the NASD in the form of underlying warrants that had been issued during Nasdaq's private placements. Concurrently, a new series of preferred voting stock was issued to the NASD, allowing it to continue to have majority voting interest in Nasdaq. The second stage, conversion to exchange status, was a requirement for the third stage--sale of Nasdaq shares to the public. Although from a practical standpoint it has little significance, Nasdaq currently is exempt from the definition of an "exchange" under Rule 3a1-1 of the Securities and Exchange Act of 1934 because it is operated by the NASD. Before the NASD could relinquish control of it, Nasdaq was required to register as a national securities exchange. With approval of Nasdaq's exchange application, the preferred shares that provide the NASD with its majority vote interest over Nasdaq will expire and it will no longer have effective control over Nasdaq. The exchange's ultimate goal has been to conduct an initial public offering (IPO). On March 15, 2001, Nasdaq submitted an initial application for exchange status to the SEC, an application that the agency published for comment on June 14, 2001. It later made several amendments to the application in late 2001 and early 2002. After the initial application, the foremost regulatory concern for the SEC and a number of securities market participants was that, as written, the application would have continued to allow Nasdaq to operate without a trade execution protocol known as intra-market price and time priority, which is required of exchanges. This protocol is described below. Nasdaq processes limit orders, orders to buy or sell a stock when it hits a specified price. The NYSE centrally posts limit orders, which permits better-priced orders to receive priority execution there or on the various other interlinked market centers that trade NYSE-listed stocks. This is known as price and time priority and all exchanges abide by it. (Both the Nasdaq and the NYSE are markets in which brokers are required to exercise their duty of best execution when they route their customer's orders. The concept is inexplicit but is often interpreted to means that an order should be sent to the market center providing the best prevailing price.) But a significant fraction of Nasdaq market makers match buyer and seller orders from their own order books. Known as internalization, this can result in well priced limit orders outside of a market maker's book being ignored. Nasdaq officials have argued that their market permits competing dealers to add liquidity to the markets by interacting with their own order flow but SEC officials have concerns about the formal absence of price priority. This was a major sticking point in the agency's delay in approving the exchange application, concerns that Nasdaq attempted to address through subsequent amendments to its exchange application. On January 13, 2006, the SEC approved Nasdaq's application to become a registered national securities exchange. As a registered exchange, Nasdaq will become a self-regulatory organization (SRO) with ultimate responsibilty for its own and its members compliance with the federal securities laws. Several years ago, Nasdaq entered into a Regulatory Services Agreement with the NASD to perform certain key regulatory functions for it, an arrangement that should continue. Nasdaq is now officially a registered an exchange, but the SEC will not permit Nasdaq to begin operations as an exchange and to fully relinquish its independence from ongoing control by the NASD until various conditions, including the following key ones, are satisfied: Nasdaq must join the various national market system plans and the Intermarket Surveillance Group; The NASD must determine that its control of Nasdaq through its Preferred Class D share is no longer necessary because NASD can fulfill through other means its obligations with respect to non-Nasdaq exchange-listed securities under the Exchange Act; The SEC must declare certain regulatory plans to be filed by Nasdaq to be effective; and Nasdaq must file, and the Commission must approve, an agreement pursuant to Section 17d-2 of the Securities Exchange Act of 1934 that allocates to NASD regulatory responsibility with respect to certain activities of common members. Nasdaq's exchange application limits the exchange to transactions in the Nasdaq Market Center, previously known as SuperMontage and Brut, which will adhere to rules on intramarket priorities. However, orders that are internalized by NASD broker dealers that may not adhere to intra-market priority rules would be reported through the new Trade Reporting Facility (TRF), which must go through a separate regulatory review process and which will be administered by the NASD. Nasdaq will receive revenues from TRF trades (a contentious point for a number of its rivals).

Traditionally, the Nasdaq stock market was a for-profit, but wholly-owned subsidiary of the nonprofit National Association of Securities Dealers, Inc. (NASD), the largest self-regulatory organization (SRO) for the securities industry. In 2000, in a strategic response to an increasingly competitive securities trading market, the NASD membership approved spinning off the for-profit NASD-owned Nasdaq and converting it into a for-profit shareholder-owned market that later planned to issue publicly traded stock. For Nasdaq, this process has involved three basic stages: (1) issuing privately placed stock; (2) converting to technical exchange status; and (3) issuing publicly-held stock. Stage one, the private placement stage has been completed. In March 2001, Nasdaq submitted an application for exchange status to the Securities and Exchange Commission (SEC), an application that has been amended several times to address certain criticisms. Obtaining exchange status is necessary for Nasdaq to proceed to stage three, the issuance of publicly held stock. Realization of that stage became much closer on January 13, 2006, when after more than a half decade, the SEC approved Nasdaq's application to become a registered national securities exchange.

In 2017, approximately 39.7 million people, or 12.3% of the population, had incomes below the official definition of poverty in the United States. The poverty rate (the percentage that were in poverty), fell from 12.7% in 2016, while the number of persons in poverty showed no discernible change. In this report, the numbers and percentages of those in poverty are based on the Census Bureau's estimates. While this official measure is often regarded as a statistical yardstick rather than a complete description of what people and families need to live, it does offer a measure of economic hardship faced by the low-income population: the poverty measure compares family income against a dollar amount called a poverty threshold , a level below which the family is considered to be poor. The Census Bureau releases these poverty estimates every September for the prior calendar year. Most of the comparisons discussed in this report are year-to-year comparisons. This report only considers a number or percentage to have changed from the previous year, or to be different from another number or percentage, if the difference has been tested to be statistically significant at the 90-percent confidence level. However, in addition to the most recent year's data, this report presents a historical perspective as well as information on poverty for demographic groups (by family structure, age, race and Hispanic origin, and work status) and by state. Over the past several decades, criticisms of the official poverty measure have led to the development of an alternative research measure called the Supplemental Poverty Measure (SPM), which the Census Bureau also computes and releases. Statistics comparing the official measure with the SPM are provided at the conclusion of this brief. The SPM includes the effects of taxes and in-kind benefits (such as housing, energy, and food assistance) on poverty, while the official measure does not. Because some types of tax credits are used to assist the poor, as are other forms of assistance, the SPM may be of interest to policymakers. However, the official measure provides a comparison of the poor population over a longer time period, including some years before many current anti-poverty assistance programs had been developed. In developing poverty-related legislation and conducting oversight on programs that aid the low-income population, policymakers may be interested in these historical trends. The Census Bureau determines a person's poverty status by comparing his or her resources against a measure of need. For the official measure, "resources" is defined as total family income before taxes, and the measure of "need" is a dollar amount called a poverty threshold. There are 48 poverty thresholds that vary by family size and composition. If a person lives with other people to whom he or she is related by birth, marriage, or adoption, the money income from all family members is used to determine his or her poverty status. If a person does not live with any family members, his or her own income is used. Only money income before taxes is used in calculating the official poverty measure, meaning this measure does not treat in-kind benefits such as the Supplemental Nutritional Assistance Program (SNAP, formerly known as food stamps), housing subsidies, or employer-provided benefits as income. The poverty threshold dollar amounts vary by the size of the family (from one person not living in a family, to nine or more family members living together) and the ages of the family members (how many of the members are children under 18 and whether or not the family head is 65 years of age or older). Collectively, these poverty thresholds are often referred to as the "poverty line." As a rough guide, the poverty line can be thought of as $25,094 for a family of four, $19,515 for a family of three, $15,877 for a family of two, or $12,488 for an individual not living in a family, though the official measure is actually much more detailed. The threshold dollar amounts are updated annually for inflation using the Consumer Price Index. Notably, the same thresholds are applied throughout the country: no adjustment is made for geographic variations in living expenses. The official poverty measure used in this report is the federal government's definition of poverty for statistical purposes, such as comparing the number or percentage of people in poverty over time. A different definition of poverty, the poverty guidelines published by the Department of Health and Human Services (HHS), is used for administrative purposes such as eligibility criteria for assistance programs and will not be discussed in this report. Figure 1 shows a historical perspective of the number and percent of the population below the poverty line. The number in poverty and the poverty rates are shown from the earliest year available (1959) through the most recent year available (2017). Because the total U.S. population has grown over time, poverty rates are useful for historical comparisons because they control for population growth. Poverty rates fell through the 1960s. Since then, they have generally risen and fallen according to the economic cycle, though during the most recent two expansions poverty rates did not fall measurably until four to six years into the expansion. Historically notable lows occurred in 1973 (11.1%) and 2000 (11.3%) . Poverty rate peaks occurred in 1983 (15.2%), 1993 (15.1%), and 2010 (15.1%). Poverty rates tend to rise during and after recessions, as opposed to leading economic indicators such as new housing construction, whose changes often precede changes in the performance of the overall economy. The poverty rate's lag is explainable in part by the way it is measured: it uses income from the entire calendar year. Notably, the poverty rate in 2017 registered a third consecutive annual decrease since the most recent recession, though it remained higher than the rate in 2000, the most recent low point. The drop in the U.S. poverty rate (from 12.7% in 2016 to 12.3% in 2017) affected some demographic groups more than others, notably the population ages 18 to 64, people of Hispanic origin, and part-time workers; it was not a broad-based decline. Details for selected demographic groups are described below. Because poverty status is determined at the family level by comparing resources against a measure of need, vulnerability to poverty may differ among families of different compositions. In this section, poverty data by family structure are presented using the official poverty measure, along with a definition of "family" that the Census Bureau has used in the CPS ASEC for nearly four decades. In the " Supplemental Poverty Measure " section of this report, a different definition will be used. Families with a female householder and no husband present (female-householder families) have historically had higher poverty rates than both married-couple families and families with a male householder and no wife present (male-householder families). This remained true in 2017: female-householder families experienced a poverty rate of 25.7%, compared with 4.9% for married-couple families and 12.4% for male-householder families. None of these groups registered a significant decrease from 2016, although families as a whole (i.e., all family types together) did--from 9.8% in 2016 to 9.3% in 2017, a drop of 0.4 percentage points after rounding). Among individuals not living in families, the poverty rate was 20.7% in 2017, not distinguishable from the previous year. Poverty rates of families in 2017 are shown in Figure 2 . When examining poverty by age, three main groups are noteworthy for distinct reasons: under 18, 18 to 64, and 65 and older. People under age 18 are typically dependent on other family members for income, particularly young children below their state's legal working age. People ages 18 to 64 are generally thought of as the working-age population and typically have wages and salaries as their greatest source of income. People 65 years and older, referred to as the aged population, are often eligible for retirement, and those who do retire typically experience a change in their primary source of income. For the working-age population, the poverty rate, but not the number of persons in poverty (22.2 million), registered a decline. In 2017, 11.2% of the working-age population was in poverty (down from 11.6% in 2016). Neither children nor the aged registered any significant changes in their poverty rate or number in poverty from 2016. Among children, 12.8 million (or 17.5%) were poor; among the aged population, 4.7 million (or 9.2%) were poor. From a historical standpoint, the poverty rate for those 65 and over used to be the highest of the three groups. In 1966, the aged had a poverty rate of 28.5%, compared with 17.6% for those under 18 and 10.5% for working-age adults. By 1974, the poverty rate for people 65 and over had fallen to 14.6%, compared with 15.4% for people under 18 and 8.3% for working-age adults. Since then, people under 18 have had the highest poverty rate of the three age groups, as shown in Figure 3 . Poverty rates vary by race and Hispanic origin, as shown in Figure 4 . In surveys, Hispanic origin is asked separately from race; accordingly, people identifying as Hispanic may be of any race. The poverty rate fell for Hispanics (from 19.4% in 2016 to 18.3% in 2017). Among blacks (21.2%), Asians (10.0%), and non-Hispanic whites (8.7%), the poverty rate did not change discernably from 2016. While having a job reduced the likelihood of being in poverty, it did not guarantee that a person or his or her family would avoid poverty. Among the 18 to 64 year old population living in poverty, 36.6% had jobs in 2017. However, workers were less likely to be in poverty in 2017 (5.3%) than they were the year before (5.8%). Among full-time year-round workers, 2.2% were poor in 2017, not measurably changed from the previous year. Among part-time or part-year workers, 13.4% were poor, down from 14.7% in 2016. No change was detected among those who did not work at least one week in 2017 (30.7% were poor). Because poverty is a family-based measure, the change in one member's work status can affect the poverty status of his or her entire family. Among all 18 to 64 year olds who did not have jobs in 2017, 58.1% lived in families in which someone else did have a job. Among poor 18 to 64 year olds without jobs, 19.1% lived in families where someone else worked. Poverty is not equally prevalent in all parts of the country. The map in Figure 5 shows states with relatively high poverty rates across parts of the Appalachians, the deep South, and the Southwest, with the poverty rate in Mississippi (19.8%) among the highest in the nation, and not statistically different from the rates in New Mexico (19.7%), Louisiana (19.7%), and West Virginia (19.1%). The poverty rate in New Hampshire (7.7%) was lowest. When comparing poverty rates geographically, it is important to remember that the official poverty thresholds are not adjusted for geographic variations in the cost of living--the same thresholds are used nationwide. As such, an area with a lower cost of living accompanied by lower wages will appear to have a higher poverty rate than an area with a higher cost of living and higher wages, even if individuals' purchasing power were exactly the same in both areas. The District of Columbia and 20 states experienced poverty rate declines from 2016 to 2017: six in the Midwest (Illinois, Indiana, Iowa, Michigan, Missouri, and Ohio), three in the Northeast (Maine, New York, and Pennsylvania); eight in the South (District of Columbia, Florida, Georgia, Kentucky, Mississippi, North Carolina, Tennessee, and Texas); and four in the West (Arizona, California, Colorado, and Idaho). Delaware and West Virginia were the only states to experience increases, and 28 states, as well as Puerto Rico, experienced no significant change. Criticisms of the official measure have led to the development of the Supplemental Poverty Measure (SPM). Described below are the development of the official measure, its limitations, attempts to remedy those limitations, the research efforts that led to the SPM, and a comparison of poverty rates based on the SPM and the official measure. The poverty thresholds were originally developed in the early 1960s by Mollie Orshansky of the Social Security Administration. Rather than attempt to compute a family budget by using prices for all essential items that low-income families need to live, Orshansky focused on food costs. Unlike other goods and services such as housing or transportation, which did not have a generally agreed-upon level of adequacy, minimum standards for nutrition were known and widely accepted. According to a 1955 U.S. Department of Agriculture (USDA) food consumption survey, the average amount of their income that families spent on food was roughly one-third. Therefore, using the cost of a minimum food budget and multiplying that figure by three yielded a figure for total family income. That computation was possible because USDA had already published recommended food budgets as a way to address the nutritional needs of families experiencing economic stress. Some additional adjustments were made to derive poverty thresholds for two-person families and individuals not living in families to reflect the relatively higher fixed costs of smaller households. While the official poverty measure has been used for over 50 years as the source of official statistics on poverty in the United States, it has received criticism over the years for several reasons. First, it does not take into account benefits from most of the largest programs that aid the low-income population. For instance, it uses money income before taxes - meaning that it does not necessarily measure the income available for individuals to spend, which for most people is after-tax income. Therefore, any effects of tax credits designed to assist persons with low income are not captured by the official measure. The focus on money income also does not account for in-kind benefit programs designed to help the poor, such as SNAP or housing assistance. The official measure has also been criticized for the way it characterizes families' and individuals' needs in the poverty thresholds. That is, the method used to compute the dollar amounts used in the thresholds, which were originally based on food expenditures in the 1950s and food costs in the 1960s, do not accurately reflect current needs and available goods and services. Moreover, the official measure does not take account of the sharing of expenses and income among household members not related by birth, marriage, or adoption. And, as mentioned earlier, the official thresholds do not take account of geographic variations in the cost of living. In 1995, a panel from the National Academy of Sciences issued a report, Measuring Poverty: A New Approach, which recommended improvements to the poverty measure. Among the suggested improvements were to have the poverty thresholds reflect the costs of food, clothing, shelter, utilities, and a little bit extra to allow for miscellaneous needs; to broaden the definition of "family;" to include geographic adjustments as part of the measure's computation; to include the out-of-pocket costs of medical expenses in the measure's computation; and to subtract work-related expenses from income. An overarching goal of the recommendations was to make the poverty measure more closely aligned with the real-life needs and available resources of the low-income population, as well as the changes that have taken place over time in their circumstances, owing to changes in the nation's economy, society, and public policies (see Table 1 ). After over a decade and a half of research to implement and refine the methodology suggested by the panel, conducted both from within the Census Bureau as well as from other federal agencies and the academic community, the Census Bureau issued the first report using the Supplemental Poverty Measure (SPM) in November 2011. Compared with the official measure, the SPM takes into account greater detail of individuals' and families' living arrangements and provides a more up-to-date accounting of the costs and resources available to them. Because the SPM recognizes greater detail in relationships among household members and geographically adjusts housing costs, it provides an updated rendering, compared with the official measure, of the circumstances in which the poor live. In that context, some point out that the SPM's measurement of taxes, transfers, and expenses may offer policymakers a clearer view of how government policies affect the poor population today. However, the SPM was developed as a research measure, and the Office of Management and Budget set the expectation that it would be revised periodically to incorporate improved measurement methods and newer sources of data as they became available; it was not developed for administrative purposes. Conversely, the official measure's consistency over a longer time span makes it easier for policymakers and researchers to make historical comparisons. Under the SPM, the profile of the poverty population is slightly different than under the official measure. After rounding, the SPM was about 1.6 percentage points higher in 2017 than the official poverty rate (13.9% compared with 12.3%, a figure that includes foster children under age 15, who are not normally included in the official measure. See Figure 6 ). More people ages 18 to 64 are in poverty under the SPM (13.2% compared with 11.2% under the 2017 official measure), as are people ages 65 and over (14.1%, compared with 9.2% under the official measure). The poverty rate for people under age 18 was lower under the SPM (15.6% in 2017) than under the official measure (17.5%, with foster children included). Again, the SPM uses a different definition of resources than the official measure: the SPM includes in-kind benefits which generally help families with children; subtracts out work-related expenses, which are often incurred by the working-age population; and subtracts medical out-of-pocket expenses, which are incurred frequently by people age 65 and older. With the geographically-adjusted thresholds, the poverty rate in 2017 was lower under the SPM than under the official measure for the Midwest (10.7% compared with 11.4%), while it was higher than the official measure for the Northeast (14.2% compared with 11.4%), the West (15.1% compared with 11.8%), and the South (14.8% compared with 13.6%).

In 2017, approximately 39.7 million people, or 12.3% of the population, had incomes below the official definition of poverty in the United States. Poverty statistics provide a measure of economic hardship. The official definition of poverty for the United States uses dollar amounts called poverty thresholds that vary by family size and the members' ages. Families with incomes below their respective thresholds are considered to be in poverty. The poverty rate (the percentage that was in poverty) fell from 12.7% in 2016. This was the third consecutive year since the most recent recession that the poverty rate has fallen. The poverty rate for female-householder families (25.7%) was higher in 2017 than that for male-householder families (12.4%) or married-couple families (4.9%). None of these poverty rates registered a discernible change from 2016. Among the working-age population (18 to 64 year olds), the poverty rate fell to 11.2% in 2017, down from 11.6% in 2016. Neither children (people under 18) nor the aged (people ages 65 and older) had discernible changes to their poverty rates over the period. Of the three age groups--children, the working-age population, and the aged--the latter used to have the highest poverty rates but now has the lowest: 28.5% of the aged population was poor in 1966, but 9.2% was poor in 2017. People under 18, in contrast, have the highest poverty rate of the three age groups: 17.5% were poor in 2017. Poverty is not equally prevalent in all parts of the country. The poverty rate for Mississippi (19.8%) appeared to be the highest but was in a statistical tie with New Mexico (19.7%), Louisiana (19.7%), and West Virginia (19.1%). New Hampshire's poverty rate (7.7%) was the lowest in 2017. Criticisms of the official poverty measure have inspired poverty measurement research and eventually led to the development of the Supplemental Poverty Measure (SPM). The SPM uses different definitions of needs and resources than the official measure. The SPM includes the effects of taxes and in-kind benefits (such as housing, energy, and food assistance) on poverty, while the official measure does not. Because some types of tax credits are used to assist the poor (as are other forms of assistance), the SPM may be of interest to policymakers. The poverty rate under the SPM (13.9%) was about 1.6 percentage points higher in 2017 than the official poverty rate (12.3%). Under the SPM, the profile of the poverty population is slightly different than under the official measure. Compared with the official measure, poverty rates under the SPM were lower for children (15.6% compared with 17.5%) and higher for working-age adults (13.2% compared with 11.2%) and the population age 65 and older (14.1% compared with 9.2%). While the SPM reflects more current measurement methods, the official measure provides a comparison of the poor population over a longer time period, including some years before many current anti-poverty assistance programs had been developed. In developing poverty-related legislation and conducting oversight on programs that aid the low-income population, policymakers may be interested in these historical trends.

Federal agencies adopt rules to implement statutes that Congress has enacted. These rules, although established by an administrative agency, maintain the force of law. As such, agencies have considerable power to establish and interpret federal law. However, for an agency to promulgate rules, Congress must first grant that agency the power to do so through statute. To control the process by which agencies create these rules, Congress has enacted statutes such as the Administrative Procedure Act (APA) that dictate what procedures an agency must follow to establish a final, legally binding rule. Other statutes govern issues such as how agencies must operate internally with respect to hiring and labor practices, the maintenance of federal records, financial management, and a diverse range of other topics. In order to understand these statutes, one must know to which entities these laws actually apply. Congress has not provided one all-encompassing definition of an agency. Instead, the term "agency" can mean different things in different contexts, depending on what statute is at issue. For example, the definition of agency under the APA differs from its definition under the Freedom of Information Act (FOIA). Furthermore, some statutes and executive orders distinguish between executive agencies and "independent agencies." This report will explain the differences between executive agencies and independent agencies, briefly discuss legislative and judicial agencies, and explore various statutory definitions of "agency." Federal agencies in the executive branch may be divided into two broad categories, executive agencies and independent agencies. Generally speaking, executive agencies are subject to direct presidential control, while independent agencies are typically designed by statute to be comparatively free from presidential control. Typically, to ensure this level of independence, Congress provides the independent agency with certain structural characteristics that limit the President's control over the agency's actions. While there is no strict definition of what qualifies an agency as "independent," this section looks at six indicia of independence that independent agencies often have in common: (1) for cause removal protection; (2) multi-member board or commission structure; (3) exemption from Office of Management and Budget (OMB) legislative clearance requirements; (4) exemption from presidential review of agency rulemaking procedures; (5) direct or concurrent budget submissions to Congress; and (6) independent litigating authority. Importantly, as will be shown throughout this section, while many independent agencies share many of these characteristics, an agency need not possess all of these characteristics to be considered independent. One of the characteristics that often indicates agency independence from executive control is the President's ability to remove the head of an independent agency only "for cause." Therefore, unlike the heads of a typical executive agency--who serve at the pleasure of the President --the President may only remove the head of an independent agency for some form of misconduct. The Supreme Court has upheld such restrictions on the President's authority to remove officers. For example, many statutes that establish independent agencies provide that the head of the agency shall serve a fixed term and may only be removed for "inefficiency, neglect of duty, or malfeasance in office." Other statutes simply state that the agency head is removable "for cause." Courts have not clearly established the threshold for removing an agency head for cause; however, Congress has indicated that removal for cause must be predicated on "some type of misconduct," as opposed to merely having policy disagreements with the President or refusing to take action that the President thinks is most prudent. This removal protection, at least in theory, gives the independent agency more flexibility when making decisions because the President cannot remove the agency head simply because he disagrees with the agency's policy choices. The Supreme Court has held that some officers enjoy "for cause" removal protection even if the statute is silent on removal procedures. In Wiener v. United States , the Court held that the structure of the War Claims Commission (WCC), specifically that the members of the commission served for a specific term of office, and the WCC's role as a quasi-judicial entity prevented President Eisenhower from removing members of the WCC at will despite the lack of specific for cause removal protection in the statute. These features prompted the Court to note that the War Claims Commission was similarly situated to other entities, such as the Federal Trade Commission, that enjoy for cause removal protection. The Court determined that Congress did not intend for the President to be able to remove these members without good cause. Lower courts, after following rationales similar to Wiener , have indicated that the commissioners of the Securities and Exchange Commission (SEC), the Federal Election Commission (FEC), and the members of the National Credit Union Administration (NCUA) Board all enjoy for cause removal protection despite statutory silence regarding removal. Ultimately, numerous agency administrators, commissioners, and board members enjoy for cause removal protection, which may be the most notable characteristic of an independent agency. The Supreme Court has established some limits on removal protections. Notably, the removal protection must not "interfere impermissibly with [the President's] constitutional obligation to ensure the faithful execution of the laws." Under such an analysis, the Court has held that a double layer of for cause protection is per se unconstitutional--that is, an inferior officer may not enjoy for cause removal protection if the principal officer in charge of him has for cause removal protection from the President. Another characteristic of independent agencies is that the agency may be directed by a multi-member board or commission, rather than a single administrator. Arguably, if an agency is led by a single administrator that the President appoints, the agency head will likely have policy preferences that reflect the views of the appointing President. Therefore, in order to curb the amount of influence that one administrator may have upon an agency, Congress may provide that an independent agency be administered by a multi-member board. In this manner, multiple views may be voiced on particular policy decisions. In addition to having a multi-member agency head, Congress sometimes places additional restrictions on the composition of a commission or board. For example, Congress often requires a board to have no more than a simple majority from one political party serving on the commission. In this manner, Congress seeks to ensure that the minority party has a voice in the agency's decision-making process. Furthermore, officers' terms are often staggered in order to prevent multiple vacancies arising at one time. Although many independent agencies share these structural characteristics, some independent agencies are headed by a single administrator. Examples include the Social Security Administration, the U.S. Office of Special Counsel, and the Consumer Financial Protection Bureau. A presidential order requires agencies to submit their legislative proposals, congressional testimony, and comments on proposed legislation that will be presented to Congress to the Office of Management and Budget (OMB), which is within the Executive Office of the President, for review. This process is known as "legislative clearance," and allows the President to ensure that agency communications to Congress reflect the President's priorities. The Obama Administration has stated that this requirement "[h]elps the agencies develop draft bills that are consistent with and that carry out the President's policy objectives." In some instances, Congress may exempt certain agencies from having to undergo OMB legislative clearance prior to submitting their views or proposals to Congress. For example, one such statute provides that No officer or agency of the United States shall have any authority to require the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the Federal Housing Finance Board, or the National Credit Union Administration to submit legislative recommendations, or testimony, or comments on legislation, to any officer or agency of the United States for approval, comments, or review, prior to the submission of such recommendations, testimony, or comments to the Congress if such recommendations, testimony, or comments to the Congress include a statement indicating that the views expressed therein are those of the agency submitting them and do not necessarily represent the views of the President. This exemption from OMB legislative clearance requirements arguably may provide an agency with greater independence from the President by allowing the agency to express its own view on a certain policy or program without the President's input. However, if a statute does not specifically exempt an agency from the legislative clearance process, the agency is generally expected to comply, as OMB Circular A-19 provides that the term "agency" includes "[a]ny executive department or independent commission, board, bureau, office, agency ... including any regulatory commission or board." Independent agencies also are exempt from centralized review of agency rulemaking under Executive Order 12866. Executive Order 12866, promulgated by President Clinton in 1993, requires executive agencies to submit their proposed and final "significant" regulations to the Office of Information and Regulatory Affairs (OIRA) within OMB for approval prior to publication in the Federal Register . The agency's submission must include, among other things, an assessment of the costs and benefits of the regulation, an explanation for the need of the regulation, and a statement explaining how the regulation "promotes the President's policy priorities." When OIRA reviews an agency's proposed significant regulation, OIRA must "provide meaningful guidance and oversight so that each agency's regulatory actions are consistent with applicable law, the President's priorities, and the principles set forth in [the] Executive order." Therefore, one of OIRA's functions is to help ensure that regulations promulgated by federal agencies promote the Administration's policy priorities. However, pursuant to Executive Order 12866, independent agencies--as defined by the Paperwork Reduction Act --are not required to submit their proposed and final regulations for centralized review. This exemption arguably further insulates independent agencies from presidential influence because OIRA does not necessarily have the opportunity to suggest changes to proposed regulations in order to bring those rules into conformance with the President's policy priorities. Notably, it is by the terms of the Executive Order, not by statute, that independent agencies are exempt from these review procedures. Therefore, independent agencies may elect to have their rules reviewed by OIRA if they so choose. Furthermore, other provisions of the order are applicable to the independent agencies. For example, independent agencies are required to submit to OIRA a "regulatory plan" that outlines the "most important significant regulatory actions that the agency reasonably expects to issue in proposed or final form in that fiscal year or thereafter." Another characteristic that may indicate the level of an agency's independence is how the agency's budget requests are submitted to Congress. Generally, agencies do not directly submit their budget proposals to Congress. Instead, most agencies are required to submit their budget proposals to OMB. The President, through OMB, may modify such requests prior to submitting them to Congress. Therefore, the President's budget does not necessarily reflect the agencies' budget proposals, but, instead, reflects the President's policy priorities. However, Congress has prohibited OMB and the President from revising the budget requests of certain agencies. For example, the Social Security Act provides that the "Commissioner shall prepare an annual budget for the [Social Security] Administration, which shall be submitted by the President to the Congress without revision, together with the President's annual budget for the Administration." Such a provision allows the agency to appeal directly to Congress for its budget priorities and arguably provides the agency with some insulation from the President's influence during the appropriations process. In other statutes, Congress has authorized certain agencies to submit their budget requests directly to Congress and OMB at the same time--a practice known as concurrent budget submission. This provides Congress with the opportunity to hear directly from the agency while still allowing OMB to review and revise the proposal prior to inclusion in the President's budget. Congress, therefore, can see what the agency directly requested along with the President's request for the same agency. An agency's ability to litigate independently from the Department of Justice (DOJ) also may provide the agency with some insulation from presidential influence. Unless otherwise provided by statute, the DOJ is responsible for conducting litigation on behalf of the federal agencies. This allows the President, through the Attorney General, to control the litigation positions of agencies generally. The Attorney General may choose when to file claims or defend agency policies. However, Congress has provided some agencies with varying degrees of independent litigating authority. For example, the Executive Director of the Architectural and Transportation Barriers Compliance Board is permitted to "appear for and represent the Access Board in any civil litigation" except for cases before the Supreme Court. Other agencies only have independent litigating authority with respect to certain types of cases. For example, the NCUA may litigate independently of the DOJ only when it is seeking to dissolve a federal credit union. Likewise, although the Solicitor General handles most litigation on behalf of the United States in front of the Supreme Court, Congress has enabled some agencies to represent themselves before the Supreme Court under certain circumstances. For example, the Federal Trade Commission (FTC) may represent itself before the Supreme Court if the Solicitor General authorizes the FTC to do so or if the Solicitor General refuses to represent the Commission. Again, this provision permits the FTC to litigate its position on a case without necessarily relying on the President for legal representation. While most federal agencies can be divided into two broad categories--executive agencies and independent agencies--there are also agencies within the legislative and judicial branches. As a general matter, legislative agencies, such as the Government Accountability Office (GAO) and the Architect of the Capitol, are distinct from executive branch agencies in that they aid Congress in its legislative capacity, and do not "execute the laws." Likewise, judicial agencies, such as the Administrative Office of the United States Courts and the Sentencing Commission, neither execute the laws nor promulgate laws that "regulate the primary conduct of the public." Instead, judicial agencies usually engage in functions that are "attendant to a[n] ... element of the historically acknowledged mission of the Judicial Branch," such as issuing sentencing guidelines for the federal courts. Perhaps the most important definition of "agency" is found in the Administrative Procedure Act (APA). This is because the APA provides the "default" procedures that agencies must follow when conducting rulemaking and adjudications--that is, unless an agency's organic statute provides for other procedures, the agency must follow the requirements in the APA. The APA also provides standards for judicial review of agency actions. It is, therefore, arguably the most important statute to understand in administrative law. Furthermore, the definition of "agency" provided in the APA is often referenced in other statutes that govern the rulemaking process. For example, the Negotiated Rulemaking Act, the Regulatory Flexibility Act, and the Congressional Review Act all define agency by reference to the APA's definition. The APA states that "agency" means each authority of the Government of the United States, whether or not it is within or subject to review by another agency, but does not include-- (A) the Congress; (B) the courts of the United States; (C) the governments of the territories or possessions of the United States; (D) the government of the District of Columbia; or except as to the requirements of section 552 of this title-- (E) agencies composed of representatives of the parties or of representatives of organizations of the parties to the disputes determined by them; (F) courts martial and military commissions; (G) military authority exercised in the field in time of war or in occupied territory. The APA definition of agency includes all executive branch agencies, including the independent regulatory agencies, but specifically excludes Congress and the judiciary, as well courts martial, military commissions, and military authorities in time of war or in the field. Aside from these exceptions, all "authorities" of the federal government are apparently included, even those that are within or under another authority or agency. For example, the DOJ is an agency composed of a number of subunits, such as the Drug Enforcement Administration, the Federal Bureau of Investigation, and the Federal Bureau of Prisons. Each of these divisions is an agency insofar as it is an "authority" of the government. Exactly what an "authority" is, however, is not defined. A legislative report released before the passage of the APA described the term as "any officer or board, whether within another agency or not, which by law has authority to take final and binding action with or without appeal to some superior administrative authority." Courts have given this language a "broad, inclusive reading" to apply the APA to both executive agencies and independent agencies; and have generally interpreted the APA definition of agency to include "any administrative unit with substantial independent authority in the exercise of specific functions." The relevant test is "whether the arm [of government] has the authority to act with the sanction of the Government behind it." Accordingly, even though "the primary purpose of the APA is to regulate the processes of rule making and adjudication ... even those administrative entities that perform neither function" can be considered agencies if they enjoy " substantial independent authority in the exercise of specific functions ." In this vein, an entity with purely advisory functions--such as a panel of nongovernmental consultants who advise an agency but do not make binding decisions--would not qualify as an authority. Given the wide variety of organizational structures in the government, whether an agency enjoys the necessary "authority" to qualify is largely a question of fact. For example, the President-elect's transition staff is not an agency because it is, by definition, outside the control of the sitting President, and therefore incapable of exercising government authority. In the same way, the National Academy of Sciences, while responsible for conducting investigations for the government, only enjoys authority derived from "a respect for the qualifications of the members of the Academy rather than on any delegation of federal authority." As such, it is not an agency for the purposes of the APA. Likewise, the APA does not apply to state-level agencies, or a private firm that provides services to a federal agency, because these entities do not exercise the power of the federal government. It is worth mentioning that Congress may establish entities that are explicitly not "agencies" exercising the power of the federal government, such as the Legal Services Corporation. In addition, Congress may establish entities that exercise government authority and are subject to constitutional constraints, but are not agencies for the purposes of the APA. For example, the Public Company Accounting Oversight Board is subject to the Constitution's Appointments Clause, but is not a government agency "for statutory purposes." In contrast, Congress can direct an entity otherwise not subject to the APA to comply with its provisions. For example, while most entities in the judicial branch are not agencies for the purposes of the APA, pursuant to statute, the United States Sentencing Commission, an independent agency in the judicial branch, must comply with the APA when it promulgates sentencing guidelines for federal judges. Finally, entities that might appear at first glance to operate somewhat independently of the federal government can sometimes fall within the APA's definition of agency. For example, even though the Federal Reserve Banks "are independent, privately owned and locally controlled corporations," because they "perform[] important governmental functions and exercise[] powers entrusted to it by the United States government," some courts have held that they are agencies for purposes of the APA. Likewise, the Board of Governors of the Federal Reserve System, though somewhat insulated from political influence as it receives no funding through the congressional appropriations process, must comply with the APA when it imposes civil penalties on private parties or promulgates certain regulations. As explained above, generally speaking, if an agency exercises the authority of the federal government, it qualifies as an agency under the APA. However, at least one major exception applies. The Supreme Court has held that the President is not an "agency" under the APA. In Franklin v. Massachusetts , the Commonwealth of Massachusetts brought a claim under the APA's abuse of discretion standard against, inter alia , the President, challenging the apportionment of congressional seats. Reviewing the APA's definition of agency, the Court noted that while the President was not "explicitly included" in the statutory definition, he was "not explicitly excluded, either." Therefore, "out of respect for the separation of powers and the unique constitutional position of the President," the Court ruled that the absence of language either way was not sufficient to subject the President to the APA. Nevertheless, entities within the Executive Office of the President can qualify as agencies under the APA. For example, the OMB is an agency under the APA because although its central duty is advising the President, it also functions as an "'instrument of presidential and policymaking control over the executive bureaucracy,'" and has various "'management, coordination, and administrative functions.'" Another important definition of agency is found in the Freedom of Information Act (FOIA), which provides the public with access to certain agency records. Unless a request for information falls under one of FOIA's nine exemptions, an "agency," under the act, must provide the requesting party with the relevant records. FOIA's current definition of an agency was intended to be broader than the APA's. It covers "each authority of the Government of the United States," including "any executive department, military department, Government corporation, Government controlled corporation, or other establishment in the executive branch of the Government (including the Executive Office of the President), or any independent regulatory agency." FOIA does not, however, apply to Congress, the courts, or the government of United States territories. Accordingly, the "entire legislative branch" and the "entire judicial branch" are "exempted." Nevertheless, the legislative history accompanying amendments to FOIA in 1974 indicated that Congress aimed to "expand" upon the definition of agency in the APA. Congress intended the definition to include government corporations like the Tennessee Valley Authority, government-controlled corporations like the National Railroad Passenger Corporation (Amtrak), and "other establishments" like the U.S. Postal Service. The language was also meant to include "functional entities" in the Executive Office of the President, such as OMB. Congress did not intend corporations that receive federal funds but are not chartered or controlled by the government, such as the Corporation for Public Broadcasting, to be covered under the statute. However, records located at certain "government owned contractor operated" (GOCO) entities can be subject to FOIA if an agency--otherwise subject to FOIA--effectively controls those records. Despite its broad scope, this definition of agency also has limits. Even though the statute specifically mentions the "Executive Office of the President," the Supreme Court has determined that the term agency does not include "'the President's immediate personal staff or units in the Executive Office whose sole function is to advise and assist the President.'" Accordingly, in Kissinger v. Reporters Committee for Freedom of the Press , the Supreme Court ruled that Henry Kissinger's telephone records while he served as an assistant to the President did not qualify as agency records subject to FOIA. In this vein, circuit courts have found that entities that only act in an advisory role to the President, like President George H. W. Bush's Task Force on Regulatory Relief, the White House Counsel's Office, the National Security Council, and the Council of Economic Advisers, are not agencies subject to FOIA. In contrast, entities within the Executive Office of the President that have "power to issue formal, legally authoritative commands to entities or persons within or outside the executive branch" are agencies under the act. Finally, courts have found that certain entities, even if established by Congress, may not be agencies for the purposes of FOIA because the government does not exercise sufficient control over the establishment. For example, the American National Red Cross, which has a number of its governors appointed by the President, operates under a congressional charter, and is subject to federal financial reporting and audit requirements, is not an agency for FOIA purposes because it is "not subject to substantial federal control or supervision." Likewise, the National Academy of Sciences, though established by an act of Congress and paid by the government to conduct research, is not an agency because it is a private entity that "merely contract[s] with the government to conduct studies," rather than participating in a government function. A somewhat broader definition of agency can be found in the Federal Records Act (FRA). Congress enacted the FRA to create "standards and procedures to assure the efficient and effective" management of federal agency records. The act applies to federal agency records made or received under federal law or connected to public business. Government records subject to the statute are eventually sent to the Archives. The FRA defines the term "federal agency" as " any executive agency or any establishment in the legislative or judicial branch of the Government (except the Supreme Court, the Senate, the House of Representatives, and the Architect of the Capitol and any activities under the direction of the Architect of the Capitol)." The statute, in turn, defines the term "executive agency" as (A) an executive department or independent establishment in the executive branch of the Government; and (B) a wholly owned Government corporation. In contrast to FOIA's scope, therefore, the FRA covers not only executive agencies, but also entities in the legislative branch and the lower federal courts. However, just as FOIA's reach does not extend to executive branch units close to the President who only engage in an advisory role, the FRA's coverage of executive branch agencies does not extend to units that simply advise the President and do not enjoy independent authority. Such records are instead subject to the Presidential Records Act. A number of statutes concerning personnel laws for the civil service define "agency" by reference to 5 U.S.C. Section 105. Section 105 of Title 5 of the United States Code defines the term "Executive agency" as an "Executive department, a Government corporation, and an independent establishment." The same chapter of the United States Code defines each of those terms, in turn. In other words, an entity within the scope of Sections 101, 103, or 104 is an executive agency for the purposes of Section 105. The definition appears to exclude agencies located in the judicial branch. First, Section 101 defines "Executive departments" as the cabinet level departments. Courts have interpreted this particular provision to not include independent establishments like the Atomic Energy Commission, the Federal Reserve Banks, and the Postal Service, or entities within an executive department, like the Internal Revenue Service, which is located inside the Treasury Department. Section 103 defines a government corporation as "a corporation owned or controlled by the government of the United States." For example, the Pension Benefit Guaranty Corporation, a government-controlled corporation within the Department of Labor, and the Federal Prison Industry, a government-owned corporation created to provide work for federal inmates, are both government corporations and are, therefore, considered an "Executive agency" for the purposes of 5 U.S.C. Section 105. Section 104 defines "independent establishment" as an "establishment in the executive branch (other than the United States Postal Service or the Postal Rate Commission) which is not an Executive department, military department, Government corporation, or part thereof, or part of an independent establishment; and ... [the] Government Accountability Office." Some courts have interpreted this provision to mean that if an entity is contained within an "Executive department," then Section 104 does not apply to it. One practical result of this distinction is that some statutes regulating the civil service will not be enforceable, at least in some jurisdictions, against the immediate "agency" employing a claimant. For example, under 5 U.S.C. Section 7114(a)(2), which entitles federal employees to the presence of a union representative when being questioned on disciplinary matters, one court ruled that because the statute's definition of agency incorporated 5 U.S.C. Section 105, the relevant defendant was not the Defense Logistics Agency, but the Department of Defense as a whole. Similarly, under the Federal Labor-Management Relations Act, one court ruled that the appropriate defendant is the Department of Justice, rather than the Department's Office of Inspector General. Congress enacted the Paperwork Reduction Act to reduce the paperwork burden for individuals and businesses resulting from the collection of information by or for the federal government. Whenever an agency requests information from 10 or more nonfederal persons, an agency must get approval from OIRA before putting out the request for information. The Paperwork Reduction Act defines the terms "agency" and "independent regulatory agency." Other statutes and executive orders define "agency" or "independent regulatory agency" by referencing the definitions provided in the Paperwork Reduction Act. The term "agency" is defined as any executive department, military department, Government corporation, Government controlled corporation, or other establishment in the executive branch of the Government (including the Executive Office of the President), or any independent regulatory agency, but does not include-- (A) the Government Accountability Office; (B) Federal Election Commission; (C) the governments of the District of Columbia and of the territories and possessions of the United States, and their various subdivisions; or (D) Government-owned contractor-operated facilities, including laboratories engaged in national defense research and production activities The term "independent regulatory agency" is defined by listing 19 agencies and including "any other similar agency designated by statute as a Federal independent regulatory agency or commission." The scope of the definition of "agency" under the Paperwork Reduction Act appears to be broad, but, by its terms, limited to the executive branch. Indeed, one commenter notes that the statute "applies to virtually the entire executive branch." Nevertheless, the United States Court of Appeals for the Tenth Circuit, after reviewing the structure and purpose of the U.S. Postal Service (USPS), determined that the USPS is not an agency for the purposes of the Paperwork Reduction Act. President Clinton promulgated Executive Order 12866--which remains in effect today--to "reform and make more efficient the regulatory process." The Executive Order contains numerous guidelines and procedures that agencies are expected to follow during the rulemaking process. The Order defines "agency" as follows: "Agency," unless otherwise indicated, means any authority of the United States that is an "agency" under 44 U.S.C. 3502(1), other than those considered to be independent regulatory agencies, as defined in 44 U.S.C. 3502(10)." Thus, Executive Order 12866 defines "agency" by referencing the definition provided in the Paperwork Reduction Act, described above. The independent regulatory agencies, listed in the Paperwork Reduction Act, are excluded from the definition. However, some provisions of the Executive Order, such as the requirement to submit planned regulations for publication in the Unified Agenda , specifically are made applicable to both independent regulatory agencies and executive agencies. Notably, the Executive Order states that it "does not create any right or benefit ... enforceable at law or equity"--thus, judicial review is not available for actions taken pursuant to the Order. Therefore, there are no judicial decisions that determine the scope of the term "agency" for the purposes of Executive Order 12866.

Congress has created a variety of federal agencies to execute the law. To this end, agencies may adopt rules to implement laws and adjudicate certain disputes arising under such laws. As such, agencies enjoy considerable power to regulate different industries and affect the legal rights of people. In order to control the manner in which agencies operate, Congress has passed numerous statutes that impose procedural requirements on federal agencies. The Administrative Procedure Act, for example, dictates the procedures an agency must follow to establish a final, legally binding rule. Other statutes govern how agencies must operate internally with respect to hiring and labor practices, the maintenance of federal records, financial management, and a diverse range of other topics. However, Congress has not provided one definition of an agency. Rather, the term "agency" can mean different things in different contexts, depending on which statute is at issue. In order to understand how different statutes operate, therefore, one must know to which entities these laws actually apply. Aside from judicial and legislative branch agencies, most agencies can be broadly divided into two general categories--executive agencies and independent agencies. The former are considered to be under direct presidential control, and the latter are designed to be comparatively more independent from the President. To ensure this level of independence, Congress often provides an independent agency with structural characteristics designed to protect it from presidential interference. This report will first examine six common indicia of independence that such agencies often have in common. Next, the report will explore several important statutes that regulate agencies and these statutes' respective definitions of "agency." These statutes include the Administrative Procedure Act, the Freedom of Information Act, the Federal Records Act, statutes governing federal employees, and the Paperwork Reduction Act. In interpreting the reach of these statutes, courts have sometimes limited their application based on an agency's operational proximity to the President, or how much control the executive branch has over the entity.

Levels of pay for congressional staff are a source of recurring questions among Members of Congress, congressional staff, and the public. Senators set the terms and conditions of employment for staff in their offices. This includes job titles and descriptions, rates of pay, subject to minimum and maximum levels, and resources available to them to carry out their official duties. There may be interest in congressional pay data from multiple perspectives, including assessment of the costs of congressional operations, guidance in setting pay levels for staff in Member offices, or comparison of congressional staff pay levels with those of other federal government pay systems. Publicly available information sources do not provide aggregated congressional staff pay data in a readily retrievable form. The most recent publicly available Senate staff compensation report was issued in 2006, and relied on anonymous, self-reported survey data. Data in this report are based on official Senate reports, which afford the opportunity to use consistently collected data from a consistent source. Pay information in this report is based on the Senate's Report of the Secretary of the Senate , published semiannually, in periods from April 1 to September 30, and October 1 to March 31, as collated by LegiStorm, a private entity that provides some congressional data by subscription. Additionally, this report provides annual data, which allows for observations about the nature of Senators' personal staff compensation over time. This report provides pay data for 16 staff position titles that are typically used in Senators' offices. The positions include the following: Administrative Director Casework Supervisor Caseworker Chief of Staff Communications Director Counsel Executive Assistant Field Representative Legislative Assistant Legislative Correspondent Legislative Director Press Secretary Scheduler "Specials Director," a combined category that includes the job titles Director of Projects, Director of Special Projects, Director of Federal Projects, Director of Grants, Projects Director, or Grants Director Staff Assistant State Director Senators' staff pay data for FY2001-FY2015 were derived from a random sampling of Senators' offices in which at least one staff member worked in a position in each year. For each fiscal year, FY2001-FY2015, a random sample of 25 Senators' offices was taken for each position. In order to be included, Senate staff had to hold a position with the same job title in the Senator's office for the entire fiscal year examined, and not receive pay from any other congressional employing authority. For some positions, it was not possible to identify 25 offices that employed staff for an entire year. In circumstances when data for 14 or fewer staff were identified for a position, this report provides no data. Every recorded payment ascribed in the LegiStorm data to those staff for the fiscal year is included. Data collected for this report may differ from an employee's stated annual salary due to the inclusion of overtime, bonuses, or other payments in addition to base salary paid in the course of a year. Generally, each position has no more than one observation per Senator's office each fiscal year. Pay data for staff working in House Member offices are available in CRS Report R44323, Staff Pay Levels for Selected Positions in House Member Offices, 2001-2014 . Data describing the pay of congressional staff working in House and Senate committee offices are available in CRS Report R44322, Staff Pay Levels for Selected Positions in House Committees, 2001-2014 , and CRS Report R44325, Staff Pay Levels for Selected Positions in Senate Committees, FY2001-FY2014 , respectively. There may be some advantages to relying on official salary expenditure data instead of survey findings, but data presented here are subject to some challenges that could affect findings or their interpretation. Some of the concerns include the following: Data are lacking for first-term Senators in the first session of a Congress. The periods of time covered by the Report of the Secretary of the Senate overlap the end of one Congress and convening of the next. This report provides no data for first-term Senators in the first nine months of their service. Pay data provide no insight into the education, work experience, position tenure, full- or part-time status of staff, or other potential explanations for levels of compensation. Staff could be based in Washington, DC, state offices, or both. Potential differences might exist in the job duties of positions with the same title. Aggregation of pay by job title rests on the assumption that staff with the same title carry out the same or similar tasks. Given the wide discretion congressional employing authorities have in setting the terms and conditions of employment, there may be differences in the duties of similarly titled staff that could have effects on their levels of pay. Acknowledging the imprecision inherent in congressional job titles, an older edition of the Senate Handbook states, "Throughout the Senate, individuals with the same job title perform vastly different duties." Tables in this section provide background information on Senate pay practices, comparative data for each position, and detailed data and visualizations for each position. Table 1 provides the maximum payable rates for staff in Senators' offices since 2001 in both nominal (current) and constant 2016 dollars. Constant dollar calculations throughout the report are based on the Consumer Price Index for All Urban Consumers (CPI-U) for various years, expressed in constant, 2016 dollars. Table 2 provides available cumulative percentage changes in pay in constant 2016 dollars for each of the 16 positions, Members of Congress, and salaries paid under the General Schedule in Washington, DC, and surrounding areas. Table 3 - Table 18 provide tabular pay data for Senators' staff positions. The numbers of staff whose data were counted are identified as observations in the data tables. Graphic displays are also included, providing representations of pay from three perspectives, including the following: a line graph showing change in pay, depending on data availability, in nominal (current) and constant 2016 dollars; a comparison at 5-, 10-, and 15-year intervals from FY2015, depending on data availability, of the cumulative percentage change in pay of that position to changes in pay, in constant 2016 dollars, of Members of Congress and federal civilian workers paid under the General Schedule in Washington, DC, and surrounding areas; and distributions of FY2015 pay, in 2016 dollars, in $10,000 increments. Between FY2011 and FY2015, the change in median pay, in constant 2016 dollars, ranged from a 9.86% increase for press secretaries to a -26.05% decrease for specials directors. Of the 16 positions, half saw pay increases, while the other half saw pay decreases during the five-year period. This may be compared to changes in the pay of Members of Congress, -5.1%, and General Schedule, DC, -3.19%, over approximately the same period (calendar years 2011-2015). Between FY2006 and FY2015, the change in median pay, in constant 2016 dollars, ranged from a 15.69% increase for field representatives to a -18.96% decrease for executive assistants. Of the 16 staff positions, 4 saw pay increases while 12 saw declines. This may be compared to changes in the pay of Members of Congress, -10.41%, and General Schedule, DC, -0.13%, over approximately the same period (calendar years 2006-2015). Between FY2001 and FY2015, the change in median pay, in constant 2016 dollars, ranged from a 27.09% increase for state directors to a -19.64% decrease for press secretaries. Of 15 staff positions for which data were available between FY2001 and FY2015, 7 positions saw pay increases while 8 saw declines. This may be compared to changes in the pay of Members of Congress, -10.4%, and General Schedule, DC, 7.36%, over approximately the same period (calendar years 2001-2015).

The level of pay for congressional staff is a source of recurring questions among Members of Congress, congressional staff, and the public. There may be interest in congressional pay data from multiple perspectives, including assessment of the costs of congressional operations; guidance in setting pay levels for staff in Member offices; or comparison of congressional staff pay levels with those of other federal government pay systems. This report provides pay data for 16 staff position titles that are typically used in Senators' offices. The positions include the following: Administrative Director, Casework Supervisor, Caseworker, Chief of Staff, Communications Director, Counsel, Executive Assistant, Field Representative, Legislative Assistant, Legislative Correspondent, Legislative Director, Press Secretary, Scheduler, "Specials Director" (a combined category that includes the job titles Director of Projects, Director of Special Projects, Director of Federal Projects, Director of Grants, Projects Director, or Grants Director), Staff Assistant, and State Director. Tables provide tabular pay data for each of the selected staff positions in a Senator's office. Graphic displays are also included, providing representations of pay from three perspectives, including the following: a line graph showing change in pay; a comparison at 5-, 10-, and 15-year intervals from FY2015, depending on data availability, of the cumulative percentage change in pay for that position to changes in pay of Members of Congress and federal civilian workers paid under the General Schedule in Washington, DC, and surrounding areas; and distributions of FY2015 pay in $10,000 increments. In the past five years (FY2011 and FY2015), the change in median pay, in constant 2016 dollars, ranged from a 9.86% increase for press secretaries to a -26.05% decrease for specials directors. Eight of the 16 positions experienced increases in pay, while the remaining eight positions saw declines in pay. This may be compared to changes to the pay of Members of Congress, -5.10%, and General Schedule, DC, -3.19%, over approximately the same period (calendar years 2011-2015). Pay data for staff working in House Member offices are available in CRS Report R44323, Staff Pay Levels for Selected Positions in House Member Offices, 2001-2014. Data describing the pay of congressional staff working in House and Senate committee offices are available in CRS Report R44322, Staff Pay Levels for Selected Positions in House Committees, 2001-2014, and CRS Report R44325, Staff Pay Levels for Selected Positions in Senate Committees, FY2001-FY2014, respectively. Information about the duration of staff employment is available in CRS Report R44683, Staff Tenure in Selected Positions in House Committees, 2006-2016, CRS Report R44685, Staff Tenure in Selected Positions in Senate Committees, 2006-2016, CRS Report R44682, Staff Tenure in Selected Positions in House Member Offices, 2006-2016, and CRS Report R44684, Staff Tenure in Selected Positions in Senators' Offices, 2006-2016.

This report discusses the FY2017 budget request for the U.S. Department of Energy's (DOE's) Office of Energy Efficiency and Renewable Energy (EERE) as proposed by the Obama Administration in February 2016, the amended FY2017 appropriations request proposed by the Trump Administration in March 2017, and the status of FY2017 congressional appropriations for EERE. It also discusses the Trump Administration's FY2018 budget blueprint released in March 2017 with regard to EERE. On March 16, 2017, the Trump Administration requested an $18 billion decrease in nondefense appropriations for FY2017. It is not clear how such a cut would apply to EERE. Additionally, the Administration released a budget blueprint for FY2018. The blueprint states that funding for EERE would focus on "limited, early-stage applied energy research and development activities where the Federal role is stronger." The blueprint requests $28.0 billion for DOE, a decrease of $1.7 billion, or 5.6%, from the FY2017 annualized continuing resolution level. The blueprint does not specify how much of the proposed $1.7 billion cut would apply to EERE programs. The blueprint specifies two program eliminations: the Weatherization Assistance Program and the State Energy Program, which received FY2016 appropriations of $211.6 million and $50.0 million, respectively (see Table 1 ). In February 2016, the Obama Administration requested both discretionary funding ($2.9 billion) and mandatory funding ($1.3 billion) for EERE for FY2017, for a total of $4.2 billion. The total $4.2 billion request is an increase of $2.2 billion (104%) from the enacted FY2016 level of $2.1 billion. The Obama Administration's discretionary portion of the FY2017 request was 40% higher than the FY2016 enacted level ($2.1 billion). The Senate-passed energy and water appropriations bill for FY2017 included $2.1 billion for EERE. The funding level Congress decides to provide could impact goals set by EERE, including sustainable transportation goals (e.g., vehicle electrification and biofuels), renewable energy goals (e.g., grid modernization for solar energy, enhanced geothermal technologies), and energy efficiency goals (e.g., establishment of one additional Clean Energy Manufacturing Innovation Institute). It also could affect EERE's involvement in the proposed 21 st Century Clean Transportation Plan and EERE assistance with industry competitiveness. This report does not discuss the opportunities, challenges, economic value, or commercial status of the various renewable energy technologies and energy efficiency initiatives selected by EERE, nor does it delve into the goals of the individual EERE programs or congressional oversight of certain EERE issues. EERE leads the DOE's effort to accelerate development and facilitate deployment of energy efficiency and renewable energy technologies and market-based solutions intended to strengthen U.S. energy security, environmental quality, and economic vitality. EERE is led by the Assistant Secretary for Energy Efficiency and Renewable Energy, and it is organized into four offices: Office of Transportation, Office of Renewable Power, Office of Energy Efficiency, and Office of Operations. EERE contends that it invests in only what it considers to be the highest-impact activities. EERE collaborates with industry, academia, national laboratories, and others to develop technology-specific road maps and then focuses on early stage research and development (R&D), technology validation and risk-reduction activities, and the reduction of market barriers to the adoption of market-ready new technologies. EERE also manages a portfolio of research and development programs that support state and local governments, tribes, and school leaders. In addition, EERE oversees the National Renewable Energy Laboratory (NREL)--the only national laboratory solely dedicated to researching and developing renewable energy and energy efficiency technologies. EERE receives its appropriations from the annual energy and water development (E&W) appropriations bill. During the last several years of the Obama Administration, the budget request was to increase funding to support EERE programs and objectives. Congress's response has been to provide funding at levels lower than what was requested. Appropriations for EERE have averaged $1.86 billion annually for the last six years in current dollars (see Table 1 ). The appropriations are split into four major categories: sustainable transportation, energy efficiency, renewable energy, and corporate support (e.g., program administration). From FY2011 to FY2016, approximately 65% of the appropriations were spent on sustainable transportation and energy efficiency, while approximately 25% of the appropriations were spent on renewable energy and approximately 12% was spent on corporate support. The Obama Administration requested $4.2 billion to support EERE programs and objectives for FY2017 ($2.9 billion in discretionary funding and $1.3 billion in mandatory funding). The total $4.2 billion request would represent an increase of $2.2 billion (104%) from the enacted FY2016 level of $2.1 billion. The discretionary portion of the Obama Administration request, $2.9 billion, would be an increase of $829 million (40%) over the FY2016 enacted level of $2.1 billion (see Table 1 ). The discretionary portion of the EERE FY2017 request is approximately 10% of the discretionary portion of the overall DOE FY2017 request of $30.2 billion. The FY2017 EERE request would allocate approximately 61% of the appropriations to sustainable transportation and energy efficiency, combined. However, energy efficiency would receive less in its share of the two categories combined than it did in FY2016 (32% in the FY2017 request, as compared with 35% in FY2016). The FY2017 request allocates close to 21% and 10% of the request for renewable energy and corporate support, respectively. Some of the goals, highlights, and major changes presented in the EERE FY2017 Obama Administration request, as reported by DOE, include the following: Sustainable Transportation [$852.9 million] Continues support for the Electric Vehicle (EV) Everywhere Grand Challenge by reducing the combined battery and electric drive system costs of a plug-in electric vehicle by up to 50% (by 2022, from a 2012 baseline). [$282.7 million] Continues support for the SuperTruck II initiative started in FY2016 to research, develop, and demonstrate a suite of technologies with the goal of improving the freight-hauling efficiency of heavy-duty Class 8 long-haul vehicles by 100% by 2020 (with respect to comparable 2009 vehicles) and demonstrating applicability of these technologies to heavy-duty regional-haul vehicles as well. [$60 million] Explore opportunities for energy efficiency above the program's traditional vehicle-level focus at the overall transportation system level with the Transportation as a System (TAS) initiative by evaluating how transportation assets, travelers, and the transportation system interact and i nfluence each other using multi scale, multisystem models, with the longer-term goal of optimizing efficiency of the transportation system. [$20 million] Support the conversion of cellulosic and algal-based feedstocks to bio-based gasoline, diesel, and jet fuel at a target cost of $3.00 per gallon of gasoline equivalent (gge) by the end of 2017, with an emphasis on drop-in hydrocarbon biofuels from nonfood sources. [$30 million for the Advanced Algal Systems subprogram] Develop a Synthetic Biology Foundry to improve efficiencies in the conversion of biomass to fuels and products. [$35 million] Support reduced cost and increased durability of a fuel cell system and invest in R&D for technologies that can lower the cost of hydrogen from renewable resources to less than $4.00/gge by 2020. [$35 million for fuel cell R&D; $44.5 million for hydrogen fuel R&D] Renewable Energy [$620.6 million] Support the SunShot Initiative goal of making solar power cost-competitive without subsidies by 2020, equivalent to a cost of solar power of $0.06 per kilowatt-hour, and support solar grid integration. [$43 million for concentrating solar power; $83 million for systems integration] Issue a competitive solicitation to establish an Offshore Wind R&D Consortium to accelerate fundamental R&D for offshore wind-specific technology barriers. [$25 million] Competitively fund new R&D projects for new stream reach development for innovative hydropower designs and construction methods. [$7.8 million] Commence procurement and construction for the critical infrastructure needed for an open-water, fully energetic, grid-connected wave energy test facility to assist with the development of marine and hydrokinetic technologies. [$20 million] Support research, development, and demonstration activities for a hydrothermal (geothermal) subprogram subsurface initiative focusing on technologies that provide for effective, adaptive, and safe control of fractures and fluid flow. [$33 million] Energy Efficiency [$919 million] Establish one additional Clean Energy Manufacturing Innovation Institute (CEMI) [$14 million] and continue support for five existing CEMIs [$70 million]. Continue support for activities that assist and enable federal agencies to meet aggressive energy, water, greenhouse gas, and other sustainability goals. Establish a Low-Global Warming Potential (Low-GWP) Advanced Cooling (HVAC) R&D funding opportunity announcement for advanced cooling and heating technologies. [$40 million] Create a Metropolitan Systems initiative that enables the use of historic and real-time, data-driven tools to support the design and development of low-energy, resilient infrastructure that will help U.S. cities meet their climate and energy targets. [$15 million] Support appliance and equipment standards. Provide access to home weatherization services for low-income households across the country to reduce their income spent on energy. Establish the Cities, Counties, and Communities Energy Program (3C Energy Program) to provide technical assistance and competitively awarded funds to catalyze more extensive clean energy solutions in community development and revitalization efforts. [$26 million] Other Obama Administration EERE initiatives included technology-to-market activities (e.g., National Incubator Initiative for Clean Energy) and international activities (e.g., expanding the number of Chinese cities using DOE's low-carbon planning tools and conducting demonstration projects featuring low-carbon technologies from U.S. companies). Additionally, under the Obama Administration's FY2017 request, EERE would establish a new crosscutting innovation initiative program introduced as a separate line item in the EERE budget table. The program would focus on providing funding for research, development, and demonstration activities, with the goal of strengthening regional clean energy innovation ecosystems, accelerating next-generation clean energy technology pathways, and encouraging clean energy innovation and commercialization collaborations between the National Laboratories and American entrepreneurs. Approximately 51% of the $215 million requested for the crosscutting innovation initiative would be spent on regional energy innovation partnerships. The Obama Administration requested that the new 21 st Century Clean Transportation program, a multiagency effort, be funded at $320 billion over 10 years. This program would aim to be a key step in "making smart and strategic investments to create a cleaner, more sustainable transportation system." The program is to be funded by both a new fee paid by oil companies--a $10 per barrel fee on oil gradually phased in over five years--and "one-time revenues from pro-growth business tax reform." The Administration stated that some benefits of the proposed plan include carbon pollution reduction, economic strengthening (i.e., job creation), and transportation expansion. The EERE FY2017 budget request would provide $1.3 billion of mandatory funding to support the program. More than half, approximately 56%, of the funding would be spent on deployment of low-carbon fueling infrastructure. DOE reports that EERE will seek to support this effort with $11.3 billion over 10 years. EERE participation in the program would include the following activities. Develop regional low-carbon fueling infrastructure, including charging stations for electric vehicles, biofuels, hydrogen, and other low-carbon options in partnership with others that take into account the unique economies, resources, and development needs of different regions. [$750 million] Conduct R&D to accelerate cutting the cost of battery technology and establish public-private partnerships to achieve lowest carbon end-to-end intermodal transport for freight and fleets. [$200 million] Establish a smart mobility research center that will investigate the intersection of information and communication technologies, vehicle technologies, low carbon fuels, and disruptive transportation business models with the goal of reducing overall system level greenhouse gas emissions and petroleum consumption. [$200 million] Conduct R&D that focuses on transformational developments that address technical barriers in biofuel feedstock logistics, lower conversion costs, enhanced economics of biofuel production by focusing on high value coproducts, and the certification of new fuel pathways. [$100 million] Accelerate the transition to a cleaner vehicle fleet by issuing challenge grants to encourage cleaner state, tribal, and local government vehicle fleets. [$85 million] The Obama Administration requested significantly more funding for EERE compared to the FY2016 enacted appropriations--at least an $829 million increase, and possibly a $2.1 billion increase if the mandatory funding request is taken into account. The funding requested would support numerous programs and activities. The $1.3 billion in mandatory funding requested to support the 21 st Century Clean Transportation Plan is part of a multiagency effort that depends on the enactment of a new revenue source. It could be a significant undertaking for EERE to implement the clean transportation plan's activities in addition to current responsibilities given that the funding requested for the plan would represent 64% of the FY2016 EERE enacted appropriations. In addition, it is possible that the plan may involve efforts previously dismissed by Congress. For instance, EERE stated that it would use the mandatory funding, in part, to "establish regional fueling infrastructure to support the deployment of low-carbon fuels." It is not known if EERE would consider blender pumps to be a part of this regional fueling infrastructure. If so, Congress rejected a related effort in the 2014 farm bill ( P.L. 113-79 ) by forbidding the use of Renewable Energy for America Program (REAP) funds to support blender pump installation. Congress may want to examine what impact such a program may have on clean transportation expansion, clean energy sources, or conventional energy sources; how quickly such a program may be implemented; and how effective such a program would be given its scope and that multiple participants--government and others, with various objectives--need to be involved to achieve the proposed outcomes. The Senate passed the Energy and Water Development and Related Agencies Appropriations Act, 2017 ( H.R. 2028 ) on May 12, 2016. The bill would have provided $2.1 billion for EERE, $825 million below the Obama Administration's FY2017 discretionary request and $3.8 million above the FY2016 enacted level. On May 26, 2016, the House rejected an Energy and Water Development and Related Agencies Appropriations Act for 2017 ( H.R. 5055 ). The bill would have provided $1.8 billion for EERE, $1.1 billion below the Obama Administration's FY2017 discretionary request and $244 million below the FY2016 enacted level. Funding is currently being provided by a continuing resolution.

