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More than 4 billion incandescent light bulbs (technically referred to as "lamps") are in use in the United States. The basic technology in these bulbs has not changed substantially in the past 125 years, despite the fact that they convert less than 10% of the energy they use into light. Improving light bulb performance can reduce overall U.S. energy use. As much as 20% of the electricity consumed in the United States is used for lighting homes, offices, stores, factories, and outdoor spaces. Lighting represents about 14% of all U.S. residential electricity use. In the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140 ), Congress imposed higher efficiency standards for manufacturers and importers of general use, screw-base light bulbs commonly used in residential fixtures, beginning on January 1, 2012. The Department of Energy (DOE) estimates that the federal lighting standards should reduce energy use for lighting per household in 2020 by 33% below the 2009 level. DOE has also estimated that the more energy-efficient bulbs, some of which are estimated to last 10 to 20 times longer than conventional bulbs, could save consumers nearly $6 billion in 2015 alone, when the law is fully phased in--taking into account the initial price of the bulbs, their expected life, and electricity costs. EISA did not ban incandescent light bulbs. Instead, the law mandated that bulbs manufactured or imported after phase-in dates specified in the bill meet higher efficiency standards--about 25%-30% more efficient on average. The law left it up to the lighting industry to determine what type of product best met those requirements. Energy-efficient alternatives such as compact fluorescent bulbs (CFLs) and light emitting diodes (LEDs) are expected to gain a larger U.S. market share after EISA is implemented, but government estimates project that incandescent bulbs will be widely available, and widely used, for years to come (see Figure 1 ). U.S. and foreign manufacturers have developed higher-efficiency halogen incandescent bulbs, available at many U.S. retailers, which meet the law's minimum standards for electricity savings. The total number of light bulbs purchased annually is forecast to decline in future years as technological advances increase the life of the products. The lighting provisions of EISA have created controversy, however. Opponents say the federal government should not mandate the type of light bulbs consumers should buy, or the market should produce. Previous lighting conservation efforts carried out by states and utilities have had limited success, in part, because people have not been satisfied with the quality of light produced by replacement products, mainly compact fluorescent bulbs (CFLs), and have been concerned about the fact that small amounts of mercury are contained in the bulbs. Consumers also have expressed concerns about possible lack of access to affordable light bulbs. The initial cost of CFL or LED bulbs can be substantially higher than conventional incandescent bulbs, even though they are cheaper in the long run due to long life and lower energy consumption. Some companies shut down domestic incandescent bulb factories rather than retool machinery to make more efficient products. On the state level, Texas Governor Rick Perry in July 2011 signed HB 2510, to allow continued sale, within the state, of incandescent light bulbs produced in Texas even if they did not meet federal standards. South Carolina has been debating similar legislation: a bill was introduced in 2011 but died in the state Senate. Arizona passed a similar bill in 2010, which was vetoed by Governor Jan Brewer. By comparison in California, which began implementing the EISA standards a year early in January 2011, the California Energy Commission has reported no significant consumer complaints about cost or performance of replacement products. That may be in part because many stores in California still have stocks of traditional incandescent bulbs, purchased before the new standards went into effect. The House, by voice vote on July 15, 2011, passed an amendment offered by Representative Burgess to the FY2012 Energy and Water Development Appropriations Bill ( H.R. 2354 , Amendment 29) to prohibit DOE from using funding to implement and enforce the incandescent light bulb standards. On December 23, 2011, President Barack H. Obama signed the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ). Title III provided FY2012 appropriations for DOE, including identical language to the Burgess amendment that bars the use of any FY2012 DOE funds to enforce the standards. Continuing resolutions for FY2013 and FY2014 kept the prohibition intact. For FY2015, the same prohibition was adopted into the House-passed Energy and Water Development Appropriations bill ( H.R. 4923 ). The DOE enforcement amendment may have only limited impact. The EISA provisions remain in effect. Executives of major lighting companies have said they will comply with the 2007 statute. Further, the funding limitation does not appear to curtail the ability of the FTC or state attorneys general, for example, to enforce provisions of the law. Major lighting industry executives argue that outright repeal of the lighting provisions of EISA could undercut energy conservation efforts as well as efforts to manufacture next-generation products such as LEDs, where U.S. companies have a technological edge. Indeed, the standards are taking effect at a time when the lighting industry is undergoing another, revolutionary change. Venture capital is flowing into companies in the United States, and abroad, that are developing LED products. LEDs are not only more energy-efficient--most exceeding standards in EISA--but they allow the industry to devise integrated fixtures that can be specially programmed to emit differing colors and types of light for various needs. The technology also has potential for communications and other applications. The LED industry already is the fastest-growing part of the global lighting market, propelled by technological breakthroughs and higher demand spurred in part by energy-efficiency laws in the United States and other nations. Some analysts project that LEDs could make up about half the global lighting market by 2020. The Obama Administration opposed efforts to repeal EISA, noting that the industry has invested to prepare for the new standards and to develop next-generation lighting. Through various research and development, loan, and grant programs, DOE has invested millions of dollars into building the domestic LED manufacturing industry, noting that the U.S. lighting industry has lost "most, if not all, of its incandescent and CFL manufacturing to Asian countries in the last two decades," because it could not match production costs and other incentives offered by foreign governments. With the industry looking past existing technologies such as CFLs and halogen bulbs, LEDs present new U.S. manufacturing possibilities. LED technology already has reached a point where large and small manufacturers have access to investment capital and competition is fierce, but public policy could play an important role by stimulating demand, and providing research and development and startup assistance. EISA imposes higher efficiency standards for manufacturers and importers of screw-base light bulbs. On January 1, 2012, higher standards took effect for 100-watt bulbs. Tighter standards for 75-watt bulbs followed on January 1, 2013, and for 60- and 40-watt bulbs on January 1, 2014 (see Table 1 ). While the law requires firms to cease producing or importing bulbs that do not meet the higher standards on the effective dates, it does not preclude manufacturers or retailers from selling existing inventory. EISA also set standards for bulbs used in candelabra and so-called intermediate base bulbs (such as refrigerator and oven bulbs). At the request of industry, DOE announced a delay enforcing higher standards for those products by one year, to January 1, 2013. Another 22 types of bulbs are exempt from higher standards, including three-way light bulbs and black lights. Consumers could use some of these exempt bulbs as replacements for traditional incandescent bulbs (see Appendix ). In addition, DOE in 2009 issued higher efficiency standards for fluorescent tube lighting, commonly used in retail and industrial establishments, and incandescent reflector bulbs, which took effect in July 2012. EISA directed DOE to initiate a rulemaking by January 1, 2014, to review and determine whether more stringent standards should be set for general service, screw-in light bulbs, which would take effect in 2020. The law requires DOE to consider using a minimum efficiency level of 45 lumens per watt, which could require general service bulbs to be at least 70% more efficient than existing incandescent bulbs. Most CFLs and LEDs already meet that standard. The lighting industry has geared up to meet the first-tier standards, which began nationally in January 2012. Many of the higher efficiency screw-in bulbs available to consumers generally carry higher retail prices than conventional incandescent bulbs, though there is considerable variability among products. Consumers could save significant money over the life of many higher efficiency bulbs, however, because they use less electricity than incandescent bulbs and could last far longer than the bulbs they will replace. Nevertheless, high initial cost remains a concern for many consumers. Several existing technologies would meet the EISA standards: Halogen incandescent bulbs. A more efficient version of the standard bulb, this bulb contains a tungsten filament like a standard incandescent, but also a halogen gas capsule that allows it to emit more light with less energy. Halogen incandescent bulbs are about 25% more energy-efficient than traditional incandescent bulbs, according to DOE. The bulbs retail on average for about $1.50 each, compared to about 50 cents for an existing incandescent bulb. While the bulbs are more efficient, and some can last three times as long as traditional incandescents, others last only about as long as standard incandescent bulbs. According to one analysis, the total cost of halogen incandescent bulbs may be equivalent to that of regular incandescent bulbs over the total life of the product. Other analyses predict a small savings if retail prices for the bulbs decline. Compact fluorescent bulbs work by exciting electrons that strike phosphorus coatings. CFLs are about 75% more energy-efficient than traditional incandescent bulbs and burn an estimated 10 times as long. The CFLs have been around for decades, but have had difficulty gaining consumer acceptance because of complaints they emitted a harsh light, did not last as long as advertised, and were bulkier than incandescent bulbs. The bulbs contain traces of mercury, making disposal more difficult, though a number of retailers such as Home Depot recycle the product. The industry has improved CFLs, giving them a more traditional shape and warmer color of light, and has made some that are compatible with dimmable fixtures. CFLs can cost from $0.50 each in a multipack in a big box store to $9.99 in a single pack in an office supply store. Given their lower cost of operation and longer life, consumers could see a payback on the multipack CFL purchase price in less than a year and save $50 over a 10,000-hour life of a bulb. Light-emitting diodes, or solid-state lights, produce light when a current is passed through a semiconductor material. Viewed as a major breakthrough in lighting technology, LEDs are estimated to produce 75%-80% energy savings compared to traditional incandescent bulbs. LEDs can have an estimated lifetime of 50,000 hours or more, though durability varies depending on room placement, ambient temperature and other factors. Some LED products such as under-cabinet and Christmas tree lights are readily available in lighting and hardware stores. But LEDs have not yet made major inroads as replacements for incandescent screw-in bulbs due to their higher cost and a dearth of higher-wattage products. LEDs designed to replace conventional light bulbs can cost up to $20 per bulb, though prices are falling rapidly. In the summer of 2014, Home Depot carried a $20 screw-in LED that is the equivalent of a 100-watt bulb. Similarly, 60-watt equivalent bulbs were selling for $16 and 40-watt equivalent bulbs were selling for $14. In terms of reduced cost of operation, LEDs would have to fall to near $5 per bulb for consumers to see a payback in less than a year. Retailers and DOE are providing consumer information about the replacement bulbs, as are the media. EISA directed the Federal Trade Commission to examine the effectiveness of light bulb labeling. In response, the FTC crafted a new packaging label for light bulbs. The label, which resembles the nutrition label on food, includes information on brightness, the estimated yearly cost of using the bulbs, the expected life of the product, the color of light produced and the mercury content, if any. The labels, as well as second-tier standards to be issued in 2020, focus on lumens--a measure of brightness--rather than wattage, which is a measure of energy use (see Figure 2 ). Some analysts note that the FTC label does not readily help consumers compare wattage on new products to former products, which would allow them to more easily buy an efficient bulb that is equivalent to an incandescent 60-watt bulb. Current bulbs can also emit a dimmer light than the bulbs they are replacing because of the lumens range allowed in the regulations. Some analysts worry that consumers will trade up to a higher wattage-equivalent bulb to increase brightness, undercutting potential energy savings of the law. The Energy Information Administration estimates that, in 2010, residential and commercial consumers used about 507 billion kilowatt-hours (kWh) of electricity for lighting--about 13.5% of total U.S. electricity consumption. Residential lighting consumed about 207 billion kWh, or about 14% of all residential electricity use. Commercial users, which include commercial and institutional buildings and public street and highway lighting, accounted for nearly 300 billion kWh, or about 22% of commercial electricity consumption. In addition, EIA's most recent data indicate that manufacturing lighting was about 2% of total U.S. electricity use in 2006. Incandescent bulbs have traditionally been used for about 85% of household lighting. In the office, commercial, and industrial sector, however, the majority of light is provided by fluorescents--mainly the long tubes found in ceiling fixtures. Overall, in 2009 conventional incandescent bulbs provided about 12% of the total light delivered in the United States. The $11 billion U.S. lighting industry includes companies that produce light bulbs, component parts, and light fixtures for residential, commercial, and industrial use. Major international companies manufacturing lighting or lighting components in the United States include Philips Lighting, GE, and Osram Sylvania. (For information on LED manufacturing see " Next-Generation LEDs .") Prominent lighting fixture and equipment manufacturing companies include Hubbell Lighting, Cooper Lighting, Juno Lighting Group, and Acuity Brands. The National Electrical Manufacturers Association (NEMA) in 2010 estimated there were 12,000-14,000 U.S. jobs in light bulb manufacturing, marketing, and research and development. The U.S. lighting industry--including light bulb, component, and fixture production--has shrunk, both in output and employment, during the past several decades due to heightened competition from abroad, including lower-cost production in China and Mexico (see Table 2 ). Some companies, such as GE, have closed U.S. factories that made incandescent bulbs due to global competition, changing federal and state energy standards, and other factors that rendered the plants obsolete. The consolidation has been occurring for some time. GE announced in 2007 that it would close a number of plants in the United States and Brazil. The company noted in its announcement that demand for traditional incandescent bulbs had been falling for years: "The market for traditional household incandescent light bulbs has declined by half over the past five or so years, according to data from the National Electrical Manufacturers Association. This has created considerable overcapacity, rising costs and inefficiencies across our manufacturing system." At the same time large lighting manufacturers are closing facilities, some are opening or refitting others to manufacture more competitive products. Osram Sylvania, which has U.S. facilities in New Hampshire, Illinois, Pennsylvania, and Kentucky, has refitted a factory in St. Marys, PA, to make halogen incandescent bulbs. GE closed plants in North Carolina and Virginia, but has invested $60 million to expand a facility in Ohio, including increasing fluorescent lighting production. GE and Philips are making some components for halogen incandescent bulbs in the United States. It is not possible from publicly available data to determine all the factors contributing to manufacturers' decisions to close certain production facilities, but lighting standards appear to be only one issue. Most of the incandescent and CFL bulbs used in the United States are imported. Light bulb imports, as a share of U.S. consumption, more than doubled from 1989 to the mid-2000s, according to one analysis. The United States in 2010 imported $6 billion more in lighting products than it exported, with China accounting for 65% of imports, while Mexico was second with 13%. Between 1996 and 2007, Chinese production of CFLs rose 30-fold, making it the world leader in production and exports. China's rapid expansion has led to questions about quality, with U.S. Agency for International Development working with China on product and safety quality controls such as more stringent oversight, heightened control of hazardous substances such as mercury, and better supervision of product distribution. Separately, there is a significant public-private partnership underway to encourage U.S. LED manufacturing (see " Next-Generation LEDs "). EISA was intended to both improve energy efficiency and rationalize manufacturing by setting uniform, national light bulb standards. The NEMA, which represents 95% of U.S. lighting