The U.S. Department of Energy's (DOE's) Office of Energy Efficiency and Renewable Energy (EERE) is the principal government agency responsible for renewable energy technologies and energy efficiency efforts. EERE works with industry, academia, national laboratories, and others to conduct research and development (R&D) and to issue grants to state governments. EERE oversees nearly a dozen technologies and programs--from vehicle technologies to solar energy to advanced manufacturing to weatherization and intergovernmental programs--each with its own respective mission and program goals. EERE receives funding from the annual energy and water development (E&W) appropriations bill. At issue for the 115th Congress is not only the level of EERE appropriations but also which activities EERE should support, including whether to continue support for specific initiatives and programs. On March 16, 2017, the Trump Administration released a budget blueprint for FY2018. The blueprint states that funding for EERE would focus on "limited, early-stage applied energy research and development activities where the Federal role is stronger." The blueprint requests $28.0 billion for DOE, a decrease of $1.7 billion, or 5.6%, from the FY2017 annualized continuing resolution level. The blueprint does not specify how much of the proposed $1.7 billion cut would apply to EERE programs. The blueprint specified that the Trump Administration's request includes two specific program eliminations: the Weatherization Assistance Program and the State Energy Program, which received FY2016 appropriations of $211.6 million and $50.0 million, respectively. The Trump Administration also requested an $18 billion decrease in nondefense appropriations for FY2017; it is not clear how such a cut would apply to EERE. For FY2017, the Obama Administration requested $2.9 billion of discretionary funding for EERE and $1.3 billion of mandatory funding for a new program, bringing the total FY2017 budget request to $4.2 billion. This total request, if enacted, would be an increase of $2.2 billion (104%) over the enacted FY2016 level of $2.1 billion (the Consolidated Appropriations Act, 2016; P.L. 114-113, Division D). The $2.9 billion of discretionary funding requested would be an increase of $829 million (40%) over the FY2016 enacted level of $2.1 billion. The bulk of the discretionary portion of the request would be split among three areas: nearly 32% for energy efficiency programs, about 21% for renewable energy programs, and about 29% for sustainable transportation programs. The discretionary funding portion of the request is nearly 10% of the $30.2 billion discretionary portion of the FY2017 request for DOE. The Obama EERE request included new and ongoing efforts that range in scale and cost. EERE would continue to support the EV Everywhere Grand Challenge, concerning the adoption and use of plug-in electric vehicles; the SunShot Initiative to make solar energy cost-competitive by 2020; and the establishment of energy efficiency requirements for equipment and appliances. With the discretionary funding, EERE requested $40 million to establish a new R&D program focused on reducing the climate impacts of heating, ventilation, and air conditioning systems. Further, the Obama Administration requested $215 million for a new EERE Crosscutting Innovation Initiatives program, which has several goals, including the establishment of regionally focused clean energy innovation partnerships across the country and the acceleration of next-generation clean energy technology pathways. A relatively significant new measure contained in the Obama budget request was $1.3 billion in mandatory funding for EERE's portion of the Obama Administration's 21st Century Clean Transportation System--a new multiagency initiative to build a clean transportation system. EERE reports that this initiative would "expand investment in transportation technologies of the future; establish regional fueling infrastructure to support the deployment of low-carbon fuels; and accelerate the transition to a cleaner vehicle fleet." On May 12, 2016, the Senate passed the Energy and Water Development and Related Agencies Appropriations Act, 2017 (H.R. 2028). The bill would have provided $2.1 billion for EERE, $825 million below the Obama Administration's FY2017 discretionary request and $3.8 million above the FY2016 enacted level. On May 26, 2016, the House rejected an Energy and Water Development and Related Agencies Appropriations Act for 2017 (H.R. 5055). The bill would have provided $1.8 billion for EERE, $1.1 billion below the Obama Administration's FY2017 discretionary request and $244 million below the FY2016 enacted level. Funding is currently being provided by a continuing resolution.

The Workforce Investment Act of 1998 (WIA; P.L. 105-220 ) is the primary federal program that supports workforce development. WIA includes four main titles: Title I--Workforce Investment Systems--provides job training and related services to unemployed or underemployed individuals. Title I programs, which are primarily administered through the Employment and Training Administration (ETA) of the U.S. Department of Labor (DOL), include three state formula grant programs, multiple national programs, Job Corps, and demonstration programs. In addition, Title I authorizes the establishment of a One-Stop delivery system through which state and local WIA training and employment activities are provided and through which certain partner programs must be coordinated; Title II--Adult Education and Literacy--provides education services to assist adults in improving their literacy and completing secondary education; Title III--Workforce Investment-Related Activities--amends the Wagner-Peyser Act of 1933 to integrate the U.S. Employment Service (ES) into the One-Stop system established by WIA; and Title IV--Rehabilitation Act Amendments of 1998--amends the Rehabilitation Act of 1973, which provides employment-related services to individuals with disabilities. The authorizations for appropriations for most programs under the Workforce Investment Act (WIA) of 1998 ( P.L. 105-220 ) expired at the end of Fiscal Year (FY) 2003. Since that time, WIA programs have been funded through the annual appropriations process. In the 108 th and 109 th Congresses, bills to reauthorize WIA were passed in both the House and the Senate; however, no further action was taken. In the 112 th Congress, the Senate Committee on Health, Education, Labor, and Pensions (HELP) released discussion drafts in June 2011 of legislation to amend and reauthorize WIA. While markup of this legislation was scheduled, it was ultimately postponed indefinitely. No legislation has been introduced. The House Committee on Education and the Workforce, however, has ordered reported H.R. 4297 --the Workforce Investment Improvement Act of 2012. This bill was introduced on March 29, 2012, by Representative Virginia Foxx of North Carolina, the chair of the Subcommittee on Higher Education and Workforce Training, (for herself, Representative Howard P. "Buck" McKeon of California, and Representative Joseph Heck of Nevada). A legislative hearing on H.R. 4297 was held before the full Committee on Education and the Workforce on April 17, 2012. On June 7, 2012, the committee, after considering 23 amendments to H.R. 4297 , ordered the bill reported by a vote of 23 to 15. This report summarizes each of the WIA titles and highlights the major features of H.R. 4297 pertaining to each title. The report also compares the proposed provisions of H.R. 4297 to current law in the following tables: Table 1 . Major Provisions of Title I. This table covers provisions governing the "workforce investment systems" that provide for, among other things, state formula grants, state and local planning procedures, and the establishment of the One-Stop delivery system. WIA established the One-Stop delivery system as a way to co-locate and coordinate the activities of multiple employment programs for adults, youth, and various targeted subpopulations. The delivery of these services occurs primarily through more than 3,000 career centers nationwide. Table 2 . Major Provisions of Title II. This table covers provisions for adult education and literacy activities. Table 3 . Major Provisions of Title III. This table covers changes to the Wagner-Peyser Act of 1933, which was also amended in Title III of WIA. Wagner-Peyser provides authorization for the Employment Service. Table 4 . Major Provisions of Title IV of WIA and Title V of H.R. 4297 . This table addresses amendments to the Rehabilitation Act of 1973, in particular to the Vocational Rehabilitation and other employment-related provisions of that act, which authorizes various employment services for individuals with disabilities. Title I of the Workforce Investment Act--Workforce Investment Systems--authorizes the establishment of a One-Stop delivery system through which state and local WIA training and employment activities are provided and through which certain partner programs must be coordinated. Title I also authorizes funding for the three major state formula grant programs (Adult, Youth, and Dislocated Worker), Job Corps (a DOL-administered program for low-income youth), and several other national programs that are directed toward subpopulations with barriers to employment (e.g., Native Americans). H.R. 4297 takes a fundamentally different approach from current law to the federal role in the delivery of workforce development services by consolidating multiple programs into a single block grant that is allocated to states by formula. At the same time, H.R. 4297 maintains the One-Stop delivery system as the delivery mechanism for employment and training services. The Adult Education and Family Literacy Act (AEFLA) is the current law that authorizes funds supporting programs related to basic education (i.e., instruction at the secondary school level and below) for individuals who are beyond school age, not enrolled in school, and lacking a high school diploma or equivalent. The program also funds educational services for English learners. The largest portion of AEFLA funds are grants to states that are subsequently allotted to local entities that conduct educational programs. H.R. 4297 reauthorizes Title II programs through 2018. It limits the annual authorized appropriation level to FY2012 levels and changes several AEFLA provisions to emphasize the relationship between adult education and employment. AEFLA is also amended to align with the new WIA performance indicators. Title III of the Workforce Investment Act--Workforce Investment-Related Activities--makes amendments to the Wagner-Peyser Act of 1933 (29 U.S.C. 49 et seq. ), which authorizes the Employment Service (ES). The ES is the central component of most states' One-Stop delivery systems, as ES services are universally accessible to job seekers and employers and ES offices may not exist outside of the One-Stop delivery system. Although the ES is one of the required partners in the One-Stop delivery system, its central mission--to facilitate the match between individuals seeking work and employers seeking workers--makes it critical to the functioning of the workforce development system under WIA. Title III adds Section 15 ("Employment Statistics") to Wagner-Peyser, which requires the Secretary of Labor to develop, provide, and improve various types of labor market information. H.R. 4297 repeals Sections 1-14, which authorize the Employment Service. Funding from the ES is consolidated into the new Workforce Investment Fund. The Rehabilitation Act, as amended, authorizes grants to support programs related to employment and independent living for individuals with disabilities. Most programs under the Rehabilitation Act are administered by the Rehabilitation Services Administration (RSA) of the Department of Education (ED). In FY2012, the Vocational Rehabilitation (VR) grants to the states program accounted for the majority of the funds that were appropriated under the Rehabilitation Act. VR is a mandatory One-Stop partner program. Title V of H.R. 4297 reauthorizes the VR grants to the states program through FY2018 and limits authorization to the prior year's appropriation plus an increase equal to inflation. It also increases emphasis on students transitioning out of school by requiring state plans to address how they will serve this population and requiring that 10% of each state's federal allotments be set aside for services to transitioning students. H.R. 4297 also repeals several smaller programs that were authorized under the Rehabilitation Act.

The Workforce Investment Act of 1998 (WIA; P.L. 105-220) is the primary federal program that supports workforce development activities, including job search assistance, career development, and job training. WIA established the One-Stop delivery system as a way to co-locate and coordinate the activities of multiple employment programs for adults, youth, and various targeted subpopulations. The delivery of these services occurs primarily through more than 3,000 One-Stop career centers nationwide. The authorizations for appropriations for most programs under the WIA expired at the end of Fiscal Year (FY) 2003. Since that time, WIA programs have been funded through the annual appropriations process. In the 108th and 109th Congresses, bills to reauthorize WIA were passed in both the House and the Senate; however, no further action was taken. In the 112th Congress, the Senate Committee on Health, Education, Labor, and Pensions (HELP) released discussion drafts in June 2011 of legislation to amend and reauthorize WIA. While markup of this legislation was scheduled, it was ultimately postponed indefinitely. No legislation has been introduced. The House Committee on Education and the Workforce, however, has ordered reported H.R. 4297--the Workforce Investment Improvement Act of 2012. This bill was introduced on March 29, 2012, by Representative Virginia Foxx of North Carolina, the chair of the Subcommittee on Higher Education and Workforce Training (for herself, Representative Howard P. "Buck" McKeon of California, and Representative Joseph Heck of Nevada). A legislative hearing on H.R. 4297 was held before the full Committee on Education and the Workforce on April 17, 2012. On June 7, 2012, the committee, after considering 23 amendments to H.R. 4297, ordered the bill reported by a vote of 23 to 15. H.R. 4297 would maintain the One-Stop delivery system established by WIA but would repeal numerous programs authorized by WIA and other federal legislation, and it would consolidate other programs into a new single funding source--the Workforce Investment Fund. In addition, H.R. 4297 would increase the role of business representatives in the state and local governance structure of WIA and would increase the ability for states to propose further program consolidation in the funding and delivery of workforce services. Adult Education and Vocational Rehabilitation retain separate titles and funding in H.R. 4297. This report first provides a brief introduction to the four main titles of WIA and then compares the proposed provisions of H.R. 4297 to the current law provisions by each of the four titles.

The European Union (EU) is an important partner or interlocutor of the United States on a large number of global political and economic issues. The EU is also a complex, multi-layered entity whose structure and institutional dynamics are not always clearly understood in Washington, DC (or in Europe, for that matter). Some Members of the U.S. Congress and other U.S. officials regularly meet with their counterparts from EU institutions and national governments of EU member countries. Just as many Europeans are admittedly unclear about the role of the Congress in U.S. foreign policy, Americans often express confusion about the exact role of a particular EU official or institution, or about how EU institutions relate to one another. Take, for example, the term "president": in the EU today, there is a President of the European Council, a President of the European Commission, a President of the European Parliament, and a rotating country presidency of the EU that has a corresponding national president or prime minister. U.S. officials dealing with the European Union may still wonder, "who should we be talking to?" or even "who am I talking to?" To complicate matters further, the EU is also an entity whose institutional arrangements and governance structure remain in a state of evolution following the entrance into force of the Lisbon Treaty, the EU's latest institutional reform effort. In early 2010, President Obama announced that he was not planning to attend the U.S.-EU Summit that was expected to be held in late May 2010 in Madrid, Spain. The U.S. State Department indicated at the time that confusion caused by changes to the EU's leadership and governance arrangements resulting from the Lisbon Treaty had contributed to the decision. This episode reflected a wider lack of clarity in the United States about the implications of the Lisbon Treaty on EU leadership, and in particular on the status of the EU's "rotating presidency," the role of the EU's new "permanent president," and the role of other EU actors involved in representing the European Union on the world stage. On December 1, 2009, following a lengthy process of ratification by each of the 27 member states, the EU adopted the Lisbon Treaty. The treaty introduces reforms intended to remedy perceived shortcomings in the EU's institutional arrangements and decision-making procedures--it aims to create a more cohesive and coherent EU capable of assuming a stronger global role; to streamline EU decision-making; and to increase transparency and democratic accountability. Changes introduced by the Lisbon Treaty have a significant impact on the leadership of the European Council, the Council of Ministers, and the EU's rotating presidency system. The European Council and the Council of Ministers are two separate but related institutions of the European Union. The similar names of these entities frequently lead to confusion. The official name of the Council of Ministers is the Council of the European Union; it is often referred to as "the Council." The European Council consists of the leaders (the heads of state and/or government) of the 27 EU member states plus the President of the European Commission. The European Council meets at least four times per year--its meetings are commonly termed "EU summits." The European Council does not adopt legislation or legal texts: the conclusions published after each meeting define general political guidelines for the EU. The institution provides high-level political direction for EU policy-making and a forum for working out consensus on difficult problems and broad strategic issues. The Council of Ministers is the main decision-making body of the EU: it enacts legislation, usually based on proposals put forward by the European Commission. A minister from each member country takes part in Council meetings, with participation configured according to the subject under consideration (e.g., foreign ministers would meet to discuss the Middle East, agriculture ministers to discuss farm subsidies). There are currently 10 different configurations under which the Council of Ministers meets. Most decisions are made by a formula of Qualified Majority Voting (QMV), but some areas--such as foreign and defense policy or accepting new members--require unanimity. Many Council decisions also require the joint consent of the European Parliament. Every six months--on January 1 and July 1 of each year--the "EU Presidency" rotates among the member states. The presidency rotates in a pre-determined order designed to alternate between big and small countries, and between older and newer members. Prior to the adoption of the Lisbon Treaty, the rotating presidency applied to both the European Council and the Council of Ministers. The leader of the presidency country chaired the European Council for six months, seeking to forge political consensus and shape the EU agenda. He or she also assumed an enhanced role in representing the EU externally, alongside the President of the Commission and the High Representative for the Common Foreign and Security Policy. At the same time, ministers of the presidency country would chair the meetings of the Council of Ministers, leading in the meetings and configurations relevant to their portfolio. During the debate over ratification, it was widely repeated that the Lisbon Treaty would "replace" the EU's rotating presidency system with the creation of a new, permanent "EU President." In fact, this assertion grew to become a fairly common misconception. The rotating presidency system continues in a modified format. The treaty creates the new position of President of the European Council, who replaces the leader of the presidency country in that role. Meanwhile, the rotating country presidency retains considerable responsibility in managing the work of the Council of Ministers, and continues to have an important role in helping to set priorities for the EU agenda. As noted above, the Lisbon Treaty creates the new position of President of the European Council to chair the meetings of the 27 EU heads of state or government. The President is elected by the member states for a term of two-and-a-half years, renewable once. Some had envisioned this position as a driver of EU policy, a heavyweight presidential figure who would command a high degree of international visibility. In choosing former Belgian Prime Minister Herman Van Rompuy, however, EU leaders have initially defined this position as more of a manager who will coordinate the activities of the Council, help ensure policy continuity, and work to facilitate consensus. According to some analysts, the choice of Van Rompuy confirms that even as its members pursue a stronger and more integrated EU, considerations of national influence and prestige remain key: leaders from both large and small countries sought to avoid establishing a powerful President who might overshadow or marginalize their own roles. Nevertheless, the intention of the treaty is that Von Rompuy is now expected to represent the EU externally as its spokesman on political issues and as the main EU interlocutor for foreign leaders at international summits. Van Rompuy is not a well-known international statesman, and will have to work hard at it if he is to gain visibility on the global stage. The Lisbon Treaty also creates another important new position to boost the EU's international visibility: High Representative of the Union for Foreign Affairs and Security Policy, which some observers have labeled "EU foreign minister." Former EU Trade Commissioner Catherine Ashton was appointed for the first five-year term of this new position. Some were surprised at this choice, citing Ashton's relative lack of foreign policy experience. Ashton is now the EU's chief diplomat, exercising the former responsibilities of the Council of Ministers' High Representative for the Common Foreign and Security Policy (formerly Javier Solana) and the Commissioner for External Relations (formerly Benita Ferrero-Waldner), who oversaw the EU's foreign aid and development policies. The new High Representative is therefore be an agent of the Council of Ministers and holds the title of a Vice President of the European Commission, an institutional adjustment intended to impart greater coherence by marrying the EU's political and economic clout in one powerful new office. The High Representative is to have extensive staff support with the creation of a new EU diplomatic corps called the European External Action Service. Within the Council of Ministers, Ashton, rather than the foreign minister of the presidency country, now chairs the meetings of the member state foreign ministers that are held under the Foreign Affairs configuration. The other nine configurations are to continue to be chaired by the relevant ministers of the rotating country presidency. The General Affairs configuration--which considers "general policy questions" and works to ensure continuity in the overall work of the Council--is chaired by the foreign minister of the rotating country presidency. Prior to the Lisbon Treaty, General Affairs and External Relations had been combined in one Council configuration. Many of the day-to-day duties of the presidency country continue as before the Lisbon Treaty. The presidency country is expected to work with the new President of the European Council to help prepare and arrange EU summits and summits between the EU and other countries. It is expected to continue preparing, arranging, and chairing the meetings of the Council of Ministers, other than in the Foreign Affairs configuration. This responsibility includes working in the Council of Ministers to forge agreement on legislative proposals. The presidency country is also expected to continue setting out a few broad policy priorities for its tenure. In the past, such priorities have often been coupled with the launch of strategic initiatives that have covered a wide range of topics such as international security and development issues, economic and trade matters, judicial affairs, social policy, and issues specific to particular regions such as the Mediterranean, the Baltic, or the EU's eastern neighbors. Advocates of the Lisbon Treaty express hope that the new arrangements will have a considerable impact in this context. The President of the European Council is charged with ensuring greater continuity, coherence, and consistency in EU policies. In the past, analysts have asserted that the rotating presidency system made the EU too susceptible to frequent shifts in focus, as successive presidencies chose to emphasize their own preferred initiatives and priorities. Van Rompuy is to impart a longer-term view as he works with the presidency countries to set and manage the EU agenda. Renewed emphasis has also been placed on the "troika" concept, in which three consecutive rotating presidencies coordinate priorities in an 18-month program. EU external affairs issues generally fall into one of two categories, differentiated from one another by both the nature of decision-making and the EU institutions relevant to that process. First, foreign policy decisions of a political nature, as well as all decisions related to EU security and defense policy, are the province (in EU terminology, the "competence") of the member states. Decisions that are adopted unanimously by all 27 member countries are what make up the EU's Common Foreign and Security Policy (CFSP). This process of "intergovernmental" decision-making takes place in the European Council and the Council of Ministers. Thus, it is in political matters and CFSP that the new President of the European Council and the new High Representative of the Union for Foreign Affairs and Security Policy are expected, as described above, to play the most prominent role (possibly with an occasional assist, as requested, from the leader or foreign minister of the rotating presidency country). Second, in many areas of policy-making, the member countries of the EU have agreed to pool their sovereignty. Areas of shared sovereignty that have relevance in external affairs include trade policy, environmental policy, and development aid. Such topics are said to fall under the "Community competence," and decision-making takes place through the "Community method." Typically, the European Commission initiates proposed legislation, which is then voted on in the Council of Ministers through a system of Qualified Majority Voting--although the EU generally seeks as broad a consensus as possible in its decision-making, unanimity is not required in these cases. In the Community method, approval of a measure also usually requires the joint consent of the European Parliament (i.e., "co-decision"). Measures approved in this way are subsequently regulated or enforced by the European Commission, often with oversight by the European Parliament. The Commission also represents the EU internationally in negotiations on these topics (e.g., on trade) or in managing the policies that fall under its competence (e.g., foreign aid). The President of the European Commission will therefore continue to play an important role in representing the EU externally on issues that are managed by the Commission, including, as mentioned above, many economic, trade, and environmental issues. Jose Manuel Barroso is in his second five-year term as Commission President. Along with the new President of the European Council and the new High Representative, Barroso is expected to participate on behalf of the EU in major international summits. The individual Commissioners also have a representative role on those issues which fall under their portfolio (some portfolios have more external aspects than others) and the staff working under each Commissioner in the Commission directorates-general may maintain working relationships with various foreign officials as their duties require. Prior to the enactment of the Lisbon Treaty, the EU "embassies" in many countries around the world, including in Washington, DC, were actually delegations of the European Commission. Reflective of the EU's consolidated legal identity under the treaty, these diplomatic posts are now delegations of the European Union, and their staffing by the newly created External Action Service is expected to consist of a mixture of personnel drawn from the Commission and the Council, as well as secondees from national diplomatic services. Many of the issues in which the European Parliament acts as a "co-legislator" bear on external affairs in some way. For example, under the Lisbon Treaty the European Parliament now has an enhanced role in EU trade policy and must approve all of the EU's external agreements. As an additional example, the Parliament's role in privacy and data protection issues can affect transatlantic homeland security and counterterrorism cooperation, as seen in its rejection of a U.S.-EU agreement on bank data transfers earlier this year which required the Commission to re-negotiate a new agreement with the United States. Although it has no formal role in the CFSP, some observers suggest that the Parliament has become an increasingly important forum for debating international issues. The President of the European Parliament, currently former Polish Prime Minister Jerzy Buzek, is its top representative and spokesman. The Parliament has 20 standing committees, including a foreign affairs committee, which often play an influential role in the formulation and oversight of EU policies and legislation. The European Parliament also plays a role in the EU's international presence with 36 delegations that maintain parliament-to-parliament contacts and relations with representatives of most countries around the world. Because the language of the Lisbon Treaty is fairly vague as to the exact duties of the newly created positions, analysts assert that the roles of the key positions in EU external affairs--the President of the European Council and the High Representative, as well as the President of the Commission, the rotating country presidency, and the European Parliament--will be worked out and defined in practice as the new arrangements are implemented. The changes of the Lisbon Treaty are designed to give the EU better tools with which to develop a stronger and more coherent global role, but change is seen as occurring over time and the impact of these changes could take years to measure.

Changes introduced by the Lisbon Treaty, the European Union's (EU's) reform treaty that took effect on December 1, 2009, have a significant impact on EU governance. The EU is an important partner or interlocutor of the United States in a large number of issues, but the complicated institutional dynamics of the EU can be difficult to navigate. The Lisbon Treaty makes substantial modifications in the leadership of the EU, especially with regard to the European Council, the Council of Ministers, and the EU's rotating presidency. Every six months, the "EU Presidency" rotates among the 27 member states. Under the treaty, however, the leader of the presidency country no longer serves as the temporary chair and spokesman of the European Council, the grouping of the EU's 27 national leaders. This duty now belongs to the newly created President of the European Council, who serves a once-renewable two-and-a-half-year term. In addition, the foreign minister of the presidency country no longer chairs the meetings of EU foreign ministers in the Council of the EU (commonly known as the Council of Ministers). This duty is now performed by the High Representative for Foreign Affairs and Security Policy, another newly created position whose holder serves a five-year term and is both an agent of the Council of Ministers and a Vice President of the European Commission. Many of the day-to-day duties of the rotating presidency country, however, will continue under the Lisbon Treaty. Ministers of the presidency country will still chair all of the meetings of the Council of Ministers other than in the area of foreign policy. The presidency country is expected to continue preparing and arranging these activities, and playing a leading role in the Council of Ministers to forge agreement on legislative proposals. The presidency country is also expected to help formulate a few broad policy priorities for its tenure. The EU remains in an extended phase of institutional transition as the new arrangements of the Lisbon Treaty are implemented, and the rotating presidency country is expected to support the development of the new institutions and positions. Hungary holds the rotating presidency for the first half of 2011, and Poland will hold it for the second half of the year. Spain and Belgium held the rotating presidency in 2010. EU foreign policy decisions of a political or security-related nature require unanimous intergovernmental agreement among the 27 member states. In many other issues which may relate to external affairs, however, EU members have agreed to pool their decision-making sovereignty. A number of additional EU actors often have particular relevance in these matters. The President of the European Commission represents the EU externally on issues that are managed by the Commission, including many economic, trade, and environmental issues. Many of the issues in which the European Parliament acts as a "co-legislator," such as trade and data protection, relate to external affairs. Some observers also suggest that the Parliament has become an increasingly important forum for debating international issues. Changes in the structure of EU governance may be of interest to the 112th Congress. For more information, also see CRS Report RS21372, The European Union: Questions and Answers, by [author name scrubbed] and [author name scrubbed] and CRS Report RS21618, The European Union's Reform Process: The Lisbon Treaty, by [author name scrubbed] and [author name scrubbed].

America's current account (CA) (exports less imports plus net income payments and net unilateral transfers) has been in deficit every year but one since 1982. After a year in surplus in 1991, it steadily rose as a share of gross domestic product (GDP) to a record high of 6.1% of GDP in 2005 and 2006. It fell slightly in 2007 and 2008, and reached 3% of GDP in 2009 (see Figure 1 ). The 2009 CA relative to GDP still exceeded the share reached in most years before the 2000s. By accounting identity, the CA deficit is equal to net inflows of foreign capital to the United States and reflects the imbalance between domestic saving and investment. If the CA deficit continued its decline since 2007, it would soon reach a sustainable level. The decline may be attributed to cyclical causes that are short-lived, however. As a result of the recession and financial crisis, domestic saving is higher, domestic private investment is lower, and so the need to borrow from abroad has diminished. As the economy returns to normal, domestic saving may fall and domestic investment is expected to rebound, either of which would increase the reliance on foreign borrowing. Further, the large increase in the federal budget deficit since 2007 requires financing--if maintained--from foreign or domestic sources. Without fundamental changes in underlying saving and investment patterns, the decline in the CA deficit will only be temporary. Some observers have questioned whether the CA deficit is sustainable. It has not prevented the economy from generally attaining full employment--the United States has run large CA deficits since the mid-1990s, yet unemployment has remained low in most of those years. The CA deficit has both positive and negative effects on the economy. Production of exports and import-competing goods is arguably lower than it would be in the absence of a CA deficit, but interest rates are also lower than they would be in the absence of foreign capital inflows. As a result, interest-sensitive spending on capital investment, residential investment, and consumer durables (e.g., automobiles and appliances) is higher. Those expressing concern about the CA deficit typically define unsustainability to mean that the United States would have difficulty financing the CA deficit at some point in the near future, and the resulting adjustment process would harm the U.S. economy. Basically, the CA deficit is sustainable as long as foreigners are willing to continue buying American assets. It is not enough for foreigners to reduce their demand for U.S. assets, since this would cause yields on U.S. assets to automatically rise until the market once again cleared. But if the desirability of U.S. assets were to change rapidly (due to a loss in confidence in the U.S. economy, for example), foreign capital inflows and the value of the dollar could decline quickly; at a minimum, foreigners would require significantly higher interest rates than they do at present for inflows to continue. For the U.S. to literally be unable to continue financing its current account deficit, foreign demand would have to fall so much that asset yields could not rise enough for foreigners to be willing to hold U.S. assets again. But what would make foreign investors change their minds about U.S. assets? Federal Reserve Chairman Ben Bernanke has argued that foreigners will continue to increase their holdings of U.S. assets as long as a "global savings glut" remains that leaves them with few other desirable investment alternatives. If both lender and borrower are rational, many economists believe that the CA deficit can be mutually beneficial--it allows the lender to enjoy a higher rate of return than could be enjoyed at home and allows the borrower to operate with a larger capital stock than could be financed from domestic saving. As long as those investments yield a high enough rate of return to service the debt, borrowing should not reduce future domestic income in absolute terms. Some economists, however, doubt this interpretation and are concerned that the large CA deficit is symptomatic of wider economic imbalance. They argue that a country cannot persistently rely on foreign borrowing to finance its investment needs, so the United States must eventually raise its low saving rate. They maintain that by financing a large budget deficit and housing boom (until 2006), much of the foreign borrowing is being used in ways that do not expand the economy's productive capacity, and therefore such borrowing does not enhance our ability to service foreign debt. Because foreign borrowing is not sustainable, they argue, Americans will eventually be forced to significantly increase their saving (equivalently, to reduce their consumption) and reduce their investment rates, and the U.S. economy will slow. As a long-term solution, these economists prescribe policy measures to raise saving and reduce overall spending as the appropriate response to an excessively large CA deficit. This could be done through microeconomic policies, such as policies to encourage higher private saving, and macroeconomic policies, such as a tightening of monetary and fiscal policy, although this response would risk inducing the same recession that they fear the CA deficit may eventually cause (particularly if the economy were weak already). As a consequence of large CA deficits, a growing share of the U.S. capital stock is owned by foreigners and a rising fraction of U.S. income will need to be diverted overseas in the form of interest and dividends to foreigners. The process cannot continue indefinitely, or else foreigners would eventually hold a larger share of American assets in their portfolios than they desire. But though economists may feel confident that the CA deficit will decline in the long run, long run predictions do not offer much help in predicting short-term trends. Foreigners may wish to increase their holdings of American assets (in which case the CA deficit would persist) in the near term. One common assumption is that the CA deficit would, at most, continue until the share of American assets held in foreign portfolios equaled America's share of world output; by this measure, foreigners still hold too few American assets. For example, citizens of the euro area hold an estimated 53% of their wealth in euro-denominated assets and 19% in U.S. dollar-denominated assets, whereas the Japanese hold an estimated 63% of their wealth in yen-denominated assets and 4% in dollar-denominated assets. This is referred to as a "home bias" in saving because all countries hold more of their own assets, and fewer foreign assets, than optimal portfolio diversification would suggest. This bias is considered unlikely to disappear entirely, in which case CA deficits will ease before this benchmark is met. In any case, the reason why home bias would decline for foreigners but not Americans, as continuing CA deficits would imply, remains unclear. On the other hand, if the U.S. economy grows faster than the rest of the world in the future, then (small) CA deficits would be needed for foreigners to maintain U.S. asset holdings equal to the U.S. share of world GDP. One reason that U.S. imports cannot exceed exports indefinitely (and the dollar could eventually fall) is that today's CA deficits have a consequence for future trade balances. The accumulation of net debt that Americans owe to foreigners will need to be serviced in the future, and debt service will take the form of a payment from the United States. To offset the payment, the United States must export more or borrow more. But, all else equal, foreigners will only be induced to buy more exports if the dollar depreciates. Net investment income payments make up a small fraction of the CA deficit today, but economist Edwin Truman estimates that if CA deficits continued to equal 6% of GDP, net income payments would eventually reach 4.5% of GDP, leaving a trade deficit of only 1.5% of GDP. In other words, a constant trade deficit would imply a growing CA deficit because of growing net investment income payments. In 2008, the United States had a net foreign debt of $3.5 trillion, but received net investment income of $126 billion from the rest of the world. What is surprising about these data is that the United States still consistently has positive net investment income despite its large net debt, and shows no long-term downward trend as the foreign debt grows. That is because U.S. holdings of foreign assets have earned a higher rate of return than U.S. debt owed to foreigners. Between 1981 and 2008, the United States earned an average estimated real rate of return of 3.1% more on its foreign assets than its foreign liabilities. This estimated rate of return differential has prevented foreign borrowing from becoming burdensome and suggest that the U.S. net foreign debt could become significantly larger before debt payments would become burdensome. Kouparitsas estimates that if these rate-of-return differentials were to continue, the United States could maintain a current account deficit of 0.9-1.3% of GDP indefinitely without any increase in its net foreign debt. However, this favorable rate-of-return differential may not continue in the future if foreigners believe that the dollar will depreciate and demand a higher rate of return on U.S. borrowing as compensation. If U.S. interest rates rose, the debt could become burdensome quickly. Although some reduction in the CA deficit is inevitable (although not necessarily in the near future), it need not be sudden. It should be emphasized that economic theory suggests that a slow decline in the CA deficit and dollar would not be troublesome for the overall economy. In fact, a slow decline could have an expansionary effect on the economy, because the increase in net exports could have a more stimulative effect on aggregate demand in the short run than the decrease in investment and other interest-sensitive spending caused by lower capital inflows. More realistically, the trade deficit would not decline exogenously, but in response to a slowing of overall domestic demand. Therefore, a falling trade deficit may tend to coincide with slower economic growth in practice, but that does not indicate that a falling trade deficit has caused growth to slow. Historical experience seems to support the idea that a slow decline in the trade deficit need not be harmful to the economy--the dollar declined by about 40% in real terms and the CA deficit declined continually in the late 1980s, from 2.8% of GDP in 1986 to nearly zero during the early 1990s. Yet economic growth was strong throughout the late 1980s. (More recent experience is considered in the next section.) A potentially serious short-term problem would emerge if foreigners suddenly decided to reduce the fraction of their saving that goes to the United States in the form of a capital inflow, or if they suddenly decided to repatriate part of their liquid financial assets. The initial effect could be a sudden and large depreciation in the value of the dollar, as the supply of dollars on the foreign exchange market increased, and a sudden and large increase in U.S. interest rates, as an important funding source for investment and the budget deficit was withdrawn from the financial markets. Most likely, the direct trade effects of these shifts in lending patterns by foreigners would not cause a recession because the dollar depreciation would lead to a trade surplus (or smaller deficit), which expands aggregate demand. (Empirical evidence suggests that the full effects of a change in the exchange rate on traded goods takes time, so the dollar may have to "overshoot" its eventual depreciation level in order to achieve a significant adjustment in trade flows in the short run.) However, the indirect interest rate effects, which typically only partially offset the direct effects, could cause a recession if the change is sudden. Large increases in interest rates could cause problems for the U.S. economy, as these increases reduce the market value of debt securities, cause prices on the stock market to fall, and jeopardize the solvency of various debtors and creditors. Resources may not be able to shift quickly enough from interest-sensitive sectors to export sectors to make this transition fluid. The Federal Reserve could mitigate the interest rate spike by reducing short-term interest rates, although this reduction would influence long-term rates only indirectly and could increase inflation. Is a scenario where the dollar crashes a likely one? Economic theory typically assumes that financial market participants act rationally. If the rationality assumption is a good one, then the potential for a sudden decline is slim. After all, foreigners would be demanding high rates of return to buy U.S. assets today if they could foresee that the foreign currency value of these assets is likely to fall sharply in the near future. Of course, financial markets do not always seem driven by rational behavior in practice, but as a result, theory has little predictive power of the timing or likelihood of a "sudden stop." Given the traditional role the United States has played as an investment safe haven, sudden capital outflows seem unlikely. On the contrary, investment might be attracted to U.S. assets in a liquidity crisis because the U.S. offers more liquid financial markets (e.g., U.S. Treasury bond markets) than do most foreign counterparts. As discussed above, a destabilizing interruption in the financing of the CA deficit would likely be triggered by some sudden change in investor sentiment about U.S. assets. The financial crisis, beginning in August 2007 with the illiquidity of the U.S. subprime mortgage market and deepening in September 2008, would seem to be a good test case for how a large change in investor sentiment would affect the CA deficit. Overall, the CA to GDP ratio declined by about half between 2007 and 2009, but this did not lead to sharp changes or negative effects for the dollar or interest rates that could be harmful to the economy. The dollar continued its long and gradual downward trend until April 2008, before it started rising--through the worst of the crisis--until March 2009. Interest rates on U.S. Treasuries fell to extremely low levels during the crisis despite the large increase in the budget deficit, as U.S. Treasuries continued to be seen as a desirable destination during the "flight to quality." Other interest rates generally fell along with U.S. Treasury yields, although risk premiums on private assets rose and some private borrowers were shut out of credit markets entirely because of the crisis. Problems recently experienced in U.S. financial markets have been widely viewed as "once in a lifetime" events. If these events failed to cause a sudden flight from U.S. assets and an inability to finance the CA deficit, it is hard to imagine what would. While the overall data provides little evidence to support fears of a "sudden stop" in financing the CA deficit, a closer look at the data is less reassuring. The crisis led to a large decline in private capital flows in 2008--both foreign purchases of U.S. assets and U.S. purchases of foreign assets that had countervailing effects on the CA balance. (Private foreign demand for Treasuries was high in 2008 and 2009, but foreigners sold private U.S. securities on net.) In 2009, private U.S. net purchases of foreign assets returned to half of their pre-crisis level, but private foreigners continued to sell U.S. assets on net. Were the U.S. reliant on private purchases alone, the CA would have seen a large swing from deficit in 2008 to surplus in 2009, all else equal. Had such a large swing occurred, interest rates and the dollar may not have been as stable as they were. Instead, the CA remained in deficit because of large purchases of U.S. assets from official sources (foreign governments or international institutions). This trend was not new--the steady financing of the CA deficit has depended heavily on official capital inflows since 2002. Official capital inflows have exceeded $200 billion per year since 2003, and $400 billion since 2006. Had these central banks decided not to increase their dollar-denominated foreign reserves, the CA deficit and the value of the dollar might have fallen precipitously. Further, the 25% fall in the dollar from 2002 to 2008 was larger than average against some trading partners who do not intervene in foreign exchange markets, and very small against trading partners who do intervene. Going forward, some analysts fear that official capital inflows could prove unreliable or provide foreign governments with leverage that would undermine U.S. policy aims. Because official inflows are likely financed by considerations other than rate of return, it is difficult to predict how they will evolve in the future. (In the past few years, official inflows have proven much steadier than private.) But given the importance of the United States as a foreign export market, deliberately taking a step that could potentially precipitate a U.S. economic crisis could be against a foreign country's economic self-interest, and reduce the value of the U.S. assets already owned by the country. The financial crisis has demonstrated that foreign governments, desiring to maintain the status quo, have been willing to increase their purchases of U.S. securities while others are reducing their U.S. holdings. The story told in this section is based on capital flow data, but these data should be viewed with caution during the financial crisis. Private capital flows are hard to track. Individual entries in the capital accounts have shown large swings from quarter to quarter during the crisis that raise issues of reliability, and the statistical discrepancy in 2008 and 2009 was about half the size of the current account deficit. Furthermore, there is a problem of causality in interpreting these results. The instability in the economy and international capital flows are generally viewed as being caused by the financial crisis, but causality could also run in the other direction, making it hard to distinguish to what extent the financial crisis should be attributed to movements in international capital flows. Problems with financing large budget and CA deficits in Greece from 2009 to 2010 are a reminder that problems around the world with CA sustainability are not unusual. But the usefulness of most comparisons to historical experience abroad is limited by the fact that the United States economy and financial system are so much larger than those of other countries. As a result, an economic occurrence in the United States has ramifications for the world economy that could have feedback effects for the U.S. economy, whereas changes in the CA balance of most small countries will most likely not affect the world economy. It also means that the amount of borrowing required to finance the U.S. CA deficit is a much larger share of world saving. Another difference is the role that the dollar plays as the world's "reserve currency." Because the dollar is the world's preferred currency for a store of value, medium of exchange, and unit of account, holders may be less willing to abandon it than they would any other currency. If so, the United States may be able to run higher sustainable CA deficits than other countries. In the developing world, a large CA deficit has often been a leading indicator of financial and currency crisis. This was the case in many recent crises, including Mexico, East Asia, Turkey, Brazil, and Argentina. The applicability of these experiences to the United States may be limited, however, because of three key differences between the United States and these countries. First, the United States has a flexible exchange rate regime. Countries with fixed exchange rates can be forced into crisis when their foreign exchange reserves are exhausted by "speculators" betting against the currency; similar bets are harder to make against flexible exchange rates. Second, the United States has traditionally been seen as a "safe haven" for investment. Third, unlike developing countries, the United States is able to borrow in its own currency, so that depreciation reduces rather than increases the burden of servicing its debt. Therefore, historical comparisons have tended to focus on the experience of other industrialized countries. Economist Sebastian Edwards found that since 1970, only two other industrialized countries, Ireland and New Zealand, had high CA deficits that were long-lasting (seven and five years, respectively). He found that large countries that experienced sharp declines in their CA also saw per capita GDP growth decline by 3.6% to 5.0%. Economists at Goldman Sachs, a financial firm, analyzed all episodes in industrialized countries since 1980 where the CA improved by more than 2% of GDP. It found 31 cases where the adjustment occurred under circumstances of economic disruption and 13 where there was no comparable disruption. In the disruption episodes, the economy typically started from a position of overheating and the output gap (the difference between actual and potential output) worsened by an average of 3.6% of GDP, whereas in the benign episodes, the economy started from a position of excess capacity and the output gap improved by 1.9%. The fact that the economy was initially overheating in the disruption episodes suggests that causality may run in the opposite direction--the CA shift may be a symptom rather than a cause of economic slowdown. In the disruption cases, there was little real exchange rate depreciation; in the benign cases, it averaged 5.1%. In most cases, the adjustment took several years. In all cases, consumption growth was negative on average and (surprisingly) interest rates on average fell. In only two cases (Portugal in the early 1980s and Finland in the early 1990s) was the CA decline associated with a severe recession. (The recession and CA decline in Finland were widely attributed to the collapse of the Soviet Union, among other factors.) Some of these cases may not be applicable to the U.S. experience, however, because the sample includes countries that had a small CA deficit or CA surplus. Only eight of these episodes involved a larger CA deficit as a share of GDP than the U.S. deficit today, and all eight episodes involved small countries. The International Monetary Fund conducted a similar study. It found 42 cases where an advanced economy had an initial CA deficit of at least 2.5% of GDP, and the CA deficit subsequently declined by at least 50%. It found, on average, that the real exchange rate declined by a cumulative 12.2%, causing a shift in the CA of 5.7% of GDP over the next 4.6 years, moving the CA from deficit to surplus (on average). GDP growth fell by an annual average of 1.4% during the reversal, causing the output gap to deteriorate by an average of 3% of GDP, from peak to trough of the business cycle. In 11 of these cases, the slowdown in economic growth was large, but, unlike the United States, 9 of these 11 did not have a floating exchange rate. In 10 other cases, there was no slowdown in growth following the CA reversal. However, not all cases of large CA deficits end in a reversal. Besides the United States, the IMF identified five other advanced economies that have had large CA deficits that have persisted to date: Australia (which has run a CA deficit of more than 2% since 1980), Greece (since 1996), New Zealand (1989), Portugal (1996), and Spain (1999). All except Australia have had CA deficits that were considerably larger than the U.S. in recent years. Greece, Portugal, and Spain have fared badly in the recent economic downturn, but Australia and New Zealand have fared relatively well. In a similar study, economists Debelle and Galati found little evidence that CA adjustments historically lead to significant disruption in financial markets. They found little change in the composition of capital flows before adjustment, which they argue is evidence that current account adjustment is caused by, rather than the cause of, broader macroeconomic imbalances. Economists Hung and Kim use statistical regressions to estimate the probability of an exchange rate crash based on several macroeconomic variables across many industrialized countries over time, and estimate that the United States had a 9% probability of a dollar crash in 2006. They find that the current account balance (and the regression overall) has relatively little predictive power for a currency crash. The size of the CA deficit in any given year may be less important in determining sustainability than how persistent CA deficits increase a country's net foreign debt over time. Economists Maurice Obstfeld and Kenneth Rogoff found that in 2003 the net debt owed to foreigners was about 23% of GDP for the United States, near an all-time high. (It was about 24% of GDP in 2008.) Were CA deficits to continue at more than 5% of GDP per year, U.S. net debt to foreigners would reach 70% of GDP within 30 years. Although this implies a relatively small yearly debt service burden, many countries that have experienced CA reversals in the postwar period had smaller net foreign debt-to-GDP ratios, between 20% and 80% of GDP. Obstfeld and Rogoff identify only one country (Ireland) with a net foreign debt-to-GDP ratio that has exceeded 80%. Thus, the authors conclude that large U.S. CA deficits cannot be sustained indefinitely. Similarly, simulations by Federal Reserve economists Bertaut et al. suggest that the net foreign debt could increase to 60% of GDP by 2020, but this would result in annual net investment income payments of only 0.5% of GDP. They found net foreign debt of 20% of GDP to be fairly typical by international standards, found 16 countries where net investment income payments exceeded 1% of GDP, and found five other countries with net debt around 60% of GDP. The authors found econometric evidence that countries with high net foreign debt had modestly higher interest rates and mixed effects on the exchange rate. Five recent academic papers address the sustainability issue. In the papers, the models used to estimate changes in the dollar and CA are not empirically derived; they are simulations based on theoretical assumptions meant to be consistent with reality. Obstfeld and Rogoff have estimated how much the dollar would need to depreciate in order to make the CA deficit disappear. In their model, shocks to aggregate demand or shifts in the demand or supply of tradeable goods could cause the CA deficit to decline; their model does not allow for exogenous changes in the demand for U.S. assets to affect the CA deficit. They estimate that the real exchange rate would depreciate between 14.7% and 33.6% if a CA deficit equal to 5% of GDP were eliminated by a change in aggregate demand, and between 9.8% and 25.5% if eliminated by a change in the supply of tradeable goods. They estimate that depreciation would be accompanied by a 3.9% to 7.1% decline in the terms of trade. The predicted dollar depreciation is so large because about three-quarters of U.S. output is nontradeable, production cannot be quickly shifted into tradeable goods to take advantage of the depreciation, and import and export prices change much more slowly than the exchange rate. This model does not predict how much larger the CA deficit could get or how quickly it will eventually fall. Economists Blanchard, Giavazzi, and Sa explicitly allow asset demand to influence the exchange rate, and they assume that assets from different countries are not perfect substitutes. In their model, a CA deficit would eventually decline because demand for U.S. assets is finite. Although an increase in the demand for U.S. assets would initially cause the dollar to appreciate, they argue, it would later depreciate to finance debt service (though it would remain above its pre-appreciation value). They estimate that a 15% decline in the dollar would be associated with a decline in the CA deficit equal to 1.4% of GDP. About one-third of the decline in the CA deficit results from U.S. debt being denominated in U.S. dollars, because a depreciation reduces its value. Blanchard et al. estimate that stabilizing the net-debt-to-GDP ratio at 2003 levels would require the dollar to immediately depreciate by 56% and the CA deficit to decline to 0.75% of GDP. However, assuming foreigners desire to maintain holdings of U.S. assets at their current share, their model predicts that the depreciation would be stretched over a few decades, depreciating by 2.7% a year, at most. If foreigners decided to reduce their holding of U.S. assets, the model predicts a larger, but still gradual, depreciation. Edwards uses a similar model to simulate how much the dollar would depreciate from its 2004 level depending on different assumptions about the foreign demand for U.S. assets. Unlike Blanchard et al., he projects fairly rapid declines in the CA deficit and dollar in the future. Under his optimistic scenario, in which he assumes that the U.S. net debt will rise to 60% of GDP by 2010 and then remain constant, the CA deficit would peak at 7.3% of GDP in four years, before eventually declining to 3.2% of GDP (with most of the decline occurring in the first four years after the peak). The real value of the dollar would appreciate while the deficit was increasing, but it would decline 21% in the first three years after the deficit began falling. If net debt were to decline to 50% of GDP after 2010 instead of remaining at 60% of GDP, which would still be about double its current level, the decline in the CA deficit and dollar would be greater. Edwards calculates that the deficit would fall by 5.3% of GDP and the dollar would depreciate by 28% after three years, which would bring both measures close to their long-term projected levels. Economists Roubini and Setser simulate what would happen to the net foreign debt over the next 10 years under three scenarios. In the first scenario, imports and exports continue to grow at historical rates. The CA deficit would exceed 12.8% of GDP and the net foreign debt would exceed 80% of GDP by 2012. In this scenario, the authors do not believe it is plausible to assume that foreigners would be willing to finance borrowing of this magnitude, and use this scenario to argue that the current path is unsustainable. In the second scenario, the trade deficit stabilizes at 5% of GDP. The CA deficit would still increase to 8.8% of GDP in 2012 (because of higher net investment income payments), at which point the net foreign debt would exceed 70% of GDP. Servicing a debt of this size, they estimate, would cost 3% of GDP in 2012. To reduce the trade deficit to 5% of GDP, they estimate that the dollar would need to depreciate by about 10% from its 2004 level. This scenario (and the first scenario) is not sustainable in the long run because the net foreign debt would grow continuously. In the third scenario, the trade deficit declines by the end of the projection to the point where the net foreign debt stabilizes as a share of GDP. They estimate that the net foreign debt would stabilize with a trade deficit of 0.8% and a CA deficit of 1.3% of GDP. If the CA deficit gradually declined to this level in 2012, the net foreign debt would stabilize at nearly 60% of GDP, which would cost an estimated 1.75% of GDP to service in 2012. To achieve a reduction in the CA deficit of this magnitude, they estimate that the dollar would need to depreciate substantially and the federal budget would need to be balanced. All of these scenarios assume that relative interest rates remain similar to past values as the net foreign debt rises; if foreigners demanded higher interest rates, then this would feed through to a much larger CA deficit and debt path than simulated. Economist Paul Krugman estimates that the dollar would need to depreciate by at least 35% from its 2005 value in real terms in the long run for the trade deficit to be reduced to zero. He looks for evidence of whether this depreciation will happen gradually or abruptly. For the depreciation to be smooth, Krugman argues that it must be anticipated by rational investors, in which case they would currently require a rate of return premium to hold U.S. assets (to offset the loss suffered from the future dollar depreciation). To determine how large the premium would have to be, he considers two hypothetical paths for the dollar. In one path, the dollar declines by 1.75% annually, and net foreign debt peaks at 118% of GDP, or at least one-third of the total U.S. capital stock. If foreigners are unwilling to hold that much U.S. debt, the dollar would have to depreciate more rapidly. In the other path, the dollar declines by 3.5% annually, and net foreign debt peaks at 58% of GDP. Yet he finds no evidence of a rate of return premium anywhere near the magnitude of either 1.75% or 3.5%--after adjusting for inflation, U.S. interest rates are very close to foreign rates. This implies that foreigners do not foresee any significant dollar depreciation in the future. Therefore, he argues that when investors eventually realize how much the dollar will depreciate, they will likely sharply reduce their demand for U.S. assets, causing the dollar to plummet. Recent experience suggests that the dollar depreciation required to put the CA deficit on a sustainable path may indeed be large. From 2002 to 2006, the dollar depreciated by 16% in inflation-adjusted terms. Despite the depreciation, the CA deficit continued to rise, both in dollar terms and as a share of GDP, from 4.5% of GDP in 2002 to 6.1% of GDP in 2006. In response to the weaker dollar, exports rose rapidly from 2004 onward, but this did not lead to a lower current account deficit because imports also continued to rise rapidly. This experience points to the fact that external factors, which can be held constant in the models discussed in this section, also influence the CA and the dollar in reality. The CA deficit began declining in 2007, along with the continued decline in the dollar through 2008. Paradoxically, the largest decline in the CA deficit has occurred in 2009, although the real value at the end of 2009 was nearly the same as the value at the end of 2007. The wide dispersion of estimates on the dollar depreciation associated with a decline in the CA deficit points to the complex and imperfectly understood factors that determine the dollar's value, the lack of a consensus exchange rate model that performs well empirically, and the sensitivity of theoretical models to changes in uncertain empirical parameters. Further complicating model-based projections, the path of CA adjustment is also subject to non-market forces, such as the accumulation of foreign reserves by central banks. Furthermore, no model reliably answers the underlying question of how much and how quickly the CA deficit will potentially decline. In the long run, running a CA deficit at current trend levels (i.e., growing faster than GDP) would result in net foreign debt continually growing relative to GDP. This is unsustainable if foreigners have a limited appetite for U.S. assets. Thus, in the long run, the CA deficit will most likely decline, although it need not decline to zero to stabilize the net foreign debt relative to GDP. Relative to GDP, the CA deficit declined by about half between 2007 and 2009. It is too soon to say whether this decline is being caused by temporary cyclical factors or represents the beginning of a long-term adjustment process. To date, the net foreign debt has placed no burden on the U.S. economy because U.S.-owned foreign assets have earned more than foreign-owned U.S. assets. Whether policymakers should be concerned about a future decline in the CA deficit depends on whether the decline were to happen in an orderly or disruptive way. There is little reason to think that a gradual decline would have a deleterious effect on the overall economy. But a sudden decline, brought on by a sudden reduction in foreign capital inflows, could be disruptive to U.S. financial markets, causing negative spillover effects for the broader economy. While a sudden reduction in foreign capital inflows cannot be ruled out--it has happened to foreign countries--it seems highly unlikely. The United States is different in a number of ways from the countries that have experienced CA crises--it is much larger, its financial markets and economy are highly developed, it has a floating exchange rate, and it is seen as a safe haven in times of financial turmoil. Nonetheless, even if the risk of a sudden CA reversal is small, it is arguably worth policy consideration since it could be highly costly to the U.S. economy. The recent financial crisis in the United States bears resemblance to the sort of scenario envisioned by economists concerned about a sudden, destabilizing outflow of capital. Yet when the crisis worsened in September 2008, the dollar began appreciating and heightened demand for certain U.S. assets, such as U.S. Treasuries, drove their prices up to unusually high levels. A large and potentially destabilizing net withdrawal of private foreign capital in 2008 and 2009 was offset by official capital net inflows (primarily purchase of U.S. assets by foreign governments), however.

America's current account (CA) deficit (the trade deficit plus net income payments and net unilateral transfers) rose as a share of gross domestic product (GDP) from 1991 to a record high of about 6% of GDP in 2006. It began falling in 2007, and reached 3% of GDP in 2009. The CA deficit is financed by foreign capital inflows. Many observers have questioned whether such large inflows are sustainable. Even at 3% of GDP, the deficit is probably still too large to be permanently sustained, and many economists fear that the decline is temporary and caused by the recession. Further, a large share of the capital inflows have come from foreign central banks in recent years, and some are concerned about the economic and political implications of this reliance. Some fear that a rapid decline in capital inflows would trigger a sharp drop in the value of the dollar and an increase in interest rates that could lower asset values and disrupt economic activity. However, economic theory and empirical evidence suggest that the most plausible scenario is a slow decline in the CA deficit, which would not greatly disrupt economic activity because production in the traded goods sector would be stimulated. The financial crisis that worsened in September 2008 would seem to be a good test case of the type of event that could lead to the feared "sudden stop" in foreigners' willingness to finance the CA deficit. While the recession deepened following the crisis, it has not been via a sudden decline in the dollar or a sudden broad spike in U.S. interest rates. On the contrary, the dollar appreciated in value in the months after the crisis and foreign demand for U.S. Treasury bonds has risen since the crisis worsened. On the other hand, there was a large decline in private foreign capital inflows beginning in 2008; had it not been for foreign government purchases of U.S. securities, the CA would have been in surplus in 2009, all else equal. One long-term consequence of large and chronic CA deficits has been the growing foreign ownership of the U.S. capital stock. A large CA deficit is not sustainable in the long run because it increases U.S. net debt owed to foreigners, which cannot rise without limit. A larger debt can be serviced only through more borrowing or higher net exports. For net exports to rise, all else equal, the value of the dollar must fall. This explains why many economists believe that both the dollar and the CA deficit will fall further at some point in the future. To date, debt service has not been burdensome. Because U.S. holdings of foreign assets have earned a higher rate of return than U.S. debt owed to foreigners, U.S. net investment income has remained positive, even though the United States is a net debtor nation. Since 1980, most episodes of a declining CA deficit in industrialized countries have been associated with slow economic growth. Only two episodes were associated with a severe disruption in economic activity. Because most of the episodes involved small countries, these cases may differ in important ways from any corresponding episode in the United States. Historically, a few other countries have had a higher net foreign debt-to-GDP ratio than the United States has at present; however, if CA deficits continue at current levels, the U.S. net foreign debt could eventually be the highest ever recorded. This report also reviews studies on the CA deficit's sustainability. Some of the studies suggest that a large dollar depreciation could eventually be required to restore sustainability. But the inflation-adjusted 25% depreciation of the dollar from 2002-2008 had little effect on the CA deficit, which kept growing until 2007. The CA deficit did not decline rapidly until after the financial crisis of September 2008--a period with little trend movement in the dollar.

About 8.3 million children under age 19 in the United States, or 10.4% of children in this age group, had no health insurance for at least some of 2009. (Similarly, about 10.3% of children in this age group had no health insurance for at least some of 2008.) Uninsured children are, on average, less likely than insured children to have the recommended number of well-baby and well-child medical visits and less likely to receive standard immunizations. Children without health insurance also rely more on hospital emergency rooms for basic care and therefore receive such care in the least cost-efficient manner. A child's health insurance status depends largely on decisions made by his or her parents or guardians, and is highly dependant on whether these adults receive employer-sponsored coverage. If the child's parents receive employer-sponsored coverage, it is likely that the child will as well. For those children not covered by their parents' (or guardians') employer-sponsored insurance, public may be programs available. Medicaid is a means-tested entitlement program that finances the delivery of primary, acute, and long-term medical care. Each state designs and administers its own version of Medicaid under broad federal rules. The state Children's Health Insurance Program (CHIP) allows states to cover targeted low-income children with no health insurance in families with incomes above Medicaid eligibility levels. States may enroll targeted low-income children in CHIP-financed expansions of Medicaid, create new separate state CHIP programs, or devise combinations of both approaches. A small number of children without employer-sponsored coverage, Medicaid, or CHIP may have other health insurance coverage. Some disabled children are eligible for Medicare. Other children have insurance from policies purchased in the small-group market or from policies granted as a part of military benefits. This report examines the health insurance status of children under age 19 in 2009. Following a brief discussion of the data, the report looks at the relationship between the types of health insurance held by a child and the characteristics of the child and his or her parents (including age, other demographic characteristics, and ties to the labor market). Next, the report demonstrates the different conclusions that might be drawn from different analyses of the childhood uninsurance data. The report concludes with a discussion of trends in insurance status since 1999 for children under age 18; comparable data exist for years been 1999 and 2009, inclusive. This report uses 2009 data collected in the 2010 Current Population Survey (CPS) conducted by the Census Bureau of the U.S. Department of Commerce. The CPS is a monthly survey of non-institutionalized civilian households used primarily to collect employment data. The Annual Social and Economic Supplement (ASEC) to the CPS collects information on individual health insurance status, income, and poverty. The ASEC is also known as the March Supplement, because most of the surveys are completed in March, with many questions covering the prior year. About 100,000 addresses comprise the sample households to be interviewed. Statistical techniques adjust the data to represent all households in the nation. The March Supplement to the CPS is one of several widely used sources used to estimate the levels of uninsurance in the United States. The key variable in this report is whether each child was uninsured in 2009. More specifically, the uninsurance variable measures whether the child lacked health insurance for at least some part of 2009. This report, therefore, uses the term "uninsured" to mean uninsured at a point in 2009, not necessarily uninsured over the entire year. This section covers the relationships between health insurance and a child's and/or parent's demographic and employment characteristics. Table 1 reports the insurance status of children according to their personal characteristics. Looking at age, the percentage of uninsured children in 2009 ranged from 9.2% for children under age 6 to 12.5% for children between 13 and 18 years old. The percentage of children with public insurance decreased with the age of the child, while the percentage of those with employer-sponsored coverage increased with age. The percentage of children with employer-sponsored insurance was 52.1% for those children under age 6 compared with 60.6% for children between 13 and 18 years old. Of those children under age 6, 39.9% had public insurance, while 26.9% of children between 13 and 18 years old had public insurance in 2009. Examining differences in insurance across race and ethnicity indicates that uninsurance rates were highest among Hispanic children (17.5%), who had the lowest employer-sponsored coverage of any race/ethnic group (35.0%). On the other hand, uninsurance rates were lowest among white children (7.3%) who had the highest employer-sponsored coverage of any race/ethnic group (69.4%) Children who were black or Hispanic were more than twice as likely to have public coverage than children who were white or Asian. Children were less likely to be uninsured if they lived in the Northwest or Midwest (7.3% and 7.8%, respectively) than if they lived in the South or West (13.0% and 11.0%, respectively). Employer-sponsored health insurance covered about 63% of children in the Northeast and Midwest, and about 53% of children in the South and West. Citizens are more likely to have employer-sponsored coverage than noncitizens. Native-born and naturalized children had similar rates of employer-sponsored health insurance, at 57.7% and 58.3%, respectively. On the other hand, only 31.4% of children who were not citizens had employer-sponsored insurance. As shown in Table 2 , insurance coverage among children under age 19 who lived with at least one parent also differed by family structure. Approximately 8% of children living in a two-parent family were uninsured in 2009, compared with 12% of children living with a single mother and 16% of children living with a single father. Although children living with a single father were more likely to have employer-sponsored health insurance than those living with a single mother, children living with a single father were more likely than those living with a single mother to be uninsured because they were less likely to have public coverage. Private health insurance coverage varies with income. Among children in families living below the poverty threshold, 14.4 % had employer-sponsored coverage, 73.7% had Medicaid or other public coverage, and 14.7% were uninsured. As family income increased, children were more likely to have employer-sponsored coverage and less likely to have public coverage. A child's source of health insurance is strongly associated with his or her parents' coverage. Approximately 90% of children who lived with a parent with employer-sponsored coverage also had employer-sponsored coverage. Likewise, 97.4% of children who lived with a parent with public coverage also had public coverage. However, among children who lived with an uninsured parent (or parents), 41.2% were uninsured, but 52.8% had public coverage. This last difference could reflect the fact that children are more likely than their parents to be eligible for Medicaid and CHIP. As shown in Table 3 , among children under age 19 who live with at least one parent, there is a relationship between the insurance status of the child and the employment characteristics of the parent(s). In 2009, of those children with at least one parent working full-time for the entire year, 71.2% had employer-sponsored health insurance and 8.2% were uninsured. Of those children with at least one parent working part-year and/or part-time, 31.6% had employer-sponsored health insurance and 12.8% were uninsured. Public insurance coverage filled some of the gaps for those without employer-sponsored coverage. Public rates were 20.7% for children with a parent who worked full-time and full-year, and almost triple that (58.2%) for children whose parents were less attached to the labor force. As is usually the case, employer-sponsored coverage was less common for workers in small firms than for workers in larger firms. Employer-sponsored coverage rates were 27.4%, and uninsurance rates were 20.6% among children when the primary worker was in a firm with fewer than 10 employees. On the other hand, employer-sponsored coverage rates were 76.3%, and uninsurance rates were 5.0% among children when the primary worker was in a firm with at least 1,000 workers. This section demonstrates that, in evaluating groups of uninsured children, it is important to decide on an appropriate comparison group. Although family status for children living with at least one parent is used as an example, the issues covered in this section are applicable to other traits as well. The conclusion is that different representations of the same data can lead to different conclusions if care is not taken when evaluating the data. Figure 1 looks at the total number of uninsured children and displays the percentage of uninsured children living with at least one parent by family structure. From this picture alone, one could conclude that uninsurance was highest among two-parent families. This is because almost 60% of the total pool of uninsured children live with two parents, while about 31% of the total pool of uninsured children live with a single mother, with the remaining 11% living with a single father. In this example, it is important to remember that all comparisons are relative to the total number of uninsured children. Different conclusions, however, might be drawn if the analysis compares the percentage of uninsured children within each group's family structure. These comparisons are illustrated in Figure 2 for two-parent families, single-father families, and single-mother families, respectively. Even though Figure 1 shows that those living in two-parent households are the largest group of uninsured children, Figure 2 demonstrate that children living in two-parent families are less likely to be uninsured than children living with only one parent. This apparent paradox--that the group least likely to be uninsured makes up the largest portion of the uninsured--also exists when looking at other characteristics. It comes about because the group representing the largest share of the relevant population (i.e., children living in two-parent families) can have the largest number of uninsured children even if they have the lowest uninsurance rate. These differences raise important issues for policy makers considering policy options to reduce the number of uninsured. For example, proposals that may affect the greatest number of children in two-parent families (which comprise almost 59% of the uninsured children) may not affect the greatest number of children living in single-father families (of whom 16% are uninsured). This report has, until this point, documented the health insurance and uninsurance patterns of children under age 19 in 2009. The focus of the report now switches to an examination of trends in insurance and uninsurance between 1999 and 2009, a period including two economic recessions. The data used in this section come from the CPS and are available in a consistent way only since 1999 for children under age 18 . It is not possible to predict whether the percentage of uninsured children will increase or decrease during a recession. Those working may lose their jobs, and thus their employer-sponsored health insurance. These employment effects would lead to an increase in the uninsurance rate for children because not all parents who lose their employer-sponsored coverage will extend their insurance through the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provisions or purchase insurance in the individual market. On the other hand, a drop in parental income during the economic downturn may allow children to become eligible for the need-based entitlement programs of Medicaid and CHIP. If the newly eligible do indeed enroll, the uninsurance rate may not increase (or may even decrease) during an economic recession. In addition, Congress and/or state legislators may choose to change an insurance program's eligibility or benefits in response to a recession. For example, the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) provided financial assistance for many individuals to maintain their health coverage under COBRA, effective February 17, 2009. This should have reduced the number of children who would have otherwise been uninsured after early February 2009. Finally, because the unemployment rate is slow to recover after a recession, and because employment is a determinant of insurance status, any effects of unemployment on uninsurance may linger past the end of the recession. Figure 3 presents the national percentages of children under age 18 who were uninsured, were covered by employer-sponsored health insurance, and were covered by public health insurance between 1999 and 2009. The gray shaded areas in Figure 3 represent periods of economic recessions. The uninsurance rate ranged from a high of 12.5% in 1999 to a low of 9.0% in 2008. There was therefore a 3.5 percentage-point spread between the high and low uninsurance rates over the 10-year period. Neither the short recession in 2001 nor the longer recession in 2008 and 2009 seemed to have much of an effect on the uninsurance rate of children. When looking simply at the uninsurance rate, the effects of the economy on the children's uninsurance rate do not seem especially meaningful. Nevertheless, these uninsurance data mask two larger changes in children's insurance status over the 10-year interval. First, the number of children covered by employer-sponsored insurance fell from 65.2% in 1999 to 55.8% in 2009. Employer-sponsored insurance fell during both recessions, and it did not subsequently increase after the first recession. In short, the falling rate of employer-sponsored insurance (in and of itself) pushed toward an increase in the uninsurance rate for children. At the same time, however, the number of children covered by public health insurance (predominately Medicaid and CHIP) increased over the 10-year period. In 1999, 20.3% of children under age 18 were covered by public insurance, but by 2009, 33.8% of children under age 18 were covered by public insurance. Several factors may have contributed to the increase in public insurance. First, ARRA provided a temporary increase in the percentages used to determine federal Medicaid payments to states. To be eligible for this matching increase, the states could not restrict their existing Medicaid eligibility standards. Therefore as more children became eligible for Medicaid when their parents lost their jobs and health insurance, ARRA's maintenance of effort requirement for Medicaid kept eligibility standards unchanged. This should have reduced the number of children who might have otherwise been uninsured had states restricted eligibility. Second, enrollment in CHIP increased throughout the decade. In particular, CHIP was enacted in 1997, and enrollment across the states began within several years. The increase in the take-up of CHIP over the past decade is thought to have been a contributor to the increase in public coverage. Beyond these statutory changes, there may have been changes in parental take-up of public health insurance for their children. First, as parents lost their jobs and other income and/or assets, more children could have met the need-based criteria for eligibility. In addition, the parents of children who were always eligible may have chosen to take up the benefits for their children. In any case, between 1999 and 2009, the offsetting downward trend in children covered by employer-sponsored health insurance and upward trend in children covered by public health insurance attenuated variations in the percentage of uninsured children.