manufacturers, in 2007 testimony to the Senate Energy and Natural Resources Committee, endorsed the light bulb proposals, saying that federal standards were needed to keep the industry competitive and to limit uncertainty as states and foreign governments moved to impose higher efficiency standards. The group pointed out that Connecticut, Rhode Island, California, and Nevada were among states that at that time were considering laws or regulations to impose more stringent, and possibly conflicting, lighting energy-efficiency standards. California in 2007 passed AB 1109, which requires a 50% increase in efficiency for residential general service lighting by 2018. In addition to state activity, Australia, the European Union, and Canada are among countries and regions that have upgraded lighting standards, another factor shifting world production toward more efficient products. NEMA reaffirmed its support for the federal law in March 2011 testimony to the Senate Natural Resources and Energy Committee. While some other industry officials voiced support for the light bulb standards at that hearing, a longtime lighting designer opposed the standards, saying the energy savings would not be as high as forecast, consumer costs could rise, and the law took away consumers' freedom of choice. DOE predicts that the lighting provisions of EISA will reduce energy use and provide cost savings to consumers. U.S. primary energy consumption could fall by 21 quadrillion British Thermal Units (BTU) and greenhouse gas emissions could decline by 330 million metric tons over the next 30 years. Those forecasts depend on factors including consumer choice of bulb, which in turn depends on variables like purchase price and product satisfaction. Other considerations in terms of total energy savings include whether more efficient bulbs are placed in high usage areas of a home, and whether the bulb actually meets forecasts for efficiency and longevity. Experience shows that it can be difficult to get consumers to embrace new lighting products. Significant energy savings can be realized only when there is widespread acceptance of energy-saving technology. That has been the case with CFLs, which have been on the U.S. market since the 1970s. States and utilities have promoted CFLs as part of programs to reduce energy use. Some utilities gave CFLs to customers at no cost, while others provided millions of dollars in subsidies for purchase of the products. American consumers increased purchases of CFLs, as shown by import and usage data ( Figure 1 and Figure 2 ), but still used incandescent bulbs for most of their lighting, citing factors including the higher price for the CFLs and concerns about light quality and mercury contained in the products. CFL sales declined in 2009 to 272 million units, from 397 million units in 2007. The recent decline may be due to a number of factors. Sales figures may have been affected by the recession, which made consumers less likely to switch to bulbs with a higher up-front cost. Shipments may also be affected by the fact that CFLs last longer, meaning consumers do not buy as many bulbs. Also, some subsidy and promotion programs ended. The lighting industry appears to have responded to consumer concerns by producing a range of replacement options for traditional incandescent bulbs. U.S. and foreign manufacturers have developed higher-efficiency halogen incandescent bulbs, available at many retailers, that meet the requirements for 25%-30% energy savings and may overcome some consumer reluctance to embrace energy-saving lighting technologies such as CFLs. Indeed, energy savings under EISA could be near the low end of DOE projections if halogen incandescent bulbs, which sell for a price near that of conventional incandescent bulbs, turn out to be consumers' main replacement choice. In addition, EISA exempts a number of commonly used incandescent bulbs from efficiency standards. Some of the exempted bulbs can also be used as replacements for standard incandescent products, which would negate some potential energy savings from more efficient technologies (see Appendix ). The lighting sector is going through another potentially historic transformation with advances in LED technology. LED efficiency depends both on the light source and the fixture in which it is placed. Depending on the package, some LEDs can be about 10 times as efficient as incandescent bulbs and as much as twice as efficient as CFLs. Solid-state lighting, a semiconductor-based technology that coverts electrical energy into light, is already the fastest-growing part of the global lighting industry and is expected by some analysts to make up one-third of the U.S. lighting market, on a unit basis, and three-fourths of the market, on a revenue basis, by 2015. Solid-state lighting has been adopted by industry, commercial businesses, and municipalities, with the main applications currently in electronics such as TVs, computers and smart phones, traffic lights and auto tail lights. LEDs are starting to move into the residential market. While 40-watt and 60-watt equivalent replacement bulbs appeared in the marketplace during 2013, products at higher 75-watt and 100-watt equivalent levels just began to appear during the spring and summer of 2014. Retail prices of LEDs are still much higher than for traditional incandescent bulbs, but are falling. Since the late 1960s, LED light output has increased by a factor of 20 each decade, while the cost per lumen has fallen by a factor of 10. The industry projects similar or faster cost reductions going forward. With technology advancing, some analysts project that general use LED bulbs could fall to a price of $5 within 10 years. However, because LED prices are still significantly more than for other replacements for incandescent lamps, consumer adoption initially could be limited. The development of LED technology and markets is a global pursuit. Major companies investing in the LED arena include Philips Lighting, GE, and Osram Sylvania. Among U.S. companies are Cree of North Carolina; the Lighting Science Group in Florida; Feit Electric of California; Switch of California; Vu 1 lighting in New York; and Bridgelux in California. The firms are competing with start-up companies and established manufacturers like Toshiba and other foreign firms. U.S.-based manufacturers Cree and Philips Lumileds together have about 11.5% of worldwide LED production. The North American LED bulb market is expected to grow from $3.6 billion in 2010 to more than $11 billion in 2015, partly due to stricter lighting efficiency standards that are being introduced in the United States, Canada, and Mexico, according to analysts. In 2010, global LED production had a projected value of $9.9 billion. Global value could reach $18 billion by 2015. Major LED manufacturing nations are shown in Figure 4 . LEDs magazine, which produces an annual guide to solid state lighting industry suppliers, lists hundreds of affiliated makers and suppliers in the United States. The companies run the gamut from semiconductor producers to specialty firms that make hospital and other lighting. Another lighting technology under development is organic light-emitting diodes, or OLEDs, where light is produced by a chemical reaction. The OLED technology is used in commercial electrical appliances such as color display screens. While the lighting market has been divided between companies producing light bulbs and companies producing fixtures, the two sectors will become more integrated if LED usage expands as forecast. According to DOE: The ultimate value of SSL [solid state lighting], including its energy efficiency potential, is not in the production of replacements for incandescents or CFLS, but in the development of integrated luminaires that serve a particular function. Fixtures and even replacement lamps must be specifically designed to accommodate light-emitting diode (LED) light sources properly; failure to do so will result in poorly performing, unreliable products. As with the introduction of CFLs, there are potential barriers to consumer acceptance of LEDs. Testing by DOE and others has found variations in product performance. For example, a recent article notes that China's manufacturing capacity--which now accounts for more than 30% of world LED production capacity--puts out products that often have problems with light quality and short lifetimes. The outlook for U.S. manufacturing is unclear. China and other countries are offering tax breaks and other incentives to lure existing companies. China is also expanding production of its domestic industry. The rapidly changing nature of products and technology is another factor affecting profitability. LED firm Cree in its 2011 Annual Report noted that the industry is "in the early stages of adoption and is characterized by constant and rapid technological change, rapid product obsolescence and price erosion, evolving standards, short product life-cycles and fluctuations in product supply and demand." China has not only invested heavily in LED production, but is a chief supplier of rare earth minerals needed to produce LEDs. The cost and availability of materials used for fluorescent and LED bulbs, including phosphorus and gallium, is a potential issue going forward. DOE has been working with private industry to foster U.S. LED manufacturing. The Energy Policy Act of 2005 ( P.L. 109-58 ) created the Next Generation Lighting Initiative to support research, development, and commercial application of LED technology. DOE has used its authority under the 2005 law to develop a commercialization plan and is funding eight LED manufacturing projects designed to reduce costs and improve products. EISA directed DOE to have the National Academy of Sciences prepare a report on the status of advanced solid state lighting (SSL) technology. Published in 2013, the report made a wide range of technological and policy findings. The technology findings include: LED and organic LED (OLED) efficiency and performance are limited by materials issues; the development of robust OLEDs requires R&D on degradation resistance and materials to extend the operational lifetimes; and technological and manufacturing breakthroughs are needed to make LED-based luminaires and lamps with high efficacies with prices lower than those for fluorescent fixtures. The policy findings include: DOE's SSL program should be increased (if possible); DOE should seek 50% cost sharing for manufacturing projects; and DOE should lead a study that evaluates the effectiveness of lighting efficiency incentives. DOE also used funds from the American Recovery and Reinvestment Act of 2009 for LED manufacturing research and development, with the goals of improving domestic efficiency and avoiding "the loss of technological expertise, intellectual property and manufacturing jobs to other countries." Other efforts include improving the consistency and quality of LEDs through DOE's Commercially Available LED Product Evaluation and Reporting program, known as CALiPER. Another federal law that helped spur energy-efficient lighting was the Commercial Building Tax Deduction Program. It provided incentives through 2013 for energy-efficiency measures including lighting equipment. The program covered new construction and upgrades to existing buildings. So-called green building is the fastest-growing part of the construction industry, including Leadership in Energy and Environmental Design (LEED) building criteria that focus on site, water, energy, materials, and indoor environment. The lighting industry has spent billions of dollars to meet the requirements of EISA and to advance LED research and development. The rapid technological pace of change in an industry that largely relied on incandescent technology for more than 100 years has created some unease among businesses, lawmakers, and consumers about product availability and cost; possible job loss; and more broadly about the role of government in mandating consumer product choices. Congress has a long-established record in the energy-efficiency area. The recent lighting standards are one in a series of home appliance and commercial equipment standards mandated by Congress to reduce overall energy use. The EISA lighting provisions, in concert with tighter standards in other countries, are helping to spark increased demand for new, more efficient products worldwide. Industry analysts add, however, that many changes now underway in the U.S. lighting industry would have occurred without EISA because of existing requirements in other countries and the pace of LED technology developments. Early indications are that the lighting industry has developed a range of products, including halogen incandescent bulbs, that meet the EISA efficiency standards and are widely available at a price point close to that of conventional incandescent bulbs. Consumers will have more and possibly confusing choices about purchasing replacement light bulbs, some of which are likely to perform better than others. Going forward, one major question is how much LED manufacturing will stay in the United States. U.S. manufacturers have been moving operations overseas for decades to capture lower production costs and secure necessary materials. Long-term manufacturing trends are unclear given major efforts in China and other Asian countries to increase production (see Figure 4 ). Industry officials have called for an expanded federal-business effort to build LED fabrication facilities and increase domestic capacity and have warned that delaying the EISA implementation could reduce energy savings and delay the transition to next-generation lighting products. EISA exempts 22 types of traditional incandescent bulbs, or lamps, from the energy-efficiency standards. DOE will monitor sales of these exempted products as the legislation is implemented. If any one of the exempted lamp types doubles in sales, EISA requires DOE to establish an energy conservation standard for the particular bulb type. The provision is designed to ensure that none of the exempted products take market share from bulbs affected by the new efficiency standards. Appliance lamp Black light lamp Bug lamp Colored lamp Infrared lamp Left-hand thread lamp Marine lamp Marine's signal service lamp Mine service lamp Plant light lamp Reflector lamp Rough service lamp Shatter-resistant lamp (including shatter-proof & shatter-protected) Sign service lamp Silver bowl lamp Showcase lamp 3-way incandescent lamp Traffic signal lamp Vibration service lamp G shape lamp (as defined in ANSI C78.20-2003 and C79.1-2002) with a diameter of 5" or more T shape lamp (as defined in ANSI C78.20-2003 and C79.1-2002) and that uses no more than 40W or has a length of more than 10" B, BA, CA, F, G16-1/2, G-25, G-30, S, or M-14 lamp (as defined in ANSI C78.20-2003 and C79.1-2002) of 40W or less.

More than 4 billion incandescent light bulbs (sometimes referred to as "lamps") are in use in the United States. The basic technology in these bulbs has not changed substantially in the past 125 years, despite the fact that they convert less than 10% of their energy input into light. Improving light bulb performance can reduce overall U.S. energy use. About 20% of electricity consumed in the United States is used for lighting homes, offices, stores, factories, and outdoor spaces. Lighting represents about 14% of residential electricity use. The Energy Independence and Security Act of 2007 (EISA, P.L. 110-140) imposed higher efficiency standards for manufacturers and importers of general use, screw-base light bulbs commonly used in residential fixtures, that began January 1, 2012. EISA did not ban incandescent light bulbs. Instead, the law mandated that bulbs manufactured or imported after phase-in dates specified in the bill meet higher efficiency standards--about 25%-30% more efficient on average. The law allows industry to determine which products best meet those requirements. On December 23, 2011, President Barack H. Obama signed the Consolidated Appropriations Act, 2012 (P.L. 112-74). Title III of the law provided FY2012 appropriations for the Department of Energy (DOE), including language barring use of any DOE funds to enforce the lighting standards. That prohibition remains in effect. Lawmakers have cited several reasons for efforts to delay or repeal the law, including consumer concerns about lack of access to affordable incandescent light bulbs, and reports that companies have shut down incandescent bulb factories because they could not afford to retool to make more efficient products. While DOE predicts that energy-efficient alternatives such as compact fluorescent bulbs (CFLs) and light-emitting diodes (LEDs) will gain a larger U.S. market share after EISA is implemented, it also forecasts that incandescent bulbs will be widely available, and widely used, for years to come. U.S. and foreign manufacturers have developed higher-efficiency halogen incandescent bulbs, available at retailers, that meet the law's minimum standards for 25%-30% electricity savings (compared to 75%-80% savings from CFLs and LEDs) and are competitive in price. The Obama Administration and major lighting companies oppose efforts to repeal the 2007 law, noting that the industry has invested billions of dollars to prepare for the new standards and develop next-generation lighting. The new light bulb standards are taking effect at a time when the lighting industry, due to advances in LED products that often exceed EISA standards, is undergoing the most sweeping technological changes in decades. The LED industry is producing not just more efficient bulbs, but integrated fixtures that can be specially programmed to emit differing colors and types of light and have other potential applications. DOE has been funding solid state lighting research projects to bolster the LED industry, which is already the fastest-growing part of the global lighting market. Some analysts project that LEDs will make up at least half the global lighting market by 2020, driven by technical breakthroughs and enhanced demand from energy-efficiency laws in the United States and other nations. Some lighting executives argue that repealing EISA could undercut LED manufacturing efforts, where U.S. companies have a technological edge. The vast majority of the incandescent and CFL light bulbs Americans now use are imported from China and Mexico. China and other countries are investing heavily in LED production.