About 8.3 million children under age 19 in the United States, or 10.4% of children in this age group, had no health insurance for at least some of 2009. (Similarly, about 10.3% of children in this age group had no health insurance for at least some of 2008.) Children living in families below the poverty threshold, children not living with at least one parent, Hispanic children, and children whose parents did not have health insurance were especially likely to be uninsured. On the other hand, children whose parents had employer-sponsored coverage were themselves likely to have employer-sponsored coverage. An extensive body of research suggests that children without health insurance are, on average, less likely than insured children to have the recommended number of well-baby and well-child medical visits and less likely to receive standard immunizations. This report examines the characteristics of insured and uninsured children in 2009 (the latest year for which data are available) using data from the (March) Annual Social and Economic Supplement to the 2010 Current Population Survey (CPS). The first part of the report compares broad groups of children. Those particularly likely to be uninsured in 2009 included the groups mentioned above, as well as children between ages 13 and 18, children living in the South, and children who are not U.S citizens. Groups particularly likely to receive publicly funded insurance included children of single mothers, black children, and children in families with incomes lower than the federal poverty threshold. The second section of the report compares two methods of measuring uninsured children. Using family structure as an example, the report analyzes uninsurance both in terms of the percentage of each family status in the total pool of uninsured children (e.g., 58.9% of the pool of uninsured children were in two-parent families) and in terms of the percentage of each family status who were uninsured (e.g., 8.3% of those in two-parent families were uninsured). This difference may be important for policy makers considering policy options to reduce the number of uninsured children. The final part of the report examines the rate of uninsured children under 18 over the past 10 years (the years for which comparable data are available). The uninsurance rate has been relatively flat over this period. This relative constancy in the children's uninsurance rate, however, masks a decline in children covered by employer-sponsored insurance and a concurrent increase in children covered by public insurance.

The global financial and economic crisis is unprecedented in many ways yet not so unique that the experience of other countries is bereft of lessons to be learned. Among the major industrialized economies of the world, Japan's lost decade of the 1990s (what some call Japan's Great Recession ), when it encountered a period of prolonged stagnation caused by the bursting of speculative bubbles and a prolonged banking crisis, is often cited as relevant for policymakers today. The drop in prices on Japan's equity markets combined with a sharp decline in land prices generated losses of about Y=1,500 trillion ($14 trillion) or roughly three times Japan's gross domestic product at that time. As of early 2009, one estimate is that the current global financial crisis may have generated losses in the capital valuation of financial assets world-wide of as much as $50 trillion or about the equivalent of the combined gross domestic product (GDP) of the world. (As equity markets recover, some of these losses may be reversed.) A study by the Joint Economic Committee of Congress concluded that "a series of fiscal and monetary blunders by the Japanese government transformed the inevitable post-bubble recession into a "lost decade" of deflation and stagnation. When the U.S. Treasury planned the $700 billion rescue package (Emergency Economic Stabilization Act of 2008, P.L. P.L. 110-343 ) to address the U.S. financial crisis, it reportedly examined the experience of Japan as that country grappled with its banking crisis in the 1990s. In fiscal policy, the Japanese experience has been used both as an example of stimulus packages that did not work and as a rationale for making stimulus packages large enough to help ensure that they would work. In monetary policy, the Bank of Japan's zero-interest rate policy demonstrated the futility of attempting to "push a string" (induce investment and consumer credit purchases through low borrowing rates). It also demonstrated the importance of strengthening the balance sheets of banks in order for lending to recover and the role of the Deposit Insurance Corporation of Japan in helping to rid the system of "toxic bank assets." The Japanese experience also may be instructive in resolving problems of "zombie corporations" (companies that technically are bankrupt but are being "kept alive" through loans and other financial support), in dealing with nationalization and subsequent privatization of insolvent banks, and in coping with deflation. Japan financed its fiscal stimuli by relying on issuing new debt. As a result, government debt as a percent of gross domestic product has soared to 167% of GDP. The Japanese experience, combined with that of the Great Depression, has provided a new framework for understanding and analyzing financial crises and policy. Traditionally, economists have viewed the causes of the Great Depression through a macroeconomic lens and have focused on monetary and fiscal policy. In terms of monetary policy, the conclusion of scholars has been that a contraction in the money supply was a primary cause of the length and severity of the Great Depression and that the depression could have been avoided through a more judicious application of monetary policy. This interpretation and its implicit policy recommendations were outlined by Ben Bernanke when he was a member of the Federal Reserve Board in a 2004 lecture on role of the Federal Reserve and of monetary factors in the origin and propagation of the Great Depression. On the fiscal policy side, particularly after the publication of John Maynard Keynes' General Theory of Employment, Interest , and Money , economists have pointed out that the depression ended only after spending for war provided the increase in aggregate demand needed for recovery. In the case of Japan's lost decade of the 1990s, policy analysts advocated expansionary monetary and fiscal policies but also added a microeconomic aspect. They argued that Japan needed to make structural changes in the form of deregulation and privatization of government enterprises in order to make its economy more efficient. For policymakers, the framework for analysis and the lens through which a financial crisis is viewed often provides the rationale for subsequent policy prescriptions. If one believes that misguided monetary policy caused and prolonged the Great Depression, then policy prescriptions tend to focus on actions that will inject reserves into the banking system and increase the supply of money in the economy. If one sees the problem as a lack of aggregate demand, the implicit policy prescription tends to focus on fiscal stimuli. If one believes that the problem is structural--on the supply side--then the remedies tend toward deregulation and economic efficiency. In Japan's case, a study by economist Richard Koo argues that Japan's problem was not completely monetary, fiscal, or structural. He presents evidence that the Japanese economy suffered a "balance sheet recession" and goes a step further by applying the balance-sheet approach to analysis of the Great Depression and the current global financial crisis. He asserts that a balance-sheet analysis explains the problem better than relying on traditional macro- and microeconomic analysis. Koo's premise is that a financial crisis that generates huge losses in wealth (financial assets in particular) causes both firms and households to place priority on repairing their balance sheets. For firms, such a priority implies behavior to minimize debt rather than to maximize profit. For households, it implies increasing savings at the expense of consumption. Under a balance sheet recession, lowering interest rates and increasing the money supply do not generate comparable increases in lending because neither households nor firms are inclined to add more debt until their liabilities are brought more into balance with their lower levels of assets. Under a balance-sheet recession, once monetary policy has reached a limit (zero interest rates), direct government purchases of debt and removing debt from company or household balance sheets tends to be more effective than injecting funds into banks to induce them to lend when potential borrowers are hunkering down and trying to rebalance their assets and liabilities. Also, if households and businesses are not willing to spend, then stimulative fiscal policy may be the next-best option in promoting economic recovery. The London Economist has noted that "history suggests that balance-sheet recessions are long and that the recoveries which eventually follow them are feeble. This report reviews the major actions by the Japanese government in dealing with its crisis and highlights some of the lessons learned from their experience. Like the current U.S. financial crisis, Japan's began with stock market and real estate bubbles. During the latter half of the 1980s, Japan's monetary authorities flooded the market with liquidity (money) in order to enable businesses to cope with the rising value of the yen. Businesses did invest in new capital equipment to become more competitive in international markets, but the excess liquidity also found its way into speculation in Japan's stock market, in real estate ventures, and in foreign investments. At that time, the market value of both land and equities was rising so fast that investors and speculators could hardly miss. Investors tended to ignore risks. The larger mistake for them was not to borrow and invest and consequently not be positioned to reap the returns from rising markets. Banks considered most loans with real estate as collateral as being unquestionably secure. Then the bubbles burst. As indicated in Figure 1 , Japan's Nikkei stock market average had peaked in 1989 (at 40,000) and dropped by 50% in one year and more than 78% (to about 8,700) by the end of 2002. Japan's banks are allowed to hold equities as part of their capital base. The value of the unrealized capital gains on such stock holdings dropped from $355 billion in 1989 to about $40 billion in 2002. This drastically reduced key capital reserves for many banks. Also, by 2000, commercial land values in the six major metropolitan areas had fallen by 80% from their peak level in 1991. Residential and industrial land values also had fallen by nearly 20%. The bursting of this economic bubble caused the value of collateral underlying many bank loans to drop below the value of their loan principal. Also, commercial real estate ventures, especially office buildings, became unprofitable as rents fell. What began as a financial and banking crisis soon caused the overall Japanese economy to slow. As the economy stagnated, companies faced excess capacity, excess inventories, and lower profits. Also as more and more loans turned sour, more and more of the underlying real estate had to be sold at "bargain" prices. In 1995, Japan's banks reported $280 billion in non-performing loans, but this figure turned out to be vastly understated. Unlike the situation in the United States under the current global economic crisis, Japanese financial institutions tended not to bundle and repackage their loans as collateralized debt obligations or rely as extensively on derivatives and credit default swaps. Mortgage defaults in Japan also tended to be on commercial property, not on private residences. The country also had no subprime or Alternate-A loans, but lending in Japan, particularly commercial lending, often was relational (based on connections and relations) rather than being purely market based. Therefore, many commercial loans had been extended partly because of close corporate ties (rather than arms-length due diligence) and turned sour. Before the definition of a non-performing loan was tightened, moreover, Japanese banks often extended small additional loans to borrowers in default in order for the borrower to make a payment of interest and to keep the loan from being reported as non-performing. The adverse effects of the bursting of Japan's real estate and stock bubbles soon spread to the entire economy. Economic growth rates fell from more than 5% per year during the late 1980s to less than 2% per year during the first half of the 1990s with a slight increase in growth in 1996 as the economy began a temporary recovery but then dropped into recession in 1998 and 1999 as fiscal policy tightened and the 1997-98 Asian Financial Crisis developed. Growth remained anemic through the early years of the new century as the recession of 2001 took its toll on Japan too. After 2001, economic growth rates did not recover to their pre-crisis levels. For Japan, the lost decade of the 1990s became an extended L-shaped recession (rather than a U- or V-shaped downturn and recovery). The bursting of Japan's stock and real estate bubbles in 1989 and 1990 had been induced by the Bank of Japan by a tightening of monetary policy (mainly through increases in interest rates), although it is not clear that the monetary authorities anticipated the severity and depth of the downturn in the economy. As the banking crisis developed, the government's initial strategy was forbearance (patience while not forcing banks to report paper losses or disclose all non-performing loans), protecting depositors by strengthening deposit protection, providing emergency liquidity, and assisting in mergers of some failed institutions. The basic attitude at the time was that Japan's banking system was like a convoy of ships. The government oversaw and intervened extensively to ensure not only that banks followed its policies but that stronger banks helped weaker banks in order to keep the convoy of domestic banks moving along together. If possible, no major bank would be allowed to sink (although some eventually did). An issue related to forbearance and the bank convoy problems was the "community banking mentality" under which banks tended to view clients as a part of their community and to eschew short-term profit maximization in favor of maximizing profits over the lifetime of the borrowing firm. This helps to explain why commercial banks continued to lend to firms that were already in default in their repayments ("zombie companies"), a practice that often resulted in even more non-performing loans being generated. In 1992, the government authorized the creation of the Cooperative Credit Purchasing Company (CCPC) to help banks dispose of non-performing loans. This was patterned somewhat after the Resolution Trust Corporation in the United States (that operated from 1989-1995) and dealt only with loans with real estate as collateral. In 1993, the top 21 banks sold Y=1.3 trillion in non-performing loans to the CCPC, an amount that accounted for 54% of all loans written off in that year. The way that the CCPC worked was that the selling bank would extend credit to the CCPC for the entire purchase cost of the non-performing loan plus all processing expenses. The bank then would be able to count the gap between the loan principal and the selling price as a capital loss for tax purposes. When the collateral underlying the loan was sold, the CCPC then repaid the credit extended by the selling bank. About half of the underlying value of the non-performing loans was recovered by the CCPC through sales of the underlying assets. The hope of the government was that if it could keep banks operating, their profits from operations and capital gains from equity holdings could fund the write-offs of bad loans. Even with the decline in stock prices, banks had acquired much of their holdings of equities years before at par value, and most still carried unrealized capital gains. In addition, the low (and from 1995 zero) interest rate policy of the Bank of Japan allowed banks to generate higher-than-usual profits by the larger difference between their borrowing and lending rates of interest. Despite billions of dollars in write-offs, however, nonperforming loans appeared as fast as they were being taken off the books. Over the crisis, Japan's banks wrote off a cumulative total of $318 billion (Y=37.2 trillion) in non-performing loans, but new ones appeared so fast that the total outstanding amount continued to increase and peaked in March 2002 at $330 billion (Y=43.2 trillion) or 8.4% of total lending. On the fiscal policy side, Japan's government announced stimulus packages in 1992, twice in 1993, in 1994, and twice in 1995. (See Table 1 .) In addition, the government's budget provided considerable fiscal stimulus. The new spending in each package amounted to between 0.3% and 1.5% of GDP. The economy responded after 1993 by slowly beginning to recover. In 1995, five years into Japan's crisis, the situation worsened following the bankruptcy of several specialized housing loan companies ( jusen ). In 1996, the government made its first injection of capital to purchase assets from ailing housing lenders. This rescue operation proved to be quite politically unpopular and may have contributed later to tentativeness by the government to take stronger policies to combat the recession. According to a leading Japanese economist, by 1995 the problem of the burst speculative bubble that caused the failures of several financial institutions was over. The "sorry state of the Japanese economy since 1995 [was] the result of weak fiscal, monetary, and supervision policies." A series of policy errors by Japan made the small problem of a burst bubble much larger than need have been the case. In 1996, many thought the economy was well on the road to recovery, but much of the rise in aggregate demand could be traced to the spending for reconstruction in the aftermath of the Kansai earthquake and to consumers buying durables in anticipation of a rise in the consumption tax (national sales tax) that occurred in 1997. By 1997, Japan's banking sector was in a full systemic crisis. The government responded by making $250 billion (Y=30 trillion) available of which $108 billion (Y=13 trillion) went to banks and $142 billion (Y=17 trillion) to the Deposit Insurance Corporation of Japan. In 1998, the government bought the bankrupt Long-Term Credit Bank and Nippon Credit Bank. These two banks had no consumer deposit system but borrowed funds on financial markets to lend on a long-term basis to businesses. These banks were eventually sold to private investors. The government also took over the management of many financial institutions. In March 1998, the government injected another $14 billion (Y=1.8 trillion) to bolster bank balance sheets and in March 1999 injected another $62.5 billion (Y=7.5 trillion). By October 1998, the government had invested $495 billion (Y=60 trillion yen), or 12% of gross domestic product, for the financial support of banks. Through a combination of capital injections, new laws and regulations, stronger oversight, a reorganization of the banking sector, moderate economic recovery, and several years of banks working off their non-performing loans, the Japanese banking sector eventually recovered. By September 2005, the banks reported 3.5% of their total lending as non-performing, a level considered to be tolerable. In combating the effects of the crisis, the Japanese government pursued a combination of monetary policy, direct intervention, and fiscal stimulus packages. As shown in Table 1 , the government announced nine stimulus packages during the 1990s. (There also was a negative stimulus in April 1997 when the government raised its consumption tax [national sales tax] from 3% to 5% in an attempt to reduce its fiscal deficit.) The total amounts for the packages are somewhat misleading because some of the packages incorporated items that had already been included in previous budgets or packages. Other items, such as funds for construction, may not have been actually spent until the next fiscal year. Also, parts of the packages awaited parliamentary approval and may not actually have been funded. The Japanese government, therefore, usually indicated how much of each package was new spending. The Japanese government referred to the new spending as "real water" ( mamizu ). The figures for the percentages of gross domestic product (GDP) listed in the "Total" column, therefore, should be considered to be upper bounds. The table also lists the percentages of GDP based on the share of new spending only. Note that in 1993, 1995, and 1998 there were two stimulus packages announced per year. In those cases, the combined total stimulus as a percent of GDP was 4.0% for 1993, 3.4% for 1995, and 8.4% for 1998. The various bank rescue operations in Japan were administered primarily by the Deposit Insurance Corporation of Japan (DICJ). When a financial institution fails, the DICJ may extend assistance to another financial institution that purchases assets or merges with the failed financial institution in order to facilitate the transaction. The DICJ also works to prevent financial institutions from failing. The forms of assistance include a direct money grant, a loan or deposit of funds, purchase of assets, a guarantee or assumption of debts, a subscription of preferred stock, and loss sharing. Not all of the activities of the DICJ, however, are related to the bailout packages. It also has ongoing operations associated with its traditional function of insuring bank deposits. The annual reports of the DICJ, however, provide detail on the disposition of $399 billion of the $495 billion in funds announced in Japan's financial assistance packages. As shown in Table 2 , as of March 2007, the DICJ had provided financial assistance in the amount of $399 billion. This included 180 cases with grants of $159 billion, asset purchases of $83 billion, capital injections of $106 billion, and other assistance (mostly loans) of $51 billion. The grants were funded by $110 billion (Y=13 trillion) in DICJ bonds issued (repaid from taxpayer funds) and from premiums from deposit insurance. Of the asset purchases of $83 billion, the DICJ recovered $79 billion. The asset purchases included $54 billion in assets from failed financial institutions (of which $60 billion had been recovered) and $25 billion in shares purchased (of which $14 billion had been recovered). Capital injections of $106 billion came under five different rescue packages and included subscriptions to preferred or common stock, purchases of subordinated bonds, and the extending of subordinated loans. The DICJ had injected capital into 25 different banks. As of March 2007, $31.3 billion of these assets was still held by the DICJ in the form of preferred shares, common shares, and subordinated loans. The $51 billion in the "Other" category included loans to banks which were under special public management, taking delivery of assets under warranty for latent defects, compensation for losses, lending to assuming financial institutions, and debt assumption. The last capital injection reported by the DICJ was in March 2003. The Resolution and Collection Corporation (RCC), a subsidiary of the DICJ, borrows funds from the DICJ to purchase and dispose of assets (within three years) from sound financial institutions and some under special public management. As of March 2007, the RCC had purchased assets with claims of $34.5 billion (Y=4.0 trillion) for a discounted price of $3.0 billion (Y=355.7 billion). These assets had been sold for $5.2 billion (Y=609.4 billion) for a gain of 172% for the RCC. In essence, the RCC paid about 9 cents on a dollar for the troubled assets and was able to dispose of them at a profit. The DICJ consults with the Purchase Price Examination Board (an advisory body to the DICJ) with respect to the price it pays for assets. The RCC made no purchases in FY2006 (ending in March 2007). As Japan's economy stagnated and the size of the government's fiscal stimulus escalated, Japan's government debt also soared. This is consistent with other financial crises in the world in which public debt typically doubles, even adjusting for inflation, in the three years following a crisis. As shown in Figure 2 , Japan's central government debt as a percent of GDP rose from 47% in 1990 to 65% in 1995 and to 106% in 2000. By comparison, in 1992, the percentages for both the United States and Japan were at 48%, while in 2008 the United States was at 40% while Japan was at 167%. In economic theory, there is what is called Ricardian equivalence. Named after English economist David Ricardo (1772-1823), the Ricardian equivalence theorem asserts that government deficits are anticipated by individuals who increase their saving because they realize that borrowing today has to be repaid later. The implication of this theorem is that when a government tries to stimulate demand by increasing government spending to be financed by debt, total demand remains unchanged because the public will save funds from the extra government spending in order to pay for future tax increases that will be initiated to pay off the debt. One analysis of Japan's experience in the 1990s, however, concluded that although Ricardian equivalence effects did exist, they were not large enough to be relevant to fiscal policy. In other words, fiscal stimulus packages had multiplier effects of about the size expected despite the relatively high saving rates in Japan and public awareness of the rising government debt. Even "wasteful" public spending had the expected multiplier effect. As for tax cuts, those targeted to the most liquidity constrained tended to have the largest effects. Another analysis concluded that the fiscal stimulus over the course of the 1990s was necessary since the limitations on monetary stimulus (zero interest rates) left little choice but to do so. However, by pursuing stimulus without a more vigorous effort to clean up the non-performing loan problem or broader economic deregulation, the impact of fiscal deficits on restoring growth had been muted. In 1996, when Japanese authorities thought the recession might be over, attention turned toward "reconstructing government finances" (reducing the budget deficit). By 1995, the central government financed 28% of its budget through borrowing. Japan's Fiscal Structural Reform Act, implemented from Japan's fiscal year (JFY) 1997, included targets of reducing the ratio of government debt to Gross Domestic Product to 60% and the ratio of the government deficit to GDP to 3% by the year 2003. This tightening of fiscal policy, however, apparently occurred too soon and is thought to have prolonged the recession. As one analysis concluded, the government had erred in overestimating the strength of the economic recovery in 1996. By 2003, instead of 60%, the government debt-to-GDP ratio had risen to 141%, and instead of 3%, the government deficit to GDP ratio had increased to 5.4%. The Japanese experience also highlights the great difficulty in reducing the "debt burden" in an economy that continues to stagnate. Even during the 2002-2007 period of relatively strong economic growth, the size of the national debt continued to grow. The servicing of the national debt in Japan requires both interest payments and payments for redemptions plus administrative costs. The Japanese government reports two categories of expenditures for servicing the debt. The first is Interest Paid on the debt and the second is National Debt Service (also referred to as Bond Expenditures in the budget). National Debt Service includes (1) interest paid; (2) redemption of the national debt (an amount equal to 1.6% of the total government bonds outstanding at the beginning of the previous fiscal year and an amount not less than half of any surplus in the government account for each of the preceding two fiscal years); and (3) administrative expenses. The bottom of Figure 2 shows interest payments as a percentage of federal government expenditures for the United States and Japan. For Japan, the share of expenditures for interest has declined from about 17% in the early 1990s to 11.5% in 2007. This decline occurred despite Japan's ballooning national debt primarily because of the drop in interest rates as part of the government's monetary policy. For the United States, the share of interest in outlays also fell from around 15% for most of the 1990s to 8.3% in 2008. The question for both nations is whether this trend can continue given the large fiscal deficits being incurred in 2009. In particular, will investors have to be coaxed to hold a larger share of government bonds in their portfolios with higher rates of interest and will they have to be compensated for what may be an increasing risk that governments will inflate away the value of their assets or even default on debts in the future. The following are various lessons and observations that observers have gleaned from the Japanese experience. Authorities underestimated the nature and seriousness of the banking problem at first. Most thought the financial problems would resolve themselves through economic growth and by keeping central bank interest rates low in order to increase bank margins and profitability. There was a slow recognition of the extent of non-performing loans and the carrying of "zombie" firms that technically were bankrupt but were kept alive by banks. This delayed resolution of the problem. Transparency and an updating of definitions and reporting requirements with respect to non-performing loans was important in realizing the true extent of the problems. Many of the rescues of ailing financial firms by a healthier financial institution required a government injection of capital in some form. There appeared to be a lack of domestic or external constraints and of political leadership that would have urged authorities to take more decisive action earlier. The government began by creating new institutions to handle emergency financial assistance but later transferred such activities to the Deposit Insurance Corporation of Japan (DICJ), an institution that already was working with troubled financial institutions. The DICJ also was given permanent authority to assist ailing financial institutions when so ordered by the Prime Minister. The Japanese government injected capital into financial institutions in several ways depending on the situation. In most cases, the DICJ could use its discretion in determining the nature of the assistance. Troubled assets were bought at a steep discount from their face value from sound financial institutions (to inject capital) and disposed of without unduly disturbing markets--usually within three years. The two banks that were nationalized were later sold to private investors. Capital injections also took the form of subscriptions to stock, grants, and subordinated loans. Even with the $495 billion financial support packages, between 1998 and 2003, Japan's banks wrote off some $318 billion in non-performing loans. The burden was shared. Government holdings of corporate shares have generated dividend income and capital gains for the DICJ. Since there are fewer banks in Japan, the authorities could focus recovery efforts on several large banks and fewer than 200 smaller financial institutions (there are about 8,500 banks in the United States) which facilitated information gathering and coordination. When Japan announced an early financial rescue package, it placed stringent conditions on the assistance that banks were unwilling to accept. The net result was that the banks ignored the package and tried to bolster their balance sheets by not lending. This was seen as worsening the economic conditions for the country. Most of the assistance to failing institutions, however, carried conditions that were enforced by the DICJ. New technologies, globalization, and the blurring of boundaries between types of financial products and institutions made risk management increasingly difficult for financial regulators. The bursting of the real estate bubble in Japan caused more difficulty for banks than the bursting of the bubble in stocks because the decline in real estate values affected the value of collateral on much bank lending. Japan is considered to have acted too slowly with respect to monetary policy, fiscal policy, and the resolution of problems in the banking sector. Once the economy began to recover, fiscal policy is thought to have tightened too soon.

During the 1990s and into the early years of the 21st century, Japan experienced prolonged recessionary economic conditions triggered by the bursting of a bubble in its equity and real estate markets and an ensuing banking crisis. Although the current global financial crisis is much more than Japan's "Great Recession" writ large, many have turned to Japan's experience to either support or oppose various policies and to improve general understanding of the underlying forces of financial crises. In fiscal policy, the Japanese experience has been used both as an example of stimulus packages that did not work and as a rationale for making stimulus packages large enough to help ensure that they would work. Fiscal stimulus did have the desired economic effect in Japan, but it mainly substituted for depressed bank lending and consumer spending. Recovery had to wait until the balance sheets of banks and households had been rehabilitated. Japan also shifted its policy focus toward reducing its fiscal deficit "too early" after authorities thought the recession had ended in 1996. The ensuing increase in taxes along with reduced fiscal stimulus (along with the 1997-98 Asian Financial Crisis) pushed the economy back into recession. In monetary policy, the Bank of Japan's zero-interest rate policy demonstrated the futility of attempting to induce investment and consumer credit purchases through low borrowing rates. The Japanese experience also may be instructive in resolving problems of companies that technically are bankrupt but are being kept alive through outside financial support and in dealing with nationalization and subsequent privatization of insolvent banks. Japan's case also illustrates that national debt may continue to rise for years after the financial crisis has ended. With respect to rehabilitating banks, Japan's five bank rescue packages may hold some lessons for the United States. Most of the packages were administered by the Deposit Insurance Corporation of Japan (DICJ). The packages had an announced value of $495 billion. The DICJ reports that it provided $399 billion to Japan's troubled financial institutions of which it has recovered $195 billion. Overcoming the crisis in Japan's banks took a combination of capital injections, new laws and regulations, stronger oversight, a reorganization of the banking sector, moderate economic recovery, and several years of banks working off their non-performing loans. This report will be updated as circumstances warrant.

From the mid-1980s to the end of FY2003, federal agencies had been authorized to enter intoEnergy Savings Performance Contracts (ESPCs) with contractors that privately financed andinstalled energy conservation measures in federal buildings and facilities. In return, the contractorsreceived specified shares of any resulting energy cost savings. The term "energy conservationmeasure" (ECM) applies to energy-efficiency improvements such as energy- and water-savingequipment, and renewable energy systems such as solar energy panels. (1) The contractor, referred to as an Energy Service Company (ESCO), provided the design,acquisition, installation, testing, operation, maintenance, and repair services for the ECM. TheESCO also had to guarantee a fixed amount of energy and cost savings throughout the term of thecontract, and bore the risk of the ECM's failure to produce a projected energy savings. The sum ofthe ECM cost and its reduced level of energy cost could not exceed the pre-ESPC energy cost. Theterm "energy savings" was applied to the measured reduction in the base cost of energy used by anexisting federally owned building or facility, as established through methods specified in thecontract. To date more than 340 ESPCs have been awarded, according to the Department of Energy(DOE), and no ESCO has failed to produce an energy and cost savings. (2) A recent Department ofDefense (DOD) proposal would have expanded ESPCs' application beyond fixed facilities intomobile systems. ESPCs were suggested as means of replacing the engines of the Air Force's agingB-52 bomber fleet with more efficient jet engines that would burn less fuel, thus qualifying as energyconservation measures. (3) Congress is currently considering ESPC reauthorization. Even though authorizing legislationhas expired, ESPCs awarded prior to the expiration date of October 1, 2003, continue in effect untiltheir completion dates. This report reviews the legislative history of ESPCs, the federal program topromote them, the Congressional Budget Office's (CBO's) scoring rationale, and ESPCs' cost andbenefits. The report also discuss the debate as to whether ESPCs offer the best contract means forinstalling ECMs, and policy considerations for Congress. Though Energy Savings Performance Contracts were authorized in 1992, they built on earlierCongressional mandates to improve the energy efficiency of federal buildings. Subsequentlegislation required federal agencies to audit their effectiveness, authorized federal agencies to retain50% of the resulting savings, raised the dollar threshold for notifying Congress, and temporarilyextended their authorization. The enabling legislation is summarized below. EPAct directed DOE to develop rules for federal use of ESPCs consistent with FederalAcquisition Regulations (FAR). DOE published the final energy savings performance contractingregulations (10 C.F.R. 436) in April 1995. (5) These provisions superseded those in the FAR. Federal agencieswere encouraged to make use of ESPCs' innovative contracting mechanisms, namely, the use ofprivate sector financing that did not require prior appropriations. (6) The financing supportedenergy-efficiency improvements to help reduce energy costs and meet federal energy reduction goals. DOE's rules also required that federal agencies document progress toward energy savinggoals by submitting an annual report, implementation plan, energy scorecard, and energymanagement data report to the President and Congress. (7) The annual report describes energy management activities infederal facilities program operations, and progress in implementing NECPA requirements and inattaining the energy-efficiency improvement goals of Executive Order 13123, Greening theGovernment Through Efficient Energy Management. (8) The order directs federal agencies to maximize their use ofavailable alternative financing contracting mechanisms, such as ESPCs. DOE's Federal Energy Management Program (FEMP) established a "Qualified List of EnergyService Companies." (9) Thelist includes all private industry firms that submitted an application and were qualified by a ReviewBoard, consisting of Federal Interagency Energy Management Task Force representatives and DOEstaff. Recognizing that awarding a stand-alone ESPC could be very complex and time-consuming,FEMP also created streamlined "Super ESPCs" as umbrella contracts that allowed agencies toundertake multiple ESPCs under one contract. Federal agencies reported new EPSC commitments through an annual Energy Scorecard thatlisted the number of contracts, projected annual savings in millions of British thermal units (Btu),total investment value, cumulative guaranteed cost savings, and contract award value. For FY1998, FEMP reported that federal agencies awarded $79 million in conventionalESPCs and another $6.6 million as Super ESPCs, excluding the Department of Defense. (10) By FY2000, conventionalawards rose to $225 million as Super ESPC awards rose to $62 million (for a total of $287 million),including Defense. (11) For FY2003, FEMP estimates that the private sector committed $252 million to finance ESPCs. Figure 1 shows the value of Super ESPCs versus conventional ESPCs awarded between FY1998and FY2003 in nominal dollars. Few if any conventional ESPCs are reported as being awarded after2001, as indicated by the abrupt drop-off of the graph curve. How effective are ESPCs' contribution to meeting federal energy reduction goals? FederalESPC projects have achieved about a 30% higher energy savings (per-square-foot basis) thanmunicipal/state governments, universities, schools, and hospitals (MUSH). (12) The median for federalenergy savings is about 18,000 Btu per square foot (Btu/ft 2 ) compared to 14,000 Btu/ft 2 for MUSH. Annual federal government electricity consumption also declined from 1992 to 2002 by 1.14 billionkilowatt-hours. (13) Figure 1. Super ESPC vs. Conventional ESPC How do the savings translate in terms of net economic benefit? In an analysis of 214 federalprojects, using a 7% discount (interest) rate, Lawrence Berkeley National Laboratory (LBNL)projected $550 million in benefits that would go to the taxpayer. (14) ESPC savings projections may or may not be achieved depending upon whether the buildingor facility is fully used after the energy improvement. (15) If savings were smaller than projected, future operation andmaintenance (O&M) spending would need to be larger than projected. The ESPCs' savings freedup funds that otherwise would have been appropriated for O&M. (16) Though authorized for up to 25 years, ESPC contract terms have been averaging 14 years inlength. (17) Normally,ESPC cost savings are used to pay the contractor first and then offset other base operating expensesafter the contract completion. (18) In an unconventional approach, DOD deferred some ESPCs' costsavings until contract completion to shorten the contract term and accelerate payoff of the energyconservation improvement. These contracts reduced energy consumption but did not reduce the totalcost of operation until contract expiration. Although CBO would score such ESPCs as futurefinancial obligations, the length of the obligation would be reduced, as would the interest chargesthat the ESCO would pass on to the government (discussed below). The federal market for ESPCs has produced at least 340 projects valued at approximately$1.6 billion in private sector investments. (19) In comparison to ESPCs, $3.17 billion in appropriated funds wasinvested in energy-reducing capital improvements between FY1985 and FY2001.Appropriations-funded projects peaked at $288 million in FY1995 and declined to $131 million byFY2001. Figure 2 shows the rate of spending between 1985 and 2001. Figure 2. Appropriations-Funded Energy Conservation Measures Are the costs of energy conservation measures installed under ESPCs as favorable as thecosts obtained through competitive sourcing with appropriated funds? To answer the question, OakRidge National Laboratory (ORNL) conducted a cost evaluation comparing energy projectscompleted under ESPCs with those completed under appropriated funds. (20) ORNL's evaluationconcluded that the "pricing under Super-ESPCs, using a design-build approach negotiated for bestvalue, was as good as the pricing obtained for the appropriations-funded projects in the traditional'bid-to-specification' competitive program." In sum, ORNL found that energy conservation measurescompleted under an ESPC were no more costly than those completed under direct appropriations. Are energy conservation measures under appropriated funds more time- consuming thanunder ESPCs? Based on data for 71 awarded projects, ORNL found that Super ESPCs averaged 15months to award the contract and 12 months for design and construction -- 27 months in durationfrom start to finish for an average implementation price of $3.26 million. (21) Based on data for 23energy projects, appropriations-funded projects averaged 63 months in duration. Only 12 of the 39ECMs studied were ultimately funded (some projects having more than one ECM). How does project financing compare between ESPCs and appropriations-funded contracts? Since ESCOs pay interest charges on money borrowed to finance the energy conservation measures,they recover the cost over the life cycle of the ESPC. Under an appropriations-funded project, acontractor's commercial finance charges would also be passed through as part the project's cost, butthe length of financing and therefore cost of financing would be considerably less than with ESPCs. A key measure for comparing the ESPC funding alternative to appropriations-funded projectslies in the life-cycle cost. This accounts for the costs of the initial survey and feasibility study,installation, and owning and operating the ECM over its useful life. ORNL devised parametrictables (22) to assist federalmanagers in deciding whether to fund ECMs through ESPCs or wait for appropriated funding. Forproject duration times between 28 and 68 months, ORNL found that appropriations-funded projectshad lower life-cycle costs as long as the up-front survey/study costs stayed below 18% of thedesign/completion costs. (23) However, when the annual energy savings fromappropriations-funded projects decreased by as little as 2% from the projected savings, the projectsbegin to lose their competitiveness with ESPCs. Under the 1990 Budget Enforcement Act (BEA, P.L. 101-508 ) pay-as-you-go (PAYGO)rules, increases in mandatory spending scored by CBO had to be offset by mandatory spending cutsor increased revenues. These enforcement mechanisms were extended through FY2002 in theBudget Enforcement Act of 1997 ( P.L. 105-33 ). In addition, the BEA imposed limits ondiscretionary spending, that is, on funds provided through the annual appropriations process. Under the BEA budget constraints from FY1991 through FY2002, CBO remained silent onscoring the budgetary cost of ESPCs. After an extensive review of whether ESPCs imposed a futurefinancial obligation on the federal government, CBO began scoring ESPCs as mandatory spending,coinciding with the expiration of the BEA. (24) The CBO scoring reflects how ESPCs create futurecommitments to appropriations. It is consistent with how appropriations-funded energy conservationprojects would be scored throughout the budget. CBO assumed in scoring H.R. 6 thatbecause the federal building inventory is aging, ESPCs would continue to be awarded at least at thesame rate as in FY2003. (25) Thus, authorizing an extension of ESPCs as included in the H.R.6 conference report could commit upwards of $2.5 billion over the next 10 years, basedon an estimated $252 million commitment in FY2003. Since the 1970s, both the executive branch and Congress have promoted energy efficiencywithin federal agencies. When the federal government's energy-efficiency and conservationprograms received severe budget cuts in the 1980s, Shared Energy Savings and later Energy SavingsPerformance Contracts were devised as part of the strategy to meet federal energy reduction goals. Appropriations-funded energy conservation projects have been declining since FY1995, and federalmanagers have increasingly turned to ESPCs as a remedy to fund energy conservation measures. EPAct had authorized federal agencies to incur obligations through ESPCs to finance energyconservation measures provided that guaranteed savings exceeded the debt service requirements. Nevertheless, CBO scores ESPCs as future commitments to appropriations, consistent with thescoring of commitments for appropriations-funded energy conservation projects throughout thebudget. O&M funds that would pay for ESPCs must be appropriated. Upwards of $2.5 billion overthe next 10 years would be scored as a future commitment if ESPCs were reauthorized. In effect, the federal government borrows money when it authorizes energy-efficiencyimprovements through ESPCs. When there is a deficit, the Treasury must also borrow moneyneeded by government to pay its bills, which government borrows by selling Treasury securities suchas T-bills, notes, Treasury Inflation-Protected securities, and savings bonds to the public. Proponents of ESPCs may argue that ESPCs represent a financially smart choice because ofthe guarantee that all costs, including debt repayment, will be covered by the cost savings producedby new ECMs. Further, the real cost of energy conservation measures under ESPCs is zero giventhat the capital improvement costs and reduced energy costs are less than what the governmentwould continue to pay without the improvements. Further arguments may be made that ESPCsrequire shorter lead times than improvements made with appropriated funds. Hence, energyreductions can be achieved sooner with ESPCs, as supported by the ORNL study. However, thelife-cycle cost of the ECM favors appropriations-funded projects within certain parameters, andESPC funding under other parameters. ESPCs were devised by Congress as a means of decreasing future obligations by reducingoperation and maintenance spending on energy. In recognizing that ESPCs do impose futurefinancial obligations, as scored by CBO, Congress may consider retaining the sunset provision. Despite declining appropriations for energy-efficiency improvements and the necessity tolimit future financial obligations, Congress may still choose to encourage energy-efficiencyimprovements in federal facilities. Congress may decide once again to extend the sunset provision,as had been authorized in the 1998 legislation. Further, Congress may consider amending theprovisions of ESPCs to promote early payback strategies to reduce long-term obligations, orexpanding their application to mobile systems for additional energy-savings potential.

Since the 1970s, both the executive branch and Congress have promoted energy efficiencywithin federal agencies. When the federal government's energy-efficiency and conservationprograms received severe budget cuts in the 1980's, Shared Energy Savings and later Energy SavingsPerformance Contracts were devised as part of the strategy to meet federal energy reduction goals. Energy Savings Performance Contracts (ESPCs) offered federal agencies a novel means ofmaking energy-efficiency improvements to aging buildings and facilities. In return for privatelyfinancing and installing energy conservation measures, a contractor received a specified share of anyresulting energy cost savings. The contractor, referred to as an Energy Service Company (ESCO),guaranteed a fixed amount of energy and cost savings throughout the term of the contract, and borethe risk of the improvement's failure to produce a projected energy savings. The sum of theimprovement's cost and its reduced level of energy cost could not exceed the pre-ESPC energy cost. The term "energy conservation measure" (ECM) was applied to energy-efficiency improvementssuch as energy- and water-saving equipment, and renewable energy systems such as solar energypanels. ESPCs were authorized in 1992 by amendments to the National Energy Conservation PolicyAct. Federal agencies' authorization to enter into ESPCs expired October 1, 2003. Legislativeattempts to reauthorize ESPCs in the 108th Congress stalled when the Congressional Budget Office(CBO) scored ESPCs as mandatory spending that imposed a future financial obligation on the federalgovernment. To date more than 340 ESPCs have been awarded with a total value of approximately $1.6billion in private sector investments. None have failed to produce energy and cost savings. Incomparison to ESPCs, $3.17 billion in appropriated funds was invested in energy-reducing capitalimprovements between FY1985 and FY2001, peaking at $288 million in FY1995 and declining to$131 million by FY2001. As appropriations-funded energy conservation projects have beendeclining since FY1995, federal managers have increasingly turned to ESPCs to fund energyconservation measures. Options for Congress include taking no further action on the sunset provision that endedagencies' authorization to enter into ESPCs, extending the sunset provision, or extending the ESPCauthorization with amendments. Such amendments could include reducing the maximum contractlength and expanding the contract scope to non-building applications. This report will be updatedas the situation warrants.

The U.S. monetary system is based on paper money backed by the full faith and credit of the federal government. The currency is neither valued in, backed by, nor officially convertible into gold or silver. Through much of its history, however, the United States was on a metallic standard of one sort of another. On occasion, there are calls for Congress to return to such a system. Such calls are usually accompanied by claims that gold or silver backing has provided considerable economic benefits in the past. This report briefly reviews the history of the gold standard in the United States. It is intended to clarify the dates during which the standard was used, the type of gold standard in operation at the various times, and the statutory changes used to alter the standard and eventually end it. It is not a discussion of the merits of such a system. Money exists to facilitate exchange, functioning as a "medium" or middle part of a transaction. In a modern economy, every time someone purchases something, that person engages in half of an exchange: one thing of inherent value has changed hands, with the buyer getting what he or she wants, but the seller still looking to get something of value in return. Money is a token given the seller signifying that he or she is still owed something of value. A gold standard uses gold--directly or indirectly--as money. In a pure gold standard, gold itself is used in transactions, with all prices in essence expressed in terms of the amount of gold needed for purchase. Because gold may be alloyed with baser metals, and its weight impossible to ascertain without proper scales, it became common to mint it into coins so that its purity and weight were certified by an authority (usually the government). Such coins typically also become a unit of account, so that instead of being specified in the number of grains of gold of a certain purity, prices are expressed in terms of dollars, guineas, doubloons, drachma, etc. A monetary system can also be regarded as a gold standard if representations of gold are used in exchange. For example, paper notes can be part of a gold standard if they represent a claim to gold. However, "claim" can be ambiguous. Typically, people think of paper currency as part of a gold standard if the notes are "backed" by gold, that is, if there is for every note outstanding a certain quantity of gold stored as "cover." Backing, however, may be largely irrelevant. For paper to represent gold, it must be regarded as equivalent to a given quantity and purity of gold. In general, this equivalence is achieved by "convertibility," the commitment to exchange the notes for gold on demand. For the purposes of this report, a paper money system in which notes are convertible on demand by the issuer into gold of a given weight and purity is regarded as a gold standard. Legal tender is something that by law must be accepted in satisfaction of obligations denominated in currency. Should a suit arise over a commercial or public transaction, the law holds that a monetary obligation is satisfied if these notes have been "tendered" in the correct amount. Under such a law, it is still possible to make a contract in something other than the legally designated currency. A vendor, for example, may specify that the payment needed to induce provision of a service will not be accepted in legal tender. But if payment for an obligation not otherwise specified is tendered in the legally designated medium, it must be accepted at face value. If some medium is made legal tender, payment of that medium for a debt cannot be refused on the grounds that the designated currency is not money. Issuing money is something else. It is possible to issue currency without making it legal tender. The government can--and has--paid out various forms of notes that have circulated as currency, but have not been declared legal tender. Full-bodied gold or silver coins may be issued without making them legal tender. At the same time, tender status can be conferred on the coins or notes of another country. Consequently, the monetary standard and legal tender can be different things. Officially, the United States began not with a gold standard, but with a bimetallic standard in which both gold and silver were used to define the monetary unit. The first coinage act, based on the recommendations of Treasury Secretary Alexander Hamilton, defined the dollar as 371.25 grains of pure silver minted with alloy into a coin of 416 grains. Gold coins were also authorized in denominations of $10 ("eagle") and $2.50 ("quarter-eagle"). The ratio of silver to gold in a given denomination was 15 to 1. These coins were declared legal tender. But in addition, a number of foreign gold coins were also declared legal tender. Most significantly at the time, the Spanish milled dollar of silver was designated as legal tender and set equal to the U.S. dollar. A country's monetary system operates in the context of a world market for metals. And the world market price ratio of silver to gold fluctuates. Not long after the first coinage act was passed, the market price ratio of silver to gold moved to around 15 1/2 to 1. As a result, silver being the cheaper metal, gold was used for purchases abroad, and the coins used for domestic purposes became primarily silver. Effectively, the United States found itself on a silver standard for the first 40 years of its existence. In 1834, Congress moved to remedy the problem caused by the 15-to-1 silver-to-gold mint ratio, and therefore restore gold coins to use in domestic commerce. The ratio was changed to 16 to 1 by reducing the gold in gold coins. The pure gold in an eagle was reduced from 247.5 to 232 grains (and the coin itself reduced to 258 grains, almost nine-tenths fine). An additional adjustment was made in 1837 to 232.2 grains of gold to make the fineness exactly nine-tenths. The fineness of silver coins was also changed to nine-tenths. Since the latter was accomplished by reducing the alloy content, the amount of silver in a dollar remained the same (371.25 grains in the newer 412.5 grain dollar coin). The new coins were legal tender for debts incurred before the alteration in the gold content. This meant that debts from before the change could be discharged with effectively less money than was borrowed. Before 1834, a $10 debt could be paid of with 3712.5 grains of pure silver, worth about 236.465 grains of gold on the world market. Afterwards, 232 grains of gold could pay the debt, a reduction of about 2% in the debtor's cost. The change in the mint ratio, however, was too great. The new mint ratio made gold cheaper relative to the world market price ratio. Silver began to be exported, and after a few years, gold became the principal coin of domestic commerce. The latter phenomenon became more pronounced with discoveries of gold in California and Australia. By 1850, silver coins had almost totally disappeared. This created a problem because there were no gold coins representing fractions of a dollar. The shortage of fractional coins was remedied by an act of 1853. This act authorized subsidiary silver coins (i.e., less than $1) with less silver than called for by the official mint ratio, and less than indicated by the world market price. They were made legal tender for amounts less than $5. Throughout the period before the Civil War, there was no legal-tender paper money in the United States. Yet a variety of paper money existed and circulated as readily as coin. These included private bank notes, some Treasury notes, and (in large transactions) financial instruments called bills of exchange. In each case, these paper claims were promises to pay gold or silver. Consequently, they were an integral part of the metallic monetary standard. Various banks conducted much of their business based on the issuance of notes. Taking deposits and making loans, the banks needed only a fraction of their total assets held as coin on hand. The rest could be held in the form of interest-earning loans, and issued as notes promising to pay the bearer on demand an amount of gold or silver on presentation of the notes. The notes were not legal tender, but circulated on the strength of the promise to redeem. Sometimes the notes passed at a discount that represented the possibility that they would be dishonored. And the discount varied with the distance from the bank and its reputation for soundness. The congressionally chartered First and Second Bank[s] of the United States were able to issue such notes on a national scale through branches throughout the country. These notes were not legal tender, but tended to pass at par with no discount (i.e., at face value). By presenting for redemption the notes of state-chartered banks that it received from customers, the Bank of the United States was able to help state bank notes remain at par as well. Banks were not always able to keep their promise to redeem notes, however, even when the banks were solvent. When unusually large numbers of customers presented notes for redemption, the demand for gold and silver exceeded what the banks had on hand. Periodic financial crises led to suspension of convertibility of notes. In such periods, paper money and metallic money diverged in value, and one was no longer a perfect substitute for the other. Starting for the first time during the War of 1812, the Treasury issued Treasury notes that promised to pay gold or silver at a future date. These were in many ways indistinguishable from other forms of Treasury debt, because they typically bore interest. The notes, however, were especially suited to be used in transactions, and therefore were used as money even though they were not legal tender. Notes that circulated usually were of denominations low enough to be useful in commerce, were the same general size as bank notes, and--most important--were receivable for taxes. The receivability feature guaranteed that they were always worth at least their face value. This meant that while the notes were not convertible into gold or silver on demand, they could satisfy obligations that would otherwise be paid with gold and silver, making them virtually equivalent to coin. Treasury notes of this type were issued at various times until the Civil War. In mercantile circles, large commercial transactions were often settled with bills drawn on other merchants. Bills of exchange were directives to a merchant or firm in another place to pay over to someone a certain sum on or after a given date. They were drawn on a merchant who held balances owed to the drawer or who had extended credit to the drawer of the bill. Once paid to one merchant in a transaction, they were often used in payment in turn to another. They could be indorsed like a check and were considered fairly secure because any indorser of the bill could be held responsible for the debt if the bill were not honored. They were particularly important in foreign trade, enabling large transactions to take place without having ship gold or silver back and forth across the ocean. Like bank notes, they economized on the use of gold and silver, permitting debits and credits among many merchants to be canceled out against each other, with only the net balance needing to be transferred in the form of coin. Under the fiscal pressures produced by the Civil War, the U.S. government issued Treasury notes of the type described above, as well as some convertible into gold and silver. But the government soon found it hard to maintain convertibility. Banks also suspended convertibility. In 1862, therefore, the government issued for the first time notes that were not convertible either on demand or at a specific future date, and that were declared legal tender. Known as "greenbacks," these notes were legal tender for everything but customs duties, which had to be paid in gold or silver. The government made no specific promise to convert such notes to gold or silver. Hence, it abandoned the gold standard . Holders of greenbacks could obtain gold or silver in the marketplace, but one dollar in greenbacks could no longer buy 23.22 grains of gold because the government no longer stood ready to maintain the dollar at its mint price. Greenbacks were issued in such large quantities that the United States experienced a substantial inflation during the course of the war. Just as occurred in the decades before, fractional silver currency disappeared because it was worth more in foreign trade than its face value. There were private issues of paper fractional currency, but these were subsequently outlawed. The government issued postage stamps for fractional currency, and subsequently fractional currency of its own. After the war was over, Congress determined to return to the metallic standard at the same parity that existed before the war. To do this, the market exchange rate of greenbacks for gold had to be brought back to its old level. This was accomplished by slowly removing the greenbacks from circulation. This was an off-and-on effort, with notes removed, held steady, and even returned to circulation. In 1875, it was decided to reduce their number to $300 million. In 1878, however, their number was frozen at about $347 million, where it remained for a century. Parity between the greenback and gold dollars was achieved in 1879, returning the United States to a metallic standard. The government stood ready to pay its debts in gold, accept greenbacks for customs, and to redeem greenbacks on demand for gold. Greenbacks were perfect substitutes for gold coins. The government had returned to a gold standard; but two important changes had taken place with respect to paper money: (1) the government now was an issuer of paper money redeemable on demand and (2) the paper money was legal tender. Although much of the monetary debate of the 1870s was about ending the paper money standard and reestablishing gold convertibility, a relatively minor recodification of law in 1873 turned out to have enormous implications for the monetary system. In defining the dollar and the coins of the United States, the legislation omitted the 412.5 grain silver dollar. Consequently, it eliminated silver as anything but fractional currency. What followed was the only period in U.S. history that can strictly be called a gold standard: 1879-1933. At the time the legislation was enacted, silver had not played a significant role in circulation (except for subsidiary coins) for almost four decades, so that the law had no immediate impact. However, within a few years after the law was passed, the market price of silver was falling rapidly, and restoration of a silver dollar at the old mint ratio would have meant that silver, not gold, would again be the circulating currency. Thus, the 1873 legislation prevented the country from shifting to a de facto silver standard. Once aware of the repercussions of the 1873 act, silver producers and advocates of cheaper money agitated in favor of restoring silver to its previous status. In 1878, legislation was enacted that called on the Treasury to purchase and mint a certain quantity of silver into dollars each year. It further permitted persons to deposit with the Treasury quantities of silver coins for which they would receive "silver certificates," which, although not legal tender, were receivable for taxes, and therefore suitable for circulation. In 1890, the provisions under which silver was purchased was changed somewhat. In addition, a new feature was added: silver certificates could be redeemed for gold. Because of the fall in the value of silver, the silver dollars and certificates under this legislation--like the silver subsidiary coins--had a metallic value on the world market much less than their mint value. The difference in the value ("seignorage") was captured by the government as it bought the silver at market value and paid out the coins at the higher face value. Hence, the value of silver money was like that of the remaining greenbacks: held at artificially high levels by government fiat, but coexistent with a gold standard because the issue of silver dollar coins and silver certificates was limited. In addition to issuing full-bodied gold coins, the government during this period also issued gold certificates. Essentially, these were promises to pay gold to the holder of the note on demand. They provided the public with money that was easier to carry and transfer. The law specified the amount of gold that had to be held in reserve for the notes. Treasury notes were re-created by the 1890 legislation. They were issued upon the security of silver in the Treasury, based on its market value at the time of issuance. They were redeemable for silver on demand based on the market value of silver at the time of redemption. They were made legal tender. Their legal tender character, and their non-interest bearing nature, made them unlike the Treasury notes issued earlier in U.S. history. Another significant change had occurred during the Civil War: the creation of the national bank system. The federal government instituted a system of chartering banks. These banks, like the state banks before them and the Bank[s] of the United States, had the power to issue their own notes. However, the notes had to be backed up by government bonds held on deposit with the Comptroller of the Currency. Because the bonds earned interest and the notes did not, banks made profits from the issuance of bank notes. The notes were not legal tender, but passed readily at their face value because they were redeemable in gold or legal tender notes. The quantity issued was limited by the amount of government bonds eligible to be held as collateral. State bank notes were driven out of circulation by means of a punitive tax of 10% imposed on them. The new national bank notes were of uniform design. Thus, soundly backed by safe assets, these notes provided a safe and uniform--but still privately issued--paper currency for the country. The government's continued flirtation with silver after 1873 generated concerns that it might restore the dual gold and silver standard in which dollar debts could be discharged with 371.75 grains of pure silver. With silver approaching half its previous value in gold, the possibility of restoring the bimetallic standard made holding dollar claims risky. International investors watched the U.S. Treasury for any signs that it might pay debt service in silver--even at the market rate. This generated market instability whenever customs duties (the government's main source of revenue and gold) decreased. In 1900, the government reaffirmed its commitment to the gold standard. The gold dollar was declared the standard unit of account, and all forms of money issued by the government were to be maintained at parity with it. For the first time, a gold reserve for government-issued paper notes was formally established. Greenbacks, silver certificates, and silver dollars continued to be legal tender, and were redeemable in gold. Treasury notes were discontinued and recalled. By the end of the 19 th century, another form of money had become increasingly common: checks. Although checks had existed for centuries, state banks--compensating for the loss of their ability to issue notes--innovated them further. Improvements in transportation and communication, and the growth of clearinghouse associations, made it possible to use them in transactions between customers of different banks, and to some extent different regions of the country. Checks functioned much the same as banks notes had: they permitted the public to conduct business with a smaller amount of coin and legal tender than they would have otherwise. Only a fraction of the money placed in checking account deposits had to be kept on hand or on deposit with clearing agents. Most transactions were settled by canceling debits against credits. Checks also suffered from the same defect that bank notes had earlier in the century: banks were prone to periodic runs by customers demanding cash from their checking accounts. Because banks only kept a limited supply of legal tender and bank notes at any given time, these massive conversions of accounts for cash created crunches and sometimes caused banks to fail. The failure (or potential) failure of banks and losses from uninsured deposits created that much more incentive for depositors to withdraw their funds, producing more bank runs. These periodic banking panics were symptomatic of a less dramatic but more regular problem: the seasonal variation in the need for currency for transactions. The system of gold and legal tender notes was not elastic, and it was subject to money "shortages" especially at harvest time. In 1913, this problem was addressed by the creation of the Federal Reserve System (Fed). The Fed was to remedy the situation in a two ways. First, it would provide a means by which banks could borrow in times of stringency to satisfy their customers' demand for cash. Second, it could create a new form of money, Federal Reserve notes, which could be expanded or contracted in quantity to respond to the need for more cash. T he creation of the Federal Reserve had little if any effect on the gold standard . The dollar was still defined in terms of gold. Federal Reserve notes were redeemable in lawful money. The Fed not only operated under the gold standard, but was charged with maintaining it, and kept a percentage of gold cover for its notes. Gold still dictated the value of the dollar. Much of the world was forced off the gold standard during World War I. Under the Fed, the United States remained on the gold standard through the war. It took several more years after the war before other major countries restored their currency to gold convertability. This was largely completed by 1927. In 1933, the gold standard was ended for the United States. Despite the creation of the Fed, a wave of bank runs resulted in massive bank failures over the period 1930-1933. The Fed failed to provide sufficient liquidity to enable the banks to meet their customers' demands for cash. This failure was due in part--and possibly largely--to the gold standard. For the Fed to generate enough cash to meet the public's changed demand for it, it would have had to create much more money and to lower interest rates. Lower interest rates, however, would have sped up the export of gold from the country as investors looked abroad for higher returns. Creating more paper money, moreover, would have created doubts about the ability of the United States to remain on gold. The greater these doubts, the greater the incentive to export gold, reducing gold reserves, and making it harder to maintain the dollar at its legal gold value. Hence, to keep the economy from collapsing, the Fed needed a policy of expansion. To stay on the gold standard, it needed one of contraction. Until 1933, it largely went with the latter. With the inauguration of Franklin Roosevelt, the government's policy changed. In a series of executive orders, legislative actions, and court decisions, the United States was taken off the gold standard. Convertibility into gold was suspended. Private holdings of gold were nationalized. A new parity with gold was established amounting to a devaluation of approximately 40%. This parity was only important for international transactions, however. Because Americans could not hold gold, their dollars were not convertible. The gold value of the dollar was largely meaningless. With no convertibility, the result was a quasi-gold standard. Shortly after taking office, President Roosevelt closed the banks in order to stop the bank runs and the export of gold from the country. His order also prohibited the banks from paying out gold or dealing in foreign exchange. He did this based on the Trading With the Enemy Act of 1917, which gave him broad powers over banking and currency. Although the 1917 act appeared to confer these powers only in wartime, President Roosevelt acted on the basis of a "national emergency" and summoned Congress to a special session to prepare legislation to confer the powers he wanted to deal with the situation. Three days later, Congress passed the Emergency Banking Act, which amended the 1917 act to include national emergencies, retroactively approved the President's actions of the previous three days, and granted him power to regulate or prohibit the payment of gold. President Roosevelt promptly used these powers to continue the prohibition on gold transactions, even for banks that reopened. By executive order, on April 5, 1933, the "hoarding" of gold was forbidden. Gold had to be turned in to the government at the official price of $20.67 per troy ounce. Essentially, the country's gold was nationalized. This action was endorsed by Congress in a joint resolution. The resolution called for a suspension of the gold standard and abrogated gold clauses. The Thomas Amendment to the Agricultural Adjustment Act of 1933 granted authority to the President to alter the gold content of the dollar, with power to reduce it to 50% of its previous value. In addition, the amendment gave the President power to authorize the issuance of up to $3 billion in U.S. notes, and the power to compel the Fed to issue money to finance up to $3 billion in government borrowing. It also set out new conditions for the issuance of more silver certificates. Under the authority of the Thomas Amendment, the market price of gold was allowed to increase to $35 by January 1934. At that time, the Gold Reserve Act was passed, and the President thereby empowered to fix the new value of the dollar at not less than 60% of its previous value. The Gold Reserve Act also gave legislative force to the nationalization of gold. Under its terms, title to all bullion and coin was vested in the U.S. government, gold coin was withdrawn from circulation, and the Treasury Secretary was given control of all trading in gold. Private holdings of gold were outlawed (except for numismatic and various industrial/artistic uses). In June 1934, the Congress passed the Silver Purchase Act. The act called for at least one-fourth of the United States' monetary stocks to be held in silver, so long as the government did not have to pay more for the silver than its official monetary value. The silver could be coined or issued as silver certificates. Silver certificates were exchangeable for silver coin. Because the market value of silver was below its monetary value, this law provided for the issuance of a limited quantity of another form of what amounted to fiat money. The government's abrogation of gold clauses in contracts was upheld by the Supreme Court in February 1935. Thus, the government could discharge all its interest and principal due in paper money. Because the dollar had depreciated due to official policy, it meant that the outlawing of gold clauses effectively reduced the amounts the government paid on its debts relative to what it would have paid in gold. Under the system adopted by the Gold Reserve Act of 1934, the United States continued to define the dollar in terms of gold. Gold transactions, however, were limited to official settlements with other countries' central banks. For an American citizen, the dollar no longer represented a given quantity of gold in any meaningful sense. The gold standard without domestic convertibility was maintained under the Bretton Woods international monetary agreement of 1944. Under this international agreement, the role of gold was severely constrained. Other countries' currencies were defined in terms of the dollar. Countries kept gold reserves and could settle accounts in gold, but were generally expected to settle balances with any other currencies that were freely convertible into foreign exchange. Countries typically used dollars to settle accounts; only limited amounts of gold were transferred across borders, and dollars were rarely converted into gold even in the international arena. The International Monetary Fund was set up to assist in the exchange process and to provide foreign exchange to help nations keep their exchange rates fixed. Under the old international gold standard, a country with an overvalued currency would have lost gold and experienced deflation until the currency was properly valued. Under Bretton Woods, this automatic adjustment was cushioned through credits that permitted a country to avoid deflating. Although virtually all countries defined their currencies in terms of dollars, for a number of years, even major trading partners imposed exchange restrictions as "transitional" measures in order not to exhaust their reserves in an effort to maintain their official exchange rates. So in important respects, many currencies were still effectively inconvertible. It was only in the late 1950s that the major trading countries finally dropped enough of their exchange restrictions that one could fairly say that they were on an international gold standard. Almost immediately, there were problems for countries maintaining the value of their currencies relative to the dollar/gold. With convertibility playing so small a role in the system, there was little of the automatic discipline which under the old gold standard forced countries' underlying currency values in line with official rates. Periodic currency crises were the result. The United States, in particular, because its currency was the key to the whole system, faced even less discipline in its monetary policy. Partly as a consequence, too many dollars were issued to keep prices stable or to keep the price of gold at its official level. A mild inflation developed. Internationally, this meant that the dollar was becoming overvalued in the system: worth more officially than indicated by its relative buying power. Under the classic gold standard, this would have caused an outflow of gold from the United States, a fall in the money supply, and a return of the dollar's buying power to its official gold price. Under the Bretton Woods system, countries coordinated their efforts to maintain currencies at their official levels. Increasingly, other countries built up balances of dollars rather than convert them to gold. Meanwhile, the United States was getting closer to the legal limit on currency that could be outstanding on the gold stock that was held in reserve. Domestically, U.S. inflation raised silver prices enough that the market value of silver in silver certificates and coins was approaching the mint value. The United States was beginning to have difficulty keeping enough coins and silver certificates in circulation. The certificates presented a problem because they were the principal form of small-denomination currency. In 1963, Congress repealed the Silver Purchase Act and granted the Federal Reserve authority to produce Federal Reserve notes in $1 and $2 denominations. The Kennedy Administration quickly made arrangements for the gradual retirement of the silver certificates, thereby freeing up the government's silver holdings for use as coins. As inflation continued, it was apparent that full-bodied silver coins would soon be impossible to keep in circulation. In 1965, Congress authorized the minting of clad coins of copper and nickel to replace the existing silver coins. In 1965, the requirement to hold gold reserves against Federal Reserve deposits was repealed. In 1968, the requirement to hold gold reserves against Federal Reserve notes was repealed. Although there was no private market for gold in the United States, such markets did exist abroad. By the late 1960s, prices in these markets were tending to deviate from official currency prices. The United States and other countries tried to combat this through a series of market interventions in which sizable amounts of the official gold stock were sold. In 1968, these "gold pool" arrangements collapsed. A new policy was adopted in which the private market price of gold would be allowed to deviate from the official settlements price. This made the international monetary arrangement a gold standard in name only. It was also necessary for the United States to avoid large official settlements in gold. Through diplomatic channels it was made clear that other countries could not expect to redeem large quantities of dollars for gold. This "closing of the gold window" was not an official action, so that it did not constitute an official abandonment of gold. Nor was it an absolute prohibition on gold redemption. However, what had previously been routine became a matter of negotiation. In August 1971, the Nixon Administration announced that it would not freely convert dollars at their official exchange rate. The measure was intended to be temporary. The gold price of the dollar and official rate of exchange into other currencies were not changed. The intention was to put pressure on other countries to revalue their currencies (and make other concessions). The country did not officially move to a "floating" rate. With no official conversion or redemption taking place, the dollar floated by default. After a series of negotiations, the "Smithsonian Agreement" was reached in December 1972, by which the dollar would be devalued from $35 per troy ounce of gold to $38 while several other countries revalued their currencies upward. This new value was made official by an act of Congress in March 1972. The new price was the official price of the dollar, and policies were pursued to maintain the dollar's value relative to other currencies. However, there continued to be no convertibility into gold--even for international transactions. The $38 price was the official price at which the United States neither sold nor purchased gold. Within a year, it became impractical to maintain the new exchange rate. To do so would have required the United States to redeem more dollars than it had in gold and foreign currency reserves, or to contract the economy to increase the purchasing power of the dollar. In February 1973, the Treasury agreed to devalue the dollar to $42.22 per troy ounce of gold. Within two weeks of the second devaluation, it again became impractical to hold the rate. At that point, despite efforts to reach a new monetary agreement, the dollar was left to float. The new $42.22 par value was made official in September 1973, long after it had been de facto abandoned. The official rate was never maintained. In October 1976, the government made official what was already true in reality: the definition of the dollar it terms of gold was removed from statute. The monetary system officially became one of pure fiat money. This brief history, although essentially factual in nature, yields a number of observations relevant to claims about the gold standard. U.S. monetary history is not one of steady commitment to gold suddenly abandoned in favor of a fiat standard. Nor were the metallic standards of the 19 th and early 20 th centuries without paper money or other characteristics abhorrent to some advocates of gold. First , a genuine gold standard existed only from 1879 to 1933. Prior to that was a bimetallic standard in which silver was dominant from 1792 to 1834, a bimetallic standard with gold dominant from 1834 to 1862, and a fiat money system from 1862 to 1879. After 1933, it was a quasi-gold standard that gradually became a pure fiat standard over the period 1967-1973. Second , even under the gold standard, the United States had paper money. For most of the time the standard was in operation, this money was issued by banks. Until the Civil War, none of the paper money was legal tender; yet, it circulated. Moreover, the gold reserve behind paper money was never more than a fraction of the total. This is a common characteristic of metallic standards. Third , a metallic standard is no guarantee against currency devaluation. The definition of the unit of account can be changed. This was demonstrated by the currency depreciation of 1834, which occurred without ever leaving the standard. Similarly, under a bimetallic standard, depreciation can occur as a consequence of the changing availability of the two metals. Fourth , even under a metallic standard, the United States issued legal-tender coins that were less than full-bodied. As early as 1853, coins were minted with less silver than called for by the official mint ratio. Fifth , the Federal Reserve system did not replace the gold standard. The Fed operated under the gold standard for nearly 20 years. A central bank and a metallic standard are not mutually exclusive. Indeed, central banks historically were set up to help the gold standard operate. Sixth , the classic gold standard ended in 1933; what followed was only a partial--and not full--gold standard. A definition of a dollar as a given amount of gold does not make a real gold standard. A genuine metallic standard is one in which the public is able to freely shift gold from exchange to other uses, and paper issued by the government freely convertible into gold. Seventh , the final move to a fiat money was not deliberate or purposeful. It occurred by default as links to gold became impossible to maintain. Nor did the final abandonment of gold occur suddenly or cleanly. The United States began to halt its redemptions of dollars into gold for international transactions in 1967 and 1968. The actions of 1971 and 1973 were not the adoption of floating exchange rates and fiat money, but the loss of the ability to redeem dollars at a fixed price. Floating occurred by default.

The U.S. monetary system is based on paper money backed by the full faith and credit of the federal government. The currency is neither valued in, backed by, nor officially convertible into gold or silver. Through much of its history, however, the United States was on a metallic standard of one sort or another. On occasion, there are calls for Congress to return to such a system. Such calls are usually accompanied by claims that gold or silver backing has provided considerable economic benefits in the past. This report briefly reviews the history of the gold standard in the United States. It is intended to clarify the dates during which the standard was used, the type of gold standard in operation at the various times, and the statutory changes used to alter the standard and eventually end it. It is not a discussion of the merits of such a system. The United States began with a bimetallic standard in which the dollar was defined in terms of both gold or silver at weights and fineness such that gold and silver were set in value to each other at a ratio of 15 to 1. Because world markets valued them at a 15 1/2 to 1 ratio, much of the gold left the country and silver was the de facto standard. In 1834, the gold content of the dollar was reduced to make the ratio 16 to 1. As a result, silver left the country and gold became the de facto standard. In addition, gold discoveries drove down the value of gold even more, so that even small silver coins disappeared from circulation. In 1853, the silver content of small coins was reduced below their official face value so that the public could have the coins needed to make change. During the Civil War, the government issued legal tender paper money that was not redeemable in gold or silver, effectively placing the country on a fiat paper system. In 1879, the country was returned to a metallic standard; this time a single one: gold. Throughout the late 19th century, there were efforts to remonetize silver. A quantity of silver money was issued; however, its intrinsic value did not equal the face value of the money, nor was silver freely convertible into money. In 1900, the United States reaffirmed its commitment to the gold standard and relegated silver to small denomination money. Throughout the period under which the United States had a metallic standard, paper money was extensively used. A variety of bank notes circulated, even without being legal tender. Various notes issued by the Treasury also circulated without being legal tender. This use of paper money is entirely consistent with a gold standard. Much of the money used under a gold standard is not gold, but promises to pay gold. To help ensure that the paper notes theretofore issued by banks were honored, the government created the national bank system in 1863. In 1913, it created the Federal Reserve System to help ensure that checks were similarly honored. The creation of the Federal Reserve did not end the gold standard. The gold standard ended in 1933 when the federal government halted convertibility of notes into gold and nationalized the private gold stock. The dollar was devalued in terms of its gold content, and made convertible into gold for official international transactions only. Even this quasi-gold standard became difficult to maintain in the 1960s. Over the period 1967-1973, the United States abandoned its commitment to covert dollars into gold in official transactions and stopped trying to maintain its value relative to foreign exchange. Despite several attempts to retain some link to gold, all official links of the dollar to gold were severed in 1976.

Wheat is grown in almost every temperate-zone country of North America, Europe, Asia, and South America. The largest wheat-producing countries are China, India, the United States, Russia, Canada, and Australia. U.S. wheat production accounts for about 9%-10% of world production; but the United States is the world's leading wheat exporter with roughly a 25% share of annual world trade. However, the international wheat market is very competitive and foreign sales often hinge on wheat variety and product characteristics as well as price. U.S. wheat is produced as both a winter and a spring crop. The United States produces all six of the world's major wheat classes--hard red winter (HRW), hard red spring (HRS), soft red winter (SRW), hard white, soft white, and durum. Hard wheats generally contain higher protein levels--a desirable trait for bread making, while softer wheats may be preferable for making noodles, crackers, and pastries. Durum wheat is ground into a coarse flour called semolina that is used for making pastas. In local markets, the demand for a particular wheat class (and quality) relative to its nearby supply will determine local prices. Traditional, higher-protein wheats command a premium over lower-protein varieties, often referred to as the "protein premium" ( Figure 1 ). However, linkages to national and global markets bring additional factors--such as transportation costs, competitors' supplies, and foreign demand--into play in determining the price of a particular wheat type and quality. Wheat is the principal food grain grown in the United States; however, a substantial portion (8%-10%) of the annual U.S. wheat crop is used as a feed grain. As a result, wheat must compete with other cereals for a place at the consumer's dinner table, while also vying with coarse grains and other feedstuffs in livestock feed markets. Almost half of the U.S. wheat crop is exported annually, although the importance of exports varies by class of wheat. White wheat and HRS wheat rely more than other wheat classes on sales into export markets. The larger the share of exports to production, the greater the vulnerability to international market forces. In the U.S. domestic market, flour millers are the major users of wheat, milling about 24% of annual wheat production into flour since 2000. In most cases, a wheat buyer at a flour mill will "source" wheat by general location and primary quality attributes such as protein quantity and quality (i.e., gluten share) and baking performance. Price premiums and/or discounts reflecting quality differences often develop and can also influence buyer preferences. Other major wheat processors include breakfast food, pet food, and feed manufacturers. Wheat may be used directly in feed rations when alternate feedstuffs are lacking or when production-related quality damage makes the wheat unmarketable as a food. Wheat milling by-products such as bran, shorts, and middlings are also used by feed manufacturers in the production of animal feeds. Early in 2007, estimates of Australia's wheat production and exports were reduced because of severe drought in 2006. Then, late-spring freeze damage in the United States and heavy rains at harvest in the United States and Western Europe reduced the output and quality of wheat. Next, dry weather hurt crops in Eastern Europe and some countries of the former Soviet Union. Drought in southeastern Europe reduced that area's wheat and corn crops, forcing livestock producers in the European Union (EU) to import wheat and feed grains for feed rations. By midsummer, it became apparent that Canada and the Ukraine would reap smaller wheat crops because of poor weather conditions. The production shortfalls curtailed exports from most traditional wheat exporters. In the spring of 2007, both Ukraine and Argentina initiated export restrictions in efforts to control food price inflation. The Ukraine imposed a ban on wheat exports and Argentina stopped issuing export registrations, which significantly slowed export sales during the rest of the year. Although the EU was able to export wheat without export subsidies, shipments out of the EU slowed sharply by late summer as wheat increasingly replaced corn used for feed. By early fall, only the United States, Russia, and Kazakhstan had large volumes of wheat available for export. Recently Kazakhstan officials have said that they also intend on slowing their country's wheat export pace (via higher custom duties) due to declining supplies. Projected tight U.S. supplies, combined with reduced export competition, caused importers to buy U.S. wheat (in late 2007) at a pace not seen since the 1970s. U.S. wheat export sales were very strong despite higher prices and record-high ocean freight rates. Imports by high-income countries, which are not very price sensitive, followed normal seasonal purchase patterns. However, a number of low- and middle-income countries, generally expected to be more sensitive to price changes, continued to purchase wheat even while prices were rising. Some importers even bought larger amounts at record high prices, apparently out of fear that less wheat would be available in the future, and prices would be even higher. In most years, U.S. wheat export shipments decline seasonally during the winter, spring, and summer months. But in 2007, shipments generally rose during this period, significantly exceeding expectations almost every month. In August and September, U.S. wheat export volume spiked, rising from monthly averages of less than 2.5 million metric tons to more than 4 million tons. This occurred as wheat prices climbed to record highs. Record high outstanding export sales (i.e., wheat that has been purchased, but not yet exported) suggest that many importers have already purchased their future needs far in advance of normal purchasing patterns, and that large monthly U.S. wheat shipments can be expected to continue for some months to come, regardless of future price movements. Global stocks are projected to drop to a 30-year low by July 2008, following seven out of eight years in which global consumption exceeded production ( Figure 2 ). In the United States, the nearly three-decades-long decline in planted area and production, coupled with the surge in export demand, has led to projections for the lowest ending wheat stocks (237 million bushels) since 1947. Because of a shortage of milling-quality wheat, prices for high-protein (13%-15%) spring wheat (HRS)--grown primarily in the Northern Plains--have risen faster than prices for the ordinary-protein (10%-13%) wheats (HRW) of the Southern Plains or the low-protein wheat (SRW) grown in the Delta and Corn Belt states. In addition, in January USDA released an estimate for last fall's plantings of the winter wheat crop that, although up from last year, was significantly below market expectations. This increased the market concern about whether a large U.S. spring wheat crop would be produced. As a result, cash and futures market prices for HRS wheat--traded daily at the Minneapolis Grain Exchange (MGE)--hit almost daily record highs through January and February. On February 25, 2008, the nearby futures contract for HRS wheat closed at a record $24 per bushel. HRS wheat prices can be tracked in the cash market by following daily price quotes for Dark Northern Spring (DNS) wheat out of Minneapolis ( Figure 1 ). Prices for soft white wheat (grown primarily in the Pacific Northwest) have also risen sharply in recent months. White wheat is used to produce a very popular type of noodle eaten throughout eastern Asia. Australia is traditionally the world's largest supplier of white wheat, but last year's drought-reduced harvest drastically limited its export supplies. As a result, China and other Asian countries have been competing for dwindling U.S. and international supplies of white wheat and this has pushed prices sharply higher. U.S. wheat planted area has been steadily declining for the past 40 years as low relative returns have led many farmers to shift to other, more profitable activities. This phenomenon has clearly been evident in the Northern Plains, where the development of short-season corn and soybean varieties has steadily cut into traditional wheat areas. This process has accelerated since late 2005 with the rapid growth of corn-based ethanol production, which has sparked high corn and soybean prices ( Figure 3 ). Wheat prices must rise high enough to compete for planted acres this spring (2008) with the other grains and oilseeds. This area competition is also contributing to the price run-up at the MGE. High commodity prices are expected to encourage farmers to expand plantings this spring. However, since the land base is constant, the question is which crops will get more area and which will lose. For 2008, USDA projects that U.S. planted acreage will expand significantly for both wheat (up 6%) and soybeans (up nearly 12%), while corn plantings will decline slightly (by about 4%). As a result, assuming normal weather and average yields, U.S. wheat production is expected to rise by nearly 13%. In addition, USDA projects that global wheat plantings and output will rise substantially (although no official estimate for 2008 global production is released until May). Larger global wheat supplies are expected to significantly reduce international demand for U.S. wheat in the latter half of 2008. Thus, the combination of higher production and lower exports is expected to allow U.S. domestic wheat stocks to rebuild and wheat prices to decline from their early 2007 peaks (while remaining high relative to past years). Markets are likely to exhibit substantial price variability until global stock levels can be rebuilt. As the global supply rebounds from the shortfalls of 2007, higher projected production is expected to facilitate the rebuilding of stocks and the return of prices to the $4 to $5 per bushel range over the next five- to ten-year period. The rise in agricultural prices, combined with high oil prices, have contributed to higher food inflation in the United States and around the world. U.S. food prices increased by 4% during 2007, the highest one-year rise since 1990. Prices for cereals and bakery products were up by 4.4%. USDA predicts that food price inflation for 2008 will be in the range of 3% to 4%, while bakery goods are expected to rise by 5.5% to 6.5%. Inflation concerns were further heightened when the U.S. Bureau of Labor Statistics announced that food prices had jumped by 1.7% during the month of January 2008--the biggest monthly increase in three years. Despite the sharp increases in commodity prices in 2007, most economists agree that fuel costs have played a larger role in food price inflation than have commodity prices. In general, retail food prices are much less volatile than farm-level prices and tend to rise by a fraction of the change in farm prices. This is because the actual farm product represents only a small share of the eventual retail price, whereas transportation, processing, packaging, advertising, handling, and other costs--all vulnerable to higher fuel prices--comprise the majority of the final sales price. Due to trade linkages, high commodity prices ripple through international markets where impacts vary widely based on grain import dependence and the ability to respond to higher commodity prices. Import-dependent developing country markets are put at greater food security risk due to the higher cost of imported commodities. The overall impact to consumers from higher food prices depends on the proportion of income that is spent on food. Since food costs represent a relatively small share of consumer spending for most U.S. households (about 10%), food price increases (from whatever source) are absorbed relatively easily in the short run. However, low-income consumers spend a much greater proportion of their income on food than do high-income consumers. Their larger share combined with less flexibility to adjust expenditures in other budget areas means that any increase in food prices potentially could cause hardship. In particular, lower-income households in many foreign markets where food imports are an important share of national consumption and where food expenses represent a larger portion of the household budget may be affected by higher food prices. Humanitarian groups have expressed concern for the potential difficulties that higher grain prices imply for developing countries that are net food importers. International food aid is the United States' major response to reducing global hunger. Because most U.S. food aid activities are fixed in value by annual appropriations, the amount of commodities that can be purchased declines with rising food prices. In 2006, the United States provided $2.1 billion of such assistance, which paid for the delivery and distribution of more than 3 million metric tons of U.S. agricultural commodities. The United States provided food aid to 65 countries in 2006, more than half of them in Sub-Saharan Africa.

The U.S. Department of Agriculture (USDA) projects the U.S. season-average farm price (SAFP) received for all wheat in the 2007/08 marketing year (June to May) to be in the $6.45 to $6.85 per bushel range. The range midpoint exceeds the previous U.S. record of $4.55 (in 1995/96) by 46%. During the past 30 years, the all-wheat SAFP has stayed within a range of $2.42 to $4.55, while averaging $3.33 per bushel. USDA projects a replenishment of U.S. and global supplies in 2008 (assuming normal weather conditions) to moderate market prices in the latter half of 2008. However, prices are likely to exhibit substantial variability until global stock levels can be rebuilt. The initial impetus for rising prices over the past year has been a 30-year low in global stocks following seven out of eight years in which global consumption exceeded production. However, in recent months several other factors--including reluctance of traditional exporters to make further supplies available to international markets, strong international demand, the rapid growth in the demand for grains and oilseeds as feedstock for biofuels production, and USDA's announcement that last fall's winter-wheat plantings were less than expected--have contributed to a sharp rise in cash and futures contract prices, particularly for higher-protein wheat varieties. This report will be updated as events warrant.

The 108 th Congress established a new recreation fee program for the Bureau of Reclamation (Reclamation) and the four major federal land management agencies--the National Park Service (NPS), Fish and Wildlife Service (FWS), and Bureau of Land Management (BLM) in the Department of the Interior (DOI), and the Forest Service (FS) in the Department of Agriculture (USDA). The Federal Lands Recreation Enhancement Act (FLREA) authorizes the agencies to charge and collect fees at federal recreational lands and waters. The act authorizes different kinds of fees, outlines criteria for establishing fees, and prohibits charging fees for certain activities or services. The agencies can spend the revenue collected without further appropriation, with most of the money retained at the collection site, and the collections can be used for specified purposes. The act also authorizes an interagency pass that can be used at federal recreation sites throughout the nation, as well as regional multi-entity passes. The program is to terminate 10 years after enactment--on December 8, 2014. This new recreation fee program supersedes an earlier one, the Recreational Fee Demonstration Program ("Fee Demo"), which began in 1996 as a three-year trial but was extended several times. That program had allowed the four land management agencies, but not Reclamation, to test the feasibility of charging fees to generate revenues for improvements at recreation sites. While the number of fee sites was limited initially, the agencies ultimately were allowed to establish any number of fee sites, set fee levels, and retain and spend the revenue collected without further appropriation. At least 80% of the revenue had to be retained and used at the site where it was generated, and agencies had wide latitude to spend the funds on purposes specified in law. The extent to which fees should be charged for recreation has been controversial for decades, and the Fee Demo program had both supporters and critics. It was supported in part for generating revenue; providing flexibility in setting fees and using revenues; having the direct beneficiaries of recreation pay more for benefits; deterring criminal activity, such as littering and vandalism; and ameliorating damage where it did occur. However, the Fee Demo program was criticized as doubly taxing the recreating public; resulting in unfair and confusing fees in some areas; promoting commercial development that damaged federal lands; and discriminating against lower-income people, rural residents, and low-impact recreation. Still other criticisms pertained to program implementation, including the high cost of fee collection and a lack of consistency in implementation within and across agencies. The current recreation fee program is expected to continue to provide incentives for agency managers to charge and use fees for onsite improvements. Prior to Fee Demo, the agencies had little incentive to develop, monitor, and evaluate fee collection since most fees went to the General Fund of the Treasury; the agencies could not retain them for resource improvements or management activities. FLREA monies, like Fee Demo collections, are intended to supplement appropriations. In general, recreation fees have represented a small portion of each agency's overall financing, with the bulk of agency monies coming from appropriated funds. The agencies anticipate collecting about $265 million in fees in FY2011, with NPS collections accounting for about two-thirds of the total. While the fees collected are small relative to total agency funding, the agencies have noted their importance in making improvements at federal recreation sites. Congress had considered whether to let the Fee Demo program expire, extend it, or make it permanent, and how to structure any extended or permanent program. Central to the debate was which agencies or types of lands to include in a fee program, and how to determine fee amounts, collect fees, and spend collections. In enacting the FLREA, Congress created a 10-year program, and extended it to Reclamation. Congress sought to eliminate some of the concerns with Fee Demo, in part by simplifying and standardizing the types of fees, authorizing an interagency recreation pass, and providing for public input in establishing fee locations and amounts. The balance of this report first provides an overview of key provisions of the FLREA. They include the types of fees allowed, use of fee receipts, public input in determining fees, and the authority for a national recreation pass. The report next focuses on issues related to the implementation of the FLREA. They involve the use of advisory committees to provide input on fees, the establishment of the national recreation pass, the extent of agency participation in the recreation fee program, and the collection and use of fee receipts. In enacting the FLREA, Congress sought to reduce or eliminate duplication, inconsistency, and confusion over determining and collecting fees. The law seeks to standardize the types of recreation fees across agencies, differentiate among different types of fees, and minimize the situations where multiple fees can be charged. To alleviate concerns that past fees had been charged for non-developed areas, the law outlines areas and circumstances where fees can and cannot be charged, in some cases specifying the level of services needed to charge a fee. Another objective of the law is to enhance public involvement in determining fee sites and setting fees. The FLREA provides guidance on establishing entrance, standard amenity, expanded amenity, and special recreation permit fees. An entrance fee may be charged for units managed by the NPS and FWS only, on the grounds that recreation fees at these agencies have enjoyed widespread support and the lands typically have certain kinds of infrastructure and services. The law explicitly states that the BLM, Reclamation, and FS may not charge entrance fees. Rather, these agencies may charge "standard amenity fees" in areas or circumstances where a certain level of services or facilities is available. Specifically, these agencies may charge standard amenity fees at a National Conservation Area; a National Volcanic Monument; a destination visitor or interpretive center that provides a broad range of interpretive services, programs, and media; an area that provides significant opportunities for outdoor recreation, has substantial federal investments, where fees can be collected efficiently, and that contains all of the following amenities: --designated developed parking, --permanent toilet facility, --permanent trash receptacle, --interpretive sign, exhibit, or kiosk, --picnic tables, and --security services. All five agencies also may charge an "expanded amenity fee," on the grounds that some extra fee for specialized services is fair and equitable. The NPS and FWS may charge such a fee when a visitor uses a specific or specialized facility, equipment, or service. The fee may be in addition to an entrance fee or may be the sole fee. The BLM, Reclamation, and FS may charge an expanded amenity fee only for specified facilities and services, such as use of developed campgrounds or developed swimming sites that provide at least a majority of services identified in the law; use of transportation services; rental of cabins, boats, and historic structures; and participation in special tours. The FLREA prohibits the BLM, Reclamation, and FS from charging standard or expanded amenity fees for certain activities and services, such as for parking or picnicking along roads or trail sides, accessing dispersed areas with low or no investment (unless specifically authorized in the law), passing through areas without using facilities and services, and using scenic overlooks. In addition, the law specifies places where entrance and standard fees may not be charged--for example, at NPS units within the District of Columbia. It also bars fees from being charged to certain persons, such as those under 16 years old, or for certain purposes, including outings for noncommercial educational purposes by schools and academic institutions. Further, the DOI and USDA Secretaries may charge a special recreation permit fee in connection with a special permit issued for specialized recreation at lands and waters of any of the five agencies. Specialized recreation includes group activities, recreation events, and use of motorized recreational vehicles. To promote fair and consistent fees among agencies and locations, the FLREA provides criteria for establishing recreation fees. For instance, they are to be commensurate with the benefits and services provided, and the Secretaries are to consider comparable fees charged elsewhere, such as by nearby private providers of recreation services. To minimize confusion, burden, and overlap of fees, the Secretaries are to consider the aggregate effect of recreation fees on recreation users and providers. They are to establish the minimum number of fees and avoid collecting multiple or layered fees for similar purposes. In establishing new fees and fee sites, the Secretaries are to obtain input from Recreation Resource Advisory Committees (" Recreation RACs "; see below). The law allows each agency to retain and spend the revenue collected without further appropriation. Each agency's collections are to be deposited into a special account in the Treasury. In general, at least 80% of the revenue collected is to be retained and used at the site where it was generated. However, the Secretaries of DOI and USDA can reduce that amount to not less than 60% for a fiscal year, if collections exceed reasonable needs. This provision seeks to provide agencies with flexibility in using their revenues, in part to address high-priority needs at areas that do not collect enough revenue. The remaining collections are to be used agency-wide, at the discretion of the agency. However, the law contains other provisions for the distribution of certain collections, including from the sale of the national recreation pass and regional multi-entity passes. The agencies have broad discretion in using revenues for purposes specified in the FLREA, which aim to benefit visitors directly. They include facility maintenance, repair, and enhancement; interpretation and visitor services; signs; certain habitat restoration; law enforcement; operation of the recreation fee program; and fee management agreements. The Secretaries may not use collections for employee bonuses or biological monitoring under the Endangered Species Act. Further, the Secretaries may not use more than "an average" of 15% of collections for program administration, overhead, and indirect costs. Under the Fee Demo program, agencies reported that a majority of fees were spent on deferred maintenance and various visitor services. The FLREA continues a requirement that the Secretaries enforce the payment of fees. It authorizes penalties for nonpayment, with the fine for the first offense capped at $100. The Secretaries must provide an opportunity for public participation in establishing fees under the FLREA. For instance, they are to publish a notice in the Federal Register regarding a new fee area six months before its establishment. In addition, for each BLM and FS state or region, the Secretaries are to appoint Recreation RACs to make recommendations regarding standard and expanded amenity fees in accordance with specified procedures. The Secretary may establish as many Recreation RACs in a state or region as necessary. If rejecting a fee recommendation, the Secretary is to notify the House Natural Resources and Senate Energy and Natural Resources Committees of the reasons at least 30 days before implementing a decision. Each Recreation RAC is to be composed of 11 members and broadly representative of the recreation community, as specified in the law. Each Recreation RAC is to include five people who represent various types of recreation users, such as summer nonmotorized recreation; three people who represent different types of interest groups, such as motorized outfitters and guides; a state tourism official to represent the state; a representative of affected Indian tribes; and a representative of local governments. The Secretaries may appoint members from nominations by governors and designated county officials, but are not to establish Recreation RACs if there is insufficient interest to ensure a balance of views. Also, in lieu of creating Recreation RACs, the Secretaries may use RACs established under other authorities (e.g., the RACs established under the grazing regulations.) The Secretaries are to post notices of fees in areas where fees are being charged, as well as in publications distributed in the area. To the extent practicable, the Secretaries also are to post notices in areas where work is being performed using collections. Communication on how fees are spent is thought to enhance public acceptance of fees. The law provides for collaboration with other federal and nonfederal entities, with a goal of greater convenience to the public and improved efficiency for the agencies. It authorizes the Secretaries to enter into contracts for various purposes, such as fee collection and processing services and emergency medical services. States or subdivisions of states that enter into such agreements may share in the revenues collected. The law authorizes the establishment of a national pass for recreation at a variety of sites managed by different agencies. One goal is to facilitate recreation by consolidating existing passes and reducing confusion over which passes can be accepted where. Another is to increase the convenience of visiting adjacent sites managed by different agencies. Specifically, the "America the Beautiful - the National Parks and Federal Recreational Lands Pass" is to cover the entrance fee and standard amenity fee at all areas where such fees are charged. The Secretaries are to establish the price of the pass, which generally is to be valid for one year. However, they are to provide free or reduced-cost passes to certain individuals, such as volunteers and senior or disabled visitors, and may provide for a discounted or free day for visitors generally. They are to issue guidelines on administering the pass, including on sharing costs and revenues among the agencies. Further, the Secretaries may enter into cooperative agreements with governmental and nongovernmental entities for developing and implementing the pass program. The law also provides authority to develop site-specific and regional multi-entity passes. A site-specific pass is to cover the entrance or standard amenity fee for a particular site for up to a year. A regional multi-entity pass is to be accepted by one or more of the five agencies or one or more governmental or nongovernmental entities. In establishing multi-entity passes, the Secretary is to enter into an agreement with all participating agencies or entities as to the price of the pass and the sharing of costs and revenues, among other issues. Many assert that the recreation fee program improves recreation and visitor services, and is needed to supplement appropriations. They believe that the program retains the benefits of the former Fee Demo program, such as keeping most fees on-site to provide improvements desired by visitors. They also contend that the current program improves upon the former one, for example, by seeking to establish fair and similar fees among agencies. The criteria in the FLREA for determining fees are intended to ensure that they are charged in appropriate circumstances, namely, where infrastructure and services directly benefit the public. Among other improvements, fee supporters note that the current program provides for more public involvement in determining fee sites and setting fees (e.g., through RACs) and for increased coordination with local communities (e.g., through fee management agreements). They also view the establishment of a single national pass as increasing consistency, convenience, and clarity. However, some concerns with recreation fees continue to be expressed. They include concerns that the program does not go far enough in simplifying fees, that it does not allow for fee experimentation to adapt to change, and that it fails to ensure that most collections will be used for maintenance backlogs of agencies, which many regard as a priority. Other concerns are that federal lands will be overdeveloped to attract fee-paying tourists, and that one national pass is difficult to implement given differences in agency lands and complex issues regarding pricing and sharing revenues. Some charge that the authority to reduce the funds a site retains to 60% could make planning difficult, reduce incentives to collect fees, and weaken visitor support for fees. Other critics continue to oppose recreation fees in general, asserting, among other reasons, that appropriations should cover the costs of operating and maintaining federal lands or that they might be reduced because fees are available. Some counties and states have passed resolutions opposing recreation fees and seeking to repeal the FLREA. A continuing issue is which agencies and types of lands should be in the fee program. A pending Senate bill, S. 868 , would repeal the FLREA and establish entrance and use fees at national park units. It also would reinstate certain recreation fees that were repealed by the FLREA, such as entrance and use fees under the Land and Water Conservation Fund Act and admission permits for certain wildlife refuges. Interagency policy guidance on many aspects of FLREA is contained in a handbook issued in June 2006. The Implementation Handbook establishes common definitions of terms in the FLREA and overarching policy guidelines to implement the law. In addition, DOI and the FS jointly issued guidelines for public involvement in establishing new fee areas and informing the public of how recreation fee revenues are used. Further, each of the agencies has issued its own guidance on the intention, requirements, and implementation of the recreation fee program. The BLM and FS are using both pre-existing and new Recreation RACs to make recommendations on creating, altering, and eliminating recreation fees on both FS and BLM lands. The agencies are collaborating in their use of these advisory bodies by having both agencies use existing BLM Resource Advisory Councils in some areas, one existing FS Advisory Board, and five new FS-chartered Recreation RACs in other areas. Based on the recommendations of three state governors, there are no RACs in Alaska, Nebraska, and Wyoming. Forest Service Recreation RACs have 11 members: five represent recreation users; three represent outfitter-guides and environmental groups; and three represent state tourism, Indian tribes, and local governments. The BLM Recreation RACs have 15 members: five represent commercial land uses (e.g., livestock grazing, timber, oil and gas, and off-highway vehicles); five represent environmental organizations, historic and cultural interests, wildlife, wild horses and burros, and dispersed recreation; and five represent elected officials and governmental agencies, Indian tribes, academia, and the general public. Together, RAC members have provided economic, social, and environmental perspectives on fee issues. Under the FLREA, a RAC may make fee recommendations to the respective Secretary if supported by a majority of each category of members (as specified in the law) and if there is documented public support. Most agency fee initiatives have received positive recommendations after RAC review. However, agencies have reconsidered a number of fee proposals based on RAC input and sought additional public views on fee initiatives based on RAC suggestions. In other cases, RACs have assisted the agencies with preliminary or conceptual fee proposals and influenced how the agencies developed their proposals. The America the Beautiful - the National Parks and Federal Recreational Lands Pass applies to access to, and use of, recreation sites of the five participating agencies. In developing the pass, a key issue was how much to charge, and the agencies contracted with a university for a pricing analysis. The standard version of the pass became available to the general public in January 2007 for a cost of $80. There are three other versions of the pass, for volunteers, seniors, and persons with disabilities. The standard annual pass is the most widely used. The volunteer pass is free to volunteers who work at recreation sites for 500 hours over any time period. Both the standard annual and volunteer passes are valid for a 12-month period, and cover entrance fees and standard amenity fees. The senior pass is a lifetime pass for those aged 62 or older, for a $10 fee. The access pass is a free, lifetime pass for persons with permanent disabilities. Both the senior and access passes cover entrance fees and standard amenity fees, and discounts on some expanded amenity fees. All passes cover admission of the pass holder(s) and other passengers (in a non-commercial vehicle) at sites where fees are charged by the vehicle, and four adults at sites that charge per person fees. The America the Beautiful Pass supersedes a variety of passes issued by agencies previously, such as the National Parks Pass. Legislation has been introduced in the 111 th Congress ( H.R. 1354 ) to make the pass available to veterans for a cost of $10 annually. The NPS administers the interagency pass program on behalf of the participating agencies. The agencies developed standard operating procedures to sell and accept the passes consistently. The procedures cover identification requirements, pass validation, and use of third-party vendors (such as REI) to sell passes, among other issues. In addition to third-party vendors, the passes are available from recreation sites that charge an entrance fee or a standard amenity fee, the U.S. Geological Survey (USGS) online or by phone, and other associations and groups. One issue is how to distribute revenues from the sale of the pass among the agencies over the long term. In the short term, revenues from pass sales at sites remain with the agency that collects them. Revenues collected centrally, for instance through sales of passes on the Internet, are used for administrative costs of the program and repaying the NPS for startup costs of the new pass, with additional revenue split among the five agencies. In the future, the distribution of revenues from centralized sales will take into account use of the pass. How to track use of the pass, particularly at BLM and FS sites that may be remote and unstaffed, continues to be a challenge. The agencies conducted a detailed analysis of the extent to which sites charging recreation fees under the former Fee Demo Program met the criteria and prohibitions of the FLREA for charging entry, standard amenity, and expanded amenity fees. The agencies instructed units to make changes where necessary. The NPS and FWS made little change, as both agencies were authorized under Fee Demo to charge entrance fees and continue to have authority to charge entrance fees under FLREA. Currently, about half of the 392 NPS units charge an entrance fee, while about 35 of the 450 FWS refuges that are open to the public charge an entrance fee. These agencies also charge amenity fees at some sites. For instance, the FWS currently charges entrance or other fees (e.g., for hunting) under FLREA at 112 refuges or other locations. Most BLM areas were in compliance with the requirements of FLREA when it was enacted, and continue to charge fees as before. However, some adjustments were made. For instance, some sites added amenities, such as picnic tables, to be in compliance with FLREA provisions. BLM currently manages about 3,600 recreation sites, of which approximately 300 charge amenity fees. The FS made the most changes as a result of the FLREA. The agency initially dropped fees at 437 sites, including numerous trailheads and picnic areas, because they did not have the amenities required by the law. The FS currently manages about 17,500 developed recreation sites, of which 4,185 collect fees under the FLREA. Most of these sites are campgrounds. Taken together, a majority of these four agencies' sites are not charging a recreation fee. In determining entrance fees, the NPS is using a standardized fee structure nationwide. This structure groups national park units into four categories based on type of designation (e.g., national park, national battlefield, national seashore) and other factors. The same entrance fee is charged at each park unit in a category. For instance, for category 2 units, namely, national seashores, recreation areas, monuments, lakeshores, and historic parks, the entrance fee is $7 per person, $10 per motorcycle, $15 per vehicle, and $30 per annual pass. The FWS typically charges daily entrance fees of $5 per vehicle and $15 for a refuge-specific annual pass. For particular activities, such as hunts, fees are based on a market analysis. FWS seeks consistency of fees within regions, based on related state and private fees. BLM sets fees based on the amenities available at recreation sites, using low, moderate, and high categories. The FS bases fees on local market rates and a variety of factors including amenities available, site condition, and operation and maintenance costs. The average fees at FS sites are approximately $6 for day use and $9 for overnight use. FS use of high-impact recreation area (HIRA) designations for charging fees has been controversial. While the FLREA does not mention HIRAs, the agencies have agreed to define an HIRA as an area of concentrated recreational use that includes a variety of developed sites providing a similar recreation opportunity. Further, it is a contiguous area composed of places, activities, or special, natural, or cultural features that is the focal point of recreation and that has clear access points and boundaries. The FS views it as more convenient for users to pay fees for use of these areas rather than to pay separate fees at each of their sites. The agency notes that collections are used for upkeep of facilities in the areas. Some of the HIRAs have been criticized by recreationists as broad designations for large tracts of land lacking in the amenities required by the FLREA. The FS examined the use of fees at its HIRAs in 2007-2008, and expects to present its findings to the RACs. The FS currently is considering fee changes in some HIRAs and is developing new directives on these areas, which will be made available for public comment. The agency anticipates that some fee changes could result. While the FLREA also applies to Reclamation, the agency is charging a fee under FLREA at only one site. The majority of Reclamation's 289 developed recreation sites are managed by partner organizations, and the agency concluded that these non-federally managed sites will not participate in the FLREA program. Other Reclamation recreation areas are managed by other federal agencies, and these agencies determine whether the areas charge fees under the FLREA. Of Reclamation's 289 developed recreation sites, 33 are managed exclusively by the agency. Reclamation determined that only six of these sites it manages directly would meet the criteria to charge amenity fees. In reviewing whether and to what extent these areas should participate, Reclamation examined whether the costs of implementing and participating in the program would exceed expected revenues. Reclamation also assessed its authority to charge recreation fees under another authority that was not repealed by the FLREA--the Federal Water Project Recreation Act. The agency concluded that it would not be cost effective for the other five qualifying sites to participate in the FLREA. In FY2009, the five agencies collected a total of $258.4 million in recreation receipts under the FLREA. The NPS takes in the most revenue, and the NPS and FS together collected more than 90% of the FY2009 revenues. Specifically, NPS collections were $171.0 million, or 66% of the five-agency total, while the FS collected $64.7 million, which was 25% of the total. The other agency collections were BLM, $17.5 million (7%); FWS, $4.8 million (2%), and Reclamation, $0.5 million (<1%). Table 1 below identifies the receipts for the agencies over the past three fiscal years. The average cost to the four agencies of collecting recreation fees declined from 21% of gross fees in FY2002 to 15% in FY2009. The decline is attributed to technological improvements, increased revenue, and definitional changes, among other factors. The cost to each agency varied considerably during FY2009. Specifically, the cost to the BLM was 2%; to the FS, 9%; to the FWS, 15%; and to the NPS, 19%. The BLM cost is significantly lower because of the reliance on technology, rather than personnel, to collect fees. The NPS cost remains the highest in part because of the higher collection costs of many smaller park units. They tend to collect relatively little revenue or have more complex logistics (e.g., staffed entrance fee stations). The agencies have different procedures for selecting projects to be funded with FLREA revenues. For BLM, FWS, and FS, most projects are approved at the local units, usually within a few weeks of being suggested by unit staff. NPS projects are reviewed by NPS local units, regions, and headquarters, before submission for DOI or congressional approval. This process can take a year or more. While it may help ensure consistency with the FLREA and accountability in use of funds, the process also may delay the implementation of projects and contribute to balances of unobligated revenues. Fees collected during a fiscal year, and carried over from previous years, are available for obligation by the agencies. The agencies have identified total recreation fees available for obligation in FY2009, and the amount that was obligated in FY2009. The agencies report having obligated FY2009 funds for a variety of purposes, including operation, maintenance, and capital improvement projects. The NPS reports that, of $441.0 million available for obligation in FY2009, $222.6 million was obligated. Of those obligations, $119.7 million (54% of total obligations) was for asset repairs and maintenance. This category is comprised of capital improvements, routine/annual maintenance, and deferred maintenance. Deferred maintenance, also called the maintenance backlog, is defined as maintenance that "was not performed when it should have been or was scheduled to be and which, therefore, is put off or delayed for a future period." A focus of Congress and the Administration over the past decade has been on quantifying and reducing agency maintenance backlogs. Another $35.0 million (16%) of the NPS funds obligated went towards interpretation and visitor services, $34.0 million (15%) was for the costs of collecting recreation fees, and the remaining $33.9 million (15%) was for other purposes. The BLM reports that, of $28.6 million available for obligation in FY2009, $16.7 million was obligated. The largest portion of the funds obligated--$5.2 million (31% of total obligations)--was for activities including interpretation and visitor services. For asset repairs and maintenance, BLM obligated $4.4 million (26%). Another $2.8 million (17%) went towards law enforcement and recreation, and the remaining $4.3 million (26%) was directed to other activities. The FWS reports that, of $10.1 million available for obligation in FY2009, $4.3 million was obligated. Of those obligations, the FWS obligated $1.6 million (37% of total obligations) on asset repairs and maintenance. Another $1.2 million (28%) of the obligations was used for visitor services, while the remaining $1.5 million (34%) was for other programs. The FS reports that, of $94.8 million available for obligation in FY2009, there were $61.2 million in total expenditures. The agency reports expenditures of $23.6 million for "Facilities Maintenance," which is 39% of total expenditures. Another $14.1 million (23%) of expenditures was for visitor services, with $11.4 million (19%) for fee management agreement and reservation services and the remaining $12.1 million (20%) for other purposes. Table 2 below identifies recreation fees available for obligation and obligated by the four agencies during FY2009. In the case of the FS, expenditures are noted. The table specifies the amount of obligations for asset repairs and maintenance, including deferred maintenance, because of the congressional and administrative focus on this activity. For the four agencies, a total of $574.4 million in recreation fees was available for obligation in FY2009. Of that amount, $304.8 million was obligated by the agencies. Asset repairs and maintenance collectively comprised $149.3 million (49%) of the obligations. This activity received the largest portion of total agency obligations in FY2009. Obligations for all other purposes were $155.5 million (51%). Information on collection and obligation of recreation fees for other years, similar to that presented here for FY2009, is available in the interagency Triennial Report to Congress on the FLREA program. Specifically, the report has data for FY2006-FY2008 for the participating agencies. Two agencies, the NPS and FWS, have projected how they would spend their recreation fee revenues during the five-year period from FY2009 to FY2013. Priorities for the two agencies include maintenance and visitor services. The BLM, FS, and Reclamation did not similarly publish five-year projections. The NPS expects to dedicate the largest share of its funds to reducing the agency's backlog of deferred maintenance. Specifically, the NPS expects to spend a total of $1.04 billion over five years (from FY2009 to FY2013), with $425.0 million (41%) on deferred maintenance. Agencies report annual estimates of the deferred maintenance of their facilities. DOI estimates deferred maintenance for the NPS for FY2009 at between $8.23 billion and $12.11 billion, with a mid-range figure of $10.17 billion. Fifty-five percent of the total deferred maintenance was for roads, bridges, and trails; 19% was for buildings; and 26% was for other structures. The NPS projects spending other portions of the $1.04 billion as follows: $200.0 million (19%) on visitor services, $185.9 million (18%) on direct costs/costs of collection, $72.5 million (7%) on non-deferred maintenance, $70.0 million (7%) on habitat restoration, and $82.0 million (8%) on other purposes. The FWS anticipates spending $28.4 million over the five-year period. The largest share, $12.1 million (43%), would be used for visitor services. For deferred maintenance, the FWS projects spending $5.4 million (19%) over five years. For FY2009, DOI estimates deferred maintenance for the FWS at between $2.44 billion and $3.59 billion. The FWS anticipates spending other portions of the $28.4 million as follows: $3.5 million (12%) for direct costs/costs of collection; $2.8 million (10%) for non-deferred maintenance; $1.7 million (6%) for administrative, overhead, and indirect costs; and $3.0 million (11%) for other purposes. The recreation fee program historically has had a large balance of unobligated funds. These revenues accumulated under the former Fee Demo program as well as the current program under FLREA. Typically, all of the fees collected during a year are not spent during that year. Questions have arisen as to why the agencies have not used available monies more quickly. Reasons include a need to carry over funds for the next year's operations and for large projects; insufficient staff at some units to administer and implement projects; and the time needed for environmental analysis, design, and engineering. FY2009 marked the first year in which more than half of available recreation revenues were obligated by the four agencies. Annual obligations have increased from 20% of total funds available in FY1997, the outset of the former fee program, to 53% in FY2009. Also during this period, revenues and obligations have increased considerably in absolute terms. In FY1997, total funds available for obligation were $55.3 million, of which $11.0 million were obligated. In FY2009, $574.4 million were available for obligation, of which $304.8 million were obligated. That left a combined unobligated balance of recreation fees totaling $269.6 million in FY2009--47% of all available revenue. Figure 1 depicts the total recreation revenues available for obligation and the total obligated since the inception of the former Fee Demo in FY1997. For each fiscal year, the first bar shows the total funding available for obligation, comprised of the recreation fees collected during the fiscal year (the bottom part of the bar) and the unobligated balance of recreation fees carried over from the previous fiscal year (top part of the bar). The second bar shows the funding that was obligated in each fiscal year. The percent of recreation funds obligated by the four agencies increased from 46% in FY2008 to 53% in FY2009, primarily due to enhanced NPS efforts to reduce its large balance of unobligated funds. For instance, the agency implemented a Recreation Fee Comprehensive Plan covering all fee projects over five years. Park units provide annual updates to include a timeline for project completion. For the first time in FY2009, NPS obligated more than half of the monies available for obligation (50.5%). An NPS goal is to reduce its unobligated balance further, from $218.4 million in FY2009, to approximately $150 million by September 30, 2010, and $80 million by January 1, 2011. To achieve this goal, the agency is limiting the percent of revenue that park units can carry over from year to year. Parks that do not achieve the carryover standard will be penalized. For instance, as of January 1, 2011, park units will lose their carryover funds if the unobligated carryover balance exceeds 35% of annual recreation revenues. The NPS also is taking actions to speed up the use of the 20% of recreation revenues available to be used agency-wide. For example, funds are to be allocated to projects by December 31 each year. If the funds are not fully obligated by December 31 of the following year, they will be reallocated to other projects. The FWS is the only one of the four agencies that obligated less than half of the funds (42%) available during FY2009. The agency has issued guidance for sites to increase the rate of obligations to at least 50%, and has projected obligations for FY2010 and FY2011 at between 62% and 63%. BLM obligated 58% of available FY2009 funds, while the FS had the highest rate of obligation at 65%.

The Federal Lands Recreation Enhancement Act (FLREA in P.L. 108-447) established a new recreation fee program for five federal agencies--the Bureau of Reclamation (Reclamation), National Park Service (NPS), Fish and Wildlife Service (FWS), and Bureau of Land Management (BLM) in the Department of the Interior (DOI) and the Forest Service (FS) in the Department of Agriculture (USDA). The law authorizes these agencies to charge fees at recreation sites through December 8, 2014. It provides for different kinds of fees, criteria for charging fees, public participation in determining fees, and the establishment of a national recreation pass. The agencies can use the collections without further appropriation. Most of the money is for improvements at the collecting site, such as operation, maintenance, and capital improvement projects. This program supersedes, and seeks to improve upon, the Recreational Fee Demonstration Program. The extent of participation in the current fee program varies considerably among the agencies, ranging from fee collection at only one Reclamation site to 4,185 FS sites. The agencies conducted analyses of the extent to which sites charging fees under the former fee program meet the criteria and prohibitions of the FLREA for charging entry, standard amenity, and expanded amenity fees. The NPS and FWS made little change in fees and fee sites as a result of the new law. The BLM made some adjustments, while the FS made the most changes, initially dropping fees at 437 sites. The agencies are determining fee sites and setting fees with public input, with the BLM and the FS using Recreation Resource Advisory Committees for this purpose. A new national recreation pass became available in January 2007. There are different versions of the pass for seniors, disabled persons, volunteers at recreation sites, and the general public. In FY2009, the agencies collected a total of $258.4 million in recreation receipts under the FLREA, with the NPS collecting about two-thirds of the revenue. Together with fees carried over from previous years, $574.4 million was available for obligation in FY2009. For the first time since the collection of recreation fees under the former fee program, more than 50% of available funding was obligated in FY2009. Recreation fees have been controversial for decades, and there continues to be a difference of opinion as to the need for recreation fees and how fee programs should operate. The current program has supporters and critics. Many assert that the program improves recreation and visitor services, keeping most fees on-site for improvements that visitors desire. Supporters contend that the current program improves upon the former one, in allowing fees to be charged only in appropriate circumstances, setting fair and similar fees among agencies, providing for public involvement in setting fees, and establishing a single national pass. Some critics continue to oppose recreation fees in general, or believe that they are appropriate for fewer agencies or types of lands. Others find fault with the current program, for instance, for not simplifying fees enough, ensuring that most fees are used to reduce the maintenance backlogs of agencies, or obligating funds more quickly. Still others contend that it is difficult to implement one national pass, given differences in agency lands and issues regarding pricing and sharing of revenues. Congress continues to oversee agency efforts to establish, collect, and spend recreation fees under the FLREA. Issues regarding the structure of the program--whether to let the program expire in 2014, or whether to extend it or make it permanent--will likely be addressed in congressional deliberations.

R ecent tax reform discussions have included possibly changing the tax treatment of business net operating losses (NOLs). How losses are treated for tax purposes can have important conse quences for business investment, economic efficiency, and tax revenues. This report provides an overview of the current tax treatment of NOLs as well as a brief legislative history. The report also explains how losses can be used to smooth income and tax liabilities. The report concludes by reviewing several policy options and considerations that Congress may find useful as it continues to debate tax reform. A business incurs an NOL when its taxable income is negative. The year in which the NOL is realized is referred to as a "loss year." Businesses have no tax liability in a loss year. In addition, under current law a business can use an NOL to obtain a refund for taxes paid in prior years or to reduce taxes owed in the future. Using an NOL to obtain a refund for past taxes paid is known as carrying back a loss, whereas using an NOL to reduce future taxes owed is known as carrying forward a loss. An NOL can generally be carried back for up to two years and may be carried forward for up to 20 years. Losses may not be used to offset more than 90% of a taxpayer's alternative minimum taxable income (AMTI) in any one year. The Internal Revenue Code (IRC) lists several exceptions to the general two-year carryback and 20-year carryforward treatment. For example, losses resulting from a casualty, theft, or a federally declared disaster are eligible to be carried back three years. Farming losses may be carried back five years. Losses resulting from a specified liability loss may be carried back 10 years. Real estate investment trusts (REITs) are not allowed to carryback an NOL, but are entitled to carry a loss forward for up to 20 years. Current law stipulates that a loss is to be first carried back to the two years preceding the loss year, beginning with the earliest year (subject to the waiver provision discussed below). If the carryback does not fully exhaust the NOL, the remaining portion is then carried forward. To carry back a loss, a taxpayer must file either an amended income tax return, or an application for tentative refund. The taxpayer uses the appropriate form to first recalculate their tax liability for the earliest eligible carryback year. This calculation involves claiming the loss as part of that year's tax deductions. The taxpayer then receives the difference between the actual taxes paid in the previous year and the new tax liability resulting from the NOL carryback as a refund. To carry a loss forward, a taxpayer claims the loss as a deduction against future income on their tax return, thus reducing the tax owed. A taxpayer may irrevocably waive the carryback period. Any losses are then carried forward in a manner similar to the one described above. A taxpayer expecting to be in a considerably higher future tax bracket may find it beneficial to waive the carryback. In general, however, a taxpayer will prefer to carry back an NOL rather than carry it forward. A carryback allows for an immediate benefit whereas a carryforward reduces future taxes. Valuing a future tax reduction requires discounting the tax savings to determine its "present," or economic, value. The need to discount a future tax reduction results in the economic value of a loss that is carried back exceeding the economic value of that same loss being carried forward. A carryback, additionally, provides a certain tax refund whereas a carryforward reduces a tax liability at some potentially uncertain time in the future. The ability to use losses to offset income earned in other years can be traced back to the Revenue Act of 1918, which first allowed for a one-year carryback and one-year carryforward. The carryback and carryforward periods have varied since then, with the longest carryback period, outside of temporary changes or special exceptions previously mentioned, being three years and the longest carryforward period being the current policy of 20 years. The current general NOL regime was instituted in 1997 with the Taxpayer Relief Act of 1997 ( P.L. 105-34 ). The act shortened the carryback period from three years to two and extended the carryforward period from 15 years to 20 years. Since 1997, changes to the carryback period have either involved temporary extensions or targeted provisions. For example, in response to the severe economic downturn associated with the financial crisis, the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) provided business taxpayers with $15 million or less in gross receipts an opportunity to extend the NOL carryback period for up to five years. Later that same year, the Worker, Homeownership, and Business Assistance Act of 2009 ( P.L. 111-92 ) extended the provision to all business taxpayers except those who had received certain federal assistance relating to the financial crisis. The NOL carryback period was also temporarily extended to five years for losses incurred in 2001 and 2002 as part of the Job Creation and Worker Assistance Act of 2002 ( P.L. 107-147 ). The extension was intended to assist businesses through the 2001 recession. In response to the destruction caused by Hurricanes Katrina, Rita, and Wilma, the Gulf Opportunity Zone Act of 2005 ( P.L. 109-135 ) extended the carryback period from two to five years for qualified losses occurring in the Gulf Opportunity Zone (or GO Zone) and suspended the 90% AMT offset limitation. In addition, the act expanded the list of acceptable deductions used for determining NOLs in the GO Zone, effectively increasing the amount of losses a taxpayer could recover. In the 105 th Congress, the Tax and Trade Relief Act of 1998 ( P.L. 105-277 ) included a provision targeted toward farmers. Specifically, the act permanently extended the NOL carryback period for losses relating to farming to five years. An example may help illustrate the basic calculations involved in carrying back an NOL and demonstrate how carrybacks allow for income smoothing. Table 1 provides information about two hypothetical firms. The total business income, costs and deductions, and taxable income of both firms are exactly the same over a two-year period. The firms differ, however, in the timing of their annual income and costs. It is assumed for this example that both firms face a 35% tax rate. Firm A's taxable income in each year is $25 million. Therefore, each year Firm A pays $8.75 million ($25 million x 35%) in corporate income taxes, for a total two-year tax liability of $17.5 million. Firm A has no NOL in either year so its tax liability with and without NOL carrybacks is the same. Firm B has taxable income equal to $75 million in year one, but incurs an NOL equal to $25 million in year two. Firm B must pay $26.25 million ($75 million x 35%) in taxes in year one. If Firm B is not permitted to carryback its year-two NOL, its total two-year tax liability will equal taxes paid in year one--$26.25 million. If, however, Firm B is allowed to carry back its year-two NOL, it will be able to receive a partial refund for taxes paid in year one and reduce its total tax bill. To carry back its year-two loss, Firm B will recalculate its year-one tax liability by subtracting its $25 million loss from its $75 million year-one taxable income and applying the 35% corporate income tax rate. The recalculated year-one tax liability is found to be $17.5 million ($50 million x 35%). Firm B is then entitled to receive as a refund in year two, the difference between taxes actually paid in year one and the new recalculated tax liability. The refund paid to the firm in year two as a result of its NOL is thus $8.75 million ($26.25 million - $17.5 million). And its total tax liability is $17.5 million, or exactly the same as Firm A, which is in-line with both firms having the same total two-year taxable income. Additionally, allowing Firm B the opportunity to carry back its loss allowed it to smooth its income. It was briefly mentioned previously that carrybacks are generally more valuable than carryforwards due to the need to discount future refunds and because of uncertainty over when the taxpayer would have taxable income to offset in the future. This difference in values can be demonstrated by extending the previous example by one year and comparing the value of Firm B's $25 million loss if it were carried forward versus if it were carried back. If Firm B were to carry its loss forward it would use it to reduce its year-three taxes by $8.75 million ($25 million x 35%) instead of receiving a refund of $8.75 million if it carried the loss back to year one. Thus, the nominal value of the refund for paid taxes by carrying back the loss is identical to the reduction in future taxes by carrying it forward, $8.75 million. However, because Firm B must wait one year to take advantage of the NOL, its true economic value is actually less than $8.75 million The economic value of an $8.75 million reduction in taxes one year in the future is determined by its "present value." The formula for calculating the present value (PV) of an amount equal to $X that is to be received N years in the future is where r is the return on investment that could be earned (e.g., an interest rate). In the current example N is equal to one. If we assume for this example that the rate of return is 5%, then the PV of an $8.75 million reduction in taxes that is to be realized in one year due to a carryforward is In contrast, the present value of an $8.75 million refund in taxes from carrying the loss back is simply $8.75 million because it is received immediately and therefore does not need to be discounted. Hence, Firm B would prefer to carry its loss back instead of forward because it has greater value to the company. It may be the case, however, that a loss must be carried forward because a firm has had little or no income in recent years that a loss can be used to offset. This is most likely to happen with start-ups and firms that are financially struggling. In some cases, these firms may never be able to carry their losses forward if they eventually go out of business. The following options and considerations could be helpful to policymakers interested in changing the treatment of NOLs. The intent of allowing loss to be carried back and carried forward is to give taxpayers the ability to smooth out changes in business income, and therefore taxes, over the business cycle. Extending the carryback period would enhance the ability to smooth income by allowing losses to be offset against a longer period of past profits rather than having them carried forward. The extension would, however, increase revenue losses to the federal government. Economic theory suggests that, under certain conditions, extending the carryback period indefinitely would minimize the distorting effects taxation has on investment decisions and, in turn, increase economic efficiency. With loss carrybacks, the government effectively enters into a partnership with businesses making risky investments, sharing both the return to investment (tax revenue gain) and the risk of investment (tax revenue loss). Extending the carryback period indefinitely would reduce the tax burden on these investments and reduce the private risk associated with investing, presumably resulting in greater investment. The reduction in private risk would be shifted to the government. Gains in economic efficiency would be possible if the government is able to spread that risk better than private markets. There may be practical limitations that prevent the indefinite carryback of NOLs. For example, allowing indefinite carrybacks would result in a large negative revenue effect, particularly during an economic downturn. Some have noted that encouraging investors to undertake risky investments is generally highly desirable, except in periods of acute economic boom. It could be argued that in an extremely expansionary period investors are already making sufficiently risky investments and that adding further incentives to take on more risk could be unnecessary and economically inefficient. Although an indefinite carryback period may be practically infeasible, extending the NOL carryback period could increase the ability for businesses to smooth their incomes more effectively and promote investment-related risk reduction over the business cycle. Since World War II the duration of the average business cycle has been approximately six years. Extending the NOL carryback period to at least the length of the typical business cycle would, arguably, allow for more income smoothing and risk reduction. The value of carrying losses forward could be enhanced if losses were permitted to accrue interest. Currently, if a business is unable to fully utilize its losses by offsetting income earned in the past two years, it may carry them forward for up to 20 years. As previously shown, losses carried forward are generally not as valuable as those carried back. To compensate for loss in value, the government could allow losses to earn interest until they are claimed in the future. For practical purposes the government could consider allowing losses to accrue interest at an approximate market rate. While paying interest on losses carried forward would help create parity between the value of loss carrybacks and carryforward and thus benefit some business taxpayers, there could be situations where this modification would have no impact. For example, for a firm to benefit from carrying a loss forward it must have a tax liability at some point in the future. New businesses and those experiencing financial problems may have no income to benefit from carrying back a loss, and also a low probability of generating income in the future for some time. In extreme cases, these firms may not benefit from carrying losses forward, with or without interest, if they go out of business. House Speaker Paul Ryan's "A Better Way" blueprint proposes eliminating the loss carryback period and allowing losses to be carried forward indefinitely while accruing interest. The proposal is part of a more general tax reform framework that includes, among other things, the introduction of a destination-based cash flow tax (DBCFT) with a border adjustment. The restriction on loss carrybacks may have been due to concern that large exporting companies would generate significant tax losses as a result of the adjustment. Not allowing any loss carryback would negatively impact the ability of some firms that have been profitable in the past to smooth their income or address cash-flow problems. The restriction on loss carrybacks could also increase effective tax rates for affected businesses. At the same time, as with the analysis just presented, paying interest on carryforwards would help some business taxpayers. As an alternative to a carryback and carryforward regime, Congress could allow taxpayers to receive a tax refund in the year losses were incurred. That is, instead of requiring taxpayers to use losses to refund past taxes or reduce future taxes, losses could be recouped in the current year via a refund equal to the tax value of the loss in the year it was incurred. For example, at a tax rate of 20% a taxpayer incurring a loss of $10,000 would receive a refund check from the government equal to $2,000 ($10,000 x 20%). Since losses are typically viewed as a type of expense, and most expenses are deductible in the year they are incurred, tax refunds for losses can be argued to align the treatment of losses with how other expenses are treated. Additionally, it has been argued that allowing tax refunds for losses is simply the opposite of taxing profits when they are realized. Allowing losses to be refunded presents tradeoffs. On the one hand, startups, which frequently incur losses in their first several years of operations, and otherwise financially struggling firms would benefit more from loss refunds than from the current carryback/carryforward system. This is because it would provide them with an immediate benefit rather than having to wait until some uncertain point in the future to deduct their losses. On the other hand, refunding losses would likely result in large revenue losses. Moving to a refund system would require determining the rate at which to value tax losses. Because businesses in a loss position do not have a tax liability there is currently not an obvious tax rate at which losses would be refundable. One option would be to apply the current income tax rate schedule in reverse. For most corporations this means losses would be refunded at a flat 35%. For pass-throughs (sole proprietorships, partnerships, and S corporations) the refund structure could be varied since pass-through income is taxed at the individual marginal tax rates of each owner, partner, or shareholder, which increase with a taxpayer's income. Alternatively, the refund rate could be set at a flat rate for all taxpayers. Refunding losses could, however, lead to tax sheltering behavior. Establishing a business (on paper) is relatively easy. Without the proper anti-abuse provisions in place, there may be attempts to generate paper losses solely for the purposes of offsetting income earned elsewhere. Policymakers could implement rules similar to passive activity loss limits that were established as part of the Tax Reform Act of 1986 ( P.L. 99-514 ) to help curtail tax sheltering that was occurring prior to the act.