China eagerly awaits the commencement of the Games of the XXIX Olympiad on August 8, 2008 in Beijing. After seven years of preparations, China will host the preeminent sporting event of the year. In the words of Premier Wen Jiabao, the 2008 Olympic Summer Games provide an opportunity to demonstrate to the world how "democratic, open, civilized, friendly, and harmonious" China is. In addition, much like the two previous Asian hosts for Olympic Summer Games--Japan in 1964 and Korea in 1988--China views the 2008 Olympics as a showcase for its modern economy and a springboard for future economic growth. To the Chinese government, hosting the Olympics also signifies a turning point in its economic development. It provides an opportunity to begin the shift from an economy based on being the assembly platform for global manufacturing to one geared to providing goods and services for China's growing and prosperous middle class. The 2010 World Expo in Shanghai will be a similar opportunity to highlight China's economic progress. In an effort to ensure the success of the 2008 Olympics, the Chinese government has invested billions of dollars in sports facilities, housing, roads, mass transit systems, and other infrastructure. China hopes that its investments, when combined with the goodwill generated by the successful completion of the Olympics, will attract more tourists, businesses, and investors to China--and foster future economic growth in its wake. In addition, to counteract possible negative publicity about labor and environmental conditions in China, the government passed new labor laws and is promoting the 2008 Beijing Olympics as the "Green Olympics." If the post-Olympic economic records of past host cities and nations are any indication, however, it is uncertain that Beijing and China will see substantial economic benefits from this summer's games. Academic research on "mega-events"--such as the Olympics--has found that their economic benefits generally fail to meet pre-event expectations, and sometimes fall short of the costs of staging the event. Certain aspects of China's current economic circumstances make it more likely that the economic gains from the 2008 Beijing Olympics could be smaller than some pre-event expectations. There is a vigorous scholarly debate over the correct method of evaluating the economic impact of "mega-events," such as the Olympics. It is difficult to disentangle changes in economic growth, employment, inflation, tourism, and other possible effects caused by the mega-event from changes caused by other factors (currency appreciation, fiscal and monetary policy changes, etc.). In addition, certain types of investments related to mega-events, such as the construction of new stadiums, often fail to generate significant economic benefits after the mega-event is over. Plus, it is uncertain if economic activities undertaken as part of the preparation for the mega-event (for example, the construction of new mass transit lines) might not have taken place even if the mega-event had not occurred. Also, impact assessments of mega-events frequently ignore the "opportunity costs" associated with investments made before the event. For example, assessments often do not consider the possibility that the money spent on the new Olympic stadium might have generated greater economic benefits if spent on hospitals or schools. Finally, while the economic gains associated with the construction of new infrastructure are generally calculated, the economic costs associated with the displacement of people and business (for example, in the demolition and construction of new housing for the mega-events) often are not. Besides the methodological questions associated with assessing the economic effects of mega-events, there are also serious problems in methodological application. In many cases, the companies or individuals conducting the economic impact assessment prior to the mega-event have an incentive to overstate the potential gains and understate the potential costs. In some cases, the assessors present the costs of the mega-event (for example, the construction cost of new sports facilities) as benefits. In other cases, the assessors overstate the certainty and size of the "investment multiplier," the secondary benefits (for example, increased future tourism) associated with the mega-event. Few studies have been done comparing the pre-event projections of the economic impact of the Olympics to their post-event reality. A study of the 1994 Winter Olympics held in Lillehammer, Norway, determined that the pre-event economic impact studies systematically overstated the potential economic benefits of hosting the event, and that actual economic gains were comparatively small and short in duration. Another study of the Lillehammer Olympics concluded, "the long-term impacts are marginal and out of proportion compared to the high costs of hosting the [Olympic] Games." A Bank of China (BoC) study of 12 host countries for Olympic Games over the last 60 years reportedly concluded that nine of the economies--including Japan and South Korea--experienced declines in their average GDP growth rates in the eight years after the Olympics when compared to the eight years prior to the Olympics. The Chinese press has run several stories pondering the question, "Will [China] succumb to the so-called Post-Olympics Effect (POE)?" When China originally bid on hosting the 2008 Summer Olympics, it estimated the cost at $1.625 billion. Since then, several revised budgets have been released, raising the official cost to over $2 billion. Included in this figure is the expense of building or renovating 76 stadiums and sport facilities in the seven venues--Beijing, Hong Kong, Qingdao, Qinhuangdao, Shanghai, Shenyang, and Tianjin--at which events will take place. However, these figures only include the direct costs of construction of the Olympic sports facilities and related venues. According to one estimate, the actual total construction cost--including the capital spent on non-sport infrastructure--is expected to exceed $40 billion. By comparison, Greece spent an estimated $16 billion on the 2004 Olympic Summer Games. At a recent press briefing, The Beijing Organizing Committee for the Games of the XXIX Olympiad (BOCOG) criticized estimates of this sort, indicating that investments on transportation ($26.2 billion), energy ($10.0 billion), water resources ($2.4 billion), and the urban environment ($2.5 billion) are to be considered part of the budget of the city in which the capital outlay took place and not part of the cost of the Olympics. The $41.1 billion on non-sport capital investment went to a variety of projects. For example, in Beijing, 200 miles of roads were refurbished, two additional ring roads completed, and more than 90 miles of subway and light rail lines were added to the city's transportation system. A 9,000 room Olympic Village was also built in Beijing to house 16,000 athletes; it is to be converted into a modern apartment complex after the Olympics are over. Similar projects were also completed in the other six Olympic venues. In 2007, two Chinese economists, Zhang Yaxiong and Zhao Kun, published a study of the projected impact of the Beijing Olympics on the economic development of Beijing, its surrounding areas, and the rest of China. According to the authors, "Apart from its significance as a grand societal gathering, hosting the Olympic Games will greatly promote investment and consumption." Their model estimated that Olympics-related investments in Beijing increased the city's economic growth by 2.02% between 2002 and 2007, raised the surrounding area's growth by 0.23%, and advanced the rest of the nation's growth by 0.09%. The paper recounts other studies of the projected impact of the Beijing Olympics on China's economy. The authors report that a study by Gu et al. published in Chinese in 2003 predicted that the Olympics will increase Beijing's economic growth by 5% between 2003 and 2009. A 2005 study by Wei and Yan (also in Chinese) concluded that the Olympics would increase Beijing's economic growth by 0.8% from 2005 to 2008. All of these studies appear to suffer from one or more of the methodological problems frequently associated with impact analysis of mega-events. In their input-output analysis, Zhang and Zhao include both sport and non-sport facility investments as part of the Olympics-related investments--contrary to the stance of the BOCOG--coming up with a total investment for the 2008 Olympics of 282.53 billion yuan, or $41.3 billion. According to some analysts, the $41.3 billion in "investments" should be properly classified as a cost--not a benefit--of the Olympics. The paper also implicitly assumes that all the investment made would not have been made if China was not hosting the Olympics. Nor do Zhang and Zhao consider the "opportunity cost" of the Olympics-related capital outlay. For example, could the money spent on the new "Bird's Nest"(National Stadium) or the "Water Cube"(the National Aquatic Center) have been instead spent in Beijing on housing, medical facilities, or schools? In addition, the paper does not attempt to estimate the losses of the people displaced from their homes or places of employment so that the new Olympic facilities could be built. Another significant drawback of the paper is its apparent lack of consideration of China's current economic circumstance, particularly its twin problems of overinvestment and inflation. At a time when the Chinese government is concerned that its economy is overheated, and the rate of inflation is rising (7.1% in June 2008), the expenditures associated with the 2008 Summer Olympics may be exacerbating the nation's economic problems in two ways. First, the direct demand for raw materials, equipment, and labor to construct the Olympic facilities may be increasing upward pressure on prices. Second, materials and resources used in constructing Olympic facilities might have been used on arguably more productive and urgent construction projects. Given the experiences of past hosts of Olympic Summer Games and the current economic situation in China, many analysts believe the 2008 Olympics are unlikely to provide much of a stimulus--or much of a deterrent--for economic growth in Beijing or the rest of China. Although the Olympics-related capital outlay is seemingly large, it is small when compared to the annual value of construction in China and the overall size of China's economy. During the first half of 2008, the gross value of construction in China was 2.27 trillion yuan, or $388 billion. In addition, China's economy--25 trillion yuan ($3.6 trillion) in 2007--is already growing at over 10% per year. By comparison, the potential economic impact of the Olympics is small. It is also unclear if the Olympics will foster greater tourism in China. There are reports that a stricter visa policy was implemented in the run-up for the Olympics, and that foreign business travelers have had a difficult time obtaining visas or have had their multiple entries visa converted into single entry visas. As a result, China's trade shows that historically have been crowded with buyers have seen a decline in attendance. While the visa situation may return to normal after the Olympics have ended, the short-term effect on China's exporters has been considerable. According to China's National Tourism Administration, China received nearly 132 million "inbound tourists"--including over 26 million "foreigners" in 2007. China's domestic tourism has grown over the last decade from 644 million domestic tourists in 1997 to 1.610 billion in 2007. For Beijing, it is unlikely that the new Olympic facilities--including the Bird's Nest and the Water Cube--will dramatically increase tourism to China's capital city. Beijing's tourism bureau reportedly reduced its projection for August's foreign visitors from 500,000 to between 400,000 and 450,000--or about the same level as last year. Just like the case of Lillehammer, Beijing hotels built in anticipation of a surge in tourism are experiencing unexpectedly high vacancy rates. There are some possible unexpected economic benefits that might be attributable to the 2008 Olympics. U.S. companies operating in China report that the new labor laws are being enforced. Such changes in labor conditions are unlikely to be reversed after the Olympics are over. Similarly, while the factories around Beijing that were closed down to help reduce air pollution during the Olympics will more than likely reopen, the increased awareness of the sources of pollution may keep China from reverting to its pre-Olympics status. It would appear that the potential gains that China may hope to acquire from hosting the Olympics will be mostly in its public image, prestige, and soft power. In the week prior to the opening ceremonies, there were some indications that obtaining these gains may prove problematic. Despite repeated government assurances, the air quality in Beijing has remained an issue of concern for the athletes. There has also been controversy over open access to the Internet for journalists covering the Olympics. In addition, there is a "risk" that protests or demonstrations on human rights in China may detract from the image the Chinese government wishes to portray in its motto for the 2008 Summer Games--"One World, One Dream." If, once the closing ceremonies are over and the 2008 Beijing Olympics are done, China has obtained neither the economic nor political gains it sought, it can look ahead to the 2010 World Expo in Shanghai as another opportunity to showcase its achievements. Alternatively, the 2010 World Expo could also be a chance to build on the successful 2008 Beijing Olympics. In either case, China will most likely use the next three years to bolster its global image as an economic and political power.

China will host the 2008 Olympic Summer Games from August 8 to 24, 2008. Most of the events will be held in the vicinity of Beijing, with selected competitions held in Hong Kong, Qingdao, Qinhuangdao, Shanghai, Shenyang, and Tianjin. Since the International Olympic Committee's decision in July 2001 to select Beijing as the host for the 2008 Olympics, China has spent billions of dollars for facilities and basic infrastructure in preparation for the international event. China anticipates that the 2008 Olympics will provide both short-term and long-term direct and indirect benefits to its economy, as well as enhance the nation's global image. However, the experience of past host cities and China's current economic conditions cast serious doubt that the Games of the XXIX Olympiad will provide the level of economic growth being anticipated. This report will not be updated.