Tax reform could result in any number of changes to current tax policy. One modification that could occur is the tax treatment of net operating losses (NOLs). An NOL is incurred when a business taxpayer has negative taxable income. A business has no tax liability in the year they incur a loss. Additionally, a loss can be "carried back" for a refund on taxes paid in the past two years or "carried forward" for up to 20 years to reduce future taxes. The intent of the NOL carryback and carryforward regime is to give taxpayers the ability to smooth out changes in business income, and therefore taxes, over the business cycle. Allowing losses to offset past or future income may also reduce the distorting effects of taxation, and promote investment and economic efficiency. This report provides an overview of the current tax treatment of NOLs as well as a brief legislative history. The report also explains the mechanics by which losses can be used to receive a refund for taxes paid in the past, or to reduce taxes owed in the future. The report concludes by reviewing several policy options and considerations that Congress may find useful as they continue to debate tax reform, including extending the carryback period, allowing an immediate tax refund for losses, and allowing interest to accrue on losses that are carried forward. Any of these changes could enhance the ability to smooth income and economic efficiency depending on their design, but would also reduce federal revenue. This report will be updated in the event of legislative changes.

RS20913 -- Farm "Counter-Cyclical Assistance" Updated May 31, 2002 Farming often is characterized as a "cyclical" business with exaggerated price swings that are destabilizing. Farmersrespond to high prices by boosting output. However, when prices drop, farmers are not quick to cut backproduction. Theyare more likely to operate at a loss and draw down resources. Contributing to the unstable nature of the farmeconomy arethe weather, export demand, currency exchange rate fluctuations, and the farm support and export subsidy programsofforeign competitors. Typically, farmers do not view the eventual self-correcting character of commodity prices and production with the sameequanimity as economists. In fact, U.S. producers of the major crops have asked for and received federalintervention --including various forms of counter-cyclical assistance -- to support their commodity prices and incomes for nearlythe past70 years. Between 1973 and 1995, a prominent form of counter-cyclical aid was deficiency payments linked to target prices. Congress specified, for each major crop, an annual per-unit target price (e.g., $4 per bushel for wheat). If, as oftenoccurred, the market price was below the target price, eligible producers received a deficiency payment to make upthedifference. This aid was ended by the Federal Agriculture Improvement and Reform (FAIR) Act of 1996 ( P.L.104-127 ). Under Title I of the 1996 Act, fixed production flexibility contract (PFC) payments replaced target price deficiencypayments. These payments were intended to provide, over 7 years, a total of about $36 billion to eligible producersorlandowners. The PFC payments were not linked to either current production or prices. By design, lawmakersintended thatthese fixed payments, along with the ability to make unconstrained planting decisions, would cause the marketplaceratherthan subsidies to guide farmers' production choices. However, the 1996 law did continue another form of counter-cyclical support: marketing assistance loans. Producers could(and, under the new 2002 law, continue to) pledge their stored grain, cotton, or oilseeds as collateral for a U.S.Departmentof Agriculture (USDA) nonrecourse commodity loan after harvest. These loans are based on a per-unit (bushel,pound)rate. In earlier years, these nonrecourse loans were set higher than market prices in order to support farm incomes, and farmersforfeited the commodities pledged as collateral at the end of the loan term (about 9 months). Under the more recentdesign,farmers can repay the nonrecourse "marketing assistance loans" at less than the original loan rate when market pricesarelower than that loan rate. The difference between the USDA loan rate and the lower repayment rate (times thenumber ofbushels under loan) constitutes the federal subsidy. In addition, those producers who choose not take out USDAcommodity loans can instead receive the equivalent subsidy as a direct payment, called a "loan deficiency payment"(LDP). The federal subsidy (either a loan gain or LDP) increases as market prices drop below the loan rate, and the subsidydiminishes as prices rise -- thus, the "counter-cyclical" nature of the marketing loan program. When the 1996 farm bill was passed, commodity prices were relatively high, and policymakers widely anticipated that thePFC payments, when combined with whatever was earned from the market, would provide sufficient income toproducers. Marketing loans were set at relatively low rates so that they only would be needed as a safety net if prices declinedrelatively steeply. However, by the late 1990s, major commodity prices declined even more than expected, andgenerallydid not recover to what farmers regarded as acceptable levels. As a result, they relied heavily on marketing loanbenefits,which went from zero in FY1996, to a high of over $8 billion in FY2000 (the cost has declined somewhat sincethen). Congress determined that the "safety net" provided by the 1996 FAIR Act (i.e., marketing assistance loans and fixed PFCpayments) was inadequate, and supplemented the benefits with additional, emergency "market loss payments." Thesepayments, mainly to PFC enrollees, added about $3 billion in FY1999, $11 billion in FY2000, and $5.5 billion inFY2001to program costs. These supplemental payments also can be characterized as counter-cyclical -- even though theyare adhoc and not "programmed" into standing law -- because they were made (according to the sponsors) inresponse to lowprices and incomes. Nearly all of the numerous farm and commodity organizations that testified before the House and Senate AgricultureCommittees in 2001 requested that additional counter-cyclical support be developed as a supplement to the currentmarketing assistance loans and fixed annual payments. In response, the separate farm bills passed in October 2001by theHouse and February 2002 by the Senate, incorporated new counter-cyclical measures into standing law. Thus,Congresspresumably would no longer have to debate and enact periodic emergency ad hoc assistance. The final farm bill, the Farm Security and Rural Investment Act (FSRIA) of 2002 ( H.R. 2646 , P.L. 107-171 ),provides new long-term counter-cyclical support for grains and cotton, by restoring target prices and deficiencypayments,similar in some respects to the program terminated by the 1996 Act. What are now called annual PFC paymentsarereplaced with fixed, "direct payments" to farmers. Both types of payments will be available to producers withannualagreements with USDA. In addition, the measure maintains marketing assistance loans and loan deficiencypayments asthey now function, with changes in most loan rates. The new law, which covers the 2002-2007 crop years, brings soybeans and the minor oilseeds (e.g., sunflowers, etc.) fullyunder the support program rules that apply to grains and cotton. In a major departure from the past, FSRIAredesignspeanut support to operate like that for grains, oilseeds, and cotton -- instead of the traditional system of peanutmarketingquotas and nonrecourse price support loans. Under the new law, fixed payments and target price deficiency payments will be paid on 85% of each farm's baseproduction (base acres times base yield of each commodity). A farmer may choose, as base production, either theacreageused for PFC payments, or average acres planted to eligible crops from 1998 through 2001. Yields effectively arethe1981-85 averages, except that, for counter-cyclical payments, yields also can be updated under astatutorily-prescribedformula. A key difference between the new target price payments and those made until 1995, is that the old payments were tied toannual planting rules (i.e., an acreage reduction program.) The new system is not contingent upon such rules:payments arebased upon historical, not current, production, and farmers can plant virtually any crops except most fruits andvegetables. Under the new counter-cyclical program, the deficiency payment rate will be calculated as the difference between the targetprice, and the lower average season market price (but not to exceed the difference between the target price and thesum ofthe loan rate and fixed payment). (See Table 1 for rates). An individual may receive no more than $130,000 peryear incounter-cyclical assistance. Milk support would continue under FSRIA through government purchases of nonfat dry milk, butter, and cheese. However, it has an added feature of counter-cyclical payments. Dairy farmers nationwide will be eligible for"nationaldairy market loss payments" whenever the minimum monthly market price for farm milk used for fluid consumptioninBoston falls below $16.94 per hundredweight (cwt.). In order to receive a payment, a dairy farmer must enter intoacontract with the Secretary of Agriculture. The value of the payment equals 45% of the difference between the$16.94 percwt. target price in any month that the Boston market price falls below $16.94. A producer can receive a paymenton allmilk production during that month, but no payments will be made on any annual production in excess of 2.4 millionpoundsper dairy operation. All contracts expire on September 30, 2005. (See Dairy Farmer Counter-Cyclical Assistance in theCRS electronic briefing book on AgriculturePolicy and the Farm Bill .) Table 1. Loan Rates, Fixed Payment Rates, and Target Prices * Reflects rates that change in some years. NA=not applicable. Whereas the final farm bill ties the availability of counter-cyclical assistance to target prices for specified commodities,other designs also were discussed. For example: One plan would have triggered payments in a state whenever state (as opposed to national) gross cash receipts for any of eight program or oilseed crops are forecast for the year to be less than 94% of that state's annualaveragecash receipts for the crop during 1996-1999. Cash receipts would be defined as the national average price timesstate-levelproduction. Those who produced the crop during 1998-2000 would be eligible for a share of total payments(AmericanFarm Bureau Federation). Another would have established a "national target income" for each major crop: that is, the national average annual market value of the crop during 1996-2000, plus the annual average of any marketing loan benefitsandmarket loss assistance payments made during those years. A further adjustment would be made to account for yieldincreases since then. Those who produced that crop during 1996-2000 would be eligible for a share of totalpaymentswhenever returns (defined as the crop's U.S. production times the average price for the first 3 months of themarketingyear) are below the national target income for the crop (National Corn Growers Association). The Congressional Budget Office (CBO) has estimated the commodity support provisions (Title I) of FSRIA at $98.9billion over 6 years (budget authority, March 2002 estimate, FY2002-2007). This is $37.6 billion more than thebaselinepolicy of simply extending current programs into the future. The new counter-cyclical payments for grains, cotton,andoilseeds account for $23.6 billion of the new costs (i.e., above baseline). The peanut and dairy counter-cyclicalpaymentsare projected to cost, respectively, another $904 million and $963 million. However, such cost estimates are speculative due to the extreme difficulty of predicting future market conditions, includingprices. If prices are lower than CBO's assumptions, then costs will be higher, and vice versa. Some other analystsalreadyhave differing projections. For example, the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri estimates that thetotal cost of the dairy program alone could exceed $3.6 billion. That's mainly because FAPRI projects significantlylowermarket prices for milk than CBO over the 46-month life of the program. CBO estimates that the average monthlypaymentrate over the 46-month life of the program will be about $0.45 per cwt.; FAPRI estimates an average monthlypayment rateof $0.89 per cwt. (See also What Is the Cost of the 2002 Farm Bill? in the CRS electronic briefing book on Agriculture Policy and the FarmBill .) The 1994 Uruguay Round Agreement on Agriculture (URAA) obligates countries to discipline their agricultural subsidyprograms and reduce import barriers in order to promote more open trade. Under the URAA, the United States iscommitted to providing subsidies of no more than $19.1 billion per year through domestic farm policies with themostpotential to distort production and trade. The URAA contains detailed rules for how countries should determine which of their programs must be counted towardtheir assigned subsidy limits (e.g., $19.1 billion for the United States). Generally, however, programs that are tiedtocurrent prices or current production must be counted (these are called "amber box" policies). Thus, marketing loangains,which rise when crop prices decline and vice versa, are "amber" and must be counted (but only if their value, alongwithother subsidies, exceeds 5% of the value of annual production of that crop). On the other hand, subsidies that are not linked to prices or production, and/or meet other specified criteria, might beexempted as "green box" policies. The United States has classified its PFC payments as "green" because they aremadewithout regard to prices or current production. It is anticipated the fixed, decoupled payments in the new law alsowill fallwithin the green box. The new counter-cyclical assistance will be decoupled from current output because the producer would not have to produceany particular crop now to receive the payments. However, because (like marketing loan gains) the target pricedeficiencypayments would be triggered by current market prices , they are expected to be placed in the amber box. So, they conclude, if counter-cyclical payments, when added to other "amber" subsidies such as marketing loanbenefits,caused U.S. spending to exceed $19.1 billion, the United States could be in violation of its world tradecommitments. Whether that would happen is unclear, in part because of the difficulty of predicting future market prices, but alsobecauseof the technicalities involved in classifying and valuing subsidies under the WTO system. "Circuit breaker" language in FSRIA is intended to require USDA to keep trade-distorting farm subsidies at or below the$19.1 billion limit. Questions arise about the administrative, economic, and political implications of changing (i.e.,reducing) benefits, particularly after they are announced and/or awarded. (See CRS Report RL30612(pdf) , FarmSupportPrograms and World Trade Commitments .) Some groups had argued that their own counter-cyclical policies could be designed in a way that they would not have to becounted toward the $19.1 billion limit. For example, if payments to farmers were triggered by low income (asmeasured bygross receipts for one or more commodities) rather than by low prices, they would be exempt, it has been argued. Othersdispute this assertion, noting that it is usually low prices that cause low income. The new counter-cyclical aid in the 2002 law focuses on the "major" commodities -- grains, cotton, oilseeds, peanuts, andmilk. These generally are the most widely produced, but that still leaves much of U.S. agriculture ineligible for suchpayments, raising questions of equity among commodities, and of the potential for distorting production towarditems thatmight receive more support (contributing to surplus production). But extending such aid to more commodities, suchasfruits, vegetables, or livestock, also would have increased federal costs, or else reduced assistance levels for themajorcommodities. Also, not all commodity groups sought such aid. For example, the National Cattlemen's BeefAssociationwas among those that opposed most forms of direct assistance, counter-cyclical or otherwise. And, the UnitedFresh Fruitand Vegetable Association argued against any subsidies that would insulate fruit or vegetable producers from marketsignals or would sustain or encourage production. Another issue was whether a new counter-cyclical program should perpetuate past patterns that tie aid to output rather thaneconomic need. Farm programs, including direct payments, marketing loans and the ad hoc "marketloss payments," havebeen based on either past or current production by individual farmers, meaning that larger payments have trendedtowardlarger operations -- which do not or should not need them, critics argue. They add that if Congress intends to helpproducers in economic distress, then such recipients should have to document their need. Others counter that farmprograms are not "welfare" but rather part of a larger policy to ensure that U.S. agriculture remains competitive intheglobal economy (an assertion that critics challenge).

Congress has approved legislation (P.L. 107-171) reauthorizing major farmincome and commodity price support programs through crop year 2007. This legislation includes new"counter-cyclicalassistance" programs for grains, cotton, oilseeds, peanuts, and milk. The intent of counter-cyclical assistance is toprovidemore government support when farm prices and/or incomes decline, and less support when they improve. In fact,farmershave, for many years, been eligible for various forms of counter-cyclical assistance. At issue has been the need for,andpotential impacts of, another counter-cyclical program. This report will not be updated.

The enacted 2008 farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110 - 246 ) includes a new conservation provision that seeks to facilitate the participation of farmers and landowners in environmental services markets, covering a range of farm and forestry services, including improved water and air quality, increased carbon storage, and habitat protection. The inclusion of this provision could expand the scope of existing farmland conservation programs and facilitate the development of private-sector markets for agriculture- and forestry-based environmental goods and services. In part, congressional interest in this area has developed in response to increased attention to the agriculture and forestry sectors' contributions to existing environmental pollution and resource degradation. For example, the U.S. Environmental Protection Agency (EPA) reports that agriculture is the leading source of water pollution in U.S. lakes and rivers, and a major contributor of pollution in U.S. estuaries. EPA also reports that agriculture contributes to an estimated 6% of all greenhouse gas emissions in the United States. At the same time, some in Congress are suggesting that U.S. farm support programs should do a better job promoting environmental benefits and also complying with domestic support constraints called for by the World Trade Organization. The agriculture and forestry sectors are also being regarded as a possible source of carbon capture and storage within the broader climate change debate. The development of market-based approaches to farm conservation and land management might complement existing and/or emerging environmental regulations or natural resource requirements affecting the agriculture and forestry sectors, as well as complement existing federally supported programs that promote conservation in the farm and forestry sectors. Environmental goods and services from the agriculture and forestry sectors might also provide for environmental improvements and mitigation at a relatively lower cost, compared to mitigation in other sectors of the economy. Environmental services markets may also offer additional financial opportunities to farmers and landowners. Ecosystem (or environmental) goods and services are the benefits society obtains from the environment and ecosystems, both natural and managed, such as water filtration, flood control, provision of habitat, carbon storage, and many others ( Table 1 ). In most cases, these constitute "free services" since landowners and managers are not compensated in the marketplace. However, as many such services have become degraded over time, there is growing recognition that they should be sustained or substituted by market capital, similar to investing in water treatment plants and engineered flood control systems. One solution would be to create markets, often developed through regulation, so that providers of environmental services can be compensated in private markets for the services they provide. This could offer a potential business opportunity to the farm and forest sectors, which may be able to provide for such services and participate in the market, for example, by creating, restoring, preserving function and value in a natural resources area, or by capturing and storing carbon before gases that contribute to global climate change are released into the atmosphere. These services would be in addition to the food and fiber services traditionally supplied by the agriculture and forestry sectors. The market for environmental goods and services involving the agricultural and forestry sectors began mostly through various pilot programs starting in the 1990s. The development of voluntary carbon credit markets and watershed approaches incorporating nutrient credit trading, along with wetlands mitigation banking, have involved the farm and forestry sectors. These programs provide a market for farmers to sell carbon or nutrient farm-based offsets to emitters/dischargers that are looking to buy offsets to mitigate their own emissions/discharges. These efforts have triggered interest in other types of tradable permits and credits, including habitat credit trading and other types of conservation banking. USDA identifies environmental markets with relevance to the agriculture and forestry sectors to include water quality, air quality, wetlands, endangered species, greenhouse gases, and developmental rights. Often the impetus for these efforts may be linked to a "regulatory driver" specific to an actual or anticipated environmental regulation or natural resource requirement, such as requirements in the Clean Water Act (CWA), Endangered Species Act (ESA), or other state or local regulation. Other incentives may include market drivers that make trading environmental services financially attractive, or the desire to cultivate community goodwill. The participation of agriculture and forestry in emerging environmental services markets is gaining wide support within the farm community and its supporting organizations and agencies, as well as among the regulatory agencies and some environmental groups. As part of its recommendations for the 2007 farm bill, the U.S. Department of Agriculture (USDA) proposed to further facilitate the development of environmental services markets in ways that would more effectively involve the farm and forestry sectors. Both the House- and the Senate-passed versions of the 2008 farm bill included similar provisions as part of the conservation title in their respective bills. A version of this provision is in the enacted 2008 farm bill (for further discussion, see section titled " Enacted 2008 Farm Bill "). Information and examples of ecosystems services markets that have involved the participation of U.S. farmers and landowners include voluntary markets for land-based reductions or storage of carbon, water quality improvements, and preservation or restoration of habitat, as briefly described below. Farmer participation in voluntary carbon credit trading programs has been growing rapidly. As of mid-2009, participation involved an estimated roughly 10,000 farmers across about 35 states covering more than more than 10 million acres . The two largest programs providing for farm-based carbon offsets are programs operated by the North Dakota National Farmers Union and the Iowa Farm Bureau. The National Farmers Union program involves more than 4,000 producers in more than 30 states, with more than 5 million acres of farmland enrolled. The Iowa Farm Bureau involves 5,000 to 6,000 producers also in more than 30 states, with more than 5 million acres enrolled. Most projects are located within the Central and Midwestern states. Other similar programs are operated by the Illinois Conservation and Climate Initiative, the Environmental Credit Corporation (based in Indiana), the Upper Columbia Resource Conservation and Development Council (Northwest), and Terrapass (based in California). Among the types of practices that are eligible to participate are no-till crop management; conversion of cropland to grass; managed forests, grasslands, and rangelands; new tree plantings; anaerobic digesters and methane projects; wind, solar, or other renewable energy use; and forest restoration. Water quality trading programs involve the participation of an estimated more than 300 farmers in programs across six states. These include initiatives such as those by the Southern Minnesota Beet Sugar Cooperative, the Grassland Areas Farmers (California), the Rahr Malting Company (Minnesota), the Great Miami River Watershed (Ohio), and the Red Cedar River (Wisconsin), among others. These programs cover some or all of the following types of nutrient runoff reduction activities: cover cropping; reduced fertilizer use; conservation tillage; tree-plantings; buffers; drainage management; and wetlands mitigation trading. Most water quality trading programs are initiated at the local or state level, often involving EPA, and cover impaired waters as well as unimpaired waters to maintain water quality standards. In general, EPA supports trading of nutrients and sediment load, as well as cross-pollutant trading of oxygen-demanding pollutants. EPA also works with USDA's Natural Resources Conservation Service (NRCS) and, in 2006, signed a partnership agreement to establish uniform trading standards, along with supporting other collaborative efforts. USDA programs related to water quality trading include funding for best management practice (BMP) installation and farmland conservation practices, technical assistance, and tool development and outreach efforts; USDA is also developing a handbook for NRCS field staff and partners to explain and support various types of trading, including water quality trading, wetlands trading, and carbon offsets. Habitat or conservation markets and trading are still mostly under development. In April 2007, the U.S. Fish and Wildlife Service, USDA's NRCS, and the Association of Fish and Wildlife Agencies signed a partnership agreement to promote habitat credits that could offer incentives to landowners who preserve and enhance the habitat of endangered or at-risk species. Among the stated objectives of this agreement is to develop and adopt common definitions, standards, and measurement protocols. Habitat credits or "conservation banking" act like a savings account, where credits are earned for land preservation of habitat and credits can then be sold to land use industries or others who are required to mitigate the loss of habitat under the ESA and other laws that restrict or prohibit development. This is conceptually similar to wetlands and stream mitigation banking, which allows for compensation of adverse impacts of development activities ("compensatory mitigation") to wetlands, streams, wildlife refuges, or other aquatic resources. Such allowances, whether through wetlands or conservation banking, typically involve creating, restoring, enhancing, or preserving function and value in a natural resources area, often within the context of meeting a federal, state, or local regulatory requirement. The development of market-based approaches has been widely touted as a possible source of additional farm income, whether through the sale of tradable credits or from other types of payments, such as recreational use or hunting fees. This could offset or partially offset the costs of pollution abatement incurred by farmers who make environmental improvements on their farmlands. In some cases, adopting alternative production practices could also result in on-farm cost savings, such as the use of renewable fuel generated on-farm. Market-based approaches are also often viewed as encompassing broader societal benefits by complementing existing farm conservation programs and evolving regulatory approaches intended to address environmental improvements in the farm and forestry sectors. USDA recognizes that creating markets for ecosystem services could increase farmer investments in environmental stewardship and provide for environmental services including clean air and water, carbon sequestration, and improved wildlife habitat, among other conservation benefits. However, USDA also reports that there are several existing barriers that may prevent the development of fully functioning markets for agricultural environmental services and may be difficult or costly to overcome. These impediments include but may not be limited to: uncertainty quantifying, measuring, and valuing credits; low demand for or discounted value of credits from agricultural sources because of uncertainty about the measurement and value of these credits; low participation in the farm and forestry sectors due to uncertainty over the value of environmental credits compared to the cost of pollution abatement; reluctance by farmers and landowners to participate in a regulatory-based program; small quantity of benefits that can be provided by individual farmers or landowners; high transaction costs; performance risks and liability; lack of information about program benefits and how to participate; lack of monitoring and enforcement; and uncertainty about whether conservation and environmental improvements that were initially funded through other publicly funded programs, such as cost-share programs administered by USDA, will be allowed to be traded. The 2008 farm bill ( P.L. 110-246 , the Food, Conservation, and Energy Act of 2008) contains a new conservation provision that seeks to facilitate the participation of farmers and landowners in environmental services markets by directing USDA to develop technical guidelines for measuring farm- and forestry-based environmental services. This provision focuses first on carbon storage and indirectly references various agriculture and forestry provisions in some legislative initiatives that are being considered as part of the broader climate change debate, which have highlighted the perceived need for uniform standards and ways of measuring emissions reduction and increases in carbon storage in the agriculture and forestry sectors. In the managers report on the 2008 farm bill, the conferees state that "the largest barrier to participation [in emerging environmental services markets] is the lack of standards and accounting procedures that make transparent the benefits that are being produced and marketed." To address this concern, the enacted bill contains a new provision in the bill's conservation title that seeks to "establish technical guidelines that outline science-based methods to measure the environmental services benefits from conservation and land management activities in order to facilitate the participation of farmers, ranchers, and forest landowners in emerging environmental services markets" (Sec. 2709, Environmental Services Markets). The intended purpose of these technical guidelines is to develop (1) a procedure to measure environmental services benefits; (2) a protocol to report environmental services benefits; and (3) a registry to collect, record, and maintain data on the benefits measured. The provision also requires that USDA provide guidelines for establishing a verification process as part of the protocol for reporting environmental services, but it allows USDA to consider the role of third parties in conducting independent verification. In carrying out this directive, USDA is directed to work in consultation with other federal and state government agencies, nongovernmental interests, and other interested persons as determined by USDA. The inclusion of this provision could expand the scope of existing farmland conservation programs by facilitating the development of private-sector markets for a range of environmental goods and services from farmers and landowners. Although the provision covers a range of farm and forestry services, including improved water and air quality, increased carbon storage, and habitat protection, among other types of environmental services, it explicitly gives priority to first establishing guidelines related to participation in carbon markets. Both the House- and Senate-passed farm bills ( H.R. 2419 ) proposed versions of this provision in their respective bills. Although the two versions differed in scope and in overall approach, both were similar in their intent to establish a framework to develop consistent standards and processes for quantifying farm- and forestry-based environmental services. The House-passed provision (Sec. 2407) proposed to establish a USDA-led Environmental Services Standards Board, which would provide contracts, cooperative agreements, and grants to develop consistent standards and processes for quantifying environmental benefits from the farm and forestry sectors, thus establishing a framework to develop such standards and processes. The Senate-passed version (Sec. 2406) also directed USDA to establish a framework to develop consistent standards and processes that would facilitate the marketability of farm- and forestry-based environmental services, but differed in that it directed USDA to "give priority" to providing assistance to farmers and landowners participating in carbon markets. The Senate version differed also in that it called for a "collaborative" process involving governmental and nongovernmental representatives. It also required a series of progress reports to Congress, which were subsequently not included in the enacted bill. The House, Senate and conference versions of this provision differed in terms of funding. For FY2008-FY2012, the House bill authorized $50 million to be appropriated for this provision, whereas the Senate bill authorized such sums as are necessary annually. However, the enacted bill does not specifically address funding; instead, the manager's report states that USDA is expected to "fulfill the intent of this section with resources available to the Department." In contrast, USDA's farm bill recommendations requested authorization of $50 million in mandatory funds to cover the types of tasks addressed in this provision. In December 2008, USDA announced it would create a federal government-wide "Conservation and Land Management Environmental Services Board" to assist USDA with the "development of new technical guidelines and science-based methods to assess environmental service benefits which will in turn promote markets for ecosystem services including carbon trading to mitigate climate change." A federally chartered public advisory committee will advise the board, and will include farmers, ranchers, forest landowners, and tribal representatives, as well as representatives from state natural resource and environmental agencies, agriculture departments, and conservation and environmental organizations. USDA's press release also announced that USDA was establishing a new Office of Ecosystem Services and Markets (OESM), which will be located within the Office of the Secretary. OESM will provide administrative and technical assistance in developing the uniform guidelines and tools needed to create and expand markets for ecosystem services in the farming and forestry sectors. At a May 2009 briefing, USDA's Sally Collins indicated that official meetings and proceedings of the USDA-led Environmental Services Board, as well as formal actions within OESM, have been delayed by leadership changes due to the Administration's transition. Aside from the 2008 farm bill, other legislative initiatives might also facilitate the development of environmental services markets involving the farm and forestry sectors--particularly in the areas of carbon storage and emissions reduction--as part of the ongoing climate change debate. Starting in the 110 th Congress, Congress debated a range of climate change policy options that would have either mandated or authorized a cap-and-trade program to reduce greenhouse gas (GHG) emissions. These actions have continued in the 111 th Congress. Some proposals dovetail with provisions enacted as part of the 2008 farm bill, including a provision that directs USDA to develop guidelines and standards for quantifying carbon storage by the agriculture and forestry sectors, among other farm bill provisions that indirectly encourage emissions reductions and carbon capture and storage. The current cap-and-trade proposals would not require emission reductions in the agriculture and forestry sectors. However, many of these proposals would allow for regulated entities (e.g., power plants) to purchase carbon offsets, including those generated in the agriculture and forestry sectors. The inclusion of these provisions as part of a cap-and-trade framework could provide financial incentives to encourage additional land-based conservation activities involving the agriculture and forestry sectors. For example, the provisions could allow farmers and landowners to participate in this emerging market by generating (and selling) carbon offsets and credits associated with carbon capture and storage, emissions reductions, and/or other implemented environmental improvements on their farm or forested lands. These allowances and credits could be sold to regulated facilities (e.g., power plants) covered by a cap-and-trade program to meet their emission reduction obligations. Under some cap-and-trade proposals, certain segments of the agriculture and forestry sectors also might receive proceeds from the sale of allowances, credits, and auctions to further promote and support activities in these sectors that reduce, avoid, or sequester emissions. Many of these bills contain language highlighting the perceived need for uniform standards and ways of measuring emissions reduction and increases in carbon storage in the agriculture and forestry sectors. Such initiatives generally stipulate that measurements of emissions reductions and carbon uptake should be real, verifiable, additional, permanent, and enforceable. However, there is considerable uncertainty about the accuracy of measuring and verifying emissions reductions and carbon storage using various forestry and agricultural and land management practices. This uncertainty has led some to question the potential for carbon offset projects in the agriculture and forestry sectors, but these types of projects are nonetheless being considered as part of a cap-and-trade program. The new conservation provision in the 2008 farm bill (see previous section) that seeks to establish technical standards and accounting procedures for environmental services generated in the agriculture and forestry sectors is intended to address such measurement, verification, and monitoring issues. For more information, see CRS Report R40896, Climate Change: Comparison of the Cap-and-Trade Provisions in H.R. 2454 and S. 1733 , and CRS Report RS22834, Agriculture and Forestry Provisions in Climate Change Bills in the 110 th Congress . For information on the measurement, verification, and monitoring challenges in the agriculture and forestry sectors in the context of evolving carbon markets, see CRS Report RS22964, Measuring and Monitoring Carbon in the Agricultural and Forestry Sectors . For other general information on the current GHG policy debate and legislative proposals, see CRS Report R40896, Climate Change: Comparison of the Cap-and-Trade Provisions in H.R. 2454 and S. 1733 , and CRS Report R40556, Market-Based Greenhouse Gas Control: Selected Proposals in the 111 th Congress . A separate provision enacted as part of the Energy Independence and Security Act of 2007 ( P.L. 110-140 ) directs the Department of the Interior to conduct a national assessment and a methodology to assess carbon sequestration and emissions from ecosystems (Section 712, "Assessment of Carbon Sequestration and Methane and Nitrous Oxide Emissions from Ecosystems"). Once completed, this assessment will provide additional information regarding the two primary greenhouse gases associated with agricultural practices: methane and nitrous oxide. DOI's national assessment will address the quantity of carbon stored in and released from ecosystems, and the annual flux of covered greenhouse gases in and out of ecosystems. The methodology to assess carbon sequestration and emissions from ecosystems will cover measuring, monitoring, and quantifying GHG emissions and reductions, and provide estimates of sequestration capacity and the mitigation potential of different ecosystem management practices. Identified components of the national assessment are (1) determining the processes that control the flux of covered greenhouse gases in and out of each ecosystem; (2) estimating the potential for increasing carbon sequestration in natural and managed ecosystems through management activities or restoration activities in each ecosystem; (3) developing near-term and long-term adaptation strategies or mitigation strategies that can be employed; and (4) estimating the annual carbon sequestration capacity of ecosystems under a range of policies in support of management activities to optimize sequestration. In conducting its assessment and developing the underlying methodology for the assessment, EISA directs DOI to consult with other agencies, including USDA, EPA, the Department of Energy, the Department of Commerce, and other relevant agencies. DOI is directed to develop its methodology for conducting the assessment, and then to release its national assessment. To date, the report has not yet been released. Among the principal questions regarding the inclusion of these types of provisions as part of any major legislative initiative is whether the agriculture and forestry sectors can effectively provide environmental goods and services along with the more traditional food, fiber, and other services these sectors already provide. The inclusion of these provisions could also raise certain procedural or implementation questions as Congress debates future farm policy or as it continues to consider the role of the agriculture and forestry sectors in climate change legislation. Standards - setting process/implementation. Aside from establishing the board discussed earlier, how will USDA implement its new farm bill directive for establishing uniform standards, accounting procedures, protocols, and registries for quantifying farm- and forestry-based environmental services? Can USDA accomplish its task using available agency resources? Jurisdictional issues. What are the advantages of establishing USDA as the lead role? What lead role will USDA play, given the mostly regulatory authority and statutory obligations of other likely participating federal agencies? Might putting USDA as the lead create conflict of interest as both the regulator and promoter of standards? Are there other jurisdictional issues, such that this provision needs to be referred to other authorizing congressional committees? How might existing state and local programs implemented by other agencies be affected? How will the collaborative effort between USDA and the other participating federal agencies be put into practice? How will disagreements be addressed and resolved among all federal partners? Consistency with existing and possible future authorities and initiatives. Will the agreed-upon decisions and standards resulting from such an effort be binding among all federal agencies? What assurances are there that these decisions will not override the authorizing legislation regulating water and air quality, and wildlife habitat? Will regulatory agencies with authorizing legislation have the flexibility to not adopt the standards authorized by the board or other collaborative process, if they violate the individual agencies' authorizing statutes, or contain regulations, such as measurement protocols? What are the possible implications if these decisions and standards are inconsistent with other existing regulatory guidelines and authorities? Will such a standard-setting framework and the agreed-upon standards be consistent with, or readily adapted to, other possible future regulatory initiatives, such as those involving climate change? If possible future climate change initiatives do not provide for carbon offsets and credits from the agriculture and forestry sector, will the agreed-upon standards be enforceable within the existing voluntary carbon market? What are the potential implications if these decisions and standards are inconsistent with other possible forthcoming regulatory guidelines and authorities? Standards. Will uniform standards be national, regional, local, or site-specific in scope? How will uniform standards address differences within different production areas, types of resources, and ecosystems? Will established protocols and management practices take into account these differences? Will these standards consist of an assigned value? Given the wide range in the types of environmental services, how will outcomes or benefits be measured and expressed as standards? Will there be penalties for non-compliance? Federal versus marketplace functions. What roles should government agencies play in actually establishing environmental services markets involving agriculture and forestry? What roles will be strictly within the purview of the private-sector and independent credit markets? Is there a federal role beyond developing the reporting and credit registries that would require the board to act as intermediary between sellers and buyers? Who will be responsible for oversight of third party verification and certification, and for assigning market value to tradable credits within an environmental services market? Will the federal agencies play a role in market oversight, enforcement, risk management, and capital investment? What other types of federal assistance may be needed to further facilitate the development of environmental services markets? Congressional reporting/timeline. How and when will the agencies involved in setting standards be expected to report their accomplishments to Congress? Should reporting requirements be included as part of these provisions? Market barriers. How effectively do the current proposals address the types of barriers that have been identified by USDA and others that may prevent the development of environmental goods and services markets? Possible unintended consequences. Might establishing a market-based approach shift governmental and/or industry priorities away from addressing more serious environmental problems by allowing some industrial facilities to buy relatively lower-cost farm-based carbon credits rather than pay for on-site pollution abatement at the facility? Might a market-based program shift USDA resources away from established farm conservation programs?

Environmental goods and services are the benefits society obtains from the environment and ecosystems, both natural and managed, such as water filtration, flood control, provision of habitat, carbon storage, and many others. Farmers' participation in providing these types of goods and services began in earnest in the 1990s with the development of watershed approaches incorporating nutrient credit trading and wetlands mitigation banking, and continued with the more recent development of voluntary carbon credit markets. These efforts have triggered further interest in the possibility of developing market and trading opportunities for farmers and landowners as a source of environmental offsets. These services would be in addition to the food and fiber services traditionally supplied by the agriculture and forestry sectors. Congress is expressing growing interest in developing such market-based approaches to complement existing federally supported programs that promote conservation in the farm and forestry sectors, as well as to complement existing and/or emerging environmental regulations or natural resource requirements that may affect the agriculture and forestry sectors. The enacted 2008 farm bill (P.L. 110-246, the Food, Conservation, and Energy Act of 2008) contains a new conservation provision that seeks to facilitate the participation of farmers and landowners in environmental services markets by directing USDA to develop technical guidelines for measuring farm- and forestry-based environmental services. This provision focuses first on carbon storage and indirectly references various agriculture and forestry provisions in some legislative initiatives that are being considered as part of the broader climate change debate, which have highlighted the perceived need for uniform standards and ways of measuring emissions reduction and increases in carbon storage in the agriculture and forestry sectors. These types of provisions could expand the scope of existing land-based conservation programs and facilitate the development of private-sector markets for a range of environmental goods and services from farmers and landowners. Among the possible questions that may emerge as these agriculture and forestry provisions are either implemented as part of U.S. farm conservation policy, or considered as part of a broader climate change initiative, are the following: Can agricultural interests effectively provide environmental services along with traditional food and forestry services? How would uniform standards address differences within production areas, types of resources, and ecosystems? What is the role of USDA as the lead federal agency in establishing technical guidelines for the agriculture and forestry sectors? How would collaboration work between other participating federal agencies? How would the agreed-upon decisions and standards work within existing regulatory authorities, and within possible forthcoming regulatory authorities, such as proposed climate change options currently being debated in Congress? What role should federal agencies play in establishing environmental services markets?

The United Nations High Commissioner for Refugees (UNHCR) is the U.N. agency dedicated to the protection of refugees and other populations displaced by conflict, famine, and natural disasters. This report describes the mandate, operations, and budget of UNHCR. It looks at the challenges facing the organization and issues of concern for Congress. UNHCR provides legal protection, implements long-term solutions, and coordinates emergency humanitarian relief for refugees and other displaced persons. An understanding of UNHCR and its challenges is particularly relevant today with the possibility of war in Iraq, which might create new populations of refugees and other displaced persons, and the continuing refugee situations in Afghanistan and other parts of the world. Issues of particular concern to Congress are funding shortages at UNHCR, burdensharing, and avenues for U.S. influence within UNHCR. Established by the U.N. General Assembly in 1950 and made operational in 1951, UNHCR is mandated to lead and coordinate international action for the protection of refugees and the resolution of refugee problems worldwide. The current High Commissioner is Ruud Lubbers, a former Dutch prime minister, who began his five-year term in January 2001. UNHCR is headquartered in Geneva and employs over 5,000 staff in more than 110 countries. Its governing body, the Executive Committee, approves the High Commissioner's assistance programs, advises the High Commissioner, and oversees UNHCR finances and administration. The Executive Committee meets every year and has 61 members, all of whom are representatives of governments, including the United States. A smaller Standing Committee meets every three or four months. UNHCR is mainly supported by voluntary contributions from governments. Refugees are granted a special status under international law. Once an individual is considered a refugee, that individual automatically has certain rights, and states that are parties to the 1951 U.N. Convention Relating to the Status of Refugees (1951 Convention) and/or its 1967 Protocol are obligated to provide certain resources and protection. UNHCR ensures these rights, works to find permanent solutions for refugees, and coordinates immediate humanitarian assistance. UNHCR was established to help resettle European refugees after World War II, and its mandate reflects this history. It became the institutional mechanism for the implementation of the 1951 Convention. Under the 1951 Convention, a refugee is legally defined as a person fleeing his or her country because of persecution or "owing to a well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside of the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country." The central rights accorded to refugees are non-rejection of asylum seekers at the border, non-forced repatriation (non-refoulement), admission to safety, access to fair and efficient procedures for determination of refugee status, assurance of the same rights and basic help received by any other foreigner who is a legal resident, and appropriate lasting solutions. The 1951 Convention limits the definition of refugees to those created by events occurring prior to 1951. In response to the emergence of large refugee movements since 1951, the 1967 Protocol incorporates the measures included in the 1951 Convention, but imposes no time or geographical limits. States may be a party to one or both instruments. UNHCR often works with states on national laws to implement provisions of these international treaties and argues that international law overrides other bilateral agreements that may exist. Enforcement of the 1951 Convention and/or its 1967 Protocol remains a challenge. Over time, the U.N. General Assembly has passed resolutions expanding UNHCR's involvement to those escaping armed conflict, generalized violence, foreign aggression, and other circumstances. While UNHCR's mandate is to protect refugees (and by legal definition, refugees have crossed an international border because of persecution or a well-founded fear of being persecuted) it now provides assistance to a broader group known as "persons of concern" to UNHCR. UNHCR estimates as of January 1, 2002, indicate that there are 19.8 million persons of concern worldwide. This category includes refugees, returnees, internally displaced persons (IDPs), asylum seekers, stateless persons, and others. Compared with the year before, this number has decreased by 2 million, as many refugees have returned to their home countries. When refugees begin to return to their home countries, UNHCR often provides assistance to these "returnees" and monitors their well-being. UNHCR may provide transportation, a start-up package (which may contain such items as cash grants, farm tools, and seeds), and assistance rebuilding homes and schools. Monitoring of their well-being rarely continues longer than two years. Unlike refugees who seek asylum outside their country of citizenship, internally displaced persons have not crossed an international border but remain inside their own country. Under international law, IDPs do not have the same protection as refugees. IDPs fall into the gaps between the mandates of different agencies. By default, UNHCR has provided assistance and some protection to IDPs, but it has argued that it lacks the capacity and resources to cope systematically with the needs of IDPs in addition to its refugee caseload. The plight of this group has gained international recognition as a problem that needs to be addressed. There are other groups requiring assistance. Asylum seekers are people who flee their home country and seek sanctuary in a second state. They apply for asylum--which is the right to be recognized as a refugee--and receive legal protection and material assistance. UNHCR helps these asylum seekers, whose formal status has not yet been determined. In addition to asylum seekers, there are other refugee-like populations. For example, UNHCR assists stateless persons, such as those from the former Soviet Union who have not been able to obtain citizenship in any of the former republics. UNHCR has three main functions. First, it provides legal protection to those who fall within its mandate. Governments establish procedures to determine refugee status and related rights in accordance with their own legal systems. UNHCR offers advice and non-binding guidelines to these governments. In countries, which are not party to international refugee treaties but request UNHCR assistance, UNHCR may determine refugee status and offer its own protection and assistance. Second, UNHCR seeks permanent solutions to refugee situations. In general, there are three solutions for refugees: 1) voluntary repatriation, 2) local integration in the country of first asylum, and 3) resettlement from the country of first asylum to a third country. UNHCR prefers voluntary repatriation, whereby refugees return to their home countries. If repatriation is impossible, then UNHCR seeks either local integration or, if this is impossible, resettlement in a third country. Third, UNHCR also coordinates numerous non-governmental organizations (NGOs) that provide emergency humanitarian relief to refugees. This relief includes shelter, food, and basic medical care. UNHCR also carries out a variety of other activities. For example, in the past UNHCR has provided training for border guards on how to handle refugee situations, developed an intergovernmental emergency response team for greater integration and coordination, and resolved particularly sensitive situations between governments and those seeking asylum. Some of these situations involved behind-the-scene negotiations and discussions. As humanitarian crises became more complex through the 1990s, UNHCR began working with a wider number and variety of organizations. Within the U.N. system, UNHCR works most closely with the World Food Program (WFP), the U.N. Children's Fund (UNICEF), the World Health Organization (WHO), the U.N. Development Program (UNDP), the Office for the Coordination of Humanitarian Affairs (OCHA), and the U.N. High Commissioner for Human Rights. UNHCR also coordinates with international organizations (IOs), such as the International Committee of the Red Cross (ICRC) and the International Federation of Red Cross and Red Crescent Societies (IFRC), and NGOs such as the International Rescue Committee (IRC) and the International Organization for Migration (IOM). UNHCR works with over 500 NGOs that provide much of the operational support for refugees. In the past decade, UNHCR has dealt with massive population movements, including those from Rwanda, the Balkans, and Afghanistan. Thousands of Afghans have lived for years in refugee camps, partly supported by UNHCR, in Pakistan and Iran. Since September 11, 2001, a reverse situation has taken place as many more Afghans have returned home from Pakistan and Iran than were expected, putting a strain on UNHCR programs and leading to a reduction in the resources provided to these returnees. UNHCR is putting together a contingency plan for Iraq in the event of a war. Currently, while there are a small number of NGOs in Iraq, U.N. agencies provide the bulk of humanitarian assistance in the form of food and medicine. Reportedly, the United Nations estimates that over 60 percent of 24 million people in Iraq receive monthly food distributions. Depending on its scope and duration, war could create a humanitarian emergency with large population movements across borders or within Iraq itself. UNHCR depends almost entirely on voluntary contributions to fund its operations. Of UNHCR's budget, 98% comes from voluntary contributions from governments and other donors, such as foundations, corporations, and the public at large. Two per cent comes from the U.N. regular budget and covers administrative personnel costs in the Geneva headquarters. Nearly 95% of the total contributions to UNHCR come from 15 donors (14 governments and the European Union). The Calendar Year (CY) 2002 budget of UNHCR is currently $1.05 billion, composed of $801.7 million from the annual budget, $219 million from supplementals to cover new emergency needs, $20 million from the U.N. regular budget, and $7 million from a young professional recruitment program. The CY2003 UNHCR appeal is for $837 million for the annual budget and $39.5 million for supplementals. Since 1999, UNHCR's annual budget has seen shortfalls, which have required cuts in planned programs. Since UNHCR relies on voluntary contributions, it depends on the annual generosity of its donors and cannot anticipate from year to year how much money will be available nor how much it will have to spend. Some pledged contributions are also late. These problems create a general cash availability crisis and budget shortfalls. In February 2002, UNHCR froze its administrative budgets. As of June 30, 2002, only $678 million had been received as income, which led to an 11% decrease in planned programs. The UNHCR annual budget was cut in CY2002 from just over $800 million to $710 million. These funding shortfalls have most seriously affected programs in Africa, as well as in Thailand, Papua New Guinea, and the Caucasus. The unpredictability of global conflicts also contributes to UNHCR's financial difficulties. UNHCR cannot fully anticipate the extent and costs of new refugee emergencies. During CY2002, UNHCR had to make a supplemental appeal to fund new emergency needs in Afghanistan, Macedonia, East Timor, Liberia, Angola, and Zambia, as well as new programs to protect U.N. personnel. For CY2003, UNHCR has made another supplemental appeal. UNHCR has introduced new mechanisms to improve its funding flows, including the creation of an operational reserve to cover some emergencies and other unexpected costs. Countries often earmark their funds for specific programs. The United States earmarks 97% of its contributions with 25% tightly earmarked (to be used only for specific countries or types of activities) and 72% lightly earmarked (allocated for use within specified geographic regions). Other countries tightly earmark a larger proportion of their contributions, such as the European Commission, which does so for its entire contribution. In contrast, the Netherlands provides 65% of its contribution in unrestricted funds. Tight earmarking, in particular, means that some programs are well funded and other programs experience shortages. For example, countries provided a high level of funding earmarked to the Kosovo crisis, but African crises have not received the same level of funding. Countries that tightly earmark "appear to view UNHCR as an implementing partner rather than a global multilateral agency with a universal mandate." High Commissioner Ruud Lubbers has reportedly stated that UNHCR will care for IDPs only under certain conditions and only if UNHCR has adequate resources: "I will not say that UNHCR will care for all IDPs. I do not believe in that at all." Instead, High Commissioner Lubbers seeks a broader response from the U.N. system and the international community. The lack of a designated organization mandated to focus on IDPs has resulted in an inconsistent and often incomplete response to IDP crises. A number of questions remain unresolved. Which organization(s) should take on this role? What kind of protective legal mechanism might be established to provide for IDPs in much the same way the 1951 Convention and 1967 Protocol have done for refugees? UNHCR has been coping with increased numbers of asylum seekers. At the same time, states are less willing to provide asylum. Developing countries host the overwhelming majority of the world's refugees. The top five refugee-hosting countries are Pakistan, Iran, Germany, Tanzania, and the United States. However, the countries with the most refugees per 1,000 inhabitants are Armenia, Guinea, Federal Republic of Yugoslavia, Republic of the Congo, and Djibouti. When one takes into account GDP, those countries with the largest refugee populations per $1 million of GDP are Armenia, Guinea, Tanzania, Zambia, and Congo. These countries have generously accepted refugees and often receive international assistance from UNHCR. However, the international community does not cover all the costs associated with large refugee populations. These countries and many others have become less willing to take in asylum seekers because they already have substantial refugee populations, face increasing economic problems, and worry about perceived threats to domestic security. Even developed countries are less willing to accept asylum seekers. The European Union, for example, sought to stem the flow of asylum seekers by promoting regional protection (relying on safe havens and other zones in the region of origin) and interpreting narrowly the definition of refugees (for example, excluding those persecuted by non-state actors). These measures may have the unintended consequence of expanding illegal migration, migrant trafficking, and organized crime, as refugees under duress seek other avenues of asylum. In November 2001, UNHCR requested an investigation into allegations of sexual exploitation of refugees by its own aid workers in West Africa. The resulting report in July 2002 could not verify the allegations, but found 10 cases of sexual exploitation, of which one case involved a U.N. Volunteer. Even though no allegations against U.N. staff members have been substantiated, the report does reveal that sexual exploitation occurs in refugee camps perhaps due to a lack of day-to-day UNHCR management and the conditions of camp life. Through 2002 and 2003, UNHCR is implementing a series of reforms to stop sexual exploitation among refugees. In some regional and civil wars, combatants have used refugees as pawns in their overall strategy. For example, some experts argue that in Kosovo Milosovic and other leaders may have purposely created large-scale refugee crises to shape the outcome of the war and manipulate the response by the international community. As a result, refugees may be seen as central to the objectives and strategies of war, and yet many remain innocent victims caught in the crossfire. In many cases, refugees seek to escape violence, but violence often follows them to refugee camps. These camps may house rival ethnic groups and armed rebels as in Democratic Republic of Congo and Pakistan in the 1990s, may be invaded by rebel forces as is currently the case in Uganda, and may not be able to protect refugees from sexual exploitation and general violence. UNHCR has sought to protect refugees and its workers from this violence, but some argue that more needs to be done. Since UNHCR often operates in the midst of wars, humanitarian assistance to refugees is not always viewed by the combatants as a neutral act. UNHCR and other humanitarian actors are increasingly perceived as taking sides. Further aggravating these problems, humanitarian agencies have needed to work with military forces, which also increasingly provide humanitarian assistance (as was the case in Macedonia during the Kosovo conflict). The risk, some argue, is that the humanitarian assistance community and refugees they protect may appear to be parties to the conflict. As a result of these trends, some U.N. humanitarian aid workers have become targets in civil wars. To improve security to its personnel, the United Nations established at the end of 2001 a new Emergency and Security Service program, of which each U.N. agency pays a portion of the costs. UNHCR will pay $2 million for this program, as well as another $7 million for other security programs. UNHCR has included the costs of these programs in its budget appeal for CY2003. The U.S. government is the largest contributor to UNHCR, representing at least 25% of all contributions. The largest share of U.S. contributions is voluntary. In FY2002, the U.S. government contributed $255 million to UNHCR. Until FY2003 funding has been appropriated, programs will continue to operate at FY2002 funding levels. A key concern is whether UNHCR will receive adequate contributions from the United States in FY2003. The State Department's Population, Refugees, and Migration (PRM) Bureau expects to have refugee needs equal to FY2002, and there could be a significant shortage in refugee program funding, including funding to UNHCR. Any additional funds would depend on the possibility of a supplemental appropriation (with a likely delay in funding of UNHCR programs). Furthermore, many countries follow the U.S. lead in making their own voluntary contributions. If the United States lowers its contributions, other countries may follow suit. In general, both the Executive branch and Congress value the work of UNHCR. For example, the Senate Committee on Appropriations' most recent foreign operations report stated that the Committee "strongly supports" the work of UNHCR, is "deeply concerned" by the large budget shortfall, and is "alarmed that this shortfall is beginning to adversely impact field operations in a number of regions." Authorization for participation in the UNHCR program is through the Migration and Refugee Assistance Act of 1962 (P.L. 87-510), as amended. Authorization is found in the Department of State authorization bill, which is determined by the Senate Committee on Foreign Relations and the House Committee on International Relations. Appropriations for UNHCR programs are provided in the Foreign Operations Appropriations bill to the Migration and Refugee Assistance (MRA) Account and to the Emergency Refugee and Migration Assistance (ERMA) Fund, which are overseen by the State Department. How much of UNHCR's expenses should the United States cover? According to U.S. Assistant Secretary for Population, Refugees and Migration Arthur E. Dewey, the European Union has not made adequate contributions to UNHCR, providing only 15% of its budget, in contrast to the 25% contributed by the United States. Through its European Community Humanitarian Office (ECHO), the European Union has distributed humanitarian assistance through NGOs, instead of through multilateral agencies like UNHCR. According to Dewey, ECHO should contribute the same level to UNHCR as the United States. However, individual European governments also provide money directly to UNHCR. According to UNHCR, ECHO and the European Union member governments have collectively provided about $70 million more than the United States to UNHCR in FY2002. The main issue appears to be whether ECHO and the member governments should redirect more funds from their own bilateral programs into multilateral programs like UNHCR. The U.S. government has reduced the number of refugees admitted into the United States. Until 1995, the ceiling for admissions was over 100,000. This ceiling has fallen to 70,000 for 2003. These reductions should be considered within the context of the broader international asylum crisis. In addition, U.S. response to asylum seekers and protection of refugees will likely impact its ability to influence other countries' behavior with regard to the protection of asylum seekers. Congress has sought to make certain that specific programs and geographical areas receive adequate resources. The House Committee on International Relations has emphasized protecting Afghan refugees, East Timorese refugees, and refugees in Africa. The U.S. government influences the activities of the UNHCR in many ways. First, since it contributes a substantial proportion of the total UNHCR budget and earmarks these funds, the U.S. government supports certain programs and certain geographical areas, and allows U.S. policy priorities to influence UNHCR priorities. Second, through the very act of contributing money and protecting refugees according to certain standards, the U.S. government also encourages other countries to contribute at appropriate levels and treat refugees at a certain standard. Third, the United States is an active member of UNHCR's Executive Committee and, therefore, has a voice in the administration of UNHCR. Fourth, U.S. nationals work for UNHCR and bring U.S. interests, values, and perspectives with them. Congress may address two related questions. What kind of influence should the United States have? How can the United States balance its priorities with the fact that UNHCR is a global, multilateral agency with a universal mandate?

Established in 1950, the United Nations High Commissioner for Refugees (UNHCR) provides legal protection, implements long-term solutions, and coordinates emergency humanitarian relief for refugees and other displaced persons around the world. At the beginning of 2002, the populations of concern to UNHCR totaled 19.8 million people, which included 12 million refugees. Currently, UNHCR faces a series of challenges: the protection of displaced populations that are not technically refugees and thus fall outside the mandate of UNHCR; availability of resources; a worldwide asylum crisis; accusations of misconduct by UNHCR employees; and the security of refugees and U.N. workers. Issues of particular concern to Congress are funding shortages at UNHCR, burdensharing, and avenues for U.S. influence within UNHCR. This report will be updated periodically.

The annual Interior, Environment, and Related Agencies appropriations bill, which began its consideration as H.R. 2584 and ended as Division E of the Consolidated Appropriations Act ( P.L. 112-74 ), funds agencies and programs in parts of three federal departments (Interior, Agriculture, and Health and Human Services), as well as numerous related agencies and bureaus, including the Environmental Protection Agency. Among the more controversial agencies represented in the bill is the Fish and Wildlife Service (FWS), in the Department of the Interior (DOI). House floor consideration of Interior and Environment appropriations was not completed, and the Senate first considered these programs in the context of Division E of the conference report on a bill whose original subject was appropriations for military construction. The House next considered FWS appropriations in the context of the conference report for the same measure. As a result, the legislative history of Interior and Environment appropriations in general, and FWS specifically, is truncated relative to most years, and the emphasis below is largely on the final bill. Congress approved $1.48 billion for the agency for FY2012. The President had requested $1.69 billion (up 13% from FY2011); on July 12, 2011, the House committee approved $1.19 billion (down 21% from FY2011). (See Table 1 .) Most accounts and subaccounts were reduced relative to FY2011 levels. At the account level, percentage changes from FY2011 to FY2012 ranged from a reduction of 20.4% for the Cooperative Endangered Species Conservation Fund to an increase of 10.8% for Construction. This report analyzes FY2012 appropriations in a policy context, with reference to past appropriations. Floor action on Interior and Environment appropriations began on July 25, 2011, when the House began consideration of H.R. 2584 . Consideration continued to July 28, 2011, when the House rose, leaving H.R. 2584 as unfinished business. During floor consideration, there were three amendments affecting FWS; two were adopted, and one was rejected. The first amendment ( H.Amdt. 732 ; Bass, NH) increased land acquisition funding by $4 million for FWS, as well as making increases for specified other agencies, with offsetting reductions in funds for the Office of the DOI Secretary. It was adopted by voice vote. (In the end, P.L. 112-74 contained funding for land acquisition, though at a lower level than in FY2011. See " Land Acquisition .") The second amendment ( H.Amdt. 735 ; Dicks, WA) was also adopted; it removed certain restrictions in the bill concerning funding limitations for endangered species protection. ( P.L. 112-74 contained some limits on listing; see discussion " Endangered Species Funding .") A third amendment ( H.Amdt. 750 ; Dicks, WA), affecting judicial review of wolf management, was rejected; P.L. 112-74 contained no language regarding wolf management and judicial review. (See " Wolf Delisting ," below.) By far the largest portion of the FWS annual appropriation is the Resource Management account, for which Congress approved $1.23 billion for FY2012, down 1.5% from FY2011. Among the programs included in Resource Management are Endangered Species, the Refuge System, Law Enforcement, Fisheries, and Cooperative Landscape Conservation and Adaptive Science (formerly called Climate Change Adaptive Science Capacity). In the FY2012 FWS appropriations cycle several issues emerged: elimination of funding for the adding of new species to the list of those protected under the Endangered Species Act; elimination of funding for critical habitat designation; cuts in funding for fish hatcheries; restoration to near FY2011 levels for the National Wildlife Refuge Fund, a fund that provides payments in lieu of taxes to local governments for the presence of non-taxable refuge land--a program for which the President proposed no appropriation; elimination of annual funding for most land acquisition for the National Wildlife Refuge System; and response to the FY2011 legislative delisting of certain populations of gray wolves. Each of the points above will be discussed in the appropriate account's section below. Funding for the endangered species program is part of the Resource Management account, and is a perennially controversial portion of the FWS budget. Congress approved $176.0 million, up 0.3% from the FY2011 level of $175.4 million. The Administration's FY2012 request was $182.6 million. (See Table 2 .) The House Committee approved $138.7 million; the accompanying committee report, citing the absence of a reauthorization for the Endangered Species Act (ESA), gave statistics on the low rate for recovery of listed species as evidence that the ESA has failed. Over half of the House committee's reduction from FY2011 level came from elimination of funding for adding new species to the list of species protected under the ESA, and for the designation of new critical habitat for species. The reductions were contained in the tables accompanying the bill; but in addition, the committee's bill language itself reinforced that elimination by directing that "none of the funds shall be used for implementing subsections (a), (b), (c), and (e) of Section 4 of the Endangered Species Act, (except for processing petitions, developing and issuing proposed and final regulations, and taking any other steps to implement actions described in subsection (c)(2)(A), (c)(2)(B)(i), or (c)(2)(B)(ii) of such section)." The language would have prevented listing new species or changing a species from threatened to endangered, or a designating new critical habitat. It would have allowed action to delist species or to downlist species from endangered to threatened, although with no funding in the committee's bill for the listing program it is not clear what funds would have been available for such actions. On July 26, 2011, the House considered H.Amdt. 735 (Dicks, WA) to strike this language. Supporters of H.Amdt. 735 rejected the claim that the ESA has failed, and cited the continued existence of all but a few of the listed species struggling in the face lost habitat and other dangers as an alternative measure of success. The amendment passed (yeas 224, nays 202; roll call #652) on July 27, 2011. In the end, P.L. 112-74 contained limits on spending for listing species in response to petitions, for listing foreign species, and for designation of critical habitat. The limitations on listing foreign species or responding to petitions were not found in the previous appropriations bill; limitations on critical habitat designation have been a feature of appropriations bills for over 15 years. P.L. 112-74 reduced funding for consultation under Section 7 of the ESA by 1.5% from FY2011. Under Section 7, federal agencies are obliged to consult with FWS on their actions which may affect listed species, and obtain a biological opinion (BiOp) from FWS on whether the action might jeopardize the species. The BiOp may include reasonable and prudent alternatives for the agency action that would avoid jeopardy. Reduced funding for FWS to consult could delay federal actions, because the action agency might hesitate to open its actions to the citizen suit provisions of the ESA in the absence of the FWS BiOp. The Cooperative Endangered Species Conservation Fund also benefits species that are listed or proposed for listing under ESA, through grants to states and territories. P.L. 112-74 provided $47.7 million, down 20.4% from the FY2011 level of $59.9 million. The program assists states with, among other things, the preparation of Habitat Conservation Plans (HCPs). HCPs are developed for non-federal actions by state, local, business or private entities as a requirement for obtaining an Incidental Take Permit for actions that may affect listed species. For HCPs involving many actors, states may use their funds from this program to coordinate the HCPs, to develop a single umbrella plan on behalf of a region, or to acquire land to mitigate effects of a project. Reduction of state support leaves states with the option of funding some of these efforts alone, or leaving individual actors to develop their own plans. Taking the two programs together, the final bill projects savings in endangered species funding, compared to FY2011 levels, at 5.0%. Because Section 15 (16 U.S.C. SS1542) authorizing ESA appropriations expired in FY1992, it is sometimes said that the ESA is not authorized. However, that does not mean that the agencies lack authority to conduct actions (SSSS4, 6-8, 10, and 11; 16 U.S.C. SSSS1533, 1535-1537, 1539, and 1540), or that prohibitions within the act are no longer enforceable (SS9; 16 U.S.C. SS1538). Those statutory provisions continue to be law, even when money has not been appropriated. The expiration of a provision authorizing appropriations does not end the statutory obligations created by that law. The U.S. Supreme Court has long held that "the mere failure of Congress to appropriate funds, without further words modifying or repealing, expressly or by clear implication, the substantive law, does not in and of itself defeat a Government obligation created by statute." Moreover, Section 11(g) (16 U.S.C. SS1540(g)) "allows any citizen to commence a civil suit on his own behalf" on various broad, specified provisions of the act. This option would still be available, regardless of agency funding. Appropriations bills have been vehicles for action on the status of wolves. While P.L. 112-74 contained no provisions regarding wolves, substantial action on delisting of gray wolves occurred in the FY2011 appropriation process ( P.L. 112-10 ), and provides background for additional action occurring during consideration of the House committee bill for FY2012. Section 1713 of P.L. 112-10 removed most wolves in the Northern Rockies from the protections of ESA. This removal from the ESA's list of protected species (or "delisting") makes these gray wolves the 49 th species to be delisted, and the only one delisted due to specific legislative action. In April 2009, FWS had issued a regulation to delist the population of wolves that had been reintroduced in the Northern Rockies. The rule removed wolves in Montana, Idaho, and parts of Washington, Oregon, and Utah from ESA protections, but the rule did not change the wolf's status outside these five states. The wolves of Wyoming were to remain protected because FWS held that Wyoming's proposed management plan was not adequate to avoid population declines that would result in relisting the wolves. In August 2010, a federal court overturned the rule. In addition, in November 2010, a federal district court in Wyoming ordered FWS to reconsider the Wyoming plan for wolf management, holding that FWS had acted arbitrarily and capriciously in rejecting the plan. Section 1713 ordered FWS to reissue the April 2009 rule and insulated the new rule from judicial review. It further stated that the section was to have no effect on the Wyoming case. FWS reissued the rule on May 5, 2011. The provision appears to leave open the option for a subsequent proposal to re-list the species. Two factors made this delisting distinct from past efforts to delist species legislatively. First, FWS had previously delisted the species though the action was later rejected by a court. FWS had argued that the best available science supported delisting. Second, the species had met and exceeded the numeric goals for delisting in the species' recovery plan, although some aspects of its recovery were disputed. In H.R. 2584 (SS119), the House committee addressed concerns that the re-issued rule or other rules delisting wolves might be challenged in court. The section directed that any final rule delisting wolves in Wyoming or in the western Great Lakes area not be subject to judicial review, provided that FWS had authorized the state(s) to manage the wolf population. H.Amdt. 750 (Dicks, WA) was offered to strike this section. In a recorded vote on July 27, 2011, the House rejected the amendment (yeas 174; nays 250, roll call #659), leaving the language in place. In the end, though, P.L. 112-74 omitted the House's provision. The only language concerning wolves in the final bill was contained in the conference report ( H.Rept. 112-331 , p. 1051). The language instructed FWS to provide $1 million from its ESA recovery funds to "re-instate a livestock loss demonstration program as authorized by P.L. 111-11 ." The program compensates ranchers for their losses due to wolf predation. The final bill contained $485.7 million for the National Wildlife Refuge System (NWRS), down 1.3% from the FY2011 level of $492.1 million. Costs of operations have increased on many refuges, partly due to special problems such as hurricane damage and more aggressive border enforcement, but also due to increased use, invasive species control, maintenance backlog, and other demands. According to FWS, refuge funding has not been keeping pace with these demands. Combined with the rising costs of rent, salaries, fuel, and utilities, the agency says these demands have led to cuts in funding for programs to aid endangered species, reduce infestation by invasive species, protect water supplies, address habitat restoration, and ensure staffing at the less popular refuges. While some increases were provided to address these problems in recent years, the FY2009 stimulus law provided additional funding to address these concerns. One response to reduced funding has been the consolidation of refuges (called "complexing" by FWS) under a single refuge manager and staff, as a means of sharing staff and equipment. This program has met resistance from refuge supporters who argue that refuge units will lose resources and adequate supervision. Balanced against these concerns is congressional interest in general deficit reduction. Law Enforcement is part of the Subaccount for Migratory Birds, Law Enforcement, and International Affairs. Nationwide law enforcement covers wildlife inspections at international borders, investigations of violations of endangered species or waterfowl hunting laws, and other activities. The consolidated bill contained $62.1 million for the Law Enforcement program, down 1.2% from the FY2011 level of $62.9 million. The consolidated bill provided $135.3 million for this account, down 2.6% from the FY2011 level of $138.9 million. Within the program, Congress rejected most of the President's proposed cuts in the hatchery program, funding it at $46.1 million rather than the requested $42.8 million; the new level was down 5.7% from the FY2011 level of $48.9 million. However, concern had been generated early in the FY2012 appropriations cycle when the Administration proposed that FWS negotiate reimbursable agreements with responsible parties for mitigation activities at National Fish Hatcheries. Until such reimbursement was negotiated, FWS proposed to eliminate or substantially reduce activities at the nine National Fish Hatcheries where mitigation costs were at least 40% of total operating expenses. FWS manages a number of hatcheries under the National Fish Hatchery System. In some cases the mandated role of a hatchery, in whole or in part, is to provide mitigation for activities by other agencies. For FY2012, FWS projected annual expenditures to mitigate projects of four agencies: Army Corps of Engineers ($4.7 million), Tennessee Valley Authority ($835,000), Bonneville Power Authority ($40,000), and the Bureau of Reclamation ($715,000). (See Table 3 . ) Nine hatcheries met or exceeded the Administration's 40% mitigation threshold: more than 40% of the benefit of the hatchery was attributed to mitigation of the effects of a water project. These nine hatcheries were then targeted for reduction or elimination of FWS support. FWS argued that some or all of the hatchery costs should be borne by the responsible water project agencies. This issue was addressed and resolved in conference: The conferees have restored the proposed $3,388,000 shortfall in the budget for mitigation hatchery operations and critical supplies. An additional $3,800,000 is appropriated elsewhere in this consolidated Act for the U.S. Army Corps of Engineers to reimburse the Service. Together, these amounts fully fund mitigation hatcheries operated by the Service for the Corps, Tennessee Valley Authority, Bureau of Reclamation's Central Utah Project and the Bonneville Power Administration. The conferees support efforts by the Service to recover costs of programs that are conducted to mitigate the environmental effects of other Federal partners. However, future budget requests must ensure that Federal partners have committed to make sufficient funding available to reimburse the Service before the Service proposes to eliminate funding for mitigations hatcheries so that operations at these hatcheries are not disrupted. For this program (formerly called Climate Change Planning and Adaptive Science Capacity), P.L. 112-74 provided $32.2 million, an increase of 4% from the FY2011 level of $31.0 million. Part of the program supports work with partners at federal, state, tribal, and local levels to develop strategies to address climate impacts on wildlife at local and regional scales. The remainder is used to support cooperative scientific research on climate change as it relates to wildlife impacts and habitat. Both portions support and work through a network of Landscape Conservation Cooperatives (LCCs) to ameliorate the effects of climate change. The LCCs are an amalgam of research institutions, federal resource managers and scientists, and lands managed by agencies at various levels of government. The conference report directed FWS to explain how it planned to integrate its LCCs with its Joint Ventures and its Fish Habitat Partnerships, as well as with the U.S. Geological Survey's Climate Science Centers, Cooperative Fish and Wildlife Research units, and Cooperative Ecosystem Studies Units. The consolidated bill provided $54.6 million for land acquisition, to be derived from the Land and Water Conservation Fund. The amount was down less than 1% from the FY2011 level of $54.9 million. The Administration had requested $140.0 million. See Table 1 . P.L. 112-74 also specified that "$5,000,000 shall be for land conservation partnerships authorized by the Highlands Conservation Act of 2004, including not to exceed $160,000 for administrative expenses." The Administration's top five acquisition priorities (of 63 listed projects) were, in descending order: Alaska Maritime National Wildlife Refuge (NWR), Silvio Conte NWR (CT, MA, NH, VT), Laguna Atascosa NWR (TX), St. Marks NWR (FL), and Cache River NWR (AR). The Migratory Bird Conservation Account is a source of mandatory spending for FWS land acquisition (in contrast to the other three federal lands agencies, which rely on annual appropriations). The MBCA does not receive funding in annual Interior appropriations bills. Rather, funds are derived from the sale of duck stamps to hunters and recreationists, and from import duties on certain arms and ammunition. For FY2011, available funds are estimated at $58.0 million. This estimate is $14.0 million above the previous year, and was based on the assumption that Congress would approve a proposed increase in the price of duck stamps from $15 to $25. No such increase has been introduced, so a more reliable estimate would be that $44.0 million would be available for FWS land acquisition from the account. The National Wildlife Refuge Fund (NWRF, also called the Refuge Revenue Sharing Fund) compensates counties for the presence of the non-taxable federal lands under the primary jurisdiction of FWS. A portion of the fund is supported by the permanent appropriation of receipts from various activities carried out on the NWRS. However, these receipts are sufficient for funding a small fraction of the authorized formula, and county governments have long urged additional appropriations to make up the difference. The Administration requested no funding for NWRF in FY2012, which would have meant that based on receipts alone, counties would have received 5% of the authorized level. The Administration argued that the savings were justified based on low costs of refuges to county infrastructure and economic benefits to local economies from increased tourism. P.L. 112-74 rejected the Administration's argument, and provided $14.0 million, down 3.5% from the FY2011 level of $14.5 million. This level, combined with receipts, will be sufficient for counties to receive 30.8% of the authorized level. FWS has long had a role in conserving species across international boundaries, beginning with species such as migratory birds, which spend some part of their life cycle within U.S. boundaries, and more recently including selected species of broader international interest. One of the programs, the Multinational Species Conservation Fund, generates considerable constituent interest despite the small size of the program. It benefits Asian and African elephants, tigers, rhinoceroses, great apes, and marine turtles. P.L. 112-74 provided $9.5 million, down 5.2% from FY2011. (See Table 4 .) The Administration requested $9.8 million. Congress approved $3.8 million for the Neotropical Migratory Bird Conservation Fund, down 5.2% from FY2011. The program provides grants for the conservation of hundreds of bird species that migrate among North and South America and the Caribbean. The act requires spending 75% of the funds on projects outside of the United States. State and Tribal Wildlife Grants help fund efforts to conserve species (including nongame species) of concern to states, territories, and tribes. The program was created in the FY2001 Interior appropriations law ( P.L. 106-291 ) and further detailed in subsequent Interior appropriations laws. (It has no separate authorizing statute.) Funds may be used to develop state conservation plans as well as to support specific practical conservation projects. A portion of the funding is set aside for competitive grants to tribal governments or tribal wildlife agencies. The remaining portion is for grants to states. Part of the state share is for competitive grants, and part is allocated by formula. This grant program has generated considerable support from state governments. Congress provided $61.3 million for these grants, down less than 1% from FY2011. It provided $51.3 million for formula grants and $5.7 million for competitive grants for states. Tribes received $4.3 million for competitive grants. See Table 1 , above. The Administration's request for FY2012 was $95.0 million. Congress specified that states must provide at least 25% matching funds for planning grants and 35% for implementation grants. CRS Report R41608, The Endangered Species Act (ESA) in the 112 th Congress: Conflicting Values and Difficult Choices , by [author name scrubbed] et al. CRS Report RS21157, International Species Conservation Funds , by [author name scrubbed] and [author name scrubbed]. For general information on the Fish and Wildlife Service , see its website at http://www.fws.gov/ .