The United States occupies a unique position in the global economy as the largest investor and the largest recipient of foreign direct investment (FDI). As a basic premise, the U.S. historical approach to international investment has aimed to establish an open and rules-based system that is consistent across countries and in line with U.S. economic and national security interests. This policy also has fundamentally maintained that FDI has positive net benefits for the United States and foreign investors, except in certain cases in which national security concerns outweigh other considerations. The Trump Administration has not yet offered a formal statement on its foreign investment policy relative to the Administration's "America First" policy. Commerce Secretary Wilbur Ross stated at a June 2017 SelectUSA investment summit that the Administration welcomes foreign investment into the U.S. economy. According to the United Nations, the global outward direct investment position in 2016 was recorded at around $26 trillion. The U.S. direct investment position, or the cumulative amount, was recorded at around $6.4 trillion in 2016, as indicated in Figure 1 . Hong Kong, the United Kingdom, Japan, and Germany rank as the next largest overseas direct investors, with individual outward investment positions about one-fourth or less than that of the United States. For the United States, the Commerce Department publishes data on the U.S. direct investment position (both inward and outward) using three different measures: historical cost, current cost, and market value, which is closest to the values calculated by the United Nations. These measures act in lieu of a price deflator to represent the value of an investment at the time of the investment (historical cost), the current replacement cost of an investment (current cost), and the stock market valuation of an investment (market value). Current estimates indicate that U.S. direct investment abroad (USDIA) in 2016 measured at historical cost, at current cost, and at market value increased by $304 billion, $304 billion, and $433 billion, respectively, to reach cumulative amounts of $5.4 trillion, $5.9 trillion, and $7.4 trillion. The increase in the value of USDIA measured at market value from 2015 to 2016 reflects price increases on equity assets that were partly offset by decreases from foreign exchange changes. As indicated, Figure 2 shows the cumulative position for USDIA and foreign direct investment in the United States (FDIUS) in market value terms. Elsewhere in this report, detailed data on foreign investment are presented on a historical cost basis. On an annual basis, U.S. direct investment abroad, or new spending by U.S. firms on businesses and real estate abroad, rose slightly in 2016 above that invested in 2015 to reach $312 billion, compared with a decline in investment spending in 2013 and 2014, according to balance of payments data by the Department of Commerce. At the same time, foreign direct investment in the United States in 2016 fell by 5.0% to $479 billion from the values recorded in the previous year. From 2006 to 2010, U.S. direct investment abroad was about a third more than the amount foreigners invested in the U.S. economy, based on balance of payments data. In 2016, foreign direct investment in the United States was greater than U.S. direct investment abroad for a second year in a row, something that has not happened since the early 2000s. A sharp drop in USDIA that occurred in 2005 reflects actions by U.S. parent firms to reduce the amount of reinvested earnings going to their foreign affiliates for distribution to the U.S. parent firms in order to take advantage of one-time tax provisions in the American Jobs Creation Act of 2004 ( P.L. 108-357 ). In general, U.S. and global foreign direct investment annual flows have not regained the amounts recorded in 2007, prior to the global financial crisis, but foreign direct investment in the United States in 2015 and 2016 surpassed in nominal terms the amount invested in 2007. Foreign direct investment in the United States fell by a fourth from $287 billion in 2013 to $207 billion in 2014, as indicated in Figure 3 . In part, the drop in FDIUS reflected a $130 billion stock buyback between Verizon and France's Vodafone. Generally, relative rates of growth between U.S. and foreign economies largely determine the direction and magnitude of direct investment flows. These flows also are affected by relative rates of inflation, interest rates, tax rates, and expectations about the performance of national economies, which means the investment flows can be quite erratic at times in response to various economic forces. According to balance of payments data, USDIA in 2016 was comprised 96% of reinvested earnings, 10.0% of equity capital, and -5.8% of intercompany debt, or a net flow of funds from foreign affiliates back to the U.S. parent firms, as indicated in Figure 4 . In comparison, equity capital accounted for 53.0% of foreign direct investment in the United States, with reinvested earnings and intercompany debt accounting for around 20% and 26.6%, respectively. Despite concerns that USDIA occurs at the expense of investment in the United States by firms shifting capital from the U.S. parent company to foreign affiliates, the reliance on reinvested earnings suggests that much of USDIA is financed by the foreign affiliates. This reliance on reinvested earnings may reflect the prominence of U.S. direct investment in the highly developed economies of Europe in which equity-financed investment is not as widely used as it is in the United States. An increase in stock market valuations around the world from 2012 to 2014 increased the overall value of U.S. direct investment abroad by nearly $2 trillion, measured at market value, but then declined in value in both 2014 and 2015. During the same period, the market value of foreign firms operating in the United States experienced a valuation increase of $1.6 trillion from 2012 to 2014, but then experienced annual increases of $500 billion in 2014 and $200 billion in 2015. Some observers argue that U.S. direct investment abroad shifts jobs overseas by reducing U.S. exports, but U.S. data indicate that foreign investment apparently stimulates intrafirm trade. This type of trade is characterized by the sum of (1) trade between U.S. parent companies and their foreign affiliates, and (2) the U.S. affiliates of foreign firms and their foreign parent companies. As indicated in Table 1 , total U.S. trade in 2014 was $1.6 trillion in exports and $2.3 trillion in imports. Of this amount, trade between U.S. parent companies and their foreign affiliates, identified as multinational companies (MNCs), accounted for $315 billion in both exports and imports, while the affiliates of foreign firms operating in the United States accounted for $189 billion in exports and $521 billion in imports. In total, intrafirm trade accounted for 31% of exports and 35% of imports. As indicated in Table 2 , the overseas direct investment position of U.S. firms on a historical-cost basis, or the cumulative amount at book value, reached $5.0 trillion in 2015, the latest year for which such detailed investment position data are available. About 71% of the accumulated U.S. foreign direct investment is concentrated in high-income developed countries that are members of the OECD: investments in Europe alone account for over half of all U.S. direct investment abroad, or $2.9 trillion. Europe has been a prime target of U.S. investment since U.S. firms first invested abroad in the 1860s. American firms began investing heavily in Europe following World War II as European countries rebuilt their economies and later when they formed an intra-European economic union. The tendency for U.S. firms to have placed the largest share of their annual investments in developed countries where consumer tastes are similar to those in the United States increased after the mid-1990s. In the last half of the 1990s, USDIA experienced a dramatic shift from developing countries to the richest developed economies: the share of U.S. direct investment going to developing countries fell from 37% in 1996 to 21% in 2000. By location, in 2015, U.S. firms focused 71% of their direct investments, or their total accumulative position, in developed economies, including 59% of their investments in the highly developed economies of Europe, as indicated in Figure 5 . Another 17% of the U.S. direct investment position abroad is located in Latin America and 15% of investment is located in Asia, including Australia, Japan, New Zealand, and South Korea. Direct investment in Africa accounts for about 1.3% of total U.S. direct investment abroad in 2015, with investments in the Middle East accounting for about 1% of the total. By country, the Netherlands is the largest recipient of USDIA, reflecting a range of factors that make it a favorable place for U.S. firms to invest, as indicated in Figure 6 . Following the Netherlands, the United Kingdom, Luxembourg, Canada, and Ireland are top locations for U.S. overseas investors. Investments in European countries and Canada likely reflect long-standing economic relationships, or close physical proximity to the United States. Patterns in U.S. direct investment abroad often reflect fundamental changes that occur in the U.S. economy during the same period. As investment funds in the U.S. economy shifted from extractive, processing, and manufacturing industries toward high technology services and financial industries, U.S. investment abroad mirrored these changes. As a result, U.S. direct investment abroad focused less on the extractive, processing, and basic manufacturing industries in developing countries and more on high technology, finance, and services industries located in highly developed countries with advanced infrastructure and communications systems. Annual investments in most sectors increased in 2015 over the amount invested in 2014, except for investment in the banking, finance, and insurance sectors, as indicated in Figure 7 . Investments by holding companies generally reflect foreign investment through existing foreign subsidiaries of U.S. parent firms, rather than through the U.S. parent firms. Generally, service-oriented sectors, particularly computer systems design and technical consulting, continued to grow through 2015. Nations once hostile to American direct investment now compete aggressively for U.S. direct investment by offering incentives to U.S. firms. A debate continues within the United States, however, over the relative merits of USDIA. Some Americans believe that USDIA, directly or indirectly, shifts some jobs to low-wage countries. They argue that such shifts reduce employment in the United States and increase imports, thereby negatively affecting U.S. employment, the trade deficit, and economic growth. Economists generally believe that firms invest abroad because those firms possess some special process or product knowledge or because they possess special managerial abilities which give them an advantage over foreign firms. On the whole, data indicate that U.S. firms invest abroad to serve the foreign local market, rather than to produce goods to export back to the United States, although some firms do establish overseas operations to replace U.S. exports or production, or to gain access to raw materials, cheap labor, or other markets. In 2014, the latest year for which detailed USDIA data are available, 10.0% of foreign affiliate sales were to U.S. parent companies, as indicated in Figure 8 . The intrafirm share of U.S. trade is higher than the average for Mexico and Canada (20.0% and 27%, respectively) in part due to formal trade agreements and the close physical proximity of the trading partners. U.S. firms operating in China had 82% of their sales in China and 6% of their sales back to the United States. USDIA is dominated by very large firms (more than 10,000 employees) that accounted for over three-fourths of employment. Investments by holding companies reflect USFDI through a foreign affiliate, rather than through the parent company itself. This ownership by holding companies blurs somewhat the data on investment flows and investment positions by industry and country. U.S. multinational corporations (MNCs) rank among the largest U.S. firms. According to data collected by the Commerce Department's Bureau of Economic Analysis (BEA), when American parent companies and their foreign affiliates are compared by the size structure of employment classes, 40% of the more than 2,000 U.S. parent companies employ more than 2,499 persons. These large U.S. parent companies account for 95% of the total number of people employed by U.S. MNCs. Employment abroad is even more concentrated among the largest foreign affiliates of U.S. parent firms: the largest 2% of the affiliates account for 90% of affiliate employment. While U.S. MNCs used their economic strengths to expand abroad between the 1980s and early 2000s, the U.S.-based parent firms lost market positions at home, in large part due to corporate downsizing efforts to improve profits. In addition, U.S. multinational companies were disproportionately negatively affected in 2008 and 2009 by the global economic recession as a result of the geographic distribution of the multinational firms' activities and the industrial composition of their operations. U.S. MNC parent companies' share of all U.S. business gross domestic product (GDP)--the broadest measure of economic activity--declined from 32% to 25% from 1977 to 1989. In 2007 (the latest year for which estimates are available), U.S. parent companies accounted for about 21% of total U.S. business activity. These MNC parent companies accounted for about 41% of total U.S. manufacturing activity, down from 46% in 2000. As U.S. MNC parent companies were losing their relative market positions at home, their cumulative amount of direct investment abroad doubled. This increase did spur a shift in some economic activity among the U.S. MNCs from the U.S. parent companies to the foreign affiliates. During the period from 2000 to 2007, the foreign affiliates increased their share of the total economic activity within U.S. MNCs--the combined economic output of the U.S. parent and the foreign affiliates--from 22% to 30%. By the end of 2014, there were more than 3,790 U.S. parent companies with more than 32,000 foreign affiliates, as indicated in Table 3 . In comparison, foreign firms had over 6,600 affiliates operating in the United States. U.S. parent companies employed over 26 million workers in the United States, compared with the 13.8 million workers employed abroad by U.S. firms and more than 6.6 million persons employed in the United States by foreign firms. Although the U.S.-based affiliates of foreign firms employ fewer workers than do the foreign affiliates of U.S. firms, they paid nearly 80% more in aggregate employee compensation in the United States than did the foreign affiliates of U.S. parent companies. The data also suggest that U.S. parent companies are more efficient than either the U.S. affiliates of U.S. firms or foreign firms operating in the United States, with higher output per employee. Foreign firms operating in the United States are more capital intensive relative to employment than U.S. parent firms or U.S. affiliates, likely reflecting the newer age of the capital stock of the foreign firms. The U.S. affiliates of foreign companies, however, had one-quarter higher average value of gross output than did the foreign affiliates of U.S. firms operating abroad. The foreign affiliates of U.S. firms, however, had total sales that were about 70% higher than those of the U.S. affiliates of foreign firms. The foreign affiliates of U.S. firms, however, paid about twice as much in taxes to foreign governments than did the affiliates of foreign firms operating in the United States. The overseas affiliates of U.S. parent companies also paid more than twice as much in taxes in relative terms than did U.S. parent companies and foreign-owned affiliates operating in the United States. One of the most commonly expressed concerns about U.S. direct investment abroad is that U.S. parent companies invest abroad in order to send low-wage jobs overseas. Such effects are difficult to measure because they are small compared with much larger changes occurring within the U.S. economy. In addition, no U.S. government agency collects data on U.S. firms in such a way that it is possible to track a plant closing in the United States with a comparable plant opening in a foreign country. As a result, most data on the activity of U.S. firms shifting plants or jobs abroad are anecdotal. A cursory examination of the data seems to indicate that employment losses among parent firms occurred simultaneously with gains in foreign subsidiaries, thereby giving the impression that jobs are being shifted abroad. Employment patterns, however, are determined by a broad range of factors, and shifts in plant locations by U.S. multinational firms likely represent a small part, at best, of the overall pattern of employment in the United States. Employment among U.S. parent companies fell during the early 1980s, but increased in the 1992-2000 period, from 17.5 million to 23.9 million. From 2000 to 2003, however, employment among U.S. parent companies fell by 12% to 21.1 million, reflecting the economic downturn at the time, but then rose after 2003 to reach 22 million in 2007. Employment fell again in 2008 to 21 million as the rate of U.S. economic growth slowed. In 2014, employment among U.S. parent companies expanded by nearly 14% over that in 2013 to reach 26.6 million, as indicated in Figure 9 . During this period, employment among the foreign affiliates of U.S. firms rose to 13.8 million in 2014, accounting for 34.4% of total U.S. multinational company employment, up from 29% in 2000. During economic downturns, U.S. parent firms and their foreign affiliates have gained or lost employment in many of the same industries, reflecting the growing interconnected nature of the global and U.S. economies. Such interconnections also complicate efforts to establish major trends in outsourcing. During recent economic downturns, both U.S. parent firms and their foreign affiliates lost employment in the petroleum and finance sectors, although both gained employment in the services and wholesale trade sectors. Furthermore, employment gains and losses among MNCs more likely reflect fundamental shifts within the U.S. economy than any formal or informal efforts to shift employment abroad. Employment trends among foreign affiliates also reflect growing trade links between the United States and other areas, particularly Asia, as indicated in Figure 10 . Between 2000 and 2014, employment among the foreign affiliates of U.S. parent firms tripled in Latin America, and nearly tripled among affiliates located in Asia, particularly in China. In other geographical regions, employment gains were less robust. Affiliates in Europe, for instance, which had been the largest employer, fell to second place behind affiliates in Asia. In addition, affiliates in Canada and Mexico experienced relatively modest increases in employment. American direct investment abroad has grown sharply since the mid-1990s, raising questions for many observers about the effects of such investment on the U.S. economy. These questions seem pertinent since American multinational corporations lost shares of U.S. GDP over the last decade and their domestic employment had declined until the mid-1990s. Increased economic activity abroad relative to that in the United States increased overseas affiliate employment in some industries, including manufacturing. Most of this affiliate activity, however, is geared toward supplying the local markets. Some observers believe U.S. direct investment abroad is harmful to U.S. workers because it shifts jobs abroad. There is no conclusive evidence in the data collected to date to indicate that current investment trends are substantially different from those of previous periods or that jobs are moving offshore at a rate that is significantly different from previous periods. There are instances when firms shift activities abroad to take advantage of lower labor costs. However, it is clear from the data that the majority of U.S. direct investment abroad is in developed countries where wages, markets, industries, and consumers' tastes are similar to those in the United States. U.S. direct investment in these developed countries is oriented toward serving the markets where the affiliates are located and they tend, in the aggregate, to boost exports from the United States. In addition, foreign firms have been pouring record amounts of money into the United States to acquire existing U.S. firms, to expand existing subsidiaries, or to establish "greenfield" or new investments. In the 114 th and 115 th Congresses, Members of Congress expressed concerns about U.S. direct investment abroad through measures that would offer certain tax advantages to U.S. firms that shifted parts of their operations back to the United States and through measures that are directed at curbing tax havens and tax inversions and other practices that shift taxes from the United States to foreign locations.

The United States is the largest direct investor abroad and the largest recipient of foreign direct investment in the world. For some Americans, the national gains attributed to investing overseas are offset by such perceived losses as offshoring facilities, displacing U.S. workers, and lowering wages. Some observers believe U.S. firms invest abroad to avoid U.S. labor unions or high U.S. wages, but 74% of the accumulated U.S. foreign direct investment is concentrated in high-income developed countries. In recent years, the share of investment going to developing countries has fallen. Most economists argue that there is no conclusive evidence that direct investment abroad as a whole leads to fewer jobs or lower incomes overall for Americans. Instead, they argue that the majority of jobs lost among U.S. manufacturing firms over the past decade reflect a broad restructuring of U.S. manufacturing industries responding primarily to domestic economic forces. In recent Congresses, Members have introduced a number of measures that would affect U.S. multinational companies in their foreign investment activities. In the 115th Congress, H.R. 685 and S. 247 (Bring Jobs Home Act) would provide certain tax exemptions to U.S. multinational firms to induce them to redirect economic activity from a foreign subsidiary to a domestic U.S. operation. In the 114th Congress, Members also introduced similar measures, including H.R. 297, the Stop Tax Haven Abuse Act of 2015, introduced by Representative Lloyd Doggett on January 13, 2015, and companion measure S. 174, introduced by Senator Sheldon Whitehouse; and H.R. 415, the Stop Corporate Inversions Act of 2015, introduced by Representative Sander Levin on January 20, 2015, and companion measure S. 198, introduced by Senator Richard Durbin. While H.R. 415 and S. 198 are directed at tax inversions, H.R. 297 and S. 174 address a number of tax and financial issues relative to U.S. multinational firms, including the use of foreign tax havens to evade U.S. taxes; money laundering; corporate offshore tax avoidance; and corporate tax inversions.

Since 1995, legislation that would guarantee collective bargaining rights for state and local public safety officers has been introduced in Congress. The Public Safety Employer-Employee Cooperation Act (PSEECA)--introduced in the 111 th Congress as H.R. 413 by Representative Dale E. Kildee, S. 1611 by Senator Judd Gregg, and S. 3194 and S. 3991 by Senator Harry Reid--would recognize such rights by requiring compliance with federal regulations and procedures if these rights are not provided under state law. Supporters of the measure maintain that strong partnerships between public safety officers and the cities and states they serve are not only vital to public safety, but are built on bargaining relationships. Opponents argue, however, that the bill infringes on an area that has traditionally been within state control. This report reviews the PSEECA and discusses the possible impact of the legislation. The report also identifies existing state laws that recognize collective bargaining rights for public safety employees, and considers the constitutional concerns raised by the measure. Under the PSEECA, the Federal Labor Relations Authority (FLRA) would be required to determine whether a state substantially provides for specified labor-management rights within 180 days of the measures enactment. If the FLRA determines that a state does not substantially provide for such rights, the state would be subject to regulations and procedures prescribed by the FLRA. The FLRAs regulations and procedures would be consistent with the labor-management rights identified in the PSEECA. These rights include granting public safety officers the right to form and join a labor organization that is, or seeks to be, recognized as the exclusive bargaining representative of such employees; requiring public safety employers to recognize the employees labor organization (freely chosen by a majority of the employees), to agree to bargain with the labor organization, and to commit any agreements to writing in a contract or memorandum of understanding; providing for bargaining over hours, wages, and terms and conditions of employment; making available an interest impasse resolution mechanism, such as fact-finding, mediation, arbitration, or comparable procedures; and requiring the enforcement of all rights, responsibilities, and protections provided by state law and any written contract or memorandum of understanding in state courts. The FLRA would have one year from the date of enactment of the PSEECA to issue regulations that establish these rights for public safety officers in states that do not substantially provide them. The new regulations would become applicable in noncomplying states either two years after the date of enactment of the PSEECA or on the date of the end of the first regular session of the states legislature that begins after the date of enactment of the PSEECA, whichever is later. The PSEECA defines the term public safety officer to include law enforcement officers, firefighters, and emergency medical services personnel. An employer, for purposes of the act, includes any state, political subdivision of a state, the District of Columbia, and any territory or possession of the United States that employs public safety officers. A political subdivision of a state that has a population of less than 5,000 or that employs fewer than 25 full time employees, however, may be exempted from the acts requirements. The sponsors of the PSEECA appear to rely on the Commerce Clause of the U.S. Constitution for the authority to enact the measure. Section 2(5) of the PSEECA states, The potential absence of adequate cooperation between public safety employers and employees has implications for the security of employees, impacts the upgrading of police and fire services of local communities, the health and well-being of public safety officers, and the morale of the fire and police departments, and can affect interstate and intrastate commerce. During the 110 th Congress, the House Committee on Education and Labor further observed that there is "little question that public safety employees [sic] and their role in homeland security affects interstate commerce.... The economic impact of terrorism and natural disasters is not limited to the locality where these events occur. Rather, such events have regional and economic impacts for which the federal government must be responsive." Whether the Commerce Clause provides sufficient authority to support the PSEECA, however, may not be entirely certain. Although the U.S. Supreme Court has found that the Fair Labor Standards Act, a statute enacted pursuant to Congresss authority under the Commerce Clause, can be applied to employees of a public mass-transit authority, more recent decisions involving the Commerce Clause suggest that the regulation of labor-management relations for public safety officers may not be sufficiently related to commerce and may be invalidated, if challenged. In United States v. Lopez , a 1995 case involving the Gun-Free School Zones Act of 1990 and Congresss authority under the Commerce Clause, the Court identified three broad categories of activity that Congress may regulate pursuant to its commerce power: First, Congress may regulate the use of channels of interstate commerce.... Second, Congress is empowered to regulate and protect the instrumentalities of interstate commerce, or persons or things in interstate commerce, even though the threat may come only from intrastate activities.... Finally, Congress commerce authority includes the power to regulate those activities having a substantial relation to interstate commerce ... i.e. , those activities that substantially affect interstate commerce. The Lopez Court concluded that the act, which prohibited any individual from possessing a firearm at a place the individual knew or had reasonable cause to believe was a school zone, exceeded Congresss authority under the Commerce Clause because the possession of a gun in a local school zone did not have a substantial effect on interstate commerce. The Court maintained that upholding the act would require the Court to "pile inference upon inference in a manner that would bid fair to convert congressional authority under the Commerce Clause to a general police power of the sort retained by the States." Similarly, in United States v. Morrison , a 2000 case involving Congresss commerce power and a section of the Violence Against Women Act, the Court found that Congress exceeded its authority because gender-motivated crimes of violence occurring within a state have no substantial effect on interstate commerce. The Court maintained that its cases upholding federal regulation of intrastate activity all involve activity that reflects some form of economic endeavor. The Court noted that the regulation and punishment of intrastate violence that is "not directed at the instrumentalities, channels, or goods involved in interstate commerce has [sic] always been the province of the States." Most recently, in Gonzales v. Raich , the Court upheld the Controlled Substances Act (CSA) as a valid exercise of Congresss commerce authority. The CSA was challenged by two users of medical marijuana that was locally grown and prescribed in accordance with California law. They argued that Congress lacked the authority to prohibit the intrastate manufacture and possession of marijuana for medical purposes. Citing its decision in Wickard v. Filburn , a 1942 case that recognized Congresss authority under the Commerce Clause to regulate intrastate activities, the Court reiterated that even if an activity is "local and ... may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce." The Court maintained that the production of a commodity has a substantial effect on supply and demand in the national market for that commodity, and observed that there was a likelihood that the high demand in the interstate market would draw marijuana grown for home consumption into that market. The Court distinguished Raich from Lopez and Morrison by noting that the CSA, unlike the Gun-Free School Zones Act and the Violence Against Women Act, regulates activities that are "quintessentially economic." The Court indicated that "[t]he CSA is a statute that regulates the production, distribution, and consumption of commodities for which there is an established, and lucrative, interstate market. Prohibiting the interstate possession or manufacture of an article of commerce is a rational (and commonly utilized) means of regulating commerce in that product." While the PSEECA would not seem to regulate the channels or instrumentalities of interstate commerce, it has been argued that it would regulate an activity that substantially affects interstate commerce. By "improving the cohesiveness and effectiveness of public safety employers and their employees," it is believed that the PSEECA would minimize the costs associated with terrorism and natural disasters. During the 110 th Congress, the House Committee on Education and Labor noted, "The economic impact of terrorism and natural disasters is not limited to the locality where these events occur. Rather, such events have regional and national economic impacts for which the federal government must be responsive." Some maintain, however, that public safety employment is not an economic activity that may be regulated pursuant to Congresss commerce authority. In light of the Courts decisions in Lopez , Morrison , and Raich , it has been argued that police work, firefighting, and emergency medical services are not economic enterprises or activities related to commercial transactions. Rather, such duties are public services provided by states and localities to their citizens. Moreover, the PSEECA would not be regulating the production, distribution, or consumption of a commodity for which there is an interstate market by requiring collective bargaining rights for public safety officers. While the PSEECA would seem to raise questions involving Congresss authority under the Commerce Clause, it does not appear to present concerns over the commandeering of state or local regulatory processes in violation of the Tenth Amendment. In New York v. United States , a 1992 case involving a federal requirement that gave states a choice between taking title to radioactive waste or regulating in accordance with congressional directives, the Court indicated that "Congress may not simply 'commandee[r] the legislative processes of the States by directly compelling them to enact and enforce a federal regulatory program.'" Unlike the provision at issue in New York , the PSEECA would not seem to direct states to legislate collective bargaining for public safety officers. Instead, states would be given the option of either enacting legislation that satisfies the federal standards or becoming subject to the FLRAs regulations. One might also contend that the measure does not appear to require state or local governments to implement a federal regulatory program. Rather, a federal collective bargaining scheme for public safety officers would be implemented by the FLRA only if a state chose not to enact a program of its own. The PSEECA has generated strong reactions from both the business and organized labor communities, with the former generally opposing the measure and the latter supporting it. Critics of the act emphasize the administrative and personnel costs that would likely be expended to comply with the measure. Because of the difficulty in predicting how many workers may organize or what terms and conditions would be negotiated, the cost of the measure for state and local governments was not estimated by the Congressional Budget Office (CBO) when earlier versions of the legislation were considered. CBO did estimate, however, that the FLRA would need to spend an additional $3 million to develop regulations, to determine whether states were in compliance with the law, and to respond to judicial review of its determinations. Indeed, some have maintained that the PSEECA could increase demands on the FLRA, either by stretching its resources or requiring new staff. Although subsequent costs are difficult to predict because states may respond differently and, once given the right, public safety officers may or may not unionize, CBO estimated that the FLRA would spend about $10 million annually to administer the act. Opponents of the PSEECA have also argued that the measure could raise the cost of public safety because of potentially higher wages and benefits, as well as the cost of negotiating and administering collective bargaining agreements. Supporters of the PSEECA contend that the measure would give many public safety workers the right to organize and bargain collectively--rights that they may not currently have. The arguments in support of the act are generally based on what proponents maintain are the benefits of collective bargaining. For example, collective bargaining may improve the hours, pay, benefits, and working conditions of public safety workers. Higher pay and better working conditions may reduce turnover. Arguably, lower turnover could reduce the cost of hiring and training new workers. Supporters also argue that the PSEECA would give workers a "voice" in the workplace. They maintain that unions provide workers an additional way to communicate with management. Instead of expressing their dissatisfaction by quitting, workers can use formal procedures to resolve issues relating to working conditions or other matters. Thus, according to supporters, the PSEECA would give labor and management a way to work together to resolve differences. Therefore, supporters further maintain that, by improving labor-management relations, the measure would improve public safety.

Since 1995, legislation that would guarantee collective bargaining rights for state and local public safety officers has been introduced in Congress. The Public Safety Employer-Employee Cooperation Act (PSEECA)--introduced in the 111th Congress as H.R. 413 by Representative Dale E. Kildee, S. 1611 by Senator Judd Gregg, and S. 3194 and S. 3991 by Senator Harry Reid--would recognize such rights by requiring compliance with federal regulations and procedures if these rights are not provided under state law. Supporters of the measure maintain that strong partnerships between public safety officers and the cities and states they serve are not only vital to public safety, but are built on bargaining relationships. Opponents argue, however, that the bill infringes on an area that has traditionally been within state control. This report reviews the PSEECA and discusses the possible impact of the legislation. The report also identifies existing state laws that recognize collective bargaining rights for public safety employees, and considers the constitutional concerns raised by the measure.