The annual Interior, Environment, and Related Agencies appropriation funds agencies and programs in three federal departments, as well as numerous related agencies and bureaus. Among the agencies represented is the Fish and Wildlife Service (FWS), in the Department of the Interior. Many of its programs are among the more controversial of those funded in the bill. For FY2012, the Consolidated Appropriations Act (P.L. 112-74, Division E, H.Rept. 112-331) provided $1.48 billion for FWS, down 2% from the FY2011 level of $1.50 billion. (This measure also provided appropriations for most federal government operations for the remainder of FY2012.) For FWS, most accounts were reduced to some degree relative to the FY2011 level. This report analyzes the FWS funding levels contained in the FY2012 appropriations bill. Emphasis is on FWS funding for programs that have generated congressional debate or particular constituent interest, now or in recent years. Several controversies arose during the appropriations cycle over funding levels or restrictions on funding: The Administration proposed limitations on funds that could be used to respond to petitions to list new species under the Endangered Species Act (ESA), arguing that petitions diverted the agency from listing species with higher conservation priority; others argued that without petitions FWS would list fewer species. The Administration also proposed to limit spending on listing foreign species. Both limits were accepted. The House bill proposed to limit judicial review of FWS decisions concerning the delisting of gray wolves under ESA. This provision was eliminated from the final bill. The Administration proposed cutbacks in funding for certain fish hatcheries involved in mitigation of the effects of federal water projects. FWS argued that the mitigation burden belonged on the shoulders of the agencies responsible for the projects. Congress did cut some of the program, but also specified a transfer of funds to FWS to support hatchery mitigation. The Administration proposed elimination of annual appropriations for payments to counties for lost revenues due to the presence of non-taxable FWS lands. Congress continued the appropriation, with small reductions from previous appropriations. The House bill proposed to eliminate nearly all funding for FWS land acquisition. Congress reduced but did not eliminate the program. All of these issues are discussed in more detail below, along with funding levels for other programs.

As part of WIPO's Digital Agenda, a WIPO Treaty on the Protection of Broadcasting Organizations is envisioned to adapt broadcasters' rights to the digital era. Advocates of this treaty from the broadcasting industry observe that relevant international agreements do not offer sufficient protection because advances in broadcasting technology and the parallel evolution of the industry are not covered by the terms of existing agreements. These proponents note that the primary agreement covering broadcasting and cablecasting rights, the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, was concluded in 1961 and predates home audio and video recording, telecommunications satellite systems and consumer satellite dishes, digital technology, wireless networks, and the ability of consumers to receive broadcasts via computer or mobile telephone. Accordingly, proponents assert the Convention does not adequately protect these new modes of broadcasting. The proposed new broadcasting treaty would grant broadcasting and cablecasting organizations protection of their program transmissions for a fixed term of years, enabling them to prohibit copying and redistribution of transmissions without authorization, which could be enforced through technological means of preventing circumvention of encrypted transmissions and the like. Such protections would be distinct from the copyright of the creators of the content for program transmissions. However, opponents of the treaty respond that it is not necessary, noting that the development of the broadcasting industry in the United States has not been hurt by the fact that it is not even a party to the Rome Convention. At its first session in November 1998, the Standing Committee on Copyright and Related Rights (SCCR) of the World Intellectual Property Organization (WIPO) decided to pursue in earnest discussions and submissions concerning the text of a new broadcasting treaty. Since 2004, the SCCR has been pushing for a diplomatic conference for final negotiations and adoption of a treaty; however, after ten years and 17 sessions plus two special sessions of preliminary negotiations in Geneva, Switzerland, no consensus has been reached on a text adequate for a diplomatic conference. At its May 2006 meeting, the SCCR decided to drop webcasting (transmitting over the Internet) and simulcasting (transmitting simultaneously via traditional broadcasting over the air and on the Internet) from the scope of the treaty, placing them into a separate, parallel negotiating track. The United States was almost the sole proponent of including webcasting in the treaty and had tried to bolster support for it by linking it to simulcasting, which the European Union advocated. The SCCR hoped to increase the likelihood of successfully concluding the treaty by dropping these highly controversial issues. At its fall 2006 meeting, the WIPO General Assembly tentatively agreed to convene a diplomatic conference in November/December 2007 to conclude a treaty for the protection of only traditional broadcasting organizations and cablecasting organizations, contingent on the SCCR's successfully tabling a consensus proposed text. To that end, the SCCR held two special sessions, in January and June 2007, to "aim to agree and finalize, on a signal-based approach, the objectives, specific scope and object of protection." The emphasis on a signal-based approach was an attempt to narrow the focus of the treaty to signal theft and piracy in order to allay concerns that a new layer of intellectual property rights in the content of broadcasts would, in effect, extend protection beyond the expiration of copyrights for each broadcast transmission and keep or remove content from the public domain. At the second special session, it became apparent that the conclusion of a treaty by the end of 2007 would not be feasible, given the significant differences that remained among the positions of various parties. No further steps have been taken to organize a diplomatic conference, although the treaty remains on the agenda of the SCCR and was discussed during SCCR meetings in March and November 2008. The Revised Draft Basic Proposal (WIPO Doc. SCCR/15/2/Rev.) and the Non-Paper on the WIPO Treaty on the Protection of Broadcasting Organizations (SCCR/S1/WWW[75352]), an unofficial paper prepared by the SCCR Chair in April 2007, provided the basis for negotiations at the second special session in June 2007, and apparently remain the current working text. The Revised Draft Basic Proposal is considered inadequate to support a successful diplomatic conference because it essentially incorporates every major alternative text for those articles where major differences remain among the WIPO parties. For example, there are two alternatives for Article 18, one providing that the term of protection shall be 50 years, the other, that the term be 20 years. The protections available under the Rome Convention have a term of 20 years, and the longer 50-year term proposed for the new treaty has been controversial. Furthermore, this text does not define a "signal," although the Chairman of the SCCR reportedly floated a proposed definition of "signal" in an earlier informal non-paper at the first special session in January 2007. Article 2 in the April 2007 Non-Paper does not define "signal" but does define "broadcast" in terms of signals. There appears to be uncertainty and disagreement among the negotiating parties as to precisely what a "signal-based" approach means for the narrowed focus of a new treaty. Consequently, some parties suggest that a "signal-based" approach, mandated by the WIPO General Assembly, may still encompass certain elements of exclusive rights including the right to prohibit certain uses of a broadcast, which remains a major point of contention. These two examples are indicative of the lack of consensus affecting most of the provisions of the Revised Draft Basic Proposal. At the November 2008 meeting of the SCCR, an Informal Paper was issued by the Chairman of the SCCR, but the SCCR did not make any formal decisions based on the paper. The paper sets forth and analyzes the range of positions on various issues that remain unresolved. It is intended to facilitate further discussion by examining the reasons behind some of the major differences among the negotiators and their stakeholders. For example, a number of WIPO member countries are parties to the 1961 Rome Convention; therefore, they view the new treaty as building on concepts in the Rome Convention which granted broadcasting organizations exclusive rights over rebroadcasting, fixation (recording of a broadcast in a medium such as optical disk), reproduction, and communication to the public. These rights are related to and are based on traditional concepts of intellectual property rights, that is, copyright in content which may be the subject of a broadcast. These WIPO members want the new treaty to provide for exclusive rights, which would be extended to new areas such as webcasting (broadcasts over the Internet), retransmission, protection of pre-broadcast signals, and technological devices to protect such exclusive rights. On the other hand, WIPO member countries that are not parties to the Rome Convention view the treaty as a free-standing endeavor that need not be based on the provision of exclusive rights. Some stakeholders are concerned that an exclusive rights-type of treaty would extend a new layer of intellectual property rights in content similar to copyright-type protections. They argue that this type of treaty would keep content out of the public domain and thus restrict the public's access to such content. The Chairman's informal paper discusses other issues, including the scope of post-fixation rights, the right of retransmission over the Internet, the term of protection, the protection of technological measures, limitations on and exceptions from the protections granted under the treaty (similar to existing exceptions to copyright for news reporting, education, and scientific research), definition of "signal-based" protection, and other secondary issues. Some of these are discussed below as points of contention. The paper concludes with two options for proceeding with negotiations. One option would be to make another attempt to conclude a treaty based on the Revised Draft Basic Proposal. The other option would be to conclude a treaty based on the Geneva Phonograms Convention of 1971 and the Brussels Satellite Convention. This would depart from the existing documents and proposals under consideration by the SCCR, but it would accomplish the goals of international protection for broadcast signals and prevention of piracy of signals. Protection at the national level could be accomplished via copyright laws, unfair competition laws, or administrative laws and sanctions. If neither of these options or other possible options can lead to a decision on a new treaty, the paper ends by recommending that the SCCR should expressly end current efforts to conclude a new treaty, remove it from its active agenda, and avoid spending further time, energy and resources. Such a decision could include a timetable for revisiting the matter later. Although further discussions occurred during the November 2008 SCCR meetings, no decisions were made, and the proposed treaty remains an active item on the SCCR agenda. Given the current lack of consensus, it may be useful to consider some of the major points of contention for the treaty as expressed by various stakeholders. The principles expressed in various stakeholder statements are fairly representative of common objections raised by treaty opponents and also of some of the concerns or positions expressed by various WIPO country-parties during negotiations. A joint statement distributed by 41 corporations, industry associations, and non-governmental organizations at the first special session of the SCCR advocated several guidelines for a treaty text, while not conceding their position that a treaty is not necessary at all. This statement is similar to earlier statements issued by many of the same stakeholders at the September 2006 meeting of the WIPO General Assembly and to positions expressed at U.S. stakeholder roundtables held jointly by the U.S. Copyright Office and the U.S. Patent and Trademark Office (USPTO) in September 2006, January 2007, and May 2007. The stakeholders issuing these statements at the SCCR meetings and the U.S. roundtables comprise a range of international and national organizations representing Internet service providers, computer technology companies, libraries and information professionals, content creators/owners, and consumer groups. First, the stakeholders assert there is no need for a treaty: "The United States has a flourishing and well-capitalized broadcasting and cablecasting sector, notwithstanding its decision not to accede to the [Rome Convention]. We see no necessity for the creation of new rights to stimulate economic activity in this area. [Longstanding negotiations do not] justify the creation of rights that would be exceedingly novel in U.S. law and that are likely to harm consumers' existing rights, and stifle technology innovation." Before the creation of such rights, the stakeholders maintain that "there should be a demonstrated need for such rights, and a clear understanding of how they will impact the public, educators, existing copyright holders, online communications, and new Internet technologies." Second, according to the stakeholders, the treaty should not be "rights-based," that is, grant exclusive rights in broadcasts similar to copyright. Rather, it should be, in their view, "signal-based," meaning that the prevention of theft or piracy of pre-broadcast signals should be the focus of the treaty. Third, stakeholders assert that the treaty should not be negotiated with reference to whether it detracts or departs from the Rome Convention, although the signers of the statement believe that strong signal protections are consistent with the Rome Convention. Some stakeholders have observed that the narrowed treaty focus on a signal-based approach is more akin to the Brussels Convention. Fourth, to the extent the treaty permits rights beyond protection against signal theft/piracy, the stakeholders claim that mandatory limitations and exceptions similar to those under copyright laws should be included in the treaty to ensure that the treaty does not prohibit uses of broadcast content that are lawful under copyright law. The treaty should also, in their view, permit additional limitations and exceptions appropriate in a digital network environment. Fifth, the stakeholders contend that the treaty should exclude coverage of fixations, transmissions or retransmissions over a home network or personal network. Concerns have been raised that because the Revised Draft Basic Proposal envisions protections for technological protections measures (TPM) and digital rights management schemes (DRM), the beneficiary broadcasting organizations would have the ability to control signals in a home or personal network environment. Stakeholders allege that this would inhibit such networking services and related technology innovations. Sixth, despite the removal of webcasting and simulcasting from the scope of the treaty, the phrase "by any means" in various articles of the Revised Draft Basic Proposal would, in the stakeholders' view, include control over Internet retransmissions of broadcasts and cablecasts. Finally, to the extent that Internet transmissions may be included in the scope of the treaty (or future related treaty), stakeholders advocate that it should ensure that intermediate network service providers are not subject to liability for alleged infringement of rights or violations of prohibitions due to actions in the normal course of business or actions of customers. The South Centre, an intergovernmental organization of developing countries, issued a research paper on the broadcast treaty in January 2007, which expressed some of the same concerns with regard to the benefits that the treaty would have for developing countries, as well as additional concerns. The South Centre paper makes recommendations similar to those discussed above. It suggests that the negotiators: (1) consider maintaining that the rationale and scope of application of the new instrument be limited to signal protection; (2) do not accept the inclusion of any exclusive rights, or at the least, that such rights do not extend beyond those incorporated in the Rome Convention, unless clear evidence is found for the need to grant such rights and mechanisms to address the potential harms they may cause are developed; and (3) ensure that appropriate safeguards to pursue public policy objectives and limitations and exceptions are included in the text. Additionally, the South Centre recommends that the negotiators: (1) refrain from expanding protection to include delivery via computer networks as well as any reference to webcasting (which is at odds with the position of the United States and webcasting advocates); (2) provide for special treatment to public service broadcasting and/or discrimination between commercial and non-commercial broadcasting; (3) limit the maximum term of protection to 20 years, if exclusive rights are required for signal protection, rather than the 50 years in the Revised Draft Basic Proposal; and (4) do not include obligations concerning the protection of technological protections measures (TPM) and digital rights management schemes (DRM), or at least consider including limitations and exceptions as minimum standards to these obligations to ensure they do not impede access to content. As noted above, the United States has been the primary advocate for extending protections to webcasting, whether in a new broadcasting treaty or in a separate agreement or protocol. In a statement submitted to the SCCR, the United States clarified that it "never intended that protection be afforded to the ordinary use of the Internet or World Wide Web, such as through e-mail, blogs, websites and the like. We intended only to cover programming and signals which are like traditional broadcasting and cablecasting, i.e. simultaneous transmission of scheduled programming for reception by the public." In the statement, the United States sought to replace the term "webcasting" with "netcasting" and clarified that "netcasting" was limited to transmissions over computer networks carrying programs consisting of audio, visual or audio-visual content or representations thereof which are of the type that can be, but are not necessarily, carried by the program carrying signal of a broadcast or cablecast, and which are delivered to the public in a format similar to broadcasting or cablecasting. The United States noted that "webcasting" "unnecessarily implied that ordinary activity on the World Wide Web would be covered by the definition." The United States reaffirmed its position that extending the same protections to "netcasting" as were and would be extended to traditional broadcasting and cablecasting, but asserted that such protections would be limited to preventing signal theft/piracy. Assuming that the treaty is eventually successfully concluded and that the United States is a signatory, any such treaty would not take effect for the United States unless and until the treaty was ratified by the United States with the advice and consent of the Senate, and Congress enacted implementing legislation. Furthermore, if the final text of the treaty adopted by WIPO includes Article 27, Alternative AAA (one of several alternate versions of Article 27 included in the draft), of the Revised Draft Basic Proposal, a party to the new broadcast treaty would be required to become a party to the Rome Convention first, which would mean that the United States would also have to consider ratification of that Convention, to which it is not currently a party. Implementing legislation would likely be necessary to establish new protections or amend existing ones in broadcasting laws and perhaps copyright laws. Currently, 47 USC SSSS 325 and 605 and 18 USC SSSS 2510-2512 provide for broadcasting protections, and title 17 of the U.S. Code contains the copyright laws. Additionally, webcasting/netcasting and simulcasting may be included in a separate agreement or as a protocol to a new broadcasting treaty, unless they are reconsidered for inclusion in the new broadcast treaty itself. Certain U.S. stakeholders, either opposed to the treaty or concerned about the potential inclusion of certain protections, have called on Congress to hold hearings on the treaty to determine whether a new treaty is necessary or at least to exercise greater oversight over the U.S. delegation's positions on the treaty. They had also urged the U.S. Copyright Office and the U.S. Patent and Trademark Office (USPTO) to solicit public commentary, which those agencies did through the aforementioned roundtables. These stakeholders are concerned that without public input, major changes in U.S. telecommunications and copyright laws will be effected via implementation of a new broadcast treaty without a full opportunity for domestic debate. Partly in response to the objections raised by stakeholders in the information and communications technology industries, the United States reportedly sought to ensure that a diplomatic conference would not proceed if special sessions failed to resolve the major disagreements. Furthermore, the Senate Judiciary Committee expressed concerns about the Treaty to the U.S. Copyright Office and USPTO, urging advocacy of a narrow, signal-theft based approach, and opposing a new layer of exclusive rights.

Existing international agreements relevant to broadcasting protections do not cover advancements in broadcasting technology that were not envisioned when they were concluded. Therefore, in 1998 the Standing Committee on Copyright and Related Rights (SCCR) of the World Intellectual Property Organization (WIPO) decided to negotiate and draft a new treaty that would extend protection to new methods of broadcasting. The SCCR has not yet achieved consensus on a text. In recent years, a growing signal piracy problem has increased the urgency of concluding a new treaty, resulting in a decision by the WIPO General Assembly to restrict the focus of the treaty to signal-based protections for traditional broadcasting organizations and cablecasting. Consideration of controversial issues of webcasting (advocated by the United States) and simulcasting protections have been postponed. However, much work remains to achieve a final proposed text as the basis for formal negotiations to conclude a treaty. Despite a concerted effort to conclude a treaty in 2007, in June 2007 the SCCR decided that more time and work were needed. Further discussions occurred during SCCR meetings in 2008, but no decisions were made. The treaty remains an active item on the SCCR agenda. A concluded treaty would not take effect for the United States unless Congress were to enact implementing legislation and the United States were to ratify the treaty with the advice and consent of the Senate. Noting that the United States is not a party to the existing 1961 Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, various U.S. stakeholders have argued that a new broadcasting treaty is not needed, that any new treaty should not inhibit technological innovation or consumer use, and that Congress should exercise greater oversight over U.S. participation in the negotiations.

Some lawmakers have expressed concern over the impact on small business of several proposed increases in the income tax rates for high-income individuals being considered in the current Congress. In his budget request for FY2011, President Obama is proposing to extend permanently most of the individual income tax cuts that were enacted in 2001 and 2003 and are due to expire at the end of 2010. But the request also called for restoring the top two tax brackets (currently 35% and 33%) to their levels prior to the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ): 39.6% and 36%; the higher rates would become effective in 2011. Under the proposal, the 39.6% rate would apply that year to all filers with adjusted gross incomes (AGIs) above $373,650, and the 36% rate would affect single filers with AGIs from $200,000 to $373,650 and joint filers with AGIs from $250,00 to $373,650. Upper-income individuals would also face higher marginal tax rates under the versions of health care reform legislation passed by the House ( H.R. 3962 ) and the Senate ( S.Amdt. 2786 to H.R. 3590 ). The House measure would impose a surtax equal to 5.4% of modified adjusted gross income (MAGI) in excess of $500,000 for single filers and in excess of $1 million for joint filers. Though the Senate bill does not include the surtax, it would impose an added payroll tax of 0.5% on the wage income of single filers above $200,000 and on the wage income of joint filers above $250,000; the tax would also apply to self-employed workers with business incomes above those thresholds. Proponents of the proposed rate hikes say they are needed to raise revenue for a variety of crucial budgetary purposes (including reducing projected federal budget deficits). In their view, the hikes would also reverse the decline in the progressivity of the individual income tax ushered in by the sweeping tax cuts enacted during the Bush Administration. Critics, by contrast, argue the rate increases would ultimately shrink the economy's long-term growth potential through their impact on savings, investment, and wages. One of their main concerns is the effect that higher rates would have on small business formation, growth, and investment. Citing recent research findings, critics maintain that firms with fewer than 500 employees historically have accounted for a substantial share of business investment and made important contributions to the commercial development of new technologies. In their view, the proposed higher marginal tax rates would boost the tax burden for many small business owners, reducing their incentives to open new lines of business, expand current operations, or invest in the development of new products and processes. This report seeks to shed some light on the validity of such an argument by exploring what is known about the share of small business owners and of small business income that is subject to the top two marginal income tax rates. The analysis at the heart of this report is built around the distribution of small business income by marginal individual tax rates. While the Internal Revenue Service (IRS) does not release to the general public the data needed to compute such a distribution, the figures can be extracted from the vast store of individual tax data collected by the agency. Using a micro-simulation model, economists at the Tax Policy Center (TPC) jointly managed by the Urban Institute and the Brookings Institution have generated a distribution of small business income and filers with such income by tax bracket for 2007 and 2009. Before discussing the results, however, it is useful to know what is meant by a small business owner and small business income in this context. Providing such an explanation is not as simple or straightforward an exercise as it may appear. This is because a small business can be defined in several ways, and there is no consensus among analysts on the proper or correct definition. Still, a line must be drawn between small business income and all other sources of income in order to determine the share of small business owners and small business income that could be affected by an increase in the marginal tax rates affecting upper-income individuals. In estimating the distribution of small business income by tax bracket, TPC uses the same definition of a small business owner that the Treasury Department has employed in several recent studies. In both cases, such an owner is anyone who reports any income or loss on Schedule C (self-employment income), Schedule E (income from rents, royalties, partnerships, limited liability companies, and S corporations), and Schedule F (farm income). Such a definition seems to have little in common with the popular image of a small business as a start-up firm owned by risk-taking entrepreneurs bent on commercializing some new technology, or a one-of-a-kind family-owned firm serving mostly local customers. There are advantages and disadvantages to using such a definition as a basis for estimating the distribution of small business income by tax bracket. On the one hand, it covers all income earned in a tax year by what are referred to as passthrough entities, many of which could be considered small on the basis of the size of their workforces, revenue, or assets. The definition also makes it possible to separate small business income from all other sources of income using available tax data. On the other hand, the definition has several limitations that call into question its usefulness for policy analysis. First, it excludes income earned by small C corporations and passed on to owners as compensation, dividends, or capital gains. There is no clear economic justification for omitting income from small C corporations when estimating the distribution of small business income by tax bracket. Second, the TPC/Treasury definition allows some firms that could be considered medium-sized or large using different criteria to be counted as small. For example, in 2005, 620,682 S corporations (or 17% of all S corporation tax returns) and 197,404 partnerships (7% of all partnership tax returns) reported receipts of $1 million or more on their federal tax returns; the same firms accounted for 91% of the combined receipts for S corporations and partnerships that year. Third, under the TPC/Treasury definition, it is likely that many upper-income individuals who are what the IRS views as passive investors in partnerships and S corporations are counted as small business owners. In 2004, for example, passive investment income from those entities made up some or all the business income reported by 9% of households, and 58% of all individuals with adjusted gross incomes (AGIs) above $1 million reported receiving some or all of their small business income as passive investment income. Yet another limitation with the TPC definition is that it treats certain kinds of miscellaneous income unrelated to investment or wages as small business income, even though the miscellaneous income has no clear-cut relationship to the ownership and management of a business; noteworthy examples include the fees given to CEOs for sitting on corporate boards, proceeds from sales on eBay, the honoraria received by journalists, and the royalties paid to book authors. It is not known to what extent these limitations might distort a distribution of small business owners or income by tax bracket based on what many would regard as a more plausible definition of a small business owner. The linkages between the individual and business tax data collected by the IRS needed to generate such a distribution simply do not exist. So given the limitations of any distribution of small business owners and income by tax bracket that relies on the TPC/Treasury definition, its results should be viewed as illustrative or suggestive rather than definitive or conclusive. Table 1 shows the key results of the estimated distribution of small business income in 2007 and 2009 generated by TPC's microsimulation model. At least four conclusions relevant to the argument that the growth of small firms would be stunted by a rise in the top two individual tax rates can be drawn from the figures in the table. First, the results indicate that few small business owners face the current top two marginal tax rates of 33% and 35%. Less than 2% of tax filers in those brackets in both 2007 and 2009 reported any small business income. At the same time, a majority of small business owners are subject to marginal tax rates ranging from 0% to 15%: in 2007, 68% of tax filers with small business income were in that position; the share rose to 72% in 2009. Thus, it seems reasonable to conclude that even after allowing for the limitations to the measurement of small business income in the TPC analysis, a tiny share of individual taxpayers who own and are actively involved in the management of firms that many would regard as small on the basis of their employment, revenue, or asset size would be affected by an increase in the top two individual tax rates. Second, small business income is not the dominant form of income in any tax bracket above zero. In 2009, such income totaled anywhere from 6.0% of AGI in the 15% bracket to 39.6% in the 35% bracket. (The high shares shown in the table for the 0% bracket stem from substantial business losses and the use of the absolute value of those losses to compute the ratio of small business income to AGI.) Third, while most filers in the top two brackets report some small business income, a majority derive less than half of their AGIs from small business. In 2009, small business income accounted for over 50% of AGI for 40% of filers in the top bracket and for 33% of filers in the second bracket. Finally, the results suggest that the proposed tax hikes for upper-income individuals would affect a greater share of small business income than small business owners. In 2007 and 2009, small business income represented an average of 30% of AGI for filers in the 33% tax bracket, and an average of 35% of AGI for filers in the 35% bracket; by contrast, the average for all taxpayers (including non-filers) was 14%. While it is unclear what proportion of small business income fell into each bracket shown in the table, there is evidence that taxpayers subject to the top two marginal rates earn a major share of that income. According to IRS individual income tax data (which can be accessed through the agency's website: http://www.irs.gov ), small business income (as defined in the TPC analysis) accounted for 61% of the aggregate AGI for all filers with AGIs of $200,000 or more in 2006 and 62% of the aggregate AGI for the same set of filers in 2007. Proposals to increase the marginal tax rates facing upper-income individuals raise several policy issues related to small business. One concerns the legal form of organization in which small firms operate. The enactment of a rate increase could modify the tax incentives to operate as a corporation. Another issue is the effect of rate increases on small business formation and investment. The results of the TPC analysis suggest that a major share of small business income could be affected by a rise in the marginal tax rates facing upper-income individuals. Some are concerned that a larger tax burden on small business income could lead to reduced rates of small business formation and investment. Both issues are explored below. Under current federal tax law, the owner(s) of a business can choose to operate either as a C corporation or some kind of passthrough entity (i.e., partnership, limited liability company, sole proprietorship, or S corporation). The decision hinges on a variety of tax and non-tax considerations. Foremost among the tax considerations are the rates at which individual and corporate income are taxed, tax rates for dividends and long-term capital gains, and the length of the investment horizon. In combination, they determine the expected after-tax rate of return on investment in or by any business entity. In general, non-tax considerations appear to be of greater importance to large firms that wish to raise capital globally from a variety of investors and lenders than they are to smaller firms. The former are organized largely as C corporations to allow them to take advantage of the benefits of operating in that legal form. Unlike other forms of organization, a C corporation faces no limits on the number of shareholders it may have, the kinds of stock it may issue, or the nationality of its shareholders. In addition, the shares of C corporations generally are traded in established exchanges, making it possible for ownership interests to be transferred readily at relatively low transactions costs. The earnings of C corporations are taxed twice: first at the corporate level and a second time at the individual level when the earnings are distributed--or passed through--to shareholders as compensation, dividends, or capital gains. By contrast, the earnings of passthrough entities are taxed only once: at the individual level of the owners as part of their taxable income from all sources, whether they are distributed or not. Given that a major proportion of small business income is taxed at the top two marginal tax rates, a rise in those rates, coupled with no change in the top rates for corporate income, dividends, and capital gains, could trigger an increase in the fraction of small firms organized as C corporations. In this case, the magnitude of the difference between the maximum individual and corporate rates could prove decisive in determining whether such a rise occurs and its extent. Both the individual and corporate rate structures are progressive. In 2010, for taxpayers with sufficient taxable income, the former ranges from 10% to 35%, while the latter has a minimum rate of 15% and a maximum rate of 35%. Qualified dividends and long-term capital gains are either not taxed or taxed at a rate of 15% in the same year. Under the Obama Administration's budget request, the top individual rate would rise to 39.6% starting in 2011, leaving it nearly five percentage points above the top corporate rate. The Administration's FY2011 budget request also calls for re-setting the top tax rate for long-term capital gains and dividends at 20% for single filers with AGIs of more than $200,000 and joint filers with AGIs in excess of $250,000, beginning in 2011. If enacted, these changes are likely to alter the tax incentives for operating as a C corporation. For lawmakers, an interesting question is whether the alteration would be sufficient to usher in a significant rise in the fraction of small firms operating as corporations. One way to address this question is to construct a series of simplified investment scenarios involving a partnership and a corporation and compare their after-tax profitability. In essence, the scenarios would reflect the interaction of current top individual, corporate, and capital gains tax rates, as well as proposed changes in them, over a variety of investment horizons. The results of such an exercise are summarized in Table 2 below. Three sets of four scenarios are analyzed, using a simple model for determining after-tax rates of return for investing in a passthrough entity like a partnership or a C corporation. Each set is built around a different investment horizon: one year, five years, and 10 years. The first scenario reflects current law in that it sets the individual tax rate at 35%, the corporate rate at 35%, and the long-term capital gains rate at 15%. In the second scenario, the individual rate rises to 39.6% (as proposed by the Obama Administration for 2011 and thereafter), while the corporate rate and the capital gains rate remain at 35% and 15%, respectively. For the third scenario, the individual rate stays at 39.6% and the corporate rate at 35%, but the capital gains rate rises to 20% (as proposed by the Obama Administration for 2011 and beyond). The fourth scenario combines an individual rate of 39.6% and a capital gains rate of 20% with a reduction in the corporate rate to 30.5%, as proposed by House Ways and Means Committee Chair Charles B. Rangel in a tax reform bill ( H.R. 3970 ) he introduced in 2007. Several simplifying assumptions undergird each scenario. First, an investor can expect to earn a constant pre-tax rate of return of 20%, regardless of whether she invests in a partnership or a corporation. Second, all after-tax income generated during the life of an investment that is not distributed is reinvested in the business. In the case of a partnership, each partner receives an annual distribution equal to 7% of partnership earnings to pay her federal tax on her share of the earnings. In the case of a corporation, shareholders receive no dividends. Third, the business is liquidated after five years. In the case of a partnership, there is no capital gain or loss at the time of the liquidation, and all partners receive a liquidating distribution of the remaining after-tax income, plus their initial investments. In the case of a corporation, the shareholders pay a capital gains tax at the top rate when they sell their shares or when the business is liquidated. Finally, the earnings of both the corporation and the partners are taxed at the top rates. As the figures in Table 2 suggest, small business owners subject to the top individual and capital gains tax rates appear to be better off operating as a partnership rather than a C corporation under both current law and the proposed changes in the maximum individual, corporate, and long-term capital gains tax rates examined here. In the scenario reflecting current law, a partnership would earn an after-tax rate of return that is 2.0 percentage points greater over one year, 1.5 percentage points greater over five years, and 1.1 percentage points greater over 10 years. Boosting the top individual rate to 39.6% while holding the other two rates constant narrows the gap significantly, but the partnership still comes out ahead over one year and 10 years. A partnership would realize a greater after-tax rate of return in all three periods when the top individual rate is 39.6%, the top capital gains rate is 20%, and the top corporate rate is 35%. And a reduction in the corporate rate to 30.5%, coupled with no change in the other two rates, results in a greater after-tax rate of return over one year and five years for a partnership, although a corporation would gain a slight edge over 10 years. The distribution of taxable income among the main forms of business organization can affect the amount of revenue flowing into the U.S. Treasury. Evidence substantiating such a link can be found in a recent report released by the Small Business Administration's Office of Advocacy that addressed average effective tax rates for the various forms of business organization. A firm's average effective tax rate is the ratio of taxes paid to gross receipts; as such, the rate reflects both the appropriate statutory tax rate and the reduction in that rate owing to any tax benefits a firm can claim, such as credits, exemptions, exclusions, and special deductions. Using IRS tax return data for individuals and corporations, the report estimated an average effective tax rate in 2004 of 26.9% for S corporations, 17.5% for C corporations, 13.3% for sole proprietorships, and 23.6% for partnerships (including limited liability companies); the rate for all small businesses was 19.8%. These findings indicate that everything else being equal, more revenue would have been raised that year if a larger amount of small business taxable income had been attributable to S corporations or partnerships than to C corporations. Federal tax policy has the potential to affect the performance of small firms through its impact on the incentives for savings, investment, and entry into self-employment. Decisions about critical matters such as whether or not to launch a new business, how a firm should be organized, how much it should invest in a certain period, and how to finance that investment can be swayed by the taxation of business income. The extent to which taxes influence the decisions of small business owners is no trivial issue, as those decisions, collectively, have important implications for the performance of the U.S. economy. Critics of the proposed increases in the marginal tax rates for high-income taxpayers claim they would harm the domestic climate for small business formation and investment. More specifically, in their view, upper-income households earn the major share of capital income, and boosting their tax burden would end up shrinking their incentives to save, form a new business, or invest in an existing small business by giving the federal government a larger share of the returns from those activities. For critics, the data in Table 1 suggesting that individuals in the top two tax brackets receive a large share of small business income validate this concern. In making such a claim, critics draw in part on some of the findings from recent research into the effect of tax policy on entrepreneurial firms, which typically are equated with the self-employed population, owing to a lack of consensus over the definition of such firms. Of particular significance is a 2001 study by economists Douglas Holtz-Eakin and Harvey S. Rosen of the impact of the individual income tax on entrepreneurial activities. They found that a rise in individual marginal tax rates contributed to lower investment spending by profitable sole proprietors, reduced growth in their workforces and payrolls, and slower expansion of their businesses (as measured by business receipts) from 1985 to 1988, relative to a scenario based on no change in those rates. Given that small firms (as defined by the Small Business Administration) are thought to account for about half of gross domestic product and non-agricultural employment in the private sector, on average, and to play critical roles in the commercial development of many new technologies, the concerns raised by critics warrant serious consideration. Yet neither the literature on taxation and entrepreneurship nor the current tax treatment of small business offers robust, unqualified support for those concerns. Instead, both this literature and current tax policy sketch a more complicated and less clear-cut picture of the relationship between income taxes and entrepreneurial activity. On the issue of the formation of new firms (which tend to be small in employment size), there is general agreement among economists that tax policy has the potential to make entering self-employment more or less attractive than working for a wage or salary. What is more open to question (and controversy) is the role taxes play in the creation of new firms. This issue is explored in depth in a 2004 review of the theoretical and empirical literature on taxation and self-employment by Herbert J. Schuetze and Donald Bruce. Their findings reveal a lack of consensus among economists on the relationship between the two. The theoretical literature suggests that taxation has a complex and ultimately ambiguous effect on the decision to become self-employed. In theory, several tax considerations are thought to influence this decision. Those discussed in the literature include differences between the tax treatment of business income and wage or salary income, the extent to which the government shares the risks associated with becoming self-employed through the offset of net operating losses against other sources of taxable income, the progressivity of the individual and corporate income tax systems, and opportunities to avoid or evade the taxation of business income. Models of the decision to enter into self-employment derived from these considerations have yielded inconclusive or contradictory results, implying that taxes have no clear-cut impact on the formation of entrepreneurial firms. A similar conclusion evidently applies to the findings of the empirical literature. Some studies discussed in the review have found that higher rates fostered increased "rates of entrepreneurial activity," while other, more recent ones have challenged that finding. The former support the popular notion that individuals become self-employed to avoid paying higher taxes on their wage or salary income. But the latter generally have detected no more than a weak link between tax rates or opportunities for tax avoidance or evasion, on the one hand, and entry into self-employment, on the other hand. For instance, in a 2006 study, Donald Bruce and Mohammed Mohsin estimated that a 50 percentage point cut in the top marginal tax rate would be required to engender a 1% gain in "entrepreneurial activity." Schuetze and Bruce attributed this weak link to the opposing effects of higher tax rates on the decision to become self-employed: a higher top rate reduces the expected returns from self-employment but increases the sharing of risk associated with starting a new business. In the view of Schuetze and Bruce, more research needs to be done on the relative importance of risk-sharing and opportunities for tax evasion in the decision to become self-employed. They contend that the development of a theoretical model incorporating both factors would make it possible for lawmakers to make more informed decisions about tax legislation affecting the incentives for small business formation, increasing the chances of achieving the intended objectives. On the issue of investment by small firms, a rise in the top two individual tax rates may not be as damaging as some have argued. In fact, a careful consideration of the major forces driving small business investment casts some doubt on the notion a rate increase would reflexively cause a drop in small business investment. In theory, if most small business income is subject to those rates, then an increase in both might result in less investment by small firms than otherwise would be the case, all other things being equal. There are two possible explanations for such an outcome. One flows from what is known as the neoclassical theory of business investment. According to the theory, the cost of capital is the main driver of this investment; so when it rises in a way that affects most firms, business investment declines, and the opposite occurs when the cost falls. For any firm, the cost of capital combines the opportunity cost of making an investment, economic depreciation for the acquired asset, and the tax burden on the returns the investment generates. By itself, an increase in a business taxpayer's marginal tax rate has the effect of boosting its cost of capital. If the neoclassical model is accurate, the taxpayer will respond by cutting back its investment spending. In the face of a higher cost of capital, the number of projects a firm can undertake profitably decreases, as does its desired capital stock. Plenty of studies indicate that business investment is responsive to changes in the cost of capital, but considerable uncertainty still surrounds the degree of responsiveness. A second reason why higher tax rates could spark a decline in business investment is tied to what might be called the cash flow theory of business investment. Under the theory, the main driver of business investment is a firm's cash flow or its retained earnings. Whereas the neoclassical model assumes that the opportunity cost of internal and external funds are the same, and that it can borrow as much money as it wants at that cost, the cash flow model proceeds from the supposition that for most firms, the cost of internal funds is lower than that of external funds. So how much a firm invests over time hinges on its cash flow in that period. All other things being equal, a rise in tax rates should lead to reduced business investment, as most firms would have lower retained earnings as a result. At least one study has found a notable correlation between cash flow and business investment, but what this means for the relationship between the two is far from clear. Do firms invest more because their retained earnings are growing, or is it the case that profitable firms have both relatively high cash flows and levels of investment? But the story does not end there. There is an alternative theory of business investment that has little to do with the cost of capital or cash flow. According to the theory, the main engine powering expansions or contractions in investment is the level of overall demand in an economy for goods and services. Rises in demand will translate to higher investment spending largely because the ratio of capital and labor to output is fixed in the short run. Under what some call the accelerator model of business investment, changes in the cost of capital generated by changes in tax policy essentially do not matter. While there is no doubt that expected increases in sales play a powerful role in determining how much a firm invests in a given period, there is little doubt that the cost of capital also plays an influential role. In addition, current federal tax law contains several tax incentives that directly affect business investment, one of which is targeted at small firms. Under Section 179 of the Internal Revenue Code (IRC), small firms have the option to write off (or expense) the cost of qualified assets in the tax year when they are placed in service, within certain limits; an enhanced version of the expensing allowance was available in 2008 and 2009 as a stimulative measure. The same firms (as well as all larger firms) were allowed to expense up to 50% of the cost of qualified assets bought and placed in service in 2008 and 2009. (Congressional leaders among the Democrats and Republicans and the Obama Administration have endorsed an extension of both the enhanced expensing allowance and the so-called bonus depreciation allowance through 2010, as a stimulative measure.) It is not known how many small firms took advantage of either or both special deductions, owing to a lack of tax and other data on small business investment. Expensing is the most accelerated form of depreciation and can result in taxing the returns to investment at a marginal effective rate of zero. So business taxpayers facing the top individual and corporate tax rates can lower the tax burden on the returns to qualified investments by claiming current expensing allowances. A similar outcome can be achieved when a small firm invests in research that qualifies for the research tax credit under IRC Section 41 and has research expenditures that may be expensed under IRS Section 174. In combination, the tax incentives can produce a negative marginal effective tax rate on the returns to investment in research and development. These considerations raise the possibility that those who claim that a rise in the tax rates affecting upper-income individuals would curtail small business investment may not be taking into account all the key forces shaping the domestic climate for that investment. The availability of investment tax incentives and other business tax benefits may lessen or offset the dampening effect of such a rise. And starting in 2011, a sustained upturn in domestic and foreign demand for goods and services produced in the United States could go a step further and overwhelm any such effect.

Some lawmakers have expressed concern over several proposals being considered in the current Congress to raise the tax burden on high-income individuals. Of particular concern are a proposal by the Obama Administration to allow the top two individual marginal tax rates (currently 33% and 35%) to return to their pre-2001 levels of 36% and 39.6%, starting in 2011, and a provision in the health care reform bill passed by the House (H.R. 3962) to impose a 5.4% surtax on the modified adjusted gross incomes (MAGIs) of single filers above $500,000 and the MAGIs of joint filers above $1 million, also starting in 2011. Critics claim the proposed tax hikes would undermine the economic incentives for small business formation and investment. By contrast, backers of the Administration's proposal say it is needed to raise revenue during a time of large budget deficits, inject greater progressivity into the federal income tax in the wake of the sweeping tax cuts enacted during the Bush Administration, and promote a fairer distribution by income level of the cost of government services. A similar argument underlies support for the surtax in H.R. 3962. One approach to evaluating the contention that the proposed tax hikes would harm small business investment, formation, and growth is to examine the distribution of small business income and the tax returns of small business owners by tax bracket. Two critical considerations in undertaking such an evaluation are the definition of small business income and ownership and its compatibility with available federal income tax data. An analysis by the Urban Institute-Brookings Institution Tax Policy Center (TPC) of the distribution of small business income and tax filers reporting such income by tax bracket in 2007 and 2009 defines a small business owner as anyone who reports income or loss on Schedule C (self-employment income), Schedule E (income from rents, royalties, partnerships, limited liability companies, and S corporations), and Schedule F (income from farming). Such a broad definition arguably has more disadvantages than advantages, calling into question its usefulness for policy analysis. So any results based on such a definition should be seen as illustrative or suggestive rather than definitive or conclusive. The TPC analysis found that a small share of small business owners would likely be affected by the proposed tax hikes: an average of less than 2% of such individuals were subject to the 33% or 35% marginal tax rates in 2007 and 2009. At the same time, the results suggested that a significant share of small business income could be subject to the higher rates. In 2007 and 2009, small business income represented an average of 30% of adjusted gross income (AGI) for filers in the 33% tax bracket, and an average of 35% of AGI for filers in the 35% bracket; the average for all filers was 14%. Raising the marginal tax rates facing high-income individuals without changing the top corporate or capital gains tax rates in theory could increase the share of firms organized as C corporations rather than passthrough entities. A shift in the distribution of taxable income among the main forms of business organization might have a significant impact on business tax revenue. A rate hike also has the potential to harm the domestic climate for small business formation and investment. But current business tax benefits, if retained beyond 2010, would lessen a rate hike's dampening effect on investment, and its impact on the creation of new firms may be difficult to determine.

This report focuses on the transformation of U.S. naval forces--the Navy and the Marine Corps, which are both contained in the Department of the Navy (DON). For an overview of defense transformation in general, see CRS Report RL32238, Defense Transformation: Background and Oversight Issues for Congress , by [author name scrubbed]. Table 1 summarizes several key elements of U.S. naval transformation. Each of these elements is discussed below. In late 1992, with the publication of a Navy document entitled ...From the Sea , the Navy formally shifted the focus of its planning away from the Cold War scenario of countering Soviet naval forces in mid-ocean waters and toward the post-Cold War scenario of operating in littoral (near-shore) waters to counter the land- and sea-based forces of potential regional aggressors. This shift in planning focus has led to numerous changes for the Navy in concepts of operation, training, and equipment over the last 12 years. Among other things, it moved the focus of Navy planning from a geographic environment where it could expect to operate primarily by itself to one where it would need to be able to operate effectively in a joint manner, alongside other U.S. forces, and in a combined manner, alongside military forces of other countries. It also led to an increased emphasis on amphibious warfare, mine warfare, and defense against diesel-electric submarines and small surface craft. The Littoral Combat Ship (LCS) and the DDG-1000 (formerly DD(X)) destroyer are key current Navy efforts intended to improve the Navy's ability to operate in heavily defended littoral waters. The Navy in mid-2005 began implementing several initiatives intended to increase its ability to participate in what the administration refers to as the global war on terrorism (GWOT). These initiatives include the establishment of the following: a Navy Expeditionary Combat Command (ECC); a riverine force; a reserve civil affairs battalion; a maritime intercept operations (MIO) intelligence exploitation pilot program; an intelligence data-mining capability at the National Maritime Intelligence Center (NMIC); and a Navy Foreign Area Officer (FAO) community consisting of officers with specialized knowledge of foreign countries and regions. The concept of network-centric operations, also called network-centric warfare (NCW), is a key feature of transformation for all U.S. military services. The concept, which emerged in the late 1990s, involves using computer networking technology to tie together personnel, ships, aircraft, and installations in a series of local and wide-area networks capable of rapidly transmitting critical information. Many in DON believe that NCW will lead to changes in naval concepts of operation and significantly increase U.S. naval capabilities and operational efficiency. Key NCW efforts include the Navy's Cooperative Engagement Capability (CEC) network, the Naval Fires Network (NFN), the IT-21 investment strategy, and ForceNet, which is the Navy's overarching concept for combining the various computer networks that U.S. naval forces are now fielding into a master computer network for tying together U.S. naval personnel, ships, aircraft, and installations. A related program is the Navy-Marine Corps Intranet (NMCI). Many analysts believe that unmanned vehicles (UVs) will be another central feature of U.S. military transformation. Perhaps uniquely among the military departments, DON in coming years will likely acquire UVs of every major kind--air, surface, underwater, and ground. Widespread use of UVs could lead to significant changes in the numbers and types of crewed ships and piloted aircraft that the Navy procures in the future, in naval concepts of operation, and in measurements of naval power. The LCS is to deploy various kinds of UVs. Unmanned air vehicles (UAVs) and unmanned combat air vehicles, or UCAVs (which are armed UAVs), if implemented widely, could change the shape naval aviation. Unmanned underwater vehicles (UUVs) and UAVs could significantly expand the capabilities of Navy submarines. Naval forces are inherently sea-based, but the Navy is currently using the term sea basing in a more specific way, to refer a new operational concept under which forces would be staged at sea and then used to conduct expeditionary operations ashore with little or no reliance on a nearby land base. Under the sea basing concept, functions previously conducted from the nearby land base, including command and control, fire support, and logistics support, would be relocated to the sea base, which is to be formed by a combination of amphibious and sealift-type ships. The sea basing concept responds to a central concern of transformation advocates--that fixed overseas land bases in the future will become increasingly vulnerable to enemy anti-access/area-denial weapons such as cruise missiles and theater-range ballistic missiles. Although the sea basing concept originated with the Navy and Marine Corps, the concept can be applied to joint operations involving the Army and Air Force. To implement the sea basing concept, the Navy wants to field a 14-ship squadron, called the Maritime Prepositioning Force (Future), or MPF(F) squadron, that would include three new-construction large-deck amphibious ships, nine new-construction sealift-type ships, and two existing sealift-type ships. Additional "connector" ships would be used to move equipment to the MPF(F) ships, and from the MPF(F) ships to the operational area ashore. Some analysts have questioned the potential affordability and cost effectiveness of the sea basing concept. The Navy in the past relied on carrier battle groups (CVBGs) (now called carrier strike groups, or CSGs) and amphibious ready groups (ARGs) as its standard ship formations. In recent years, the Navy has begun to use new kinds of naval formations--such as expeditionary strike groups, or ESGs (i.e., amphibious ships combined with surface combatants, attack submarines, and land-based P-3 maritime patrol aircraft), surface strike groups (SSGs), and modified Trident SSGN submarines carrying cruise missiles and special operations forces --for forward presence, crisis response, and warfighting operations. A key Navy objective in moving to these new formation is to significantly increase the number of independently deployable, strike-capable naval formations. ESGs, for example, are considered to be formations of this kind, while ARGs generally were not. The Navy in 2006 also proposed establishing what it calls global fleet stations, or GFSs . The Navy says that a GFS is a persistent sea base of operations from which to coordinate and employ adaptive force packages within a regional area of interest. Focusing primarily on Phase 0 (shaping) operations, Theater Security Cooperation, Global Maritime Awareness, and tasks associated specifically with the War on Terror, GFS offers a means to increase regional maritime security through the cooperative efforts of joint, inter-agency, and multinational partners, as well as Non-Governmental Organizations. Like all sea bases, the composition of a GFS depends on Combatant Commander requirements, the operating environment, and the mission. From its sea base, each GFS would serve as a self-contained headquarters for regional operations with the capacity to repair and service all ships, small craft, and aircraft assigned. Additionally, the GFS might provide classroom space, limited medical facilities, an information fusion center, and some combat service support capability. The GFS concept provides a leveraged, high-yield sea based option that achieves a persistent presence in support of national objectives. Additionally, it complements more traditional CSG/ESG training and deployment cycles. The Navy is implementing or experimenting with new ship-deployment approaches that are intended to improve the Navy's ability to respond to emergencies and increase the amount of time that ships spend on station in forward deployment areas. Key efforts in this area include the Fleet Response Plan (FRP) for emergency surge deployments and the Sea Swap concept for long-duration forward deployments with crew rotation. The FRP, Navy officials say, permits the Navy to deploy up to 6 of its 11 planned CSGs within 30 days, and an additional CSG within another 60 days after that (which is called "6+1"). Navy officials believe Sea Swap can reduce the stationkeeping multiplier--the number of ships of a given kind needed to maintain one ship of that kind on continuously station in an overseas operating area--by 20% or more. The Navy is implementing a variety of steps to substantially reduce the number of uniformed Navy personnel required to carry out functions both at sea and ashore. DON officials state that these actions are aimed at moving the Navy away from an outdated "conscript mentality," under which Navy personnel were treated as a free good, and toward a more up-to-date approach under which the high and rising costs of personnel are fully recognized. Under the DOD's proposed FY2008 budget and FY2008-FY2013 Future Years Defense Plan (FYDP), active Navy end strength, which was 365,900 in FY2005, is to decline to less than 325,000 by FY2010. Reductions in personnel requirements ashore are to be accomplished through organizational streamlining and reforms, and the transfer of jobs from uniformed personnel to civilian DON employees. Reductions in personnel requirements at sea are to be accomplished by introducing new-design ships that can be operated with substantially smaller crews--a shift that could lead to significant changes in Navy practices for recruiting, training, and otherwise managing its personnel. Current ship-acquisition programs related to this goal include the LCS, the DDG-1000, and the Ford (CVN-78) class aircraft carrier (also known as the CVN-21 class). DON is pursuing a variety of initiatives to improve its processes and business practices so as to generate savings that can be used to help finance Navy transformation. These efforts are referred to collectively as Sea Enterprise. Many DON transformation activities efforts take place at the Navy Warfare Development Command (NWDC), which is located at the Naval War College at Newport, RI, and the Marine Corps Warfighting Laboratory (MCWL), which is located at the Marine Corps Base at Quantico, VA. These two organizations generate ideas for naval transformation and act as clearinghouses and evaluators of transformation ideas generated in other parts of DON. NWDC and MCWL oversee major exercises, known as Fleet Battle Experiments (FBEs) and Advanced Warfighting Experiments (AWEs), that are intended to explore new naval concepts of operation. The Navy and Marine Corps also participate with the Army and Air Force in joint exercises aimed at testing transformation ideas. Potential oversight questions for Congress include the following: Are current DON transformation efforts inadequate, excessive, or about right? Are DON transformation efforts adequately coordinated with those of the Army and Air Force? Is DON striking the proper balance between transformation initiatives for participating in the global war on terrorism (GWOT) and those for preparing for a potential challenge from improved Chinese maritime military forces? Is DON achieving a proper balance between transformation and maintaining near-term readiness and near-term equipment procurement? How might naval transformation affect Navy force-structure requirements? Will the need to fund Army and Marine Corps reset costs in coming years reduce funding available for Navy transformation?

The Department of the Navy (DON) has several efforts underway to transform U.S. naval forces to prepare them for future military challenges. Key elements of naval transformation include a focus on operating in littoral waters, increasing the Navy's capabilities for participating in the global war on terrorism (GWOT), network-centric operations, use of unmanned vehicles, directly launching and supporting expeditionary operations ashore from sea bases, new kinds of naval formations, new ship-deployment approaches, reducing personnel requirements, and streamlined and reformed business practices. This report will be updated as events warrant.

Congress has passed several laws requiring that goods purchased by federal agencies be produced in the United States. Among these are two separate but closely related laws applying to national security agencies. The Berry Amendment covers direct Department of Defense (DOD) purchases of textiles, apparel, footwear, food, and hand or measuring tools. The Kissell Amendment is more limited, applying to textiles, apparel, and footwear procured by certain Department of Homeland Security (DHS) agencies. Under these two laws, the purchased items must be 100% domestic in origin, unless exemptions laid out in the laws apply. The two laws are controversial. Proponents argue the amendments are important to the U.S. economy by helping to preserve the U.S. industrial base and creating manufacturing jobs for American workers. They also claim domestic preference laws may lessen dependence on foreign sources for certain critical U.S. military and nonmilitary needs, and that these laws encourage some foreign manufacturers to invest within the United States so that their products can be sold to the U.S. government. On the other hand, opponents believe the laws give monopolies to certain companies, raise the government's procurement costs, and fail to fully utilize the international supply chains that many U.S. manufacturers rely on to meet their production needs. The Berry Amendment (10 U.S.C. SS2533a) is the popular name of a 1941 statute enacted as part of the Fifth Supplemental National Defense Appropriations Act (P.L. 77-29). It has been amended numerous times. It became a permanent part of the U.S. Code when it was codified by the FY2002 National Defense Authorization Act ( P.L. 107-107 ). Proposals to alter the Berry Amendment typically are advanced during consideration of defense appropriations acts and the National Defense Authorization Act. DOD implements the Berry Amendment through its Defense Federal Acquisition Regulation Supplement (DFARS). The Berry Amendment specifies that affected products purchased directly by DOD must be "entirely grown, reprocessed, reused, or produced in the United States." Unless DOD grants a waiver because domestic firms do not make the product or because other exceptions in the law are met, the entire production process of an affected product, from the production of raw materials to the manufacture of all components to final assembly, must be performed in the United States. As an example, when DOD purchases a military uniform, it must be sewn in the United States using fabric, thread, buttons, and zippers made in the United States from raw materials of U.S. origin. The Berry Amendment mandates a much higher level of domestic content than the Buy American Act of 1933, which generally governs the procurements of other federal agencies. Under the Buy American Act, the final product must be mined, produced, or manufactured in the United States, and if manufactured, either at least 50% of the cost of its components, by value, must be manufactured in the United States, or the end product must be a commercially available off-the-shelf item. The United States has made binding commitments related to the government procurement market under the World Trade Organization Agreement on Government Procurement (WTO GPA). Of the more than 45 countries that are parties to this arrangement, each has agreed to provide producers in other signatory countries access to its national government procurement markets. This can result in certain "foreign" products being treated as "domestic" ones in specific procurements. However, the agreement expressly does not apply to DOD procurements involving textiles, clothing, food, and hand or measuring tools. This Berry Amendment restriction also applies to most U.S. free-trade agreements, including the North American Free Trade Agreement and the Dominican Republic-Central America Free Trade Agreement, as well as to bilateral free-trade agreements with Australia, Morocco, Peru, South Korea, and Colombia. A second law, sometimes referred to as the Kissell Amendment (6 U.S.C. SS453b), is modeled on, but not identical to, the Berry Amendment. The Kissell Amendment was enacted as Section 604 of the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). It applies to the Coast Guard and the Transportation Security Administration (TSA), both of which are within DHS. It is implemented through the Homeland Security Acquisition Regulation, which imposes domestic content restrictions on certain clothing, textile, and footwear products acquired by particular DHS agencies when an item is directly related to national security. In introducing the amendment, Representative Lawrence Kissell noted he was particularly interested in supporting the domestic textile industry. Thus, the narrowly defined purpose of the Kissell Amendment is to ensure that DHS purchases of textile, apparel, and footwear products are wholly produced in the United States. The law covers clothi ng (including materials and components), canvas or textile products, natural and synthetic fabrics, individual equipment items, and footwear products. If these items are related to "the national security interests of the United States," they must be "domestically grown, reprocessed, reused, or produced in the United States" to the greatest extent possible. Unlike the Berry Amendment, the Kissell Amendment does not apply to food or to hand or measuring tools. Although the Kissell Amendment as enacted applies to all agencies of DHS, in practice its restrictions apply only to the Coast Guard and TSA. The reason for this is that, prior to the Kissell Amendment's passage, the United States had entered into commitments under various trade agreements to open U.S. government procurement to imported goods. However, the WTO GPA entitles the United States to exempt agencies critical to national security from its international procurement obligations. The United States has applied this exemption to those two agencies, so the Kissell Amendment governs their procurement. Other DHS agencies, such as Customs and Border Protection, Immigration and Customs Enforcement, the Federal Emergency Management Agency, and the Secret Service are not covered by the exemption, and the Kissell Amendment therefore does not apply. Like many other agencies, these agencies' procurement is subject to the less stringent Buy American Act. However, under the Trade Agreements Act of 1979, if a procurement is covered under a trade agreement, then Buy American Act restrictions are waived. Thus, DHS can purchase textile and apparel products from more than 100 countries if certain conditions are met. The United States has also entered into commitments under various free-trade agreements to open U.S. government procurement to imported goods. As a result of these trade agreements, manufacturers in Mexico, Canada, and Chile are treated as "American" sources under the Kissell Amendment. The Berry Amendment includes several exemptions, which may apply at the discretion of DOD. For example, DOD may buy covered items from non-U.S. sources when products are unavailable from American manufacturers at satisfactory quality and in sufficient quantity at market prices; items are used in support of combat operations or contingency operations; products are purchased by vessels in foreign waters (e.g., a Navy ship is docked overseas and the crew needs to purchase textile, clothing, or footwear items); products contain noncompliant fibers, if the value of those fibers is not greater than 10% of the product's total price; items are for emergency acquisitions; products are intended for resale at retail stores such as military commissaries or post exchanges; or the purchase is part of a contract whose value is below the Simplified Acquisition Threshold, generally $150,000, beneath which certain federal procurement regulations do not apply. Kissell Amendment exemptions are often the same as those in the Berry Amendment, such as purchases beneath the Simplified Acquisition Threshold. But there are also some notable differences. For example, the Kissell Amendment has "national security" limiting language that is not included in the Berry Amendment. This restricts Kissell Amendment coverage to purchases intended for or used by DHS to protect against internal or external threats to the United States. Thus, if an item, such as curtains for a DHS office, is not related to activities to protect the United States from internal or external national security threats, its procurement most likely would not be subject to the Kissell Amendment. Appendix A shows the differences between the Berry Amendment, the Kissell Amendment, and the Buy American Act. Sales to DOD in the four Berry-applicable product categories totaled $2.4 billion in FY2016 (see Figure 1 ). DOD expenditures on Berry Amendment products accounted for roughly 1% of the department's spending on products and services in FY2016, according to figures from the Federal Procurement Data System-Next Generation (FPDS-NG). One reason for the drop in spending on Berry-related products in recent years is the decrease in Armed Forces end strength. The number of active-duty personnel fell to 1.38 million in 2016 from 1.51 million in 2010, when the U.S. military was more actively engaged in Iraq and Afghanistan. If there is a higher level of defense spending in coming years, this could result in increased DOD demand for Berry-applicable products. In FY2016, the Coast Guard and TSA combined accounted for more than $30 million in procurement obligations for Kissell items. Most of this amount involves uniforms. TSA provides 14 different uniform items to new hires. Under the Berry and Kissell Amendments, all covered textile and apparel items must be manufactured in the United States from domestic components. This has created niche markets for domestic producers. Figure 2 provides a graphic depiction of the textile and apparel production steps affected by these laws. DOD spent approximately $1.6 billion on Berry-compliant purchases of textiles and apparel in FY2016, and DHS purchases of apparel under the Kissell Amendment came to more than $30 million. Purchases subject to the Berry and Kissell Amendments represented around 2% of the $68 billion of textile and apparel shipments from U.S. factories in 2016. In FY2016, the top apparel products consumed by DOD were special-purpose clothing, personal armor, individual equipment, and footwear. Among the large private contractors benefiting from the Berry Amendment market were American Apparel, a producer of military uniforms, in Alabama; Ceradyne, a major supplier of military body armor, in California; Campbellsville Apparel, a large supplier of undergarments to the military, in Kentucky; and contractors that sell textile fabrics to DOD, such as the International Textile Group's Burlington Industries of North Carolina. Outside the mainland United States, Puerto Rico is the largest source of military apparel items. Several large private suppliers operate Berry-compliant manufacturing facilities there, including Propper International, M&M Manufacturing, and Bluewater Defense. Government supply sources, including those that operate under the AbilityOne program, such as the National Industries for the Blind, the Travis Association of the Blind, and Goodwill Industries, are also significant suppliers of apparel for the military market. Federal Prison Industries (FPI), also known as UNICOR, delivers prison-manufactured apparel compliant with the Berry Act. FPDS reports that action obligations of clothing from UNICOR to the Department of Defense totaled nearly $100 million in FY2016. As of September 30, 2016, 18 U.S. penitentiaries and federal correctional institutions produced clothes and textiles, including facilities in Atlanta, GA; Beaumont, TX; Jesup, GA; Talladega, AL; and Butner, NC. FPI/UNICOR buys raw materials and component parts from private industry. DOD's awarding of clothing contracts to this government-owned supplier has proven controversial in both Congress and the apparel industry. Critics have voiced concern that prison industrial programs hurt private industry and provide jobs for inmates rather than residents who are not incarcerated. Among other issues, critics have challenged FPI/UNICOR's mandatory source provision, which requires DOD to purchase from FPI/UNICOR factories if they can provide the desired product within the required time frame and at a competitive price. The mandatory source requirement is waived when the prison share of federal purchases of a product rises above 5% of total DOD purchases of that product. In FY2016, DOD accounted for more than 90% of FPI/UNICOR's textile and apparel sales. In that year, FPI/UNICOR also sold about $250,000 in apparel to the U.S. Coast Guard. Over the years, Congress has considered various bills to eliminate FPI's mandatory source clause and require FPI/UNICOR to compete for federal contracts. For example, in the 114 th Congress, the Federal Prison Industries Competition in Contracting Act of 2015 ( H.R. 1699 ) would have eliminated FPI's no-bid contract status. TSA's biggest supplier of apparel under the Kissell Amendment in FY2016 was VF Imagewear, a subsidiary of VF Corporation, and owner of brands such as Lee Brand and Wrangler Hero. DHS accounts for around 10% of VF's sales. The company produces clothes in a number of U.S. locations. Congress regularly considers exemptions to the Berry Amendment. For instance, over the years, lawmakers have passed legislation granting permanent waivers for flame-resistant rayon fabrics used in standard ground combat uniforms. A 1999 waiver for para-aramid fibers and yarns used as a principal fiber in antiballistic body armor, taking the form of a grant of authority to DOD to procure articles containing para-aramids from foreign sources, has since been implemented in the DFARS as a Berry Amendment exception. In the commercial market, apparel firms have been outsourcing the labor-intensive manufacturing process to low-wage countries for many years, often constructing elaborate supply chains that allow inputs from multiple countries to be combined into a single finished product. As shown in Figure 3 , direct employment in apparel manufacturing dropped 85% from 1990 to 2016, from about 900,000 jobs to roughly 130,000 jobs. In the more highly automated textile manufacturing industry, employment fell from 700,000 in 1990 to about 230,000 in 2016. Many of the remaining textile industry workers are involved in producing fabrics for industrial applications, such as conveyor belts and automotive floor coverings, rather than for apparel. The Berry and Kissell Amendments require apparel manufacturers to construct supply chains separate from those used in commercial apparel production, relying exclusively on domestic manufacturers of components such as buttons and zippers. Because these producers lack scale and face little competition in the market for 100% U.S.-made products, they may have cost structures that make it difficult to compete in the commercial apparel market. Notwithstanding the protection offered by the Berry Amendment and, more recently, the Kissell Amendment, manufacturers have found it difficult to sustain domestic production of many types of textiles and apparel. For example, six years after opening a $500 million factory, DuPont recently announced plans to shutter its South Carolina Kevlar para-aramid production plant, which manufactures a fiber used in bulletproof vests and combat helmets for the military. DuPont cited uncertainty over DOD orders for para-aramid fibers as one reason for the plant closure, along with a lack of commercial demand. The Bureau of Industry and Security at the Department of Commerce is updating its 2003 assessment of the U.S. textile, apparel, and footwear industries. The updated assessment, which the bureau expects to finish in summer 2017, is expected to address the effectiveness of the Berry and Kissell Amendments and other domestic-source laws. About 99% of all footwear sold in the United States is imported, according to the Footwear Distributors and Retailers of America, the main trade group representing solely the footwear industry. The United States maintains a small number of firms manufacturing nonorthopedic footwear, including boots and other types of footwear for the military. These firms employed about 10,800 workers in 2015. DOD's direct purchases of footwear, such as combat boots and military dress shoes, totaled about $157 million in FY2015. This is equivalent to roughly 9% of the sales of U.S. footwear manufacturers, implying that the domestic-purchase requirement protected approximately 1,000 jobs. Leading DOD footwear contractors include McRae, Rocky Brands, and Wolverine. In the 2017 National Defense Authorization Act, Congress extended the Berry Amendment to require the military services to provide recruits with 100% U.S.-made running shoes. Previously, DOD provided vouchers to recruits to purchase athletic footwear, which did not have to be domestic in origin. The new requirement is to be implemented beginning on October 1, 2018, and may create a new market for athletic shoes manufactured domestically. As with other types of footwear, assembling a running shoe may require more than a dozen parts (see Figure 4 ). New Balance, a maker of running shoes, reportedly manufactures about 25% of its domestically sold products in Massachusetts and Maine, but imports the majority of its inventory from China and Vietnam. Currently, a "Made in the USA" New Balance sneaker can include up to 30% foreign content, which would not meet the 100% U.S.-made requirement of the Berry Amendment. However, the company says it will be able to manufacture a wholly American-made athletic shoe for the military. Wolverine Worldwide, a Michigan-based footwear firm, manufactures some shoes in the United States, including combat boots and military dress shoes, and the rest in Asia. Nike, which sources virtually all of its footwear from independent manufacturers overseas, had opposed a strict American-made athletic shoe purchase policy for the military. Adidas, another major athletic shoe brand, has announced that it plans to open a factory in the United States in 2017 to produce U.S.-made running shoes. Adidas's so-called "speedfactory" would be largely operated by robots. Military food items, also known as subsistence items, are purchased, with few exceptions, through the Defense Logistics Agency (DLA) Troop Support Subsistence Directorate in Philadelphia, PA, which serves as the operational manager for all food operations. Just as with textiles, apparel, and footwear, DLA must buy food items in accordance with the provisions of the Berry Amendment, generally requiring food served to U.S.-based troops be of wholly domestic origin, with certain allowable exemptions and waivers. The Kissell Amendment contains no provisions related to food products. Food products were the second-largest share of DOD's contract obligations subject to Berry Amendment requirements, at more than $655 million in sales in FY2016. These sales represented slightly more than 1% of overall domestic food, beverage, and tobacco manufacturing shipments that year. Most packaged, nonperishable food items are purchased through DLA's subsistence prime vendor program. Current participants include about 50 commercial food distributors, ranging from large companies such as U.S. Foods, Sysco, and Labatt Food Service to much smaller companies. DLA buys U.S.-origin food products from manufacturers such as Kraft Heinz, Nestle, General Mills, Tyson Foods, ConAgra, and Campbell Soup, which then ship the purchases to a prime vendor for delivery to military dining facilities and other locations. DOD also buys some unique and perishable items directly from producers. Meals ready-to-eat (MREs) are a major share of food sourced for DOD under the Berry Amendment. AmeriQual, SoPakCo, and Wornick are the three main companies that supply MREs to the military, with DOD sales of more than $300 million in FY2016. Combined, the three companies employ more than 1,600 people. For AmeriQual, sales of MREs to the U.S. military account for approximately 85% of revenue. Under Berry Amendment requirements, DOD, with certain exceptions, must purchase food and ration kits for the military services from sources that manufacture, grow, or process food in the United States. Meeting this standard is generally easier with food than other manufactured products because there is a large domestic agricultural sector that supplies the overwhelming majority of food purchased by U.S. consumers. The food industry's output contains a larger share of domestic content than the output of any other manufacturing industry. Affecting the purchase of food under the Berry Amendment are certain distinctions between food types and considerations of where the food was grown, caught, and/or harvested. For example, DOD interprets the Berry Amendment to provide that if a food item is processed in the United States, it may contain food grown or harvested in other countries. Thus, DOD may buy corn canned in the United States even if the corn was grown abroad. The same logic applies to many other items, such as potato chips, boxed cereals, and juices; as long as these items are processed in the United States, they are deemed compliant with the Berry Amendment. The Federal Acquisition Regulations provide exemptions for a list of items that are generally not available from U.S. growers, such as bananas, capers, cashew nuts, coffee, cocoa beans, olive oil, bulk spices and herbs, raw sugar, tea in bulk, and vanilla beans. In addition, in 2008, the Under Secretary of Defense for Acquisitions, Technology, and Logistics issued a Domestic Non-Availability Determination affecting seasonal fresh fruits and vegetables, which allows DOD to purchase fruits and vegetables from foreign producers during off-season. Previous Congresses have considered amending the Berry Amendment to permit the purchase of fresh fruits and vegetables from all sources. The most restrictive food-related provisions in the Berry Amendment pertain to fish, shellfish, and seafood. These food items must be taken from the sea in U.S.-flag vessels or caught in U.S. waters, and must be processed in the United States or on a U.S.-flag ship. The rule applies to both fresh and frozen products whether sold whole, in parts, or as fillets. American Samoa's tuna fishing and processing industry, which comprises the majority of private-sector employment in this unincorporated territory of the United States, has benefited from the domestic preference provisions for food items in the Berry Amendment. In recent years, however, tuna companies, such as Chicken of the Sea, have eliminated or cut back operations in American Samoa, reportedly due to an increase in the minimum wage there. Food procurement for places such as Iraq and Afghanistan has been excluded from the Berry Amendment due to operational considerations, but most nonperishable food is still acquired from U.S. manufacturers. Food sold in military commissaries and post exchanges is explicitly excluded from the Berry Amendment requirements by law. Hand or measuring tools such as chisels, files, hammers, pliers, screwdrivers, calipers, and micrometers are specifically indicated as products covered by the Berry Amendment. The amendment requires each individual tool or all the tools within tool sets or kits purchased by DOD be wholly produced in the United States, unless exemptions laid out in the law apply. A hand or measuring tool is defined as wholly U.S.-made if it is assembled in the United States out of components, or otherwise made from raw materials into the finished product. For example, DOD is generally prohibited from buying a wrench not forged in the United States. The Kissell Amendment contains no provision related to hand or measuring tools. Assuring compliance with the Berry mandate may be complicated, as some sets or kits may consist of thousands of tools. Domestic supply of certain hand or measuring tools may be very limited; according to one estimate, in 2016, imports of hand tools accounted for more than 40% of domestic demand. Suppliers to DOD must provide assurance that all items in a tool or measuring set or kit are compliant with the Berry Amendment. Hand or measuring tools account for a relatively small share of DOD's total Berry-applicable contract procurement obligations, worth about $100 million in FY2016. Leading distributors and manufacturers of hand or measuring tools and equipment to DOD are Federal Resources Supply, Snap-On, and Kipper Tool. Because commercial demand for hand or measuring tools far outweighs sales to DOD, the law seemingly does little to encourage manufacturers to produce or assemble tools in the United States, or to move the manufacture of tools produced in a foreign country to the United States. According to the federal government, cutlery and hand tool shipments totaled $10.3 billion in 2015, implying that sales to DOD under the Berry Amendment accounted for about 1% of shipments. Thus Berry Amendment purchases may be responsible for roughly 380 of the 38,000 jobs in cutlery and hand tool manufacturing. Allowable exceptions to the Berry Amendment include a nonavailability waiver if hand or measuring tools are not available domestically. This waiver became a requirement as part of the FY2011 Defense Authorization Act ( P.L. 111-383 ). Proponents of the Berry and Kissell Amendments assert that the laws serve to keep certain U.S. production lines operating. They argue that the U.S. military should not be dependent on foreign sources for critical items, including those covered by the Berry and Kissell Amendments, and that dependence on foreign sources for military and national security items could lead to supply problems during times of war or military mobilization. Critics of the amendments point out that the laws may raise procurement costs and lengthen delivery times by requiring the purchase of domestic products when less expensive imports are available. They claim that the amendments are inconsistent with modern practices in manufacturing, which often involve supply chains that source components and raw materials from multiple countries, and that domestic purchase requirements may alienate foreign trading partners, thereby potentially provoking retaliation and harming foreign sales. This controversy notwithstanding, Congress has not considered repeal of the Berry or Kissell Amendments. Legislative action has centered on the scope of the amendments, the requirements for obtaining waivers, and the use of audits to determine the laws' effectiveness. There have been attempts over the years to reduce the scope of the Berry Amendment. For example, lawmakers have offered bills that would have eliminated FPI/UNICOR's federal contract mandate and made changes to the Simplified Acquisition Threshold, such as raising the Berry and Kissell thresholds to $500,000. The higher limit would reduce the number of purchases covered by the Berry and Kissell Amendments, making foreign suppliers eligible to bid on more DOD and DHS procurement contracts. None of these proposals has passed. In recent Congresses, lawmakers have introduced bills that would have widened the scope of these domestic preference laws. For instance, in the 115 th Congress, the Homeland Production Security Act, H.R. 1811 , would amend the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) to prohibit the use of funds appropriated to DHS for the procurement of uniforms not manufactured in the United States. Such a change would expand the Kissell Amendment to the Customs and Border Patrol, the Secret Service, and Federal Emergency Management Agency (FEMA) of DHS. According to DLA Troop Support, more than a dozen domestic nonavailability determinations were approved between 2005 and 2015 (see Appendix B for more information about selected determinations). These waivers of Berry Act requirements generally apply only for a specific time period. In some cases, waivers remain in force until a domestic source or a substitute material can be found. On April 18, 2017, President Donald Trump issued an executive order directing executive branch agencies "to maximize, consistent with law ... the use of goods, products, and materials produced in the United States" and directing them to "minimize the use of waivers, consistent with applicable law." An explicit reference to the Berry Amendment was mentioned in a White House background briefing on the executive order. It is unclear how the executive order will affect DOD and DHS interpretations of waiver requirements under the Berry and Kissell Amendments, respectively. Pursuant to the FY2014 National Defense Authorization Act ( P.L. 113-66 ), Congress directed DOD's Office of Inspector General to conduct periodic audits to ensure compliance by the military services with the Berry Amendment and the Buy American Act. Three recent audits found the Navy fully complied with the Berry law in 12 of 23 contracts, the Air Force in 15 of 21 contracts, and the Army in 29 of 33 contracts. In addition, Senator Christopher Murphy has requested the Government Accountability Office (GAO) to investigate U.S. government compliance with the Berry Amendment and the Buy American Act. The committee report on the Senate-reported 2016 DHS appropriations bill ( S. 1619 ) requested that GAO audit DHS's compliance with the Kissell Amendment. This legislation was incorporated in the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). GAO expects to complete its study in 2017. Appendix A. Comparison of Berry Amendment, Kissell Amendment, and Buy American Act Appendix B. Selected Berry Amendment Domestic Nonavailability Waivers (DNAD) Since 2005

The Berry and Kissell Amendments are two separate but closely related laws requiring that certain goods purchased by national security agencies be produced in the United States. The Berry Amendment (10 U.S.C. SS2533a) is the popular name for a law requiring textiles, clothing, food, and hand or measuring tools purchased by the Department of Defense (DOD) to be grown, reprocessed, reused, or produced wholly in the United States. Congress over the decades has varied the list of products covered by the law. Under the Kissell Amendment (6 U.S.C. SS453b), textile, apparel, and footwear products purchased by certain Department of Homeland Security (DHS) agencies--namely, the Transportation Security Administration (TSA) and the U.S. Coast Guard--must be manufactured in the United States with 100% U.S. inputs. The Berry and Kissell Amendments have created niche markets for domestic producers. DOD's Defense Logistics Agency purchased about $2.4 billion of Berry-applicable products in FY2016. DOD's annual Berry Act purchases equal approximately 2% of domestic textile and apparel shipments and around 1% of domestic production of footwear, food, and hand or measuring tools. Annual purchases of textiles, clothing, and shoes by the TSA and the Coast Guard pursuant to the Kissell Amendment are approximately $30 million. Proponents of the Berry and Kissell Amendments assert the laws serve to keep certain U.S. production lines operating, provide jobs to American factory workers, and shield the U.S. military from dependence on foreign sources for critical items that could lead to supply problems during times of war or military mobilization. Critics of the amendments point out the laws may undercut free-market competition and can result in higher costs to DOD and DHS because they must pay more for protected products than the free market requires. They also argue the laws are inconsistent with modern practices in manufacturing, which often rely on supply chains that source components and raw materials from multiple countries. Another concern is that these requirements can potentially provoke retaliation and harm foreign sales. In recent Congresses, legislative action has centered on the scope of the Berry and Kissell Amendments. For example, in the 2017 National Defense Authorization Act (NDAA), Congress extended the Berry Amendment to athletic footwear, ending a voucher program that had allowed new recruits to purchase foreign-made running shoes. Beginning on October 1, 2018, DOD is scheduled to provide 100% U.S.-made running shoes to recruits. In the 115th Congress, H.R. 1811 has been introduced to widen the scope of the Kissell Amendment to all DHS agencies. A related issue for Congress is the use of prison labor to manufacture Berry-compliant apparel by DOD. A mandatory source provision in law gives an advantage to prison factories if they can provide the desired product within the required time frame at a competitive price. In the 114th Congress, the Federal Prison Industries Competition in Contracting Act of 2015 (H.R. 1699) would have eliminated Federal Prison Industries' no-bid contract status. Requirements for obtaining waivers are another congressional concern. The Government Accountability Office (GAO) is currently auditing DHS's compliance with the Kissell Amendment. The audit is expected to be finished in summer 2017. Congress is also considering the effectiveness of the laws. To address this issue, the Bureau of Industry and Security (BIS) at the U.S. Department of Commerce (DOC) is conducting an assessment of the defense industrial base for textiles, apparel, and footwear, which will include a review of the usefulness of the Berry and Kissell Amendments. That review is scheduled to be released in 2017.

Since the 1960s, emission standards for motor vehicles, coupled with standards for the fuels they burn, have reduced emissions from new cars and trucks by at least 95%. Nevertheless, because there are more vehicles on the road, because they are being driven more miles, and because the average useful life of a car exceeds the statutorily defined "useful life" over which emission standards must be met, emissions from motor vehicles continue to be a major component of the nation's air pollution problems. For these reasons, Congress, through the Clean Air Act (CAA) has required emission standards for new automobiles since 1965, and has amended these requirements on several occasions. Further, over the last five decades, the scientific understanding of the effects of air pollutants has led to a tightening of air quality standards. The CAA, as amended, requires the U.S. Environmental Protection Agency (EPA) to set National Ambient Air Quality Standards (NAAQS) for common pollutants from numerous and diverse sources, which may reasonably be anticipated to endanger public health and welfare. EPA has set standards for six principal pollutants: ozone, particulate matter, nitrogen oxides, sulfur dioxide, carbon monoxide, and lead. The agency reports that in 2013 on-road vehicles accounted for about 34% of carbon monoxide emissions in the United States, 38% of nitrogen oxides, 12% of volatile organic compounds, and 3% of particulate matter. Despite nationwide reductions in each of these major air pollutants by over 50% since 1970, air quality still fails to meet ambient standards in areas where about one-third of the nation's population lives. Emission requirements for new motor vehicles have been strengthened numerous times since the first federal rulemaking took effect in 1968. The most recent revision, referred to as the "Tier 2" standards, was promulgated in February 2000. Tier 2 required vehicle manufacturers to reduce tailpipe emissions of several common pollutants, including carbon monoxide (CO), formaldehyde (HCHO), nitrogen oxides (NO x ), non-methane organic gases (NMOG, a class of volatile organic compounds (VOCs)), and particulate matter (PM). The standards significantly targeted emissions of NMOG and NO x to help control the formation of ground-level ozone pollution. Relative to the prior Tier 1 standards, the fleet-average standard for NO x required vehicle manufacturers to reduce overall tailpipe emissions by 88% to 95% (based upon the vehicle type). However, manufacturers had the flexibility to average the NO x emissions of their vehicle fleets to demonstrate compliance with the standards instead of certifying each vehicle according to the same stringency. The Tier 2 standards also required at least an 80% reduction in PM emissions and a less stringent reduction in CO emissions. Tier 2 was phased in beginning in model year (MY) 2004 and required all new passenger cars and light trucks up to 8,500 pounds, and all new heavier passenger vehicles up to 10,000 pounds (including large sport-utility vehicles), to demonstrate full compliance by MY2009. To further the vehicle emissions requirements, standards were also set on the level of pollutants (or compounds that may lead to pollution) in the vehicles' fuels. Most prominently, oil refiners were required to limit sulfur levels in gasoline to an average of 30 parts per million (ppm) nationwide beginning in 2005, roughly 90% less than the previous national average of 340 ppm. Reducing sulfur in gasoline prevents the fouling of catalytic converters, restoring or preserving their effectiveness in reducing NMOG, NO x , and CO emissions. Vehicle fuel economy has been regulated by the National Highway Traffic Safety Administration (NHTSA) since 1975. Under the Obama Administration, EPA has begun regulating emissions of greenhouse gases (GHGs) from motor vehicles. Because fuel consumption and GHG emissions are closely linked, EPA has coordinated with NHTSA since 2010 to issue a series of joint rulemakings. Most recently, on August 28, 2012, NHTSA and EPA issued final rules to tighten passenger corporate average fuel economy (CAFE) and GHG standards for MY2017-2025. The agencies expect that combined new passenger car and light truck fuel economy standards will be nearly 41.0 miles per gallon (mpg) in MY2021 and 49.7 mpg in MY2025, up from 34.1 mpg in MY2016. GHG emissions from new vehicles will decline by about 50% as a result of the standards. While the joint CAFE/GHG standards are not directly associated with the Tier 2/Tier 3 standards, requirements in the latter would assist vehicle manufacturers in advancing technology that would help meet the requirements of the former. This relationship is discussed further in the next sections. In February 2011, EPA began scoping new emissions standards for conventional pollutants from cars and light trucks as mandated by a May 2010 memorandum from the White House. The memorandum directed EPA to "review for adequacy the current non-greenhouse gas emissions regulations for new motor vehicles, new motor vehicle engines, and motor vehicle fuels, including tailpipe emissions standards for nitrogen oxides and air toxics, and sulfur standards for gasoline," and to promulgate regulations as required. Through its investigation, EPA found that Over 149 million Americans are currently experiencing unhealthy levels of air pollution, which are linked with respiratory and cardiovascular problems and other adverse health impacts that lead to increased medication use, hospital admissions, emergency department visits, and premature mortality. Motor vehicles are a particularly important source of exposure to air pollution, especially in urban areas. By 2018, we project that in many areas that are not attaining health-based ambient air quality standards (i.e., "nonattainment areas"), passenger cars and light trucks will contribute 10-25 percent of total nitrogen oxides (NO x ) emissions, 15-30 percent of total volatile organic compound (VOC) emissions, and 5-10 percent of total direct particulate matter (PM 2.5 ) emissions. As a result of these findings, EPA proposed Tier 3 standards on May 21, 2013, released the final version on March 3, 2014, and published it in the Federal Register on April 28, 2014. The final rule is effective on June 27, 2014. As with Tier 2, the Tier 3 standards consider the vehicle and its fuel as an integrated system and include changes to both vehicle emission limits and fuel formulation rules, lowering the allowable sulfur content of gasoline. The Tier 3 standards have been controversial since at least a year prior to their proposal, with dueling studies from auto manufacturers, EPA, and the petroleum refining industry having been prepared in advance of their release. The proposed standards were reported to be nearly ready in the spring of 2012, but the controversy over their presumed content delayed the proposal for a year. Numerous Members of Congress weighed in on the standards during their development, with many expressing their concern over the potential cost, and urging delay to permit further study. As finalized, the Tier 3 standards set requirements on tailpipe emissions for the sum of non-methane organic gases (NMOG) and nitrogen oxides (NO x ), presented as NMOG+NO x , and for particulate matter (PM). They apply to all light-duty passenger cars and trucks as well as some medium and heavy-duty vehicles. Compared to current standards, the NMOG and NO x tailpipe standards for light-duty vehicles represent approximately an 80% reduction from Tier 2's fleet average and a 70% reduction in per-vehicle PM standards. Heavy-duty vehicle tailpipe standards represent about a 60% reduction in both fleet-average NMOG+NO x and per-vehicle PM standards. Consistent with the Tier 2 principle of vehicle and fuel neutrality, the Tier 3 standards apply to all light-duty vehicles and trucks, regardless of the fuel they use. That is, vehicles certified to operate on any fuel (e.g., gasoline, diesel fuel, ethanol blends, compressed natural gas, liquefied natural gas, hydrogen, and methanol) are all subject to the same standards. EPA is also extending the regulatory useful life period during which the standards apply from 120,000 miles to 150,000 miles. The tailpipe standards include different phase-in schedules that vary by vehicle class, but generally become effective between MY2017 and MY2025. In addition to the gradual phase-in schedules, several other provisions are designed to further ease manufacturers' paths to compliance. These flexibilities include credits for early compliance and the ability to offset some higher-emitting vehicles with extra-clean models. EPA is also finalizing more lead time for small businesses and small volume manufacturers as well as a hardship provision that allows for additional time to comply if a manufacturer cannot meet requirements after a good faith effort. The standards for NMOG+NO x are fleet-average standards, meaning that a manufacturer calculates the weighted average emissions of the vehicles it produces in each model year and compares that average to the applicable standard for that model year. The standards differ by vehicle class and test procedures (see Table A-1 for more detail). The PM standards are expressed on a per-vehicle basis, meaning the standards apply to each vehicle separately (i.e., not as a fleet average). PM standards also differ by vehicle class and test cycle (see Table A-2 for more detail). Tier 3 also sets standards designed to eliminate fuel vapor-related evaporative emissions from the vehicle's fuel system. The evaporative emissions program represents about a 50% reduction from current standards and applies to all light-duty and on-road gasoline-powered heavy-duty vehicles. As with the tailpipe standards, the evaporative emissions standards include phase-in flexibilities, credit and allowance programs, and more lead time and a hardship provision for small businesses and small volume manufacturers. EPA is also extending the regulatory useful life period during which the standards apply from 120,000 miles to 150,000 miles. See Table A-3 for more detail. As with Tier 2, the Tier 3 standards treat vehicles and fuels as a system to reduce both vehicle emissions and fuel pollutants. Under the Tier 3 fuel program, gasoline is required to contain no more than 10 parts per million (ppm) sulfur on an annual average basis beginning January 1, 2017, down from 30 ppm under the Tier 2 program (similar reductions have already been phased in for highway diesel fuels beginning in 2006). The new gasoline sulfur standards aim to make emission control systems more effective for both existing and new vehicles, and thus enable more stringent vehicle emissions and fuel economy standards (i.e., since removing sulfur allows the vehicle's catalytic converter to work more efficiently and facilitates the development of lower cost technologies to improve fuel economy and reduce GHG emissions). There is an averaging, banking, and trading (ABT) program that allows refiners and importers to spread out their investments through an early credit program and rely on ongoing nationwide averaging to meet the standard. Further, there is a three-year delay for small refiners and "small volume refineries" (refiners processing less than or equal to 75,000 barrels per calendar day). Tier 3 also updates the federal emissions test fuel specifications to better match current in-use gasoline and look forward to future ethanol and sulfur content. The new fuel specifications apply to new vehicle certification, assembly line, and in-use testing. Key changes include moving to a test fuel containing 10% ethanol by volume, lowering octane, and lowering the existing sulfur specification to be consistent with Tier 3 requirements. EPA anticipates that the implementation of the Tier 3 vehicle and fuel standards will reduce emissions of NO x , VOC, PM 2.5 , and air toxics. The fuel standards alone, which would take effect in 2017, are projected to provide an immediate 56% reduction in sulfur dioxide (SO 2 ) emissions as the ultra-low sulfur gasoline is deployed in existing vehicles and engines. Further, EPA projects that NO x emissions will be reduced by about 260,000 tons by 2018 (about 10% of the current emissions from on-highway vehicles), and by about 330,000 tons by 2030 (about 25% of the current emissions from on-highway vehicles) as covered vehicles become a larger percentage of the fleet. VOC and CO emissions are projected to be reduced by about 170,000 tons and 3.5 million tons respectively by 2030 (16% and 24% of the current emissions from on-highway vehicles). Emissions of many air toxics, including benzene, 1,3-butadiene, acetaldehyde, formaldehyde, acrolein, and ethanol, are projected to be reduced in the range of 10% to 30%. These projected reductions would immediately reduce ozone levels in 2017 when the sulfur controls take effect, and would lead to significant decreases in ambient concentrations of ozone, PM 2.5 and air toxics by 2030 as the vehicle fleets become updated. EPA has reported that exposure to ambient concentrations of ozone, PM 2.5 , and air toxics is linked to adverse human health impacts such as premature deaths and other public health and environmental effects. EPA expects the final Tier 3 standards to reduce these adverse impacts and yield significant benefits, including the annual prevention of between 660 and 1,500 PM-related premature deaths, between 110 and 500 ozone-related premature deaths, about 2,200 asthma-related hospital admissions, 81,000 work days lost, 210,000 school absence days, and approximately 1.1 million minor restricted-activity days. The agency estimates that the annual monetized health benefits of the Tier 3 standards in 2030 (2011$) would be between $7.4 billion and $19 billion, assuming a 3% discount rate (or between $6.7 billion and $18 billion assuming a 7% discount rate). Further, EPA anticipates the Tier 3 tailpipe emission and gasoline sulfur standards would improve the performance of existing emission controls and facilitate the use of new technology. Auto manufacturers have been generally supportive of the standards, which they view as allowing the adoption of new technology necessary to meet the separate GHG standards already promulgated, and which would harmonize the U.S. fuel requirements with those of foreign fuels. The Tier 3 gasoline sulfur standards are similar to levels already achieved in Europe, Japan, and South Korea, as well as those proposed in China and some other countries. For companies that operate in world markets--as the major auto manufacturers do--harmonizing fuel and emission standards is a major concern. In the U.S. context, auto manufacturers already face more stringent requirements for both tailpipe emissions and fuel requirements in California and the Section 177 states, and many individual vehicle manufacturers and their trade organizations have emphasized the importance of a nationwide program to enable streamlined production and decreased compliance costs. For these reasons, the EPA proposal has been supported by various Members of Congress, many industry, environmental and public health groups, and by a number of governors and other state and local officials. Many state and local stakeholders have also noted that without the tighter standards set on vehicles and gasoline, nonattainment areas in about half the states would need to impose more controls on stationary sources of ozone precursors and particulates (e.g., power plants and factories). Some trade organizations, however, contend that the Tier 3 standards would have negligible effects on air quality in comparison to reductions that have been realized by previous rulemaking. Two separate studies prepared by the Environ International Corporation for the American Petroleum Institute (API) present findings which show significant improvements in both summertime ambient ground-level ozone and ground-level PM 2.5 concentrations as a result of the switch from Tier 1 to Tier 2 standards. However, the studies project relatively small additional reductions in 2022 levels of these pollutants as a result of the proposed Tier 3, even when considering emissions reductions due to a lower gasoline sulfur content. As a result, API has argued that the Tier 3 proposal ignores the results of earlier sulfur standards that had led to "significant reduction in ambient ozone levels and will lead to further ozone reductions for the next decade," adding that Tier 3 rules would add no substantial benefit while imposing "significant costs on making gasoline." Further, API notes that any benefit-cost analysis of the rule would need to be considered along with EPA's other mandates for the refinery sector, including the prospects for strengthening fuel volatility requirements for gasoline, greenhouse gas rules for the sector, and forthcoming stricter ozone ambient air standards. As a point of comparison, EPA's Final Regulatory Impact Analysis for the Tier 3 standards returns estimates similar to the Environ studies for reductions in ozone and fine particulate levels in the near term (2018). Further, EPA estimates that by 2030--when it is projected that many of the vehicles on the road would be covered under the Tier 3 standards--ozone and fine particulate levels would decrease an additional 50% on average. EPA bases its health impact estimates on the 2030 modeling. The economic cost imposed by the Tier 3 standards will affect two sectors directly: vehicle manufacturing and petroleum refining. For the former, changes in vehicle design are expected to increase manufacturers' costs of production. EPA estimates that these costs differ across years and range from $46 to $65 for cars, $73 to $88 for trucks, and $33 to $75 for medium- and heavy-duty vehicles covered by the rule. This increase in price is expected to lower the quantity of vehicles sold, although given that vehicle prices likely would not change by more than the cost increase, the decrease in vehicle sales is projected to be negligible. More controversial has been the potential impact on the cost of gasoline. In letters to the President before the standards' proposal, several Senators of both parties asked that the Administration delay the EPA rulemaking over concerns that the new fuel standards would raise the price of gasoline; similar concerns have been expressed in the wake of the final rule. Refiners argue that it will be difficult and costly overall to meet the standards and that some independent and/or smaller refineries will find it more difficult than others to comply. The American Petroleum Institute contends that the tighter sulfur controls would impose almost $10 billion in refinery capital expenditures, create an annual compliance cost of $2.4 billion, increase gasoline manufacturing costs from 6 to 9 cents per gallon, and increase refinery GHG emissions by 1%. EPA has asserted that the rule as proposed would add less than a penny to the price of a gallon of gasoline (0.65 cents according to the final rule's Regulatory Impact Analysis). EPA contends that many variables determine the retail price of gasoline, including the price of crude oil on the global market, taxes, transportation costs, and distribution and marketing costs, as well as refinery costs. According to analysis by the U.S. Energy Information Administration, refinery costs averaged 10.6% of the retail cost of gasoline in 2013; and thus, the gasoline sulfur control for Tier 3 would add just 0.2 percentage points to this refining component. EPA's evaluation of gasoline sulfur control costs is corroborated by several studies, including one prepared for the International Council for Clean Transportation and another for the Emissions Control Technology Association. (See text box for further discussion of the cost estimates). In sum, EPA estimates the annual compliance cost of the overall program in 2030 would be approximately $1.5 billion ($760 million for the vehicle program and $700 million for the fuel program), and the 2030 benefits would be between $6.7 billion and $19 billion, or 4.5 to 13 times greater than the costs of the program. To address industry concerns, the final rule would allow a three-year delay in compliance for small refiners. It also includes averaging, banking, and trading programs that would give the refining industry flexibility in meeting the standards.

On March 3, 2014, the Environmental Protection Agency finalized new ("Tier 3") emission standards for light duty (and some larger) motor vehicles. Light duty vehicles include cars, SUVs, vans, and most pickup trucks. Phase-in of the standards will begin with Model Year 2017. By the time Tier 3 is fully implemented in Model Year 2025, the standards for light duty vehicles will require reductions of about 80% in tailpipe emissions of non-methane organic gases and nitrogen oxides (both of which contribute to the formation of ground-level ozone) and of about 70% in tailpipe emissions of particulates. Ozone and particulates are the most widespread air pollutants in the United States. Both contribute to respiratory illness and premature mortality. EPA estimates that implementation of the standards will reduce premature mortality by 770 to 2,000 persons annually, as well as providing reductions in hospital admissions, lost work days, school absences, and restricted activity days for persons with respiratory illness. Assigning monetary values to these benefits, EPA estimates the annual benefits at between $6.7 billion and $19 billion in 2030. Like the current "Tier 2" standards, which were promulgated in 2000 and phased in between Model Years 2004 and 2009, the Tier 3 standards treat vehicles and fuels as a system: reductions in vehicle emissions are easier to achieve if the fuel used contains less sulfur. The Tier 3 standards will require that gasoline contain no more than 10 parts per million (ppm) sulfur on an annual average basis beginning January 1, 2017, down from 30 ppm under the Tier 2 program. The fuel standards will match limits already attained in California and in much of the world, including the European Union, Japan, and Korea, and proposed for adoption in China. Further, the rule extends the required useful life of emission control equipment from 120,000 miles to 150,000 miles, and sets standards for heavier duty gasoline-powered vehicles. The standards will also require about a 50% reduction in evaporative emissions (some of which also contribute to ozone formation and/or cause health problems directly). EPA estimates the cost of the rules at $1.1 billion annually in 2017 to $1.5 billion annually in 2030. The agency estimates that the rule will add $33 to $88 to the cost of a new vehicle, and less than one cent to the price of a gallon of gasoline. The effect on gasoline prices has been the most controversial issue: the American Petroleum Institute contends that the tighter sulfur controls will impose almost $10 billion in refinery capital expenditures and increase gasoline manufacturing costs by 6 to 9 cents per gallon. But, in addition to EPA, at least two studies by third-party consultants conclude that the costs will be far less than API's estimate. To address refining industry concerns, the final rule will allow a three-year delay in compliance for small refiners. It also includes averaging, banking, and trading programs that will give the refining industry some flexibility in meeting the standards. The auto industry is generally supportive of the rule--five auto companies, five trade groups, and the United Auto Workers union have issued statements of support, and a GM executive joined the EPA Administrator as she announced the standards. The standards facilitate the adoption of new technologies necessary to meet greenhouse gas standards already promulgated by EPA. In addition, California and 12 other states have already adopted tailpipe standards similar to Tier 3. Proponents contend that the harmonization of national standards eliminates the threat of a patchwork of state requirements and decreases compliance costs by preserving a unified national market. Many in Congress have expressed concern about the potential impacts of the rule. As a result, Congress can be expected to continue oversight as the rule is implemented.

Reports by congressional commissions, the mention of bioterrorism in President Obama's 2010 State of the Union address, and the issuance of executive orders have increased congressional attention to the threat of bioterrorism. Federal efforts to combat the threat of bioterrorism predate the anthrax attacks of 2001 but have significantly increased since then. The U.S. government has developed these efforts as part of and in parallel with other defenses against conventional terrorism. Continued attempts by terrorist groups to launch attacks targeted at U.S. citizens, including those in transit to U.S. soil, have increased concerns that federal counterterrorism activities, and the investments that underlie them, insufficiently address the threat. Experts differ in their assessments of the threat posed by bioterrorism. Some claim the threat is dire and imminent. The congressionally mandated Commission on the Prevention of WMD Proliferation and Terrorism concluded that unless the world community acts decisively and with great urgency, it is more likely than not that a weapon of mass destruction will be used in a terrorist attack somewhere in the world by the end of 2013. The Commission further believes that terrorists are more likely to be able to obtain and use a biological weapon than a nuclear weapon. In contrast, other experts assert that the bioterrorism threat is less severe or pressing than that posed by more conventional terrorism or other issues facing the United States. The Scientists Working Group on Biological and Chemical Weapons concluded that public health in the United States faces many challenges; bioterrorism is just one. Policies need to be crafted to respond to the full range of infectious disease threats and critical public health challenges rather than be disproportionately weighted in favor of defense against an exaggerated threat of bioterrorism. Stakeholders often measure federal efforts against the perceived magnitude of the threat. Thus, those who believe that bioterrorism poses a relatively low threat tend to conclude that the government has done too much. In contrast, those who perceive a greater threat conclude that the federal government needs to do more, whether under existing programs or new ones. Many experts come to mixed conclusions: they regard some programs as effective but identify others as insufficient. The federal government's biodefense efforts span many agencies and vary widely in their resources, scope, and approach. For example, the Departments of State and Defense have cooperated with foreign governments and nongovernmental organizations to engage in nonproliferation, counterproliferation, and foreign disease outbreak detection efforts. The Departments of State and Commerce have strengthened export controls of materials that could be used for bioterrorism. The Department of Health and Human Services (HHS) has made investments in public health preparedness; response planning; foreign disease outbreak detection; and research, development, and procurement of medical countermeasures against biological terrorism agents (see " Medical Countermeasures " below). The intelligence community has engaged in intelligence gathering and sharing regarding bioterrorism. The Department of Justice performs background checks on people who want to possess certain dangerous pathogens. The Department of Homeland Security (DHS) has engaged in preparedness, response, and recovery-related activities, developed increased capabilities in environmental biosurveillance (see " Biosurveillance " below), and invested in expanding domestic bioforensics capabilities. The Environmental Protection Agency (EPA) has explored post-event infrastructure decontamination. Many agencies, jointly or separately, have invested in expanded biodefense infrastructure, including public and private high-containment laboratories for research, diagnostic, and forensics purposes. Lastly, the Executive Office of the President and other executive branch coordinating groups have engaged in risk assessment and strategic planning exercises to coordinate and optimize federal investment against bioterrorism and response capabilities. Conflicting views of the bioterrorism threat and the breadth of the federal biodefense effort, which crosses congressional committee jurisdictions, complicate congressional oversight of the overall biodefense enterprise. Providing oversight and direction for individual biodefense agencies or programs is easier than addressing the entirety of the biodefense enterprise at once, but such an approach may focus too narrowly to improve the overall effort. An alternative approach identifies key areas or activities that shape federal agency efforts. The Bush Administration identified four such "pillars" as organizing principles for the federal biodefense efforts: threat awareness; prevention and protection; surveillance and detection; and response and recovery. Each of these pillars may have several agencies performing critical parts of the activity. Congressional oversight and direction of biodefense efforts has followed a similar but not identical path. Congress has provided oversight and direction on the basis of both individual agency biodefense activity and on those cross-agency themes and policies deemed most important by congressional policymakers. Because of the diversity of federal biodefense efforts, this report cannot address all aspects and associated programs related to this issue. Instead, this report focuses on four areas under congressional consideration deemed critical to the success of the biodefense enterprise: strategic planning; risk assessment; surveillance; and the development, procurement, and distribution of medical countermeasures. This report also focuses on the effectiveness and sufficiency of programs implementing these aspects of the federal biodefense efforts, outside analysts' suggestions for improving the government's efforts, and current issues under congressional consideration. This report does not attempt to address all biodefense issues of potential congressional interest. Although outside the scope of this report, state and local governments, private industry, and our international partners play key roles in defending against the threat of bioterrorism. Although the federal government had previously undertaken efforts to address the bioterrorism threat, the events of September 11, 2001, and the subsequent anthrax mailings led to an increased focus on terrorism in general and especially on biological weapons of mass destruction (WMDs). The Bush Administration established a homeland security apparatus within the White House. Congress and the Bush Administration created the DHS as a focal point in the federal preparedness, response, and recovery to terrorism and imbued it with a variety of new authorities. In addition, the Bush Administration developed a series of national strategies and other guidance documents for homeland security generally and biodefense in specific. Beyond these cross-governmental strategy documents, many agencies developed more focused strategic plans for their individual operations against bioterrorism. The Obama Administration has continued this focus on bioterrorism by issuing additional guidance and directives. Congress has acted to require federal strategic planning activities through provisions of the Homeland Security Act of 2002 ( P.L. 107-296 ), the Pandemic and All-Hazards Preparedness Act ( P.L. 109-417 ), and other legislation. In addition to establishing DHS, Congress has created offices and agencies within other Cabinet departments and assigned them specific planning activities. Finally, Congress established an office within the Executive Office of the President charged with preventing WMD proliferation and terrorism. Policymakers, analysts, and other experts have criticized federal efforts at strategic planning. Some experts have criticized White House led cross-agency planning as lacking metrics and measures, failing to encompass the full range of threats, and insufficiently meeting stated goals. Policymakers have critiqued efforts by federal agencies to develop multi-agency plans as lacking metrics. Even when considering efforts within individual agencies, experts have levied criticisms of research plans, stating that the correspondence between strategic goals, operational outcomes, and program investments has not been made clear. Agency implementation, translating strategic goals into effective programs and policies, will remain a key component of successful federal biodefense activities. Given these criticisms, Congress could choose to recommend changes in the strategic planning process, either government-wide or at the agency level, to address specific deficiencies. For example, Congress, as a body, could enact legislation to require a more robust and transparent government-wide strategic plan that articulates clear goals, metrics and priorities; a periodic comprehensive report detailing biodefense activities government-wide; or the development of a national framework to organize and prioritize biodefense investments. Alternatively, Congress might require the Administration to perform internal or external reviews of policies and activities to determine their sufficiency and then direct the Administration to formulate new or revised policies as recommended by the reviews. Congress could also require the creation of implementation plans, linking agency activities with meeting the required, desired strategic goals. Congress might mandate the augmentation of government-wide planning documents, such as the National Response Framework, or the development of a forward-looking planning document, similar to the Quadrennial Homeland Security Review or the National Strategy for Pandemic Influenza and its implementation guide, for cross-agency federal biodefense activities. Through oversight activities, congressional committees of jurisdiction have a key role in assessing the completeness of ongoing planning. Because of the broad oversight responsibilities of congressional committees, congressional policymakers may identify synergies and duplications between agency efforts more easily than decision-makers within individual agencies. Congress, through its oversight activities, may also identify areas where executive branch resource allocation does not reflect need or congressional intent. A congressional perspective may highlight unnecessary duplication or gaps in federal planning for the various necessary stages of response to a bioterrorism event. Congress may also be able to assess whether current plans appropriately factor in the roles of private industry, states, and our international partners. Some experts have suggested that Congress might optimize oversight of federal homeland security efforts if fewer committees and subcommittees maintained jurisdiction over homeland security. Proponents with this perspective argue that congressional oversight would become more focused and holistic because of the centralization of oversight authority. Additionally, this might reduce the amount of time homeland security officials spend testifying before Congress. On the other hand, such consolidation might decrease the level of congressional scrutiny, since fewer committees with broader homeland security mandates might have less time and fewer resources to focus on individual agencies and activities. Ideally, a full understanding of the risk posed by bioterrorism would underpin the government's biodefense efforts. By understanding the bioterrorism risk, the federal government could determine the appropriate level of federal response and investment against this risk. The Government Accountability Office (GAO) has called for increased risk assessment activities in biodefense for many years. Unfortunately, the nature of the bioterrorism threat, with its high consequences and low frequency, makes determining the bioterrorism risk difficult. Additionally, the presence of an intelligent adversary who can adapt to the presence of successful countermeasures complicates the use of standard risk assessment techniques. Despite these challenges, risk assessment activities can help agencies use risk-informed decision-making processes to plan, prioritize, and invest wisely. In contrast, investment based on uninformed hypotheses or on an ad hoc basis may allow improperly identified or assessed risks to go unmitigated or result in overinvestment against low-risk events. The Bush Administration identified bioterrorism risk assessment as a key component of its biodefense strategy. As a consequence, DHS engages in a bioterrorism risk assessment process on a two-year cycle. Other agencies also engage in risk assessment activities, but they vary from DHS's efforts in approach, assumptions, emphasis, and purpose. Risk assessment processes depend heavily on the information used as input, the quantitative and qualitative factors used to interpret that information, and the robustness of the assessment process. These factors complicate comparisons between bioterrorism risk assessments performed for different purposes or among assessments of other threats. The DHS has begun this comparison on a limited scale, but its use of these risk assessments for planning purposes has been strongly criticized by outside experts. These experts assert that the DHS risk assessments do not adequately address the decision-making process of an intelligent adversary. Regardless of the complexity of the risk assessment methodology, the inherent uncertainties associated with assessing risk in a counterterrorism context likely necessitate retaining some level of flexibility in managing risk. A key question for congressional policymakers is: to what extent should bioterrorism and other risk assessments inform agency and government-wide priorities and policies? Congress could mandate risk-informed decision making based on the intelligence community's assessment of current and future bioterrorism-related threats, endorse a particular risk assessment method, or require the establishment of measures of robustness. It could require agencies to harmonize their risk assessment methodologies or mandate the development of a government-wide risk assessment process rather than individual agency-level assessments. Alternatively, Congress could direct agencies to rely less on the risk assessment process and instead set priorities based on other factors, such as expert judgment. Unlike most other terrorist attacks, a biological attack could infect victims without their knowledge. Days or weeks might pass before victims develop symptoms. Health practitioners treating infected, symptomatic individuals might be the first to identify that a bioterrorism attack had occurred. The Bush Administration prioritized the development and deployment of biosurveillance technologies in an attempt to identify a bioterrorism attack as soon after an attack as possible. The sooner officials identify an attack, the sooner treatment of the exposed individuals could begin. Earlier treatment generally increases the likelihood of individual survival and recovery. The Bush Administration implemented a number of different detection approaches, including environmental detection, syndromic surveillance, and information sharing. Through these efforts, the federal government aims to identify bioterrorism events at various scales, ranging from large, aerially disseminated releases to smaller releases infecting only a few individuals. The federal government, in collaboration with state and local jurisdictions, enhanced the existing network of public health laboratories to ensure that diagnostic laboratories could correctly handle and analyze clinical samples related to potential bioterrorism events. Similarly, the federal government has continued to invest in some global health activities partly to help identify when an emerging disease might pose a threat to the United States. Government and outside experts have both criticized and supported these efforts. Widespread deployment of environmental biosurveillance technologies by the federal government began after the anthrax mailings, and federal efforts to further develop these technologies have also increased. Questions remain regarding the effectiveness of their detection ability, especially in comparison to the innate detection ability of the medical system through astute physicians. A repeated criticism of biosurveillance activities is that the detection system may lack sufficient sensitivity and dependability to allow for a federal response following detection of a bioterrorism event. Technical difficulties persist in making a detection system sufficiently sensitive to detect very low levels of pathogens while maintaining a very low number of false alarms. Frequent false alarms pose a high cost in terms of resource consumption and responder opportunity costs. Additionally, frequent false alarms may lead responders and the public to assume that all alarms are likely false, and thus they may not take alarms seriously. Other widely discussed issues include the extent to which the federal government should protect the population of the United States with such systems, through environmental sensing or other methods, and how the federal government should deploy the limited number of available systems. Congress may remain interested in these programs. The DHS has developed and deployed the next generation of environmental detectors more slowly than it originally predicted. Congress may seek to determine whether the current plans for capabilities and coverage of surveillance sufficiently protect the population. Appropriators could provide additional funds and authorizing committees could provide additional oversight or guidance to encourage the completion of the deployment of these detectors. Alternatively, the appropriation committees and the authorizing committees could determine that potential decreases in risk provided by this program does not support continued investment. Congress may also address concerns about the interactions between DHS and local jurisdictions. Local jurisdictions have identified fiscal burdens from this federal program, and questions remain about their proper role in the response to positive test results. Congress could attempt to alleviate these concerns by providing additional resources to local jurisdictions or by providing additional guidance to DHS regarding its relationships with local jurisdictions. Effective medical countermeasures could significantly decrease the impact of a bioterrorist attack. Several federal agencies, described below, have devoted many resources to the development, procurement, and distribution of medical countermeasures that could help respond to a bioterrorist attack. Since 2001, the federal government has often reexamined programs in these areas. Outside observers, Congress, and the executive branch have scrutinized, suggested improvements to, and further refined these policies. Many potential bioterrorism agents lack available medical countermeasures. To help address this, the federal government invested billions of dollars in research and development that might lead to effective medical countermeasures. The Department of Health and Human Services (HHS) has played a key role in supporting the development of medical countermeasures, mainly through the National Institutes of Health (NIH) and the Biomedical Advanced Research and Development Authority (BARDA). Additionally, efforts undertaken by the Department of Defense (DOD) to protect warfighters may also contribute to civilian biodefense. As a result of the 2010 Public Health Emergency Medical Countermeasures Enterprise review, HHS has called for the creation of dedicated centers to improve advanced development of medical countermeasures in both HHS and DOD and the establishment of a venture capital entity to spur private sector biodefense research investment. Some scientists have criticized the federal investment in biodefense countermeasures. They claim that the relative threat of bioterrorism does not justify the large investment in biodefense and that these efforts would provide greater benefits if directed to other areas of research and development, such as more conventional public health threats. Additionally, Congress has questioned the balance of investment among the various stages of research and development, identifying funding gaps that may pose barriers to the conversion of research results into deployable countermeasures. Congress also identified deficiencies in executive branch management of the countermeasure development process. These observations led Congress to establish BARDA to fund and coordinate the conversion of promising research results into deployable products. Policymakers often face the challenge of determining the optimal balance of funding between competing stages of the research and development process. While Congress, as a body, has supported a historic increase in biodefense-related basic research funding at NIH, critics have suggested that the federal government has underfunded the critical next stages of research and development that convert promising research results into usable products. Current fiscal pressures will likely exacerbate the difficult decisions regarding appropriate funding levels. Congress may consider whether the federal government appropriately leverages efforts by other stakeholders including state government, academia, and the private sector. Policymakers may also consider whether the federal government should reduce its dominant role in countermeasure research and development in favor of a greater role for investment by industry. Congress may again consider incentive-based approaches, such as tax cuts and credits or patent protections, or demand-based approaches, such as increased funding to support larger contract awards. Alternatively, Congress might conclude that the government needs to take a larger role in developing countermeasures in areas where the private sector has failed to produce desired countermeasures. As a single entity, the federal government is by far the largest procurer of bioterrorism medical countermeasures. It stockpiles countermeasures and keeps them ready for deployment to respond to a bioterrorism event. The relatively small market for most bioterrorism countermeasures provides little incentive for companies to invest in developing a countermeasure when compared with the larger potential market of other products of the same industry, such as anti-cholesterol drugs. The federal government has experienced difficulties in obtaining desired countermeasures because of this relatively small market. The executive branch and Congress have taken several steps to encourage companies to enter the medical countermeasure field. These activities include providing liability protection to companies developing medical countermeasures, guaranteeing a government market for countermeasures, and more clearly communicating the government's countermeasure needs and priorities. These efforts have met with mixed success. In the face of a need for medical countermeasures against emerging natural threats, such as pandemic influenza, HHS has also invested in medical countermeasure infrastructure to provide a more rapid response. The HHS has also planned a public-private partnership that would create flexible manufacturing infrastructure to lower barriers to desired countermeasure manufacture. A variety of experts, commissions, and policymakers have characterized the federal government's efforts to partner with private sector countermeasure developers as underfunded, unclear, or insufficient. Given the large costs of bringing a product to market, government assurances of a planned purchase seem insufficient to entice companies into this field. Private companies faced with the potential for liability following adverse reactions to a fielded medical countermeasure expressed reluctance to develop countermeasures. This led Congress to enact measures to protect companies from such liability. Companies and think tanks continue to state that the government should better communicate to developers the countermeasures it would like to procure. Think tanks and industry have also criticized actions they interpret as weakening the government's commitment to guaranteeing a government market by diverting funds designated for that program to other uses. They assert such actions reinforce industry's perception of the government as an unreliable partner in the development enterprise. In addition, GAO has cautioned against the federal government failing to have and make clear expectations regarding countermeasure and company performance. Congress may choose, as it has in some previous years, to use money advance appropriated for countermeasure procurement to support countermeasure development. In addition, policymakers may assess whether previously enacted programs draw new investors into countermeasure manufacturing or whether the federal government must consider other, more novel manufacturing incentives. Congress may also examine whether the procurement prioritization matches the risk assessments and the strategic plans developed by the executive branch. Finally, Congress may provide additional appropriations or create new authorities for HHS, supporting recommendations formed by various assessments of HHS's countermeasure enterprise. Even when effective medical countermeasures against potential bioterrorism pathogens exist, their distribution to individuals affected by an attack remains a challenge. The federal government has attempted to address this need through programs that stockpile and distribute stores of medical countermeasures, the development of alternative distribution mechanisms outside the normal health care setting, and the consideration of other options, such as pre-event distribution or prophylaxis. The Food and Drug Administration (FDA), the Centers for Disease Control and Prevention (CDC), state and local governments, and industry partners play key roles in distributing emergency medical countermeasures. The FDA regulates distribution of pharmaceuticals and biological products and has certain authorities to permit the emergency use of unapproved products. The CDC maintains the Strategic National Stockpile (SNS) and when requested delivers it to state and local governments for distribution. State and local governments are responsible for developing and exercising distribution plans. In addition to producing emergency medical countermeasures, industrial partners store some of the SNS and may play a role in state and local distribution plans. Experts have especially focused on the ability of the federal and state governments to distribute medical countermeasures to those infected in a timely way so as to minimize casualties and fatalities. Much of a successful bioterrorism response relies on providing effective medical countermeasures to the exposed. Experts question whether the federal government can distribute federal stockpiles to states and localities in the midst of an emergency, whether state governments have sufficient manpower or organization to receive federal stockpiles and effectively disseminate them, and whether federal and state governments have sufficiently conceptualized and practiced alternative mechanisms of distribution. Congress may face decisions regarding the acceptable ways to disseminate medical countermeasures in an emergency situation, whether the advantages of alternative distribution mechanisms outweigh the potential drawbacks of lowered oversight and control of countermeasure use, and whether the federal government has effectively leveraged private sector resources to improve distribution. Some experts have suggested the FDA should have new legal authorities and should develop new policy and regulatory frameworks to improve the distribution process during an emergency. Congress may consider whether current FDA authorities are adequate to address medical countermeasure emergency distribution issues and if not whether deficiencies should be addressed through new legislative activity or through solely executive branch action. While no mass-casualty bioterrorism event has yet occurred in the United States, some experts and policymakers assert that terrorist organizations are attempting to develop such a capability. The federal government has been preparing for a bioterrorism event for many years. Multiple programs in many agencies attempt to prepare for and respond to a bioterrorism event. Whether these programs are sufficient, redundant, excessive, or need improvement has been a topic of much debate. Congress, through oversight activities as well as authorizing and appropriations legislation, continues to influence the federal response to the bioterrorism threat. Congressional policymakers may be faced with many difficult choices about the priority of maintaining, shrinking, or expanding existing programs versus creating new programs to address identified deficiencies. Augmenting such programs may incur additional costs in a time of fiscal challenges while maintaining or shrinking such programs may be deemed as incurring unacceptable risks, given the potential for significant casualties and economic effects from a large-scale bioterror attack.

Reports by congressional commissions, the mention of bioterrorism in President Obama's 2010 State of the Union address, and issuance of executive orders have increased congressional attention to the threat of bioterrorism. Federal efforts to combat the threat of bioterrorism predate the anthrax attacks of 2001 but have significantly increased since then. The U.S. government has developed these efforts as part of and in parallel with other defenses against conventional terrorism. Continued attempts by terrorist groups to launch attacks targeted at U.S. citizens have increased concerns that federal counterterrorism activities insufficiently address the threat. Key questions face congressional policymakers: How adequately do the efforts already under way address the threat of bioterrorism? Have the federal investments to date met the expectations of Congress and other stakeholders? Should Congress alter, augment, or terminate these existing programs in the current environment of fiscal challenge? What is the appropriate federal role in response to the threat of bioterrorism, and what mechanisms are most appropriate for involving other stakeholders, including state and local jurisdictions, industry, and others? Several strategy and planning documents direct the federal government's biodefense efforts. Many different agencies have a role. These agencies have implemented numerous disparate actions and programs in their statutory areas to address the threat. Despite these efforts, congressional commissions, nongovernmental organizations, industry representatives, and other experts have highlighted weaknesses or flaws in the federal government's biodefense activities. Reports by congressional commissions have stated that the federal government could significantly improve its efforts to address the bioterrorism threat. Congressional oversight of bioterrorism crosses the jurisdiction of many congressional committees. As a result, congressional oversight is often issue-based. Because of the diversity of federal biodefense efforts, this report does not provide a complete view of the federal bioterrorism effort. Instead, this report focuses on four areas under congressional consideration deemed critical to the success of the biodefense enterprise: strategic planning; risk assessment; surveillance; and the development, procurement, and distribution of medical countermeasures. Congress, through authorizing and appropriations legislation and oversight activities, continues to influence the federal response to the bioterrorism threat. Congressional policymakers may face many difficult choices about the priority of maintaining, shrinking, or expanding existing programs or creating new programs to address identified deficiencies. Augmenting or creating programs may result in additional costs in a time of fiscal challenges. Maintaining or shrinking programs may pose unacceptable risks, given the potential for significant casualties and economic effects from a large-scale bioterror attack.