Almost four decades since the end of the Vietnam War, the controversy surrounding the spraying of an herbicide known as "Agent Orange" and the exposure of Vietnam-era veterans to this herbicide continues. Since the late 1970s, Vietnam-era veterans have voiced concerns about how exposure to Agent Orange may have affected their health and caused certain disabilities, including birth defects in their children, and now their grandchildren. The Department of Veterans Affairs (VA) received the first claims asserting conditions related to Agent Orange in 1977. Since then, Vietnam-era veterans have made efforts to obtain disability compensation and health care from Congress and through the judicial system. In response to issues raised by Vietnam-era veterans, Congress has passed legislation to research the long-term health effects of Agent Orange on Vietnam veterans and to provide benefits and services to those who may have been exposed to it. In addition, the courts have addressed some concerns of Vietnam-era veterans. This report provides an overview of how Congress and the judiciary have addressed the concerns of Vietnam-era veterans and briefly describes some of the current issues raised by Vietnam-era veterans. This report should be read in conjunction with CRS Report R41405, Veterans Affairs: Presumptive Service Connection and Disability Compensation . The first part of the report discusses previous legislative efforts to address health care and disability compensation issues of Vietnam-era veterans exposed to Agent Orange. The second part discusses litigation pertaining to Agent Orange. The last part of the report briefly addresses current major issues related to Agent Orange and Vietnam-era veterans. In addition, the appendixes contain three tables. Table A-1 provides a summary of congressional action related to health care for Vietnam-era veterans. Table B-1 provides a list of diseases and conditions that are presumptively service-connected with exposure to Agent Orange. Lastly, Table B-2 provides a list of diseases and conditions not presumed to be service-connected. As part of a military strategy to remove foliage that provided cover for the enemy, to destroy enemy crops, and to destroy tall grasses and bushes from the perimeters of U.S. military bases, the U.S. military--from 1962 to 1971--sprayed tactical herbicides in combat military operations in Vietnam. The U.S. Air Force sprayed nearly 19 million gallons of herbicides in Vietnam, of which at least 11 million gallons were Agent Orange--making it the most widely used herbicide in the war. "Agent Orange (so named because of orange color stripes on the barrels used to store and ship the chemical) was a 50-50 mixture of the herbicides 2,4,5-T and 2,4-D." This mixture was contaminated with varying concentrations of numerous dioxins, including 2,3,7,8-tetrachlorodibenzo-pdioxin (TCDD) during the manufacturing process. This contaminant was shown to be highly toxic in animals, and it was implicated in birth defects seen in mice. However, its effects on humans have not been fully understood. It is important to note that "Agent Orange" and "dioxin" are not the same. For simplicity the term Agent Orange is used throughout this report. Spraying of Agent Orange occurred over inland forests at the junction of the borders of Cambodia, Laos, and South Vietnam; inland jungles north and northwest of Saigon; mangrove forests on the southernmost peninsula of Vietnam; and mangrove forests along major shipping channels southeast of Saigon. Initially, the Department of Defense (DOD) maintained that only a limited number of U.S. military personnel could be positively identified as having been exposed to Agent Orange in South Vietnam (e.g., the crews of aircraft that were used to spray herbicides). However, following the publication of a 1979 General Accounting Office (GAO, now called Government Accountability Office) report documenting ground troop exposure, DOD acknowledged that ground troops were also exposed to Agent Orange. Likewise, the Department of Veterans Affairs (VA) consistently took the position that because the long-term exposure to Agent Orange was unclear, and because of scientific uncertainty of the evidence linking Agent Orange to specific illnesses, it could not compensate veterans who alleged that exposure to Agent Orange had caused their diseases. In testifying before the House Committee on Veterans' Affairs, the then Administrator of Veterans Affairs stated: Unless or until some such latent effects of Agent Orange or its derivative components are scientifically documented there are intrinsic limitations to VA's authority to allow these [Agent Orange] claims under current law. Though I cannot emphasize enough our policy to resolve reasonable doubt as to service incurrence of disabilities in favor of claimants, there is currently no medical basis upon which adverse health effects of late-post-exposure onset can be reasonably tied to Agent Orange. In December 1979, Congress passed the Veterans Health Programs Extension and Improvement Act of 1979 ( P.L. 96-151 ) and directed the VA to investigate the long-term effects of dioxin exposure during the Vietnam War. In 1981, Congress passed the Veterans' Health Care, Training, and Small Business Loan Act of 1981 ( P.L. 97-72 ) and required the VA to include the study of other environmental exposures that may have occurred during the Vietnam conflict. However, the VA never designed a protocol for conducting the study, and responsibility for conducting the study was transferred to the Centers for Disease Control and Prevention (CDC). In 1987, the CDC ceased attempts to produce a study and never released any findings. Although Vietnam-era veterans continued to urge Congress to establish policies for health care and disability compensation (see text box "Eligibility for Health Care and Disability Compensation") for Agent Orange exposure, a lack of a substantial, scientific consensus on the potential health effects of Agent Orange in Vietnam veterans and their offspring impeded those efforts. Since the late 1970s and early 1980s, disability compensation policies and health care for possible adverse health outcomes pertaining to veterans exposed to Agent Orange have proceeded on two parallel tracks: through legislation and through the judicial system. In April 1970, Congress held the first of many hearings on the health effects of Agent Orange. Policy makers began to address the health concerns of Vietnam-era veterans in 1981 with the passage of the Veterans' Health Care, Training and Small Business Loan Act ( P.L. 97-72 ). Since the enactment of P.L. 97-72 , Congress has from time to time passed legislation to provide medical care to veterans--and to some of their offspring--who may have been exposed to Agent Orange. In particular, Congress has addressed specific health care concerns of male and female Vietnam-era veterans. These concerns typically involve adverse reproductive effects. For instance, for male veterans, service in Vietnam has been associated with one particular adverse reproductive outcome: spina bifida. However, among female veterans, Vietnam service has been associated with the risk of having children with a wide range of birth defects. Therefore, special programs have been established based on gender. Table A-1 summarizes major legislation pertaining to health care for Vietnam-era veterans who served in Vietnam or other select locations. In general, Congress has passed legislation to provide health care to Vietnam-era veterans and, when warranted, their children--even though according to the Institutes of Medicine (IOM) there was no definitive scientific evidence showing that the disorders treated were related to the exposure. Nevertheless, for the purposes of disability compensation, Congress and the VA have relied on scientific evidence concerning Agent Orange exposure during Vietnam service and diseases and conditions suspected to be associated with such exposure. Since the 1980s, two major laws have affected disability compensation policies of Vietnam-era veterans exposed to Agent Orange. The Veterans' Dioxin and Radiation Exposure Compensation Standards Act of 1984 ( P.L. 98-542 ) required the VA to develop regulations for disability compensation to Vietnam veterans who may have been exposed to Agent Orange. Veterans seeking compensation for a condition they thought to be related to herbicide exposure had to provide proof of a service connection that established the link between herbicide exposure and disease onset. P.L. 98-542 authorized disability compensation payments to Vietnam veterans for the skin condition chloracne, which is associated with herbicide exposure. In 1991, the Agent Orange Act ( P.L. 102-4 ) established a presumption of service connection for diseases associated with herbicide exposure (see text box "What is Presumption of Service Connection ?"). The act directed the VA to "prescribe regulations providing that a presumption of service connection is warranted for [a] disease" when a positive statistical association exists between Agent Orange exposure and the occurrence of that disease in humans. In making this determination, P.L. 102-4 authorized the VA to contract with the Institute of Medicine (IOM) of the National Academy of Sciences (NAS) to review and summarize the scientific evidence concerning the association between exposure to herbicides used in support of military operations in Vietnam during the Vietnam era and each disease suspected to be associated with such exposure. P.L. 102-4 mandated that IOM determine, to the extent possible, (1) whether there is a statistical association between the suspect diseases and herbicide exposure, taking into account the strength of the scientific evidence and the appropriateness of the methods used to detect the association; (2) the increased risk of disease among individuals exposed to herbicides during service in Vietnam during the Vietnam era; and (3) whether there is a plausible biological mechanism or other evidence of a causal relationship between herbicide exposure and the health outcome. The law requires the VA, within 60 days of receiving a report from IOM regarding the relationship between exposure to herbicides used in Vietnam during the Vietnam War and certain diseases, to consider whether a presumption of service connection is warranted for any of the diseases discussed in the report, as well as all other available sound medical and scientific information. Within 60 days of making such a determination, the VA is required to issue proposed regulations setting forth that determination. Within 90 days of issuing the proposed regulations, the VA must issue final regulations establishing a presumption of service connection for any disease for which there is scientific evidence of a positive association with herbicide exposure. Once the VA has established a presumption of service connection for a certain disease or medical condition, a veteran who, during active military, naval, or air service, served in the Republic of Vietnam (or its inland waterways) during the Vietnam era shall be presumed to have been exposed during such service to Agent Orange, and a service connection for that disease or condition will be granted. Those who did not serve in in the Republic of Vietnam or its inland waterways could still establish service connection on a direct basis. Based on the most recent IOM report, "Veterans and Agent Orange: Update 2012," the VA decided not to establish any new presumptions. Table B-1 provides a list of diseases and conditions that are presumptively service-connected. The VA's authority to issue regulations establishing additional presumptions of service connection for diseases found to be associated with Agent Orange exposure will expire on September 30, 2015. The Agent Orange Act of 1991 ( P.L. 102-4 ) also mandated the VA to publish a notice when the VA determines that a presumption of service connection is not warranted. On April 11, 2014, based on the 2010 and 2012 IOM reports on Agent Orange, the VA issued a notice that a presumption of service connection is not warranted for certain diseases and conditions based on exposure to herbicides used in Vietnam during the Vietnam era. Table B-2 provides a list of diseases and conditions that are not presumptively service-connected. With regard to Agent Orange exposure and disability compensation, litigation has largely focused on two questions. First, which diseases are presumed to be caused by exposure to Agent Orange? Second, which veterans have been presumptively exposed to Agent Orange? These questions have been resolved by two lines of cases. Nehmer claims involve which diseases are presumed to be caused by exposure to Agent Orange, and Haas claims involve which veterans have been presumptively exposed to the herbicide. This section provides a discussion of the laws, regulations, and court decisions that have emerged from these cases. In 1986, numerous Vietnam veterans brought a class action lawsuit against the VA, arguing that their previous claims for service-connected compensation for disabilities allegedly caused by exposure to Agent Orange were improperly denied. At the time, the VA had promulgated a rule that found only one disease, chloracne, associated with exposure to Agent Orange. When promulgating this rule under the Veterans' Dioxin and Radiation Exposure Compensation Standards Act, the VA had used a stringent "cause and effect" test for determining which diseases would be associated with Agent Orange exposure. The veterans argued that the "cause and effect" standard was too stringent and contrary to the legislative intent of Congress. In 1989, the U.S. District Court for the Northern District of California agreed and declared that the VA was required to use a more lenient "significant statistical association" standard when determining whether a disease is associated with Agent Orange exposure. The court invalidated the VA regulations and voided all benefit denials made under those regulations. In response to this court decision, Congress enacted the Agent Orange Act of 1991 in February of that year. After the enactment of the Agent Orange Act of 1991, the parties from Nehmer entered into a Final Stipulation and Order (Final Stipulation) that established the actions that the VA would take in response to the 1989 court decision. Most notably, the VA was required to issue new regulations regarding which diseases are associated with exposure to dioxin under the Agent Orange Act of 1991 and then readjudicate the claims that were previously denied by the VA under the invalid regulations. The Final Stipulation also stated that any benefits awarded upon such readjudication or adjudication shall be paid retroactively. Generally, when claims are awarded based on a new regulation, the effective date of the award can be no earlier than the date in which the regulation came into effect; however, under the Final Stipulation, the effective date would be either the date the claim was filed or the date the disability arose, whichever was later. Following the Final Stipulation, the VA began to readjudicate the voided Agent Orange claims. However, the VA established a policy only to readjudicate claims in which the veteran had specifically alleged Agent Orange to be the cause of disease. The veterans again sued the VA, and in February 1999, the court clarified which compensation claims were voided by the 1989 decision. The court again agreed with the veterans and struck down the VA's policy. The court noted that the 1989 decision "voided those decisions in which the disease or cause of death is later found - under valid Agent Orange regulation(s) - to be service connected." Therefore, the 1989 decision voided all VA decisions in which the disease or condition is later found to be associated with Agent Orange, regardless of whether the veterans specifically alleged that their diseases were caused by Agent Orange. Finally, later litigation clarified that the VA must pay the full retroactive benefit to the estates of deceased class members. In 2001, Congress extended the sunset date of the Agent Orange Act from September 30, 2002, to September 30, 2015, thus requiring the Secretary to continue issuing regulations designating service-connected diseases in response to scientific reports. In 2003, the VA found Chronic Lymphocytic Leukemia (CLL) to be associated with Agent Orange exposure. However, the VA did not readjudicate the prior claims of Vietnam veterans suffering from CLL and did not pay them retroactive benefits. The VA contended that the Final Stipulation did not apply to diseases that it determined to be service-connected after September 30, 2002, the original sunset date of the Agent Orange Act of 1991. In 2004, the plaintiff class, disputing this interpretation, filed a motion for clarification and enforcement of the Final Stipulation as to disease determinations made after September 30, 2002. In 2005, the court again agreed with the veterans and rejected the VA's interpretation. The court stated that the extension of the sunset provision also extended the duration of the Final Stipulation. Therefore, so long as diseases are determined to be associated with dioxin under the Agent Orange Act, the VA is required to readjudicate any previously denied claims for those conditions. The U.S. Court of Appeals for the Ninth Circuit in 2007 upheld the decision and ordered the VA to reajudicate all prior claims related to CLL and to provide retroactive benefits on such claims. On October 13, 2009, after reviewing an independent study by the Institute of Medicine, the VA announced that three additional conditions would be granted presumptive service connection as associated with exposure to Agent Orange. On August 31, 2010, the