"Risk adjustment is the process of adjusting payments to organizations (usually health insurance plans) based on differences in the risk characteristics of people enrolled in each plan." In the simplest case, assume that on average the costs of providing a package of health care benefits to women are $100 more than the cost of providing the same set of benefits to men. In this hypothetical situation, if a payer, such as Medicare, paid the same amount to insurers for covering both men and women, insurers would have a strong financial incentive to enroll men and avoid enrolling women. One mechanism for leveling the playing field , could be to risk adjust the payment to insurers by paying them $100 more for women than for men. Conversely, a risk-adjusted payment for men would be $100 less than that for women to reflect their relatively lower level of expected health expenditures. In either of these situations, all other things being the same, insurers should be indifferent between enrolling men or women into their plan. Health care costs vary by more than just gender, and sophisticated risk adjustment models are designed to take into account additional factors that can include age, geography, health status, tobacco use, family size, and other factors. But even the most sophisticated risk adjustment models do not explain a substantial proportion of the differences in expected health care spending. Immediately below, this report describes how the Centers for Medicare & Medicaid Services (CMS) pays private health plans under Medicare Advantage (MA or Medicare Part C) and how these payments are risk adjusted. Subsequent sections describe how risk scores for MA enrollees are initially generated and change over time. The report concludes with a discussion of how CMS audits risk-adjusted MA payments and some potential issues associated with risk adjustment and the audits. Medicare Advantage provides private plan options, such as managed care, for Medicare beneficiaries who are enrolled in both Medicare Parts A and B. By contract with CMS, a health plan agrees to provide all required Medicare benefits (except hospice) to a group of Medicare beneficiaries enrolled in the plan in return for a capitated monthly payment adjusted for the demographics and health status of the beneficiaries who actually enroll in the plan. The same monthly payment is made regardless of how many or few services a beneficiary actually uses. The plan is at-risk if costs, in the aggregate, exceed program payments; conversely, the plan can retain savings if costs are less than payments. Payments to MA plans are based on a comparison of each plan's estimated cost of providing Medicare covered benefits (a bid) relative to the maximum amount the federal government will pay for providing those benefits in the plan's service area (a benchmark). Bids reflect each plan's estimate of how much it requires to cover an average, or standard, beneficiary. "The bid includes plan administrative costs and profit. CMS also sets a benchmark, or bidding target, and if a plan's standard bid is above the benchmark, the plan receives a base rate equal to the benchmark; if the plan's bid is below the benchmark, the plan receives a base rate equal to its bid." In addition, CMS adjusts the payment to private plans, in part, on the characteristics of the Medicare beneficiaries actually enrolled in each plan. For instance, a plan may, on average, enroll healthier or sicker Medicare beneficiaries than the average or standard beneficiary. Part of CMS's payment to plans, as described below, reflects the age, gender, and other characteristics of plan enrollees. The current MA risk adjustment methodology relies on demographic, health history, and other factors to adjust payments to plans. These factors are identified in a base year, and used to adjust payments to plans in the following year. In other words, since MA payments are based on a prospective payment system, CMS is attempting to estimate next year's health care expenditures as a function of beneficiary demographic, health, and other factors identifiable in the current year. This section describes how CMS determines the risk adjustment to be applied to MA plan payments. It is well established that health care expenditures vary by age (increasing with age), gender, Medicaid eligibility, and disability; incorporating these variables into payments is fairly straightforward. Also taken into account is how a beneficiary original ly became eligible for Medicare--either due to age or permanent disability. CMS has these data from administrative sources and while there can be error in these administrative data, they tend to be accurate and somewhat stable over time. Incorporating health status into payments is somewhat more complicated. The process begins with a diagnosis using the International Classification of Disease, Ninth Revision, Clinical Modification--an ICD-9-CM code. ICD-9-CM codes are used to denote signs, symptoms, injuries, diseases, and conditions. Physicians have been required by law to submit ICD-9-CM diagnosis codes for Medicare reimbursement since the passage of the Medicare Catastrophic Coverage Act of 1988. Currently, there are more than 13,000 ICD-9-CM codes. The ICD-9-CM codes are first mapped into diagnostic groups and then into condition categories (see Figure 1 ). Ultimately, as discussed below, the condition categories have a hierarchy imposed on them. The codes are hierarchical such that only the most significant manifestation of a disease is coded for payment purposes. For example: [All] ICD-9-CM Ischemic Heart Disease codes are organized into the Coronary Artery Disease hierarchy, consisting of four CCs [condition categories] arranged in descending order of clinical severity and cost, from CC 81 Acute Myocardial Infarction to CC 84 Coronary Atherosclerosis/Other Chronic Ischemic Heart Disease . A person with an ICD-9-CM code in CC 81 is excluded from being coded in CCs 82, 83, or 84 even if codes that group into those categories were also present. Similarly, a person with ICD-9-CM codes that group into both CC 82 Unstable Angina and Other Acute Ischemic Heart Disease and CC 83 Angina Pectoris/Old Myocardial Infarction is coded for CC 82 and not CC 83. Hierarchical coding ensures that the most costly form of the disease dictates the basis for reimbursement. While there are 189 hierarchical condition codes (HCCs), only 70 HCCs are incorporated into the current CMS model. These 70 HCC codes are chronic codes that empirically have been shown to best predict the following year's Medicare Part A and Part B expenditures. Beginning in 2012, 87 HCC codes will be incorporated into the model (see Table B -1 for these 87 HCC codes and their relative factors). Figure 2 depicts an example of how ICD-9-CM codes are converted into HCC codes. More specifically, Figure 2 depicts the ICD-9-CM codes of a hypothetical 76-year-old female with a variety of diagnosed conditions, including acute myocardial infarction, angina pectoris, chronic bronchitis/emphysema, renal failure, chronic renal failure, chest pain, and an ankle sprain. As can be seen in Figure 2 , not all diagnoses result in an HCC. For instance, this woman's HCC code for acute myocardial infarction (81), near the top right of the figure, implies that she is not coded with HCC 83 even though she has also been diagnosed with some form of unspecified angina pectoris since both codes are in the same disease category and the acute myocardial infarction (HCC 81) is higher in the hierarchy. Similarly, as can be seen at the bottom of Figure 2 , some conditions (chest pain and ankle sprain) map to one of the 189 HCCs but are excluded from the CMS model since they are not chronic. In addition, short-term illnesses, even if expensive, are not captured. As noted above, these models are seeking to explain next year's expenditures and many of these conditions are either fleeting or not good predictors of future expenditures. While only the highest code in a related disease category is used, codes across unrelated disease categories are used such that the model is additive. Therefore, using the earlier example of a 76-year-old female from Figure 2 , Table 1 depicts the risk factors estimated for each condition. This beneficiary's hypothetical total risk score (1.583) is the sum of the individual risk factors, taking into account the disease hierarchy. The risk score would be multiplied by the MA plan's base rate to determine the risk-adjusted base payment. In this example, a monthly base rate of approximately $621.67 would result in a total estimated annual payment of $11,810, or [approximately $621.67 x 12 months x 1.583 risk score = $11,810 yearly risk-adjusted base payment]. Empirical study has also shown that the presence of two or more conditions sometimes can result in greater costs than just their additive effects. These are referred to as interaction effects. For instance, the health care costs for an individual with both diabetes and congestive heart failure are higher than one would predict from just adding the costs of diabetes and the costs of congestive heart failure. In addition, empirical investigation has shown that there are interaction effects between certain diseases and disability such that the health care costs for an individual with a disability and diabetes are higher than one would predict from just adding the additional costs associated with being disabled to the costs of having diabetes. CMS has incorporated both types of interactions into the CMS-HCC model (see Appendix B , Table B -1 ). The previous section explained how payments to MA plans are adjusted to account for the relatively higher or lower cost of enrolling Medicare beneficiaries with certain demographic characteristics or diagnoses. The size of the adjustments is determined by a mathematical model briefly described below. The CMS-HCC model is a linear regression model with expenditures predicted by diagnoses (CMS-HCCs) and demographic variables. Variables that represent certain interactions are also included--such as the interactions between certain diseases and between certain diseases and permanent disability. The expenditure data are based on actual claims data for original Medicare Parts A and B. The CMS-HCC model has been refined over the years and the relative risk factors for each health care or demographic variable used as the basis of payment (i.e., coefficients) are periodically recalculated using more current Parts A and B claims data. The results derived from the model can be standardized such that an individual with a risk score of 1 equates to a Medicare fee-for-service beneficiary with average costs, while individuals with risk scores of less than 1 equate to Medicare beneficiaries with below average costs and individuals with risk scores of more than 1 equate to Medicare beneficiaries with above average costs. Moreover, the risk scores can be further standardized such that a risk score of 1.2 reflects an individual with 20% higher costs than an average Medicare beneficiary, for example, or that an individual with a risk score of .8 reflects a beneficiary with 20% lower costs. Therefore, CMS can use these risk scores to adjust payments to plans such that the payments are individualized to reflect health status and demographics and reflective of the likely costs that a plan, on average, should incur in treating a similarly situated Medicare beneficiary (see Table 1 ). Again, the goal is not to accurately predict any particular individual's expenditures for the following year but predict how expenditures on average vary. The above discussion describes how CMS estimates adjustments to payments for each Medicare beneficiary enrolled in a Medicare Advantage plan. This section describes how risk scores are attributed to MA enrollees for purposes of payment. "For new enrollees [who are new to Medicare Advantage and new to the Medicare program in general], who did not have 12 months of Part B eligibility in the preceding calendar year, rates are based on age, sex, Medicaid status, and original reason for Medicare entitlement (disability or age), not on diagnoses", since CMS does not have historical diagnostic data for these enrollees. Non-new enrollees would include those beneficiaries who are switching MA plans, continuing in the same MA plan, or otherwise have at least 12 months of Part B eligibility in the preceding calendar year. CMS collects information from Medicare Advantage plans (previously using the RAPS (risk adjustment processing system) and now the Encounter Data Processing System (EDPS)), that allows CMS to periodically update the risk score of each beneficiary enrolled in MA. Historically, under RAPS, about 80% of the diagnostic information was provided by physician claims. CMS is in the process of moving to encounter level data that include dates of service and ICD-9-CM codes, thus allowing CMS to retain diagnostic information for updating risk scores and payments directly from plan data. In addition to physician supplied information, data from inpatient hospital or outpatient hospital facilities are acceptable. Risk scores can be adjusted twice each year on January 1 and July 1. Table 2 shows a typical schedule for data submission and payment updates. The data that form the basis of the risk-adjusted payment are always from a prior 12-month period; no diagnosis data reported in the service year are used to adjust payments during the service year. There are only a few sources of error that can enter into the calculation of risk adjusted Medicare Advantage payments: error with respect to age, gender, disability status, Medicaid eligibility, or disease. As noted above, the demographic data, disability status, and Medicaid eligibility generally come from administrative files. The health status information comes from plans submitting diagnoses to CMS. Therefore, error in the health status information provided to CMS by a plan to justify a risk-adjusted payment are the only data that plans are responsible for and that are auditable. Since there can be error in the information that plans provide to CMS to justify risk-adjusted payments as well as error in the updating process, CMS audits Medicare Advantage plans to ensure that the risk-adjusted payments plans are claiming and being paid for are in fact supported by the medical record (referred to as RADV audits). While audits have been conducted for several years, previously CMS only sought to recover the error in payments associated with sampled enrollees. In February 2011, the President's FY2011 budget proposed to extrapolate the RADV error rate to the entire plan contract for the year, resulting in estimated savings of $2.27 billion over the five-year budget window. In December 2010, CMS released for comment its proposed methodology for auditing the data submitted by Medicare Advantage plans and extrapolating a contract level error in payments. In February 2012, CMS released the final notice of payment error calculation methodology, which states that for payment year 2011 audits, CMS will extrapolate audit findings to derive the payment error estimate for the entire contract. Going forward, as CMS seeks to potentially recover larger dollar amounts from plans, the plans are likely to push back more aggressively. These audits, and the potential recoveries, are likely to be problematic for some Part C plans. Audits are conducted at the contract level, and several plans can be under a single contract. Having selected a contract to audit, CMS engages in a three-step process: sampling, medical record review, and error rate calculation/payment adjustment (see Figure 3 ). CMS uses samples, rather than an audit of all eligible enrollees, so as to reduce the burden on plans to provide data. CMS has determined that 201 enrollees is a sufficient sample size. Each of these steps is discussed below. The enrollee sample is drawn from the cohort of eligible Medicare beneficiaries who were enrolled in the contract in January of the payment year. In addition, the enrollees also had to be 1. Enrolled in an MA contract in January of the payment year. 2. Continuously enrolled in the same MA contract for all 12 months of the data collection year. 3. Non-End Stage Renal Disease (non-ESRD) status in or prior to the payment year. 4. Non-hospice between January of the data collection year and January of the payment year, with less than 12 months of hospice during the payment year. 5. In Medicare Part B coverage for all 12 months during the data collection period (i.e., defined as full risk enrollees for risk-adjusted payment). 6. Diagnosed with at least one risk adjustment diagnosis (ICD-9-CM code) submitted during the data collection period that led to at least one CMS-HCC assignment. These HCCs were present for risk-adjusted payments, based on plan-submitted risk adjustment data, and are referred to as the validation HCCs for the sampled enrollees. Eligible enrollees are divided into three equal groups based on the total number of eligible enrollees. Since the goal is to sample 201 eligible enrollees, the first group consists of 67 eligible enrollees randomly drawn from the one-third of enrollees with the highest risk scores. The second group consists of 67 enrollees randomly drawn from the one-third group of eligible enrollees with the lowest risk scores. The final group consists of 67 enrollees randomly drawn from the one-third remaining eligible enrollees. Sampling weights are constructed so each sample of eligible enrollees represents the group from which they were drawn. For example: if a contract has 3,000 RADV-eligible enrollees, the enrollees would be ranked by risk score, then divided into three equal groups of 1,000 enrollees each (to represent high, medium, and low strata). An equal number of enrollees will be randomly selected from each group. The weight for each sampled enrollee will equal 14.925 (i.e., 1,000/67). ...The enrollee sampling weights will be used as multipliers to scale-up (or extrapolate) the sample payment error findings to the population it represents. Having drawn the sample of eligible enrollees to be audited, the MA plan is informed of the enrollees being audited and their HCC codes. The plan is directed to reproduce and deliver to the CMS contractor evidence from the medical records that substantiates each HCC code the plan was paid for. Plans have 12 weeks to assemble and deliver the medical records for the sampled 201 enrollees. The medical records, once received by the CMS contractor, are reviewed to establish whether a particular diagnosis which gave rise to a risk-adjusted payment can be substantiated. If the record confirms the underlying diagnosis, the payment was considered justified. If the medical record does not confirm the underlying diagnosis, the payments based on the diagnosis were considered in error. If the plan disagrees with the findings of the initial CMS contractor, it may appeal to have CMS examine the previously submitted one best medical record and attestation. This final decision is binding unless the plan requests a review by the CMS Administrator. CMS notes that "the payment error for each enrollee will be either positive--representing a net overpayment, or negative--representing a net underpayment." Since the review is based on the first medical record that validates the audited CMS-HCC, any evidence of underpayment would have to be found in that same record, because underpayments, in general, cannot be supported in the audit by a plan submitting additional medical records to justify additional CMS-HCC codes. The risk scores for each sampled enrollee are corrected based on the HCCs that are supported by the RADV medical record review and payments are calculated for each sampled enrollee using the corrected risk scores. Enrollee-level payment errors are defined as the difference between the original payment and the corrected payment. The payment error can be either positive--representing a net overpayment, or negative--representing a net underpayment. A payment error is calculated for each sampled enrollee based on the number of months the person was enrolled in the MA selected contract (and was not ESRD or hospice) during the payment year. To derive the estimated payment error for each MA contract --as opposed to the error calculated for the sample--the total payment error for each sampled enrollee will be multiplied by the enrollee's sampling weight (computed during the sampling phase and described above). The weighted enrollee payment errors will be summed across all enrollees in the sample to determine an estimated payment error for the MA contract. The payment recovery amount for each audited MA contract will be determined by the lower bound of the 99% confidence interval around the payment error estimate, modified by a fee-for-service (FFS) adjuster. The FFS adjuster accounts for the fact that the documentation standards used in RADV audits are different from the documentation standards used to develop the risk adjustment model; this adjuster may address a methodological concern raised by the American Academy of Actuaries, as discussed in the " Concerns with CMS Audit Process " section of this report. Figure 4 depicts the payment error calculation. As described above, 201 eligible enrollees per contract will be selected for review. A total error in payment will be established for each enrollee based on all of the errors identified during the audit. The impact of each enrollee will then be extrapolated to the contract by weighting the enrollee relative to the plan and adjusting for the time that the enrollee was in the plan. The error for each of the 201 sampled enrollees, both overpayments and underpayments, will then be summed. In the hypothetical example in Figure 4 , the estimated plan level error across all enrollees is $1,187.50. A 99% confidence interval for this estimate is then calculated for the estimated plan error--that is, there is a 99% certainty that the actual error in payment will fall within the estimated confidence interval. In the purely hypothetical example generated in Figure 4 , the confidence interval is from $1,037.50 to $1,337.50. This means that with a certainty of greater than 99%, the error in payment to this hypothetical plan is at least $1,037.50. If the 99% confidence interval includes $0 or is below $0, then the recovery amount would be constrained to $0. If the 99% confidence interval does not include $0, then the lower bound of the confidence interval is modified by a fee-for-service adjuster to establish the amount the plan would be required to reimburse the government. The recovery amount is, again, constrained at $0 if application of the FFS adjuster would otherwise result in a negative recovery. In other words, the results of the RADV audit will not result in an additional payment to MA plans. Recent academic study of risk adjustment and some preliminary research by the Medicare Payment Advisory Commission (MedPAC) have raised some concern with risk adjustment under Medicare Advantage. As seen in Figure 5 , there is a distribution of actual costs associated with any set of beneficiaries with the same HCC code or set of codes. Medicare reimburses a plan based on the average associated cost of treating such beneficiaries (Point A). Brown et al. (p. 33) suggest that plans may "decrease their efforts to screen enrollees along dimensions included in the model, while increasing their efforts along dimensions excluded from the model." To the extent that plans can do this, they can disproportionately enroll beneficiaries who on average are below average cost (across HCCs) into their plan and experience below average expenses while being reimbursed at rates established for average beneficiaries; beneficiaries with below average costs are represented by Point B in Figure 5 . MedPAC is similarly concerned that some Medicare Advantage plans, specifically special needs plans and PACE plans, may disproportionately enroll high cost individuals but be reimbursed for average cost enrollees (Point C). While MedPAC suggests exploring improvements to the CMS risk adjustment model, Brown et al. are more skeptical of the prospects of improving the risk adjustment model. A number of stakeholders have also expressed concerns regarding the audit process. The American Academy of Actuaries (AAA) responded to a CMS Request for Comments on CMS's proposed RADV sampling and error calculation methodology. While the crux of the AAA's position is presented below in full, their position can be summarized as concern that: the Medicare fee-for-service data used to estimate risk adjustments were never validated and therefore may also contain errors, and the methodology was designed to estimate payment errors not adjust premiums and the resulting premiums may not reflect the risk profiles of actual enrollees: Our primary concern with the proposed audit process is that it creates an inconsistency between how the risk adjustment factors were developed and how they now would be applied. An underlying principle of risk adjustment systems is that there needs to be consistency in the way the model was developed and how it is used. The CMS-HCC risk adjustment factors were developed with FFS data that, to the best of our knowledge, were not validated or audited for accuracy. The proposed audit process, however, effectively would apply those factors only to MA data that are validated. In other words, the data used in the RADV audit to determine a plan's payment error are fundamentally and materially different from the data used to develop the risk adjustment model. If, as a result of the RADV audit, for example, certain lower-cost enrollees no longer are considered diabetic but would have been considered diabetic in the FFS data used to develop the risk scores, then the payment for diabetic members in the payment year could be inadequate. In this example, the risk score factor associated with diabetes would be understated relative to the factor that would have resulted from using only substantiated diagnoses, because the lower-cost patients would have lowered the average spending amounts among those identified as diabetics in the FFS data. When that factor is applied to similarly non-validated data, the total payments for those with diabetes would be adequate. When that same factor is applied only to those with substantiated data, however, the total payments could be too low. This type of data inconsistency not only creates uncertainty, it also may create systematic underpayment, undermining the purpose of the risk adjustment system and potentially resulting in payment inequities. In addition, the uncertainty related to a plan's ultimate post-audit risk score could make it difficult for actuaries to estimate the plan's risk score and certify the plan bid. Extrapolating RADV payment-error calculations to adjust premium payments to MA plans represents a significant change in the risk adjustment methodology. The Health Practice Council is concerned that the resulting modified payment methodology may not appropriately reflect the relative risk profile of enrollees in the affected MA plans. The notice of final calculation methodology added a fee-for-service adjustment to the final recovery amount, which may address these concerns. More information about the fee-for-service adjuster is forthcoming. Risk adjustment is intended to compensate MA plans for the higher (or lower) cost of enrolling sicker (or healthier) Medicare beneficiaries, yet, as described in this report, plans that disproportionately enroll sicker (or to the extent possible, healthier) beneficiaries may be systematically under (or over) compensated. Others have raised concerns about using Medicare fee-for-services data--which have not been audited for accuracy--to generate the risk adjustment coefficients for Medicare Advantage plans. Some plans have expressed concern that recoveries from RADV audits may place them at substantial financial risk. It remains to be seen how the Secretary will account for methodological concerns as she implements risk adjustment. Appendix A. History of Part C Risk Adjustment Payments to private plans under Medicare are risk adjusted to account for the variation in the cost of providing health care among Medicare beneficiaries. Several different models have been used to calculate risk adjustment, each successive model gaining in complexity and explanatory power. This appendix briefly describes the risk adjustment models that are not otherwise discussed in the text of this report. Below, Table A -1 shows the risk adjustment models that have been used to adjust Medicare private plan payments, the year each model was in use, and the percentage of variation in individual expenditures predicted by each model (R 2 ). The R 2 is one measure of how well a model explains why a specified outcome varies--in this case beneficiary expenditures. The range of spending by individual Medicare beneficiaries can be from $0 per year for a very healthy beneficiary who did not use any medical care, items, or medications, to hundreds of thousands of dollars, or more, for a very ill beneficiary. The models attempt to predict beneficiary spending based on beneficiary characteristics. Sicker beneficiaries may have higher expenditures--but how much more? The R 2 quantifies that measure for the model as a whole--from 0 (which means the model does not explain any of the variation) to 1, which means the model perfectly predicts expenditures. Looking at the first model listed in Table A -1 , the Average Adjusted Per Capita Cost (AAPCC) model has an R 2 of 0.0077, which means that the model explains 0.77% of the variation in beneficiary expenditures. Each subsequent model used by CMS has increased the percent of variation in beneficiary expenditures explained. The most recent (proposed) model is able to explain approximately 12.5% of the variation in expenditures. Adjusted Average Per Capita Cost (AAPCC) Prior to payment year 2000, private plan payments under the Medicare+Choice (M+C) and TEFRA risk programs--both predecessors to the Medicare Advantage program--were risk adjusted to account for the effect of certain demographic characteristics. The demographic variables in the AAPCC model were age, sex, Medicaid enrollment, institutionalized status for nursing home residents, and working aged status representing those Medicare beneficiaries 65 years of age and over with employer sponsored insurance as their primary source of coverage. Taken together, these demographic data explain less than 1% of the variation in Medicare beneficiary expenditures (see Table A -1 ). This model did not account for the costs associated with beneficiary health. Payments to individual plans were not adjusted for enrolling very ill beneficiaries. However, in the aggregate, private plan enrollees were healthier than enrollees in original Medicare, leading to higher payments than if beneficiary health had been taken into account. Principal In-Patient Diagnostic Cost Group (PIP-DCG) The Balanced Budget Act of 1997 required CMS to implement a risk adjustment methodology that took into account beneficiary health status by no later than January 1, 2000. From payment year 2000 through 2003, CMS used the Principal Inpatient Diagnostic Cost Group (PIP-DCG) model. In addition to demographic variables, this model took into account, "the worst principal inpatient diagnosis (principal reason for inpatient stay) associated with any hospital admission." Though, as shown in Table A -1 , the PIP-DCG model explained more of the variation in Medicare expenditures than the AAPCC (demographic only) model, it had several limitations. First, illnesses that resulted in higher expenditures but did not result in a hospital admission were not counted in the model. Second, any attempt to reduce hospital admissions through, for example, better management of chronic disease, could potentially result in lower risk-adjusted payments. Though the PIP-DCG model was to be phased-in, subsequent legislation held the phase-in schedule at 90% demographic-only method/10% PIP-DCG method through 2003, in part to "soften the financial impact of risk adjustment on M+C organizations." CMS-Hierarchical Condition Category (CMS-HCC) Starting in 2004, Medicare plan payments were adjusted by the CMS-HCC model--a model that includes information from hospital inpatient and outpatient settings, physicians visits, and visits with clinically trained non-physicians such as psychologists and podiatrists. The CMS-HCC takes into account the severity of a beneficiary's illness (and only compensating for the most severe manifestation reported), the accumulated effect of multiple (unrelated) diseases, as well as interactive effects--instances where having two or more specified diseases or characteristics results in expected health care expenditures that are larger than the simple sum of the effects. The CMS-HCC model explains nearly 10% of the variation in beneficiary expenditures and is described in detail in the "Risk Adjustment Under Medicare Advantage" section of this report. Updates to the CMS-HCC retain the basic structure of the model. Version 12 CMS-HCC Each year the model is updated to account for changes in the ICD-9-CM diagnosis codes. In addition, Version 12 was recalibrated with more recent diagnosis and expenditure data. The update increased the percentage of the variation in Medicare expenditures which were explained by the model from just under 10% to nearly 11%. Version 21 CMS-HCC Version 21 includes updates to the ICD-9CM diagnosis codes, and recalibration with more recent diagnosis and expenditure data. In addition, version 21 "underwent a major clinical revision in 2009 to adjust for changes in disease patterns, treatment methods, and coding practices, as well as compositional changes within the Medicare population." These updates again increased the predictive power of the model to approximately 12.5%. Version 21 is slated to be implemented in 2012 for PACE plans. Appendix B. CMS-HCC Risk Adjustment Model

According to the American Academy of Actuaries, "[h]ealth risk adjustment is the process of adjusting payments to organizations (usually health insurance plans) based on differences in the risk characteristics of people enrolled in each plan." By adjusting payments to compensate organizations for the relatively higher medical costs associated with an ill individual, plans should, all other things being equal, be indifferent between enrolling the sicker person or the relatively healthier one. Medicare Advantage (MA) is an alternative way for Medicare beneficiaries to receive covered benefits. Under MA, private health plans are paid a per-person amount to provide all Medicare-covered benefits (except hospice) to beneficiaries who enroll in their plan. The Centers for Medicare & Medicaid Services (CMS) risk adjusts the payments to MA plans. The size of the adjustment depends on the demographic and health history of each plan enrollee. The payment adjustment takes into account the severity of a beneficiary's illness, the accumulated effect of multiple diseases, as well as interactive effects--instances where having two or more specified diseases or characteristics results in expected health care expenditures that are larger than the simple sum of the effects. The payments are not adjusted for short-term illnesses because they are assumed to be poor predictors of future health spending. MA plans provide information to CMS to justify the risk-adjusted payments; CMS therefore audits the plans to ensure that the risk-adjusted payments that the plans are claiming are in fact supported by the medical record. Based on the audit findings, plans may have to pay back money when the medical record does not provide evidence for the risk-adjusted payment they had received. Alternatively, the audit may reveal additional illnesses that had not previously been taken into account. Previously, MA plans were only required to pay back money (or receive money) based on the findings from the audited enrollee records. CMS has proposed extrapolating the audit findings to apply to all enrollees in the audited plan. Some concerns have been raised about risk adjustment under Medicare Advantage and the MA plan audits. First, risk adjustment compensates plans for the average predicted cost of any particular diagnosis. To the extent that MA plans could enroll beneficiaries with below-average expenditures relative to the average for their disease, those plans would be over-compensated by risk adjustment. Second, according to the American Academy of Actuaries, the Medicare fee-for-service data used in the MA risk adjustment model were not audited for accuracy and may contain errors. The audits under MA, however, would apply the risk adjustment factors to data that were validated. The inconsistency of using audited data in one circumstance and non-audited data in another could create uncertainty; however, a for-for-service adjustment factor added by CMS in the final notice of payment methodology may remedy this concern. Third, some plans have expressed concern that recoveries from the audits may place them at substantial financial risk. This report describes how CMS pays providers under Medicare Advantage and how these payments are risk adjusted. In addition, it describes how risk scores for individual Medicare Advantage enrollees are initially generated and change over time, and it discusses how CMS audits risk-adjusted MA payments. It concludes with a short discussion of several concerns raised with risk adjustment and the audit process.

In the wake of the September 2001 terrorist attacks on the United States, President George W. Bush launched major military operations as part of a global U.S.-led anti-terrorism effort. Operation Enduring Freedom in Afghanistan has realized major successes with the vital assistance of neighboring Pakistan. Yet a resurgent Taliban today operates in southern and eastern Afghanistan with the benefit of apparent sanctuary in parts of western Pakistan. The United States is increasingly concerned that members of Al Qaeda, its Taliban supporters, and other Islamist militants find safe haven in Pakistani cities such as Quetta and Peshawar, as well as in the rugged Pakistan-Afghanistan border region. This latter area is inhabited by ethnic Pashtuns who express solidarity with anti-U.S. forces. Al Qaeda militants also reportedly have made alliances with indigenous Pakistani terrorist groups that have been implicated in both anti-Western attacks in Pakistan and terrorism in India. These groups seek to oust the Islamabad government of President Gen. Pervez Musharraf and have been implicated in assassination attempts that were only narrowly survived by the Pakistani leader and other top officials. In fact, Pakistan's struggle with militant Islamist extremism appears for some to have become a matter of survival for that country. As more evidence arises exposing Al Qaeda's deadly new alliance with indigenous Pakistani militants--and related conflict continues to cause death and disruption in Pakistan's western regions--concern about Pakistan's fundamental political and social stability has increased. In his January 2007 State of the Union Address, President Bush said, "We didn't drive Al Qaeda out of their safe haven in Afghanistan only to let them set up a new safe haven in a free Iraq." Yet many observers warn that an American preoccupation with Iraq has contributed to allowing the emergence of new Al Qaeda safe havens in western Pakistan. South Asia is viewed as a key arena in the fight against militant religious extremism, most especially in Pakistan and as related to Afghan stability. In November 2006, the State Department's Under Secretary for Political Affairs, Nicholas Burns, said, "It is in South Asia where our future success in the struggle against global terrorism will likely be decided--in Afghanistan and Pakistan." The 9/11 Commission Report emphasized that mounting large-scale international terrorist attacks appears to require sanctuaries in which terrorist groups can plan and operate with impunity. It further claimed that Pakistan's "vast unpoliced regions" remained attractive to extremist groups. The Commission identified the government of President Musharraf as the best hope for stability in Pakistan and Afghanistan, and recommended that the United States make a long-term commitment to provide comprehensive support for Islamabad so long as Pakistan itself is committed to combating extremism and to a policy of "enlightened moderation." In January 2007 Senate testimony assessing global threats, the outgoing Director of National Intelligence, John Negroponte, captured in two sentences the dilemma Pakistan now poses for U.S. policy makers: "Pakistan is a frontline partner in the war on terror. Nevertheless, it remains a major source of Islamic extremism and the home for some top terrorist leaders." In what were surely well-calculated remarks, he went on to identify Al Qaeda as posing the single greatest terrorist threat to the United States and its interests, and warned that the organization's "core elements ... maintain active connections and relationships that radiate outward from their leaders' secure hideouts in Pakistan." This latter reference was considered the strongest such statement to date by a high-ranking Bush Administration official. Throughout the opening months of 2007, Administration officials, U.S. military commanders, and senior U.S. Senators issued further incriminating statements about Pakistan's assumed status as a terrorist base and the allegedly insufficient response of the Islamabad government. The United States also remains concerned with indigenous extremist groups in Pakistan, and with the ongoing "cross-border infiltration" of Islamist militants who traverse the Kashmiri Line of Control and other borders to engage in terrorist acts in India and Indian Kashmir. Many analysts consider such activities conceptually inseparable from the problem of Islamist militancy in western Pakistan and in Afghanistan. Domestic terrorism in Pakistan, much of it associated with Islamist sectarianism, has become an increasingly serious problem affecting major Pakistani cities. Separatist violence in India's Muslim-majority Jammu and Kashmir state has continued unabated since 1989, with some notable relative decline in recent years. Many experts reject efforts by the Pakistani government and others to draw significant distinctions between U.S.- and Indian-designated terrorist groups fighting in Kashmir and those fighting in western Pakistan and Afghanistan, and in Pakistan's interior. India blames Pakistan for the infiltration of Islamist militants into Indian Kashmir, a charge Islamabad denies. The United States reportedly has received pledges from Islamabad that all "cross-border terrorism" would cease and that any terrorist facilities in Pakistani-controlled areas would be closed. Similar pledges have been made to India. Numerous experts raise questions about the determination, sincerity, and effectiveness of Pakistani government efforts to combat religious extremists. Doubts are widely held by Western experts, many of whom express concerns about the implications of maintaining present U.S. policies toward the region, and about the efficacy of Islamabad's latest strategy, which appears to seek reconciliation with pro-Taliban militants. Islamabad is adamant in asserting that it serves its own self-interests through closer relations with the United States since 2001, that there should be no doubts about the sincerity of its anti-terrorism policies (with a corollary that any failings in this area are rooted in Pakistan's capabilities rather than in its intentions), and that solely military efforts to combat religious militancy are bound to fail. Instead, Pakistani officials aver, the so-called "war on terrorism" must emphasize socioeconomic uplift and resolution of outstanding disputes in the Muslim world, including in Kashmir, Palestine, and Iraq. The outcomes of U.S. policies toward Pakistan since 9/11, while not devoid of meaningful successes, have neither neutralized anti-Western militants and reduced religious extremism in that country, nor have they contributed sufficiently to the stabilization of neighboring Afghanistan. Many observers thus urge a broad re-evaluation of such policies, including a questioning of a seeming U.S. reliance on the institution of the Pakistani military and on the person of President Musharraf, along with a shifting of considerable U.S. assistance funds toward programs that might better engender long-term stability in Pakistan. In June 2003, President Bush hosted President Musharraf at Camp David, Maryland, where he vowed to work with Congress on establishing a five-year, $3 billion aid package for Pakistan. Annual installments of $600 million each, split evenly between military and economic aid, began in FY2005. In the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ), the 108 th Congress broadly endorsed the recommendations of The 9/11 Commission Report by calling for U.S. aid to Pakistan to be sustained at a minimum of FY2005 levels and requiring the President to report to Congress a description of long-term U.S. strategy to engage with and support Pakistan. The premiere House resolution of the 110 th Congress ( H.R. 1 , the Implementing the 9/11 Commission Recommendations Act of 2007) was passed in January 2007. Section 1442 of the act contains discussion of U.S. policy toward Pakistan, including a requirement that the President report to Congress a long-term U.S. strategy for engaging Pakistan and making a statement of policy that further waivers of coup-related aid sanctions "should be informed by the pace of democratic reform, extension of the rule of law, and the conduct of the parliamentary elections" scheduled to take place in late 2007. Perhaps most notably, the section includes a provision that would end U.S. military assistance and arms sales licensing to that country in FY2008 unless the President certifies that the Islamabad government is "making all possible efforts" to end Taliban activities on Pakistani soil. Many analysts view Section 1442 as a signal that a Democratic-controlled Congress may pressure the Bush Administration to review its Pakistan policy, although many also warn that such overt conditionality is counterproductive to the goal of closer U.S.-Pakistan relations. The Bush Administration explicitly opposes the certification provision on such grounds and it instead urges that the certification be replaced with a reporting requirement. A Senate version of the House bill ( S. 4 ) was passed in March, but contains no Pakistan-specific language. In response to U.S. congressional signals of a possible shift in U.S. policy toward Islamabad, the Pakistani National Assembly's Defense Committee unanimously passed a resolution threatening to end or reduce Islamabad's cooperation on counterterrorism if U.S. aid to Pakistan were to be made conditional. In the years since September 2001, Pakistan has received nearly $1.5 billion in direct U.S. security-related assistance (Foreign Military Financing totaling $970 million plus about $516 million for other programs). Congress also has appropriated billions of dollars to reimburse Pakistan for its support of U.S.-led counterterrorism operations. Some 80% of Defense Department spending for coalition support payments to "Pakistan, Jordan, and other key cooperating nations" has gone to Islamabad. At $4.75 billion to date, averaging more than $80 million per month, the amount is equal to more than one-quarter of Pakistan's total military expenditures. The Bush Administration requested another $1 billion in emergency supplemental coalition support funds for FY2007, however, H.R. 1591 , passed by the full House on March 23, 2007, called for only $300 million in such funds. The Administration also has requested another $1.7 billion in coalition support for FY2008. In justifying these requests, the Administration claims that coalition support payments to Pakistan have led to "a more stable [Pakistan-Afghanistan] border area." Major U.S. defense sales and grants in recent years have included advanced aircraft and missiles. The Pentagon reports Foreign Military Sales (FMS) agreements with Pakistan worth $836 million in FY2003-FY2005. In-process sales of F-16 combat aircraft raised the FY2006 value to nearly $3.5 billion. (In June 2006, the Pentagon notified Congress of a planned FMS for Pakistan worth up to $5.1 billion. The deal involves up to 36 advanced F-16s, along with related refurbishments, munitions, and equipment, and would represent the largest-ever weapons sale to Pakistan.) The Pentagon has characterized F-16 fighters, P-3C maritime patrol aircraft, and anti-armor missiles as having significant anti-terrorism applications, a claim that elicits skepticism from some analysts. Security-related U.S. assistance programs for Pakistan are said to be aimed especially at bolstering Islamabad's counterterrorism and border security efforts, and have included U.S.-funded road-building projects in western Pakistan and the provision of night-vision equipment, communications gear, protective vests, and transport helicopters and aircraft. The United States also has undertaken to train and equip new Pakistan Army Air Assault units that can move quickly to find and target terrorist elements. U.S. security assistance to Pakistan's civilian sector is aimed at strengthening the country's law enforcement capabilities through basic police training, provision of advanced identification systems, and establishment of a new Counterterrorism Special Investigation Group. U.S. efforts may be hindered by Pakistani shortcomings that include poorly trained and poorly equipped personnel who generally are underpaid by ineffectively coordinated and overburdened government agencies. Many commentators on U.S. assistance programs for Pakistan have recommended making adjustments to the proportion of funds devoted to military versus economic aid and/or to the objectives of such programs. Currently, funds are split roughly evenly between economic and security-related aid programs, with the great bulk of the former going to a general economic (budget) support fund and most of the latter financing "big ticket" defense articles such as airborne early warning aircraft, and anti-ship and anti-armor missiles. It may be useful to better target U.S. assistance programs in such a way that they more effectively benefit the country's citizens. One former senior Senate staffer has called for improving America's image in Pakistan by making U.S. aid more visible to ordinary Pakistanis. An idea commonly floated by analysts is the "conditioning" of aid to Pakistan, perhaps through the creation of "benchmarks." For example, in 2003, a task force of senior American South Asia watchers issued a report on U.S. policy in the region which included a recommendation that the extent of U.S. support for Islamabad should be linked to that government's own performance in making Pakistan a more "modern, progressive, and democratic state" as promised by President Musharraf in January 2002. Specifically, the task force urged directing two-thirds of U.S. aid to economic programs and one-third to security assistance, and conditioning increases in aid amounts to progress in Pakistan's reform agenda. A more recent perspective is representative of ongoing concerns about the emphases of U.S. aid programs: [T]he United States has given Musharraf considerable slack in meeting his commitments to deal with domestic extremism or his promises to restore authentic democracy. The U.S. partnership with Pakistan would probably be on firmer footing through conditioned programs more dedicated to building the country's political and social institutions than rewarding its leadership. Other analysts, however, including those making policy for the Bush Administration, believe that conditioning U.S. aid to Pakistan has a past record of failure and likely would be counterproductive. Some add that putting additional pressure on an already besieged Musharraf government might lead to significant political instability in Islamabad. The Bush Administration has come under fire from some quarters for overemphasizing its relationship with the person of Pervez Musharraf--an army general who came to power through extra-constitutional means--at the expense of democratization processes in Pakistan and, further, for maintaining a single-minded focus on anti-terrorism that has "given a pass" to Musharraf and the Pakistani military in the areas of nuclear proliferation, rule of law, and human rights. For several years, veteran Pakistan watchers have been calling attention to the potential problems inherent in a U.S. over-reliance on President Musharraf as an individual at alleged cost to more positive development of Pakistan's democratic institutions and civil society. In 2006, two former senior U.S. diplomats jointly urged the Bush Administration to move beyond its fairly limited focus on the person of Pervez Musharraf by creating better links with a wider array of pro-democracy civil society elements there. More substantive military-to-military relations could be of significant benefit to overall U.S.-Pakistan relations and the attainment of U.S. goals in South Asia. Related sanctions imposed on Pakistan in 1990 were in some respects harmful to subsequent U.S. interests in the region. For example, the suspension of military training (IMET) programs meant that for more than a decade there was no exchange between the Pakistani and U.S. militaries. A Washington-based expert on the Pakistani military has insisted that such exchanges are crucial in encouraging a liberal, secular outlook among Pakistan's officer corps, and provide the United States unique access to that country's leading institution. In apparent response to growing concerns about the course of events in Pakistan and in U.S.-Pakistan relations, Assistant Secretary of State for South and Central Asian Affairs Richard Boucher met with top Pakistani leaders in Islamabad in mid-March, where he lauded Pakistan's role as a vital U.S. ally and announced a new five-year, $750 million aid initiative for development programs in Pakistan's western tribal regions. The Administration also will seek Pentagon authority to spend $75 million in FY2007 funds to improve the capacity of Pakistan's paramilitary Frontier Corps.

This report provides a summary review of issues related to Pakistan and terrorism, especially in the context of U.S. interests, policy goals, and relevant assistance. The outcomes of U.S. policies toward Pakistan since 9/11, while not devoid of meaningful successes, have neither neutralized anti-Western militants and reduced religious extremism in that country nor contributed sufficiently to the stabilization of neighboring Afghanistan. Many observers thus urge a broad re-evaluation of such policies. Sources for this report include, among other things, the U.S. Departments of State and Defense, congressional transcripts, intergovernmental and nongovernmental organizations, regional press reports, and major newswires. This report will be updated periodically.

One of the most controversial issues in U.S. foreign assistance concerns restrictions on U.S. funding for abortion and family planning activities abroad. For many, the debate focuses on three key questions: Do countries or organizations that receive U.S. assistance perform abortions or engage in coercive abortion or involuntary sterilization activities with U.S. funds? Should U.S. funding be permitted or withheld from countries or organizations that participate in these activities? What impact, if any, might the withholding of U.S. funds have on population growth, family planning, and reproductive health services in developing countries? Members of Congress have engaged in heated debates regarding these issues in connection with a broader domestic controversy regarding U.S. abortion policy. These debates have continued since the Supreme Court's 1973 landmark ruling in Roe v. Wade , which holds that the Constitution protects a woman's decision whether to terminate her pregnancy. In nearly every Congress since Roe , Members who oppose abortion have introduced legislation that would prohibit the practice in the United States. Many congressional opponents have also sought to attach provisions to annual appropriations measures banning the use of federal funds to perform abortions. Before the Roe decision, the majority of discussions in Congress regarding the federal funding of abortion focused on domestic authorization and appropriations legislation, particularly labor and health and human services appropriations. After Roe , however, the controversy spread to U.S. foreign assistance, leading to the enactment of abortion and voluntary family planning restrictions in foreign assistance authorizations and appropriations. Debate over international abortion restrictions has also reached the executive branch. In 1984, President Reagan issued what has become known as the "Mexico City policy," which required foreign nongovernmental organizations (NGOs) receiving U.S. Agency for International Development (USAID) family planning assistance to certify that they would not perform or actively promote abortion as a method of family planning, even if such activities were undertaken with non-U.S. funds. In the intervening years, the Mexico City policy has been rescinded and reissued by various Administrations. Most recently, it was rescinded by President Barack Obama in January 2009 and reinstated and expanded by President Donald Trump on January 23, 2017. During the 115 th Congress, Members have continued to debate prohibitions and restrictions on abortion and family planning activities abroad. As in prior appropriations cycles, some Members sought to renew, add, modify, or remove language addressing these issues in State-Foreign Operations legislation. In addition, some introduced legislation aiming to make the Mexico City policy (also referred to as "Protecting Life in Global Health Assistance," or PLGHA), or its reversal, permanent law. Federal funding for abortion and family planning activities remains a controversial issue in foreign assistance, and congressional interest in the subject is likely to continue into the next congressional session. This report examines key legislative and executive branch policies that restrict or place requirements on U.S. funding of abortion or voluntary family planning activities abroad. It discusses when and how the policies were introduced and the types of foreign aid to which they apply. Many of the restrictions attached to U.S. funding of abortion and requirements relating to voluntary family planning programs abroad are included in foreign aid authorizations, appropriations, or both, and affect different types of foreign assistance. Some provisions have come to be known by the name of the lawmakers who introduced them (for example, the "Helms amendment"), while others are identified by the subjects they address (for example, "involuntary sterilization"). Legislation that authorizes foreign aid establishes, continues, or modifies an agency or program for a fixed or indefinite period of time. The Foreign Assistance Act of 1961 (FAA), as amended, is the cornerstone of permanent foreign aid authorization law. The FAA is divided into several "parts" that authorize different types of foreign assistance, including development assistance (part I); military and security assistance (part II); general, administrative, and miscellaneous provisions (part III); the Enterprise for the Americas Initiative (part IV); and debt reduction for developing countries with tropical forests (part V). Congress has routinely amended the FAA since 1961 and has authorized new programs in stand-alone acts, but it has not comprehensively reauthorized most programs in the FAA since 1985. Subsequent authorization bills have often stalled in the face of debates and disagreements on controversial issues (including abortion and family planning), a tight legislative calendar, or foreign policy disputes between Congress and the executive branch. In the absence of the regular enactment of foreign aid authorizations, Congress has annually considered appropriations measures that set spending levels for nearly every foreign assistance account. In recent years, these measures have become increasingly significant for Congress in influencing how U.S. foreign aid is disbursed. Many of them have included family planning or abortion-related restrictions or requirements. The links among the various requirements and restrictions, as well as their inclusion in different legislation, are complex and in some cases not immediately apparent. For example, some amendments that were already enacted in the FAA, such as the Helms and Biden provisions, appear to be added to other foreign assistance-related legislation for emphasis. In other cases, the provisions may have been added so that they apply to additional categories of foreign aid not covered under the FAA. Moreover, some restrictions and requirements stand on their own, while others seek to clarify and amend other existing restrictions. The Leahy amendment, for instance, defines the term "motivate" as written in the Helms amendment, while the Livingston amendment seeks to clarify prohibitions in the DeConcini amendment. This section details enacted legislative restrictions relating to U.S. funding of abortion and requirements related to voluntary family planning programs abroad. They are listed in chronological order by the year they were enacted. The Helms amendment prohibits the use of U.S. foreign assistance funds to perform abortions or to motivate or coerce individuals to practice abortions. Introduced by Senator Jesse Helms in 1973, it was adopted as an amendment to the FAA because of concerns that federal funds could be used to perform abortions overseas. Under the FAA heading "Prohibition on Use of Funds for Abortions and Involuntary Sterilizations," the Helms amendment states the following: (1) None of the funds made available to carry this part may be used to pay for the performance of abortions as a method of family planning or to motivate or coerce any person to practice abortions. The amendment as written in the FAA applies to all foreign assistance activities authorized by part I of that act (development assistance). Since FY1980, the Helms amendment has also periodically been enacted in foreign operations appropriations measures. It is included in two places in the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2018, (hereinafter referred to as the "FY2018 State-Foreign Operations Appropriations Act"). In Section 7018 of Title VII, General Provisions, the language applies to all foreign assistance activities in the act that are authorized under part I of the FAA (development assistance). In Title III, Bilateral Economic Assistance, the language applies to foreign assistance activities in the entire act. In 1978, Congress passed an amendment to the FAA specifying that U.S. foreign assistance may not fund (1) the performance of involuntary sterilizations, or (2) the coercion of involuntary sterilizations (or provide financial incentives to undergo sterilization): None of the funds made available to carry out this part may be used to pay for the performance of involuntary sterilizations as a method of family planning or to coerce or provide any financial incentive to any person to undergo sterilizations. The provision is also repeated in annual foreign operations appropriations. Most recently, it was included in Section 7018 of the FY2018 State-Foreign Operations Appropriations Act. In both the FAA and State-Foreign Operations appropriations acts, it applies to all foreign assistance activities authorized by part I of the FAA (development assistance). Since FY1979, annual foreign operations appropriations have included an abortion restriction on Peace Corps funding due to concerns that money appropriated to the organization was being used to finance abortions for volunteers. The restriction, included under the heading "Peace Corps," states that "none of the funds appropriated under this heading shall be used to pay for abortions." As in some previous fiscal years, the FY2018 State-Foreign Operations Appropriations Act includes an additional provision that allows exceptions to the prohibition on funding abortions in the case of rape, incest, or endangerment to the life of the mother. No restrictions exist on funding for the medical evacuation of Peace Corps volunteers who decide to have an abortion. Under existing policy, the Peace Corps covers the cost of evacuation to a location where "medically adequate facilities" for obtaining an abortion are available and where abortions are legally permissible. In 1981, Congress passed an amendment to the FAA specifying that the United States may not provide foreign assistance for biomedical research related to abortion or involuntary sterilization. This provision, named after Senator Joseph Biden, states the following: None of the funds made available to carry out this part may be used to pay for any biomedical research which relates, in whole or in part, to methods of, or the performance of, abortions or involuntary sterilization as a means of family planning. The Biden amendment has also been included in foreign operations appropriations acts. Most recently, it was included in Section 7018 of the FY2018 State-Foreign Operations Appropriations Act. The provision as included in the FAA and the FY2018 State-Foreign Operations Appropriations Act applies to all foreign assistance activities authorized by part I of the FAA (development assistance). In 1981, Representative Mark Siljander introduced an amendment to the FY1982 Foreign Assistance and Related Programs Appropriations Act specifying that no U.S. funds may be used to lobby for abortion. Since the Siljander amendment was first introduced, Congress has modified the amendment to state that no funds may be used to "lobby for or against abortion" (emphasis added). The Siljander amendment has been included in annual foreign operations appropriations acts. It applies to all programs and activities appropriated under such acts. Most recently, the FY2018 State-Foreign Operations Appropriations Act states that "none of the funds made available under this Act may be used to lobby for or against abortion." In 1985, Congress enacted a provision to the FY1986 Foreign Assistance and Related Programs Appropriations Act specifying that the United States would only fund family planning projects that offer a range of family planning methods and services, either directly or through referral. The measure was enacted to counter a Reagan Administration policy that would provide U.S. funding to overseas groups that advocate only "natural" family planning methods and services, such as abstinence. The amendment, introduced by Senator Dennis DeConcini, states the following: That in order to reduce reliance on abortion in developing nations, funds shall be available only to family planning projects which offer, either directly or through referral to, or information about access to, a broad range of family planning methods and services ... The provision has been included in annual foreign operations appropriations legislation since 1985, and it is most recently included in the FY2018 State-Foreign Operations Appropriations Act. It is applied to family planning assistance funded through all accounts under that act. In 1985, Congress included a provision in the FY1986 Foreign Assistance and Related Programs Appropriations Act requiring that no funds made available under part I of the FAA may be obligated for any given country or organization if the President certifies that the use of such funds violates the aforementioned Helms, Biden, or involuntary sterilization amendments. The amendment states the following: None of the funds made available to carry out part I of the Foreign Assistance Act of 1961, as amended, may be obligated or expended for any country or organization if the President certifies that the use of these funds by any such country or organization would violate any of the above provisions related to abortions or involuntary sterilizations [the Helms, Biden, and involuntary sterilization amendments]. The provision has been included in annual foreign operations appropriations. Most recently, it is incorporated into Section 7018 of the FY2018 State-Foreign Operations Appropriations Act. It applies to all foreign assistance activities in the act that are authorized under part I of the FAA (development assistance). In 1985, Congress agreed to the Kemp-Kasten amendment as part of the FY1985 Supplemental Appropriations Act. The measure, introduced by Senator Bob Kasten and Representative Jack Kemp, states the following: None of the funds made available under this Act nor any unobligated balances from prior appropriations Acts may be made available to any organization or program which, as determined by the President, supports or participates in the management of a program of coercive abortion or involuntary sterilization. The provision was adopted due to the concerns of President Reagan and some Members of Congress that the U.N. Population Fund's (UNFPA's) program in China engaged in or provided funding for abortion or coercive family planning programs. It has been included in annual foreign operations appropriations legislation measures since FY1985. Although it applies to any organization or program that supports or participates in coercive abortion or involuntary sterilization, a determination has only been made regarding UNFPA. Most recently, the provision is included in the FY2018 State-Foreign Operations Appropriations Act, which also states, any determination made under the previous proviso must be made not later than 6 months after the date of the enacted of this Act, and must be accompanied by the evidence and criteria utilized to make the determination. In 16 of the past 34 years, the United States has not contributed to UNFPA as a result of executive branch determinations that UNFPA's program in China violated the Kemp-Kasten amendment. For seven years, the George W. Bush Administration transferred funds appropriated for UNFPA to other foreign aid activities. The Obama Administration supported U.S. funding for the organization, noting that its decision highlighted the President's "strong commitment" to international family planning, women's health, and global development. The United States is currently not providing funding to UNFPA under Kemp-Kasten; in March 2017, the Trump Administration issued a determination that UNFPA "supports, or participates in the management of, a program of coercive abortion or involuntary sterilization" through its country program in China. In recent years, in response to concerns regarding UNFPA's program in China and in addition to Kemp-Kasten restrictions, Congress has enacted certain conditions for U.S. funding of UNFPA. Most recently, Section 7082 of the FY2018 State-Foreign Operations Appropriations Act requires that funds not made available for UNFPA because of any provision of law shall be transferred to the Global Health Programs account and made available for family planning, maternal, and reproductive health activities; none of the funds made available to UNFPA may be used by UNFPA for a country program in China; U.S. contributions to UNFPA be kept in an account segregated from other UNFPA accounts and not be commingled with other sums; and for UNFPA to receive U.S. funding, it cannot fund abortions. The act also required the Secretary of State to submit a report to the committees on appropriations on dollar-for-dollar withholding of funds. Specifically, not later than four months after the enactment of the act, the Secretary is required to submit a report to the committees on appropriations indicating the funds UNFPA is budgeting for a country program in China. If the Secretary's report states that funds will be spent on such a program, then the amount of such funds shall be deducted from the funds made available to UNFPA for the remainder of the fiscal year in which the report is submitted. In 1986, Representative Bob Livingston introduced an amendment as part of FY1987 continuing appropriations that prohibited the United States from discriminating against organizations based on their religious or conscientious commitment to offer only "natural" family planning when awarding related grants: [I]n awarding grants for natural family planning under section 104 of the Foreign Assistance Act no applicants shall be discriminated against because of such applicant's religious or conscientious commitment to offer only natural family planning; and, additionally, all such applicants shall comply with the requirements of the previous proviso [DeConcini amendment]. The Livingston amendment is related to the DeConcini amendment, which states that the United States shall only fund family planning projects that offer a range of family planning methods and services, either directly or through referral. The measure ensures that the United States cannot discriminate against organizations that support natural family planning methods when awarding family planning grants and agreements, providing such organizations comply with the DeConcini amendment. The provision has been included in foreign operations appropriations, and it is most recently incorporated into the FY2018 State-Foreign Operations Appropriations Act. It is applied to family planning assistance from any account appropriated under that act. The Leahy amendment, introduced by Senator Patrick Leahy in 1994 as an amendment to the FY1995 Foreign Operations, Export Financing, and Related Programs Appropriations Act, seeks to clarify language in the Helms amendment, which states, "None of the funds made available ... may be used to pay for the performance of abortions as a method of family planning or to motivate or coerce any person to practice abortions" (emphasis added). The Leahy provision aims to address some policymakers' concerns that providing information or counseling about all legal pregnancy options could potentially be viewed as violating the Helms amendment. The most recent version states the following: [F]or purposes of this or any other Act authorizing or appropriating funds for the Department of State, foreign operations, and related programs, the term ''motivate,'' as it relates to family planning assistance, shall not be construed to prohibit the provision, consistent with local law, of information or counseling about all pregnancy options. The amendment has been included in foreign operations appropriations in various forms since it first appeared in enacted legislation. It was included in the FY2018 State-Foreign Operations Appropriations Act, and applies to all enacted authorization and appropriations legislation related to the Department of State, foreign operations, and related programs. In October 1998, Congress enacted an amendment introduced by Representative Todd Tiahrt as part of the FY1999 Foreign Operations, Export Financing, and Related Programs Appropriations Act that directs voluntary family planning projects supported by the United States to comply with five specific requirements. The provision, which became known as the Tiahrt amendment, has been included in foreign operations appropriations in each subsequent fiscal year. It states that "funds shall be made available" only to voluntary family planning projects that meet the following requirements: (1) service providers or referral agents in the project shall not implement or be subject to quotas, or other numerical targets, of total number of births, number of family planning acceptors, or acceptors of a particular method of family planning (this provision shall not be construed to include the use of quantitative estimates or indicators for budgeting and planning purposes); (2) the project shall not include payment of incentives, bribes, gratuities, or financial reward to: (A) an individual in exchange for becoming a family planning acceptor; or (B) program personnel for achieving a numerical target or quota of total number of births, number of family planning acceptors, or acceptors of a particular method of family planning; (3) the project shall not deny any right or benefit, including the right of access to participate in any program of general welfare or the right of access to health care, as a consequence of any individual's decision not to accept family planning services; (4) the project shall provide family planning acceptors comprehensible information on the health benefits and risks of the method chosen, including those conditions that might render the use of the method inadvisable and those adverse side effects known to be consequent to the use of the method; and (5) the project shall ensure that experimental contraceptive drugs and devices and medical procedures are provided only in the context of a scientific study in which participants are advised of potential risks and benefits; and, not less than 60 days after the date on which the Administrator of the United States Agency for International Development determines that there has been a violation of the requirements contained in paragraph (1), (2), (3), or (5) of this proviso, or a pattern or practice of violations of the requirements contained in paragraph (4) of this proviso, the Administrator shall submit to the Committees on Appropriations a report containing a description of such violation and the corrective action taken by the Agency. Representative Tiahrt introduced the amendment amid media and NGO reports that some governments were offering financial incentives to meet sterilization quotas. At that time, many poor women living in rural Peru were reportedly forcibly sterilized and provided with little or no information about alternative contraception methods. In some cases, complications from unsanitary sterilizations led to sickness or death. The intent of the amendment was to ensure that U.S. foreign assistance did not support such practices. In April 1999, USAID issued guidance on implementing the Tiahrt requirements for voluntary family planning projects. It also provided technical guidance on the "Comprehensible Information" paragraph of the amendment. Since the Tiahrt amendment was enacted, USAID reports there have been violations in Peru, Guatemala, and the Philippines. In 2007, the USAID Inspector General conducted an audit of USAID's compliance with the amendment. Several USAID operating units were audited, including the Global Health Bureau, USAID/Bolivia, USAID/Ethiopia, and USAID/Mali. The audit report, published in February 2008, found no further violations of the amendment. Most recently, the Tiahrt amendment was included in the FY2018 State-Foreign Operations Appropriations Act. It is applied to family planning assistance funded through all accounts under that act. This section provides an overview of two executive branch policies addressing abortion or voluntary family planning: the Mexico City policy (also referred to as "Protecting Life in Global Health Assistance," or PLGHA), and USAID Policy Determination 3 (PD-3) on voluntary sterilization. The Mexico City policy has traditionally restricted U.S. family planning assistance to foreign NGOs engaged in voluntary abortion activities, even if such activities are conducted with non-U.S. funds. Unlike the aforementioned laws which are enacted by Congress, the policy has, for the most part, been implemented and reversed through statements and instruments issued by the executive branch. Such actions have generally been split along party lines, with Republicans supporting the policy and Democrats opposing it. Most recently, the Trump Administration reinstated and expanded the policy to include all global health assistance. The Mexico City policy has remained a controversial issue in U.S. foreign assistance. It was first issued by President Reagan at the International Conference on Population held in Mexico City in 1984. At the time, it represented a shift in U.S. population policy; under the aforementioned Helms amendment and other international abortion and family planning-related restrictions, no U.S. funds could be used to pay for the performance of an abortion as a method of family planning or for involuntary sterilizations. However, U.S. and foreign recipients of USAID grants could use their own resources and funds received from other sources to engage, where legal, in abortion-related activities--though they were required to maintain separate accounts for U.S. money in order to demonstrate compliance with U.S. abortion restrictions. The policy, as issued under President Reagan, required foreign NGOs receiving USAID family planning assistance (either as a direct recipient or a subrecipient through a U.S. NGO that receives USAID funds) to certify in writing that they did not, and would not during the time of the funding agreement, perform or actively promote abortion as a method of family planning. The Mexico City policy as described above was maintained by President George H. W. Bush and rescinded by President Clinton in 1993. President George W. Bush issued a memorandum reinstating the policy in January 2001 and expanded it in August 2003 to include all assistance for voluntary population planning furnished to foreign NGOs by the State Department. President Bush also instituted exceptions for cases of rape, incest, conditions that threatened the life of the mother, and for postabortion care. Several months later, he announced additional exceptions for funding provided through the President's Emergency Plan for HIV/AIDS Relief (PEPFAR), and intergovernmental organizations, such as the United Nations and its affiliated entities. President Obama revoked President Bush's policy in January 2009, issuing a memorandum stating that "these excessively broad conditions on grants and assistance awards are unwarranted. Moreover, they have undermined efforts to promote safe and effective voluntary family planning programs in foreign nations." In January 2017, President Trump reinstated George W. Bush's January 2001 memorandum that reestablished the Mexico City policy and expanded it to include global health assistance. In the memo, he directed the Secretary of State to "implement a plan to extend the requirements of the reinstated memorandum to global health assistance furnished by all departments or agencies" in coordination with the Secretary of Health and Human Services, and to "ensure that U.S. taxpayer dollars do not fund organizations or programs that support or participate in the management of a program of coercive abortion or involuntary sterilization." The expanded policy, which the Trump Administration named "Protecting Life in Global Health Assistance" (PLGHA), was approved by the Secretary of State in May 2017. According to Administration officials, "global health assistance" applies to about $8.8 billion in funding for international health programs appropriated to the Department of State, USAID, and the Department of Defense--including programs addressing HIV/AIDS, maternal and child health, malaria, global health security, and family planning and reproductive health. PLGHA excludes global health assistance to national or local governments, public international organizations, and other similar multilateral entities. It also excludes humanitarian assistance, such as State Department migration and refugee assistance activities, USAID disaster and humanitarian-relief activities, and Defense Department disaster and humanitarian relief. Similar to previous iterations of the policy, it includes exemptions for rape, incest, and conditions that threaten the life of the mother, as well as postabortion care. In May 2018, the Trump Administration published a six-month review summarizing the implementation of PLGHA based on feedback from U.S. government agencies and other stakeholders, such as health groups and NGOs. Broadly, the report acknowledged that with less than six months of implementation, it was "too early to assess the full range of benefits and challenges of the PLGHA policy for global health assistance." It stated that four prime recipients, and 12 subrecipients (out of 733 awards tracked) refused to agree to the PLGHA terms. It also identified a number of challenges and possible action items--one of the foremost being to improve understanding of the policy's intent, implementation, compliance, and oversight. (For example, many implementing organizations sought clarification of the definition of certain terms related to PLGHA to ensure they understand the full scope of the policy and implications for their participation.) The department plans to conduct a further review of implementation by December 15, 2018. Policy Determination 3 (PD-3) on voluntary sterilization (VS) was issued by USAID in September 1982 with the purpose of ensuring that voluntary sterilization services funded by the U.S. government protect the needs and rights of individuals. According to USAID, such protections are necessary given the special nature of VS as a highly personal and permanent surgical procedure. PD-3 outlines a number of requirements for USAID voluntary sterilization services, including the following: Informed consent --USAID assistance to VS service programs is contingent on satisfactory determination that such services, performed in whole or in part with USAID funds, are performed only after the acceptor of the procedure has voluntarily presented himself or herself at the treatment facility and given his or her informed consent. Ready access to other methods --Where VS services are available, other means of family planning should also be readily available at a common location, thus allowing the acceptor to have a choice of family planning methods. No incentive payments --USAID funds cannot be used to pay potential acceptors of sterilization to induce their acceptance of VS. In addition, the fee or cost structure applied to VS and other contraceptives shall be established in such a way that no financial incentive is created for sterilization over another method. PD-3 also provides guidance on payments to VS service acceptors, providers, and referral agents. Certain types of payment are not considered incentives provided they are "reasonable." Determination of a reasonable payment must be based on a country- and program-specific basis using knowledge of social and economic circumstances. Specifically: VS acceptors may generally receive recompense for legitimate extra expenses related to VS (such as transportation, food, medicines, and lost wages during a recovery period); VS service providers may receive per-case payment and compensation for related items (such as anesthesia, personal costs, transportation, and pre- and postoperative care); and VS service referral agents may receive per-case payment for extra expenses incurred in informing or referring VS clients. PD-3 applies to family planning assistance from any account where USAID funds are used for whole or partial direct support of the performance of voluntary sterilization activities. It applies to U.S. NGOs, foreign NGOs, public international organizations, and governments.

This report details legislation and policies that restrict or place requirements on U.S. funding of abortion or family planning activities abroad. The level and extent of federal funding for these activities is an ongoing and controversial issue in U.S. foreign assistance and has continued to be a point of contention during the 115th Congress. These issues have been debated for over four decades in the context of a broader domestic abortion controversy that began with the Supreme Court's 1973 ruling in Roe v. Wade, which holds that the Constitution protects a woman's decision to terminate her pregnancy. Since Roe, Congress has enacted foreign assistance legislation placing restrictions or requirements on the federal funding of abortions and on family planning activities abroad. Many of these provisions, often referred to by the name of the lawmakers that introduced them, have been included in foreign aid authorizations, appropriations, or both, and affect different types of foreign assistance. Examples include the "Helms amendment," which prohibits the use of U.S. funds to perform abortions or to coerce individuals to practice abortions; the "Biden amendment," which states that U.S. funds may not be used for biomedical research related to abortion or involuntary sterilization; the "Siljander amendment," which prohibits U.S. funds from being used to lobby for or against abortion; the "Kemp-Kasten amendment," which prohibits funding for any organization or program that, as determined by the President, supports or participates in the management of a program of coercive abortion or involuntary sterilization (the Trump Administration has withheld funding from UNFPA under this law); and the "Tiahrt amendment," which places requirements on voluntary family planning projects receiving assistance from USAID. The executive branch has also engaged in the debate over international abortion and family planning. In 1984, President Ronald Reagan issued what has become known as the "Mexico City policy," which required foreign nongovernmental organizations receiving USAID family planning assistance to certify that they would not perform or actively promote abortion as a method of family planning, even if such activities were conducted with non-U.S. funds. The policy was rescinded by President Bill Clinton and reinstituted and expanded by President George W. Bush to include State Department activities. In January 2009, President Barack Obama rescinded the policy. It was reinstated and expanded by President Trump in January 2017, and renamed "Protecting Life in Global Health Assistance" (PLGHA). This report focuses primarily on legislative restrictions and executive branch policies related to international abortion and family planning. For information on domestic abortion laws and U.S. global health assistance, including international family planning, see CRS Report RL33467, Abortion: Judicial History and Legislative Response, by Jon O. Shimabukuro, and CRS In Focus IF10131, U.S. Global Health Assistance: FY2017-FY2019 Request, by Tiaji Salaam-Blyther. This report is updated as events warrant.