VA published the final rule in the Federal Register , officially adding B-cell leukemias (such as hairy cell leukemia), Parkinson's disease, and ischemic heart disease to the list of conditions associated with exposure to dioxin. Because these conditions were added pursuant to the Agent Orange Act, which does not expire until 2015, the VA is required to readjudicate any claims previously denied for these conditions in order to comply with the Nehmer Final Stipulation. According to the Agent Orange Act of 1991, certain veterans of Vietnam have been presumptively exposed to Agent Orange. If a veteran falls within such a presumption, he does not have the burden of proving that he was actually exposed to the herbicide in order to obtain disability compensation. According to the statute, if a veteran proves that he "served in the Republic of Vietnam" between January 9, 1962, and May 7, 1975, any disease determined to be associated with exposure to Agent Orange will "be considered to have been incurred in or aggravated by" his service in Vietnam. The VA has interpreted this statutory language to include only veterans who have actually set foot on the landmass of Vietnam or served in the inland waterways of Vietnam (veterans who served in the inland waterways are generally known as "brown water" veterans). Veterans who served on ships that remained off the coast of Vietnam (generally referred to as "Blue Water Navy" veterans) do not satisfy the test and are not considered to be presumptively exposed to Agent Orange. This interpretation of the statute was challenged in court. Although the Court of Appeals for Veterans Claims (CAVC) found the VA's interpretation to be invalid, the Court of Appeals for the Federal Circuit overturned the CAVC's decision and, therefore, the VA's "foot-on-land" test remains the current standard. The following section provides the details of the litigation. In 2001, a Vietnam veteran, Jonathan Haas, applied for disability compensation for Type 2 Diabetes allegedly caused by his exposure to Agent Orange. Mr. Haas claimed that he was entitled to a presumptive service connection because he "served in the Republic of Vietnam." Mr. Haas never physically went ashore to Vietnam but instead served on a U.S. vessel that remained off the coast during his service. Both the VA Regional Office and the Board of Veterans' Appeals (BVA) denied Mr. Haas the presumption of service connection, stating that a veteran must have actually "set foot on land in the Republic of Vietnam" to qualify for a presumption of service connection for exposure to Agent Orange. Mr. Haas appealed the decisions to the CAVC, arguing that his service off the coast of Vietnam should entitle him to a presumptive service connection based on his "service in the Republic of Vietnam." In 2006, the CAVC agreed with Mr. Haas and overturned the BVA's decision. The CAVC found the regulation to be ambiguous and determined that the current interpretation conflicted with the agency's earlier interpretations. Furthermore, the court stated that the VA could not make such a change in its interpretation without undertaking proper notice and comment rulemaking procedures. The CAVC also found the "foot-on-land" test to be an unreasonable interpretation of the law, and stated that there could be "the same risk of exposure" for veterans who served on ships near the coast. As a result of the CAVC's ruling, the VA directed the BVA to stay all proceedings involving Agent Orange exposure claims of veterans who only served on ships off the coast of Vietnam. The VA also published a notice of proposed rulemaking in the Federal Register declaring its intent to clarify its interpretation. Finally, the VA also appealed the CAVC's decision to the U.S. Court of Appeals for the Federal Circuit. On appeal, the case name was changed to Haas v. Peake after James Peake became the Secretary of Veterans Affairs. The U.S. Court of Appeals for the Federal Circuit reversed the decision of the CAVC, ruling in favor of the VA. As a result of this decision, the VA still maintains its "foot-on-land" policy for a Vietnam veteran to qualify for a presumption of exposure to Agent Orange. Although "Blue Water" veterans can still receive compensation for Agent Orange exposure if they prove they were actually exposed to Agent Orange, they will not receive a presumption of exposure due to their service. Throughout its opinion, the court reversed each basis of the CAVC's ruling. The court stated that the agency's interpretation of the statute was due deference under the Chevron doctrine. The court found the "foot-on-land" rule to be a reasonable interpretation of the statute, noting that Congress had been silent regarding the scope of the statutory language, and stated that the VA's interpretation was a reasonable line to draw. The court also noted that the agency had consistently applied this interpretation for an extended period of time. Finally, the court declared that because this was an interpretive rule, not a substantive rule, the agency did not have to follow notice and comment rulemaking procedures when promulgating its interpretation. Therefore, there was no violation of the Administrative Procedure Act. The court reversed the CAVC decision and remanded the case. Although it ruled in favor of the VA, the court noted that Mr. Haas was free to "pursue his claim that he was actually exposed to herbicides while on board his ship.... However, he [was] not entitled to the benefit of the presumptions set forth in [the Agent Orange Act of 1991]." The Supreme Court of the United States denied certiorari on Mr. Haas's appeal. Currently, three major issues pertain to Vietnam-era veterans and their exposure to Agent Orange: (1) providing presumptive service-connected disability compensation for those who served in the waters surrounding Vietnam and in other areas that Agent Orange may have been stored or used; (2) providing disability compensation and health care for paternally mediated birth defects; and (3) researching and providing disability compensation and health care services to biological grandchildren and later generations of Vietnam-era veterans. Each of the three issues is briefly discussed in detail. Under current law, veterans who have diseases or conditions listed in Table B-1 are entitled to service-connected disability compensation as long as they (1) stepped foot on land in Vietnam or (2) served on the inland waterways of Vietnam during active duty at any time between January 9, 1962, and May 7, 1975. Other veterans who have an Agent Orange-related disease or condition are entitled to these benefits if they can prove they were exposed to Agent Orange during active duty service. However, there are some exceptions to this general requirement (see text box on "Presumption of Exposure to Agent Orange in Veterans who served in Korea"). Furthermore, only veterans who served in Vietnam are entitled to retroactive benefits. As discussed under the " Blue Water Veteran Litigation " section, some veterans of the Vietnam era who served aboard deep-water naval vessels off the coast of Vietnam--referred to as "Blue Water Navy" veterans--have been pressing Congress and the judicial system to expand the definition of service in Vietnam, thereby qualifying this group to receive disability compensation for diseases or conditions presumed to be associated with Agent Orange. These veterans contend that they were exposed to Agent Orange while on board vessels anchored offshore, either directly through contact with aircraft that sprayed Agent Orange or while handling drums of Agent Orange or by drinking distilled water. In late 2009, the VA asked the Institute of Medicine (IOM) to conduct a study and prepare a report on whether Vietnam-era veterans who served in the waters off Vietnam ("Blue Water Navy" veterans) or who served on boats or ships that operated on the inland waterways and delta areas of Vietnam ("brown water" navy veterans) experienced a comparable range of exposures to Agent Orange as the veterans who served on the ground. In 2011, IOM announced that it was unable to determine whether "Blue Water Navy" veterans were exposed to Agent Orange. IOM's report stated: The committee was unable to state with certainty that Blue Water Navy personnel were or were not exposed to Agent Orange and its associated [2,3,7,8-Tetrachlorodibenzo-p-Dioxin] TCDD. Owing to a lack of data on environmental concentrations of Agent Orange and Agent Orange-associated TCDD and an inability to reconstruct likely concentrations, as well as the dearth of information about relative exposures among the ground troops and Brown Water Navy personnel and Blue Water Navy personnel, it is impossible to compare actual exposures across these three populations. Furthermore, the committee concludes that because of the small number of studies and their limitations, there is no consistent evidence to suggest that Blue Water Navy Vietnam veterans were at higher or lower risk for cancer or other long-term adverse health effects associated with Agent Orange exposure than shore-based veterans, Brown Water Navy veterans, or Vietnam veterans in other branches of service. The committee's judgment is that exposure of Blue Water Navy Vietnam veterans to Agent Orange-associated TCDD cannot reasonably be determined. In addition, several groups of Vietnam-era veterans have asserted that they may have been exposed to Agent Orange based on storage and transportation of Agent Orange. For example, veterans have contended that they came into contact with Agent Orange on Guam in the late 1960s during the Vietnam War. Moreover, some veterans have asserted that Agent Orange had been used in testing performed in the Panama Canal Zone in the 1960s and 1970s, and others have contended that they were exposed during storage at Johnston Island in the North Pacific between 1971 and 1977. Furthermore, some Vietnam-era veterans have asserted that they were exposed to Agent Orange in C-123 airplanes used after the Vietnam War. All these veterans groups have sought to establish a presumption of exposure, thereby qualifying them to receive disability compensation for diseases or conditions presumed to be associated with Agent Orange. The VA is reviewing all these claims on a case-by-case basis. Currently, the VA provides disability compensation and health care services for only one paternally mediated birth defect: spina bifida in the children of male Vietnam-era veterans. Nevertheless, the VA provides disability compensation and health care for a range of maternally mediated birth defects in children of female Vietnam-era veterans. This more liberal compensation for female Vietnam-era veterans was based on the results of a health study of 8,280 women Vietnam-era veterans (half of whom served in the Republic of Vietnam and half of whom served elsewhere), completed in October 1998 and titled "Women Vietnam Veterans Reproductive Outcomes Health Study." This study was conducted by the Environmental Epidemiology Service of the Veterans Health Administration of the VA. The most recent 2012 Agent Orange report from IOM stated that there was inadequate or insufficient evidence to determine whether an association exists between exposure to Agent Orange and birth defects in the offspring of male Vietnam-era veterans. However, some veteran service organizations have asserted that more research should be done regarding paternally mediated birth defects and that eventually disability compensation policies should be developed for disabilities and health conditions that appear in later generations. Some Vietnam-era veterans have raised concerns that the genetic effects of Agent Orange may skip a generation and reappear in third or subsequent generations. In November 2010, some veterans made presentations to the IOM, requesting that it assess the "transgenerational effects resulting from exposure-related epigenetic changes, either in the parents or exposed fetuses, which would lead to adverse health effects in later generations, such as grandchildren." During previous reviews of Agent Orange studies, the IOM focused "only on birth defects (primarily limited to problems detectable at birth or within the first year of life) and childhood cancers (usually restricted to particular cancers that characteristically appear in infants and children and are diagnosed before the age of 18 years)." However, beginning with the 2010 review, the IOM extended its focus to include all types of medical conditions occurring in Vietnam-era veterans' children, regardless of age, and to include such conditions in successive generations. According the most recent 2012 Agent Orange report from IOM, there is inadequate or insufficient evidence to determine whether an association exists between exposure to Agent Orange and specific health issues such as endometriosis; semen quality; infertility; spontaneous abortion; stillbirth; late fetal, neonatal, or infant death; low birth weight or preterm delivery; birth defects other than spina bifida; childhood cancers; or diseases in more mature offspring or later generations. However, the report from IOM states that The committee [the IOM Agent Orange study committee] favors renewed efforts to conduct epidemiologic studies on all the developmental effects in offspring that may be associated with paternal exposure . In addition, new studies should evaluate offspring for defined clinical health conditions that develop later in life, focusing on organ systems that have shown the greatest effects after maternal exposure, including neurologic, immune, and endocrine effects. Finally, although the committee recognizes that there is evidence that environmental exposures can affect later generations through fetal and germ-line modifications, epidemiologic investigation designed to associate toxicant exposures with health effects manifested in later generations will be even more challenging to conduct than research on adverse effects on the first generation. Appendix A. Health Care Legislation for Vietnam Veterans Appendix B. Diseases and Conditions Presumed/Not Presumed to Be Service-Connected with Exposure to Agent Orange

The U.S. Armed Forces used a variety of chemical defoliants to clear dense jungle land in Vietnam during the war. Agent Orange (named for the orange-colored identifying stripes on the barrels) was by far the most widely used herbicide during the Vietnam War. Many Vietnam-era veterans believe that their exposure to Agent Orange caused them to contract several diseases and caused certain disabilities, including birth defects in their children, and now their grandchildren. The Department of Veterans Affairs (VA) received the first claims asserting conditions related to Agent Orange in 1977. Since then, Vietnam-era veterans have sought relief from Congress and through the judicial system. Beginning in 1979, Congress enacted several laws to determine whether exposure to Agent Orange in Vietnam was associated with possible long-term health effects and certain disabilities. The Veterans' Health Care, Training and Small Business Loan Act (P.L. 97-72) elevated Vietnam veterans' priority status for health care at VA facilities by recognizing a veteran's own report of exposure as sufficient proof to receive medical care, absent evidence to the contrary. The Veterans' Health Care Eligibility Reform Act of 1996 (P.L. 104-262) completely restructured the VA medical care eligibility requirements for all veterans. Under P.L. 104-262, a veteran does not have to demonstrate a link between a certain health condition and exposure to Agent Orange; instead, medical care is provided unless the VA determines that the condition did not result from exposure to Agent Orange. This authority was permanently authorized by the Caregivers and Veterans Omnibus Health Services Act of 2010 (P.L. 111-163). Likewise, Congress passed several measures to address disability compensation issues affecting Vietnam veterans. The Veterans' Dioxin and Radiation Exposure Compensation Standards Act of 1984 (P.L. 98-542) required the VA to develop regulations for disability compensation to Vietnam veterans exposed to Agent Orange. In 1991, the Agent Orange Act (P.L. 102-4) established a presumption of service connection for diseases associated with herbicide exposure. P.L. 102-4 authorized the VA to contract with the Institute of Medicine (IOM) to conduct scientific reviews of the evidence linking certain medical conditions to herbicide exposure. Under this law, the VA is required to review the reports of the IOM and issue regulations, establishing a presumption of service connection for any disease for which there is scientific evidence of a positive association with herbicide exposure. Based on these IOM reports, currently 15 health conditions are presumptively service-connected. Under current regulations, a servicemember must have actually set foot on Vietnamese soil or served on a craft in its rivers (also known as "brown water" veterans) to be entitled to the presumption of exposure to Agent Orange. Those who served aboard deep-water naval vessels (commonly referred to as "Blue Water Navy" veterans) do not qualify for presumption of service connections for herbicide-related conditions unless they can prove that the veteran's service included duty or visitation within the country of Vietnam itself, or on its inland waterways. Recently, Vietnam-era veterans have increasingly expressed concerns about all types of medical issues occurring in their children, regardless of age, and in successive generations. Furthermore, they have asserted that more research should be done on paternally mediated birth effects, so that compensation policies might be developed similar to those that address maternally mediated birth effects of Vietnam-era progeny.

RS20737 -- The Federal Republic of Yugoslavia: U.S. Economic Assistance Updated August 16, 2001 As a result of the September 2000 election of Vojislav Kostunica to the Presidency of the Federal Republic of Yugoslavia (FRY) and the subsequent end of theMilosevic regime, the people of Yugoslavia have opened the door to dramatic political and economic change likethat already in progress in the rest of centralEurope and the former Soviet Union. (1) The FRY, however, not only faces the daunting challenge of a transition to a free market economy anddemocratic systemafter decades of authoritarian rule, but the added burden of a devastated infrastructure from years of war with otherformer republics, the NATO bombing of 1999,and international sanctions. Responding to this situation, the United States and Europe have issued offers ofassistance. (See CRS Report RL30371 , Serbia andMontenegro: Political Situation and U.S. Policy by [author name scrubbed].) Due to the sanctions put in place by the international community, including the United States, as a result of the Bosnia conflict, there was only limited U.S.economic assistance to the FRY in the 1990s. All but humanitarian and democracy assistance were prohibited underU.S. law. A humanitarian aid program,mostly benefitting the vulnerable and elderly in Kosovo, began in 1993, and, in 1996, USAID launched a food aidprogram targeted mainly toward refugees fromBosnia and Croatia and the poor, and implemented through U.S. private charitable organizations and the WorldFood Program. Democratization efforts, however, continued to be stymied by the lack of a U.S. monitoring presence on the ground. In the mid-1990s, some assistance wasnonetheless provided to Albanian language newspapers and a civic education program was initiated in Kosovo. But,following the lifting of Bosnia-relatedsanctions at the end of 1996, a USAID office was established in Belgrade, and it initiated a small program to helpbuild democracy, encourage economic growth,and improve the quality of life (health and education). Projects were mostly conducted through U.S. and localnon-governmental organizations (NGOs), focusingon the grassroots and local government. Democracy programs assisted the development of independent media,strengthened indigenous NGOs, and advisedpolitical parties. Economic growth-related projects were aimed at Montenegro, which, with the rise to power ofan anti-Milosevic government in 1997, hadshown some progress in adopting economic reforms. Among other activities, USAID helped the government ofMontenegro privatize its economy and providedbusiness services to entrepreneurs, including microcredit assistance. The 1999 war in Kosovo significantly altered the U.S. assistance program in the Federal Republic of Yugoslavia. In the aftermath of the war, the province ofKosovo - now occupied by an international military force and administered by the United Nations - began to receivelarge-scale infusions of U.S. assistance. Aidwent to such items as the UN administrative budget, infrastructure repair, and law enforcement, in addition totraditional development activities. Kosovo iscurrently treated as a separate entity by the U.S. assistance program. (For discussion of U.S. and international aidprograms, see CRS Report RL30453 , Kosovo:Reconstruction and Development Assistance .) Montenegro, as a bone fide opponent of Milosevic, also became the focus of greater attention, larger amounts of assistance, and separate treatment by the U.S. aidprogram. Following the Kosovo war, the United States provided $15 million in balance-of-payments support andtechnical assistance, aimed at helpingMontenegro survive the economic disruption and influx of Kosovar refugees caused by the war, as well as Serbianefforts to destabilize it. Aid to Serbia, restricted by Congress to humanitarian and democracy assistance, was increased immediately after the war. In June 1999, President Clintonformally committed at least $10 million to democratization - $11.8 million was eventually used. In the months justbefore the FRY elections, most of another $25million commitment was used. These funds helped support the opposition parties, by providing equipment suchas computers, training organizers, and fundingvoter surveys. Assistance was also provided to independent media, labor unions, and opposition local governments,with a view toward strengthening opponentsto Milosevic's rule. Since the end of the Milosevic regime, both the Administration and Congress have taken steps to assure Serbia of U.S. support as it moves toward democracy andeconomic reform. In the first weeks after the change in government, the Administration ordered many financial andtrade sanctions lifted, including the oilembargo and flight ban. The Administration also notified Congress of its plan to provide Serbia immediately with$10 million in emergency energy support forelectricity to meet its energy deficit and $45 million in humanitarian food aid from the PL480 account. U.S. Economic Aid to the FRY: FY1998-2002 (in $ millions) Source: USAID Note: Economic aid includes Development Assistance, SEED, and Economic Support Fundaccounts. Food, disaster, and peacekeeping aid are excluded from thetable. Congressional action on the annual foreign operations legislation in October 2000 offered an opportunity for Congress to make its views known on the dramaticchanges in Serbia. The FY2001 Foreign Operations Appropriations, signed into law on November 6 ( H.R. 4811 , P.L. 106-429 ), removed previousappropriations language prohibiting all but democracy assistance for Serbia. It approved the use of up to $100million for Serbia aid (an across-the-boardrescission reduced that amount to $99.780 million) and, in the conferee report, recommended expenditure of notless than $89 million in Montenegro. Congressalso encouraged Administration efforts to support FRY membership in international organizations and internationalfinancial institutions (sec. 594). FY2001 SEED appropriations for Serbia are funding the following activities: $24.9 million for electricity supply and $9.8 million to improve the heating system and meet basic needs of the poorest people immediatelyafter the 2000 election; $22.1 million aimed at municipal communities to encourage citizen participation, restore essentialservices, and generatejobs; $14.3 million for technical experts to assist economic policy reform of the banking system and publicfinance and fiscal reform; efforts tostrengthen bank supervision and international accounting standards; emergency assistance to the National Bank ofYugoslavia to prevent a collapse of the bankingsystem; and microfinance activities, and $18.7 million to support democratic systems, including NGOs, an independent media, the politicalprocess, and the rule of law. Providestechnical assistance to local governments. For Montenegro, the United States was expected to provide $12.9 million in food aid and more than $72 million in SEED funds in FY2001. Of the latter, $30.0million are being used for emergency pension and energy costs, $26.7 million for private sector development andmacro-economic reform technical assistance, $7million for technical assistance to municipal governments, and $5 million for democracy and civil society support. In its FY2002 budget request, the Bush Administration requested $145 million for the FRY (Serbia and Montenegro). On July 24, the House approved H.R. 2506 , the FY2002 foreign operations appropriations. While the legislation does not earmark funds forthe FRY, Appropriations Committeereport language ( H.Rept. 107-142 ) "directs" that $60 million be provided to Montenegro. On July 26, the SenateAppropriations Committee approved its versionof the bill. While it has not released a report or introduced legislation, a press release notes that $115 million isprovided for Serbia in the bill. At the June 2001 international donor conference, the United States pledged $181.6 million for calendar year 2001, $75 million of which are FY2002 funds not yetappropriated. Constraints on U.S. Assistance. Two legislative provisions contained in the FY2001 appropriations threatenedto limit aid. Under section 594, any unobligated amounts of the $100 million provided as FY2001 bilateral aid toSerbia, except humanitarian and democracy aid,could not be obligated after March 31, 2001, unless the President certified that the FRY is cooperating with theInternational Criminal Tribunal for the FRY(ICTY), taking steps to abide by the Bosnia peace accords, or implementing policies respecting minority rights andthe rule of law. On April 2, the Administrationprovided the certification required by section 594, with the qualification that the United States would be watchingclosely to see if the FRY continued to meet theconditions. Section 594 also applied conditions to the U.S. position on entry of the FRY into international organizations, including the World Bank and the European Bank(EBRD) which is expected to supply the bulk of large-scale development assistance. While Montenegro has beenexempted from most bilateral aid restrictions, it,too, stands to benefit from international loans to the FRY. The bill instructed U.S. representatives to theseinstitutions to support membership, once the Presidentcertified that the FRY has taken steps to resolve issues related to debts and other liabilities. Responsibility for debtsand assets of the pre-1991 former Yugoslaviaremained in dispute among the former constituent republics until May 25 when the FRY and the four other successorstates reached an agreement on the divisionof assets, a step toward resolution of liability issues with donor nations. U.S. support for individual loans and otherassistance from international institutions afterMarch 31, 2001, also rested on the same presidential determination governing the $100 million in bilateral aid, andmay now occur Under section 564, no assistance, with the exception of humanitarian, democracy, cross border physical infrastructure and some other categories, could beprovided to countries that give sanctuary to indicted war criminals, such as Milosevic in the FRY. This sectioncould be waived for specific programs if a writtendetermination was provided to Congress. Because SEED appropriations are provided "notwithstanding" any otherprovision of law, both conditions could beignored as they apply to SEED funds. However, the Administration did not intend to utilize that provision. Despite the April certification, Members of Congress, including the authors of section 594, Senators Leahy and McConnell, indicated that the FRY's record ofcooperation with the Tribunal must be taken into account by the Administration if aid notifications and future aidrequests were to go forward. During his visit tothe White House on May 9, President Kostunica was, reportedly, reminded of U.S. interest in seeing Milosevichanded over to the Tribunal. The BushAdministration threatened to skip the international donors conference if no further steps were taken. As Milosevicwas being extradited on June 28, theAdministration announced that it would attend the June 29 conference, but it has indicated that disbursement ofpledges would continue to be dependent on FRYcooperation with the Tribunal. Role of Other Donors. Apart from the United States, the chief potential aid donors to Serbia are the EuropeanUnion (EU), its members, and the multilateral financial institutions. The latter, especially the World Bank andEBRD, could be expected to supply the bulk oflarge-scale development assistance. A key factor hindering assistance from these quarters had been the state of theFRY's debts and other liabilities. The IMF and World Bank cannot provide assistance to countries that are not members, and the FRY could not become a member until it settled its arrears withthese institutions (the FRY had no arrears to the EBRD and joined on December 15, 2000). On December 20,following a $129 million payment to the IMF, theFRY was granted IMF membership and provided with a $151 million loan. The loan allowed it to reimburseSwitzerland and Norway which had advanced it thefunds that enabled it to pay off its IMF arrears. On June 11, the IMF approved a stand-by loan for the FRY of about$249 million through March 2002. Although the FRY currently owes the World Bank $1.7 billion in arrears, its membership in the Bank was announced on May 10, when the FRY met Bankrequirements, including agreement to resolve the arrears issue. Prior to membership, the Bank had beeninstrumental in organizing a donor coordination meetingand helping to assess FRY needs. In March 2001, the Bank set up a $30 million Trust Fund for the FRY to providesome short-term grant assistance prior tomembership. European donors launched assistance initiatives soon after the election results in Yugoslavia were known. The EU approved nearly $190 million in aid - forurgent needs such as heating oil, and supply of medicines and basic foodstuffs - for the winter of 2000-2001. It alsopromised up to $21 million for restoration ofnavigation on the Danube, which will benefit the entire region. Together EU members, the European Commission,and the European Investment Bank pledgednearly $637 million at the June donor conference. As they did for Kosovo and the southeast Europe region, theEuropean Union and the World Bank organizedboth the December 2000 donor coordination meeting, which clarified the FRY's priority needs, and the June donorpledging conference. In most parts of the world, the extent of other bilateral donor assistance has little impact in determining the size of the U.S. aid program. However, with acongressional limitation on U.S. aid to Kosovo at 15% of total donor contributions, the role of other donors couldbecome a factor in the U.S. program in the restof the FRY, especially because the United States has expressed the view that Europe should take the lead in Balkandevelopment. A potential drawback tolimiting U.S. assistance is that it may also lessen U.S. influence on events in the region. At the June donorconference, a total of $1.3 billion was pledged, ofwhich the U.S. pledge accounts for 13.5%. EU members and institutions represent 47.4% of the total. U.S. Aid and Relations Between Kosovo, Montenegro, and Serbia. Cooperation with the International CriminalTribunal is not the only major issue that remains as a possible obstruction affecting U.S. assistance to Serbia. Serbia's treatment of its sister republic,Montenegro, and the province of Kosovo are likely to influence the quality and quantity of future U.S. aid to Serbia,and moves by Montenegro towardindependence from the FRY may affect assistance to it. Although the United States does not formally support the independence movements of either Kosovo or Montenegro, U.S. aid has been employed in ways thatworked to strengthen the independence of each vis-a-vis the FRY. U.S. assistance to Montenegro grew in tandemwith Montenegrin policies at variance withMilosevic. U.S. aid projects fostered economic and political reform, facilitating Montenegrin separateness fromits sister entity. In Kosovo, U.S. and allied aidhas, in effect, created the framework of an independent state, despite the formal UN - and U.S. - position inResolution 1244 that the FRY maintains sovereigntyover the province. With the change of regime in Belgrade, new possibilities have arisen for a peaceful settlement of both relationships. Montenegrin officials have postponed plansfor an independence referendum until, perhaps, early 2002. Although FRY leaders currently say they would not actto stop Montenegrin independence, the UnitedStates and EU countries oppose independence and have indicated that aid might be cut off as a consequence. Duringthe past year, however, members of Congresshave indicated strong support for Montenegro. The Appropriations committee report on H.R. 2506 supportsa specific funding level for Montenegroand pointedly directs that it be identified as a separate line item in the Administration aid report, demonstratingCommittee "disappointment" with theAdministration for combining the Serbia and Montenegro budget requests into one figure. In Kosovo, U.S. assistance would likely support any peaceful and mutually cooperative outcome. But such an outcome may not be possible, and how U.S.assistance would be used in that eventuality is unclear at this time.

U.S. economic assistance to the Federal Republic of Yugoslavia (FRY) seeks to fosterdemocratic institutions andeconomic reform. Congress approved $100 million for Serbia for FY2001 and the Administration has requested$145 million for the FRY for FY2002. Congressional debate may center on constraints on that aid, the role of other donors, and Serbia's relationship withMontenegro and Kosovo in that context.

T he United States has initiated renegotiations of the North American Free Trade Agreement (NAFTA) with Canada and Mexico. The Administration's agriculture-related objectives in the renegotiation include a contentious proposal to establish trade remedies for perishable and seasonal products. The proposal would establish separate domestic provisions for seasonal products such as fruits and vegetables in anti-dumping and countervailing duties (AD/CVD) proceedings, making it easier to initiate a trade remedy case against (mostly Mexican) exports to the United States. While some in Congress support adding a seasonal AD/CVD proposal as part of NAFTA renegotiations, others in Congress and most U.S. food and agricultural groups--including U.S. fruit and vegetable producer groups--oppose the proposal. Some also worry that efforts to push for seasonal protections, among other U.S. proposals, could derail agricultural provisions in the NAFTA renegotiation. The Office of the U.S. Trade Representative's (USTR) agriculture-related NAFTA negotiating objectives cover agricultural market access and regulatory cooperation, sanitary and phytosanitary (SPS) measures (including agricultural biotechnology), geographical indications (GIs), and trade remedies for perishable and seasonal products in AD/CVD proceedings, among other general provisions addressing dispute settlement and regulatory harmonization. Selected USTR agriculture-related objectives are shown in the text box below. The Administration's most recent market access objectives for U.S. agriculture specifically target remaining Canadian tariffs on imports of U.S. dairy, poultry, and egg products that are subject to tariff-rate quotas (TRQs) and certain technical barriers to U.S. grain and alcohol beverages. Potential opportunities for the U.S. food and agriculture industries as part of the ongoing NAFTA renegotiation include the following: improve agricultural market access by liberalizing remaining dutiable agricultural products that were exempted from the original agreement; update NAFTA's SPS provisions by "going beyond" existing World Trade Organization (WTO) obligations regarding risk assessment, transparency, notification, response and enforcement; and address certain outstanding agricultural trade disputes between the United States and its NAFTA partners, including concerns regarding dairy, fruits, vegetables, wine, and a range of SPS and GI concerns. One of the more controversial agricultural proposals considered by U.S. negotiators would establish seasonal protections for U.S. agriculture in trade remedy cases. The U.S. proposal would "[s]eek a separate domestic industry provision for perishable and seasonal products in AD/CVD proceedings." Although the precise text of the proposal is not publicly available, the proposal would reportedly protect certain U.S. fruit and vegetable producers by making it easier to initiate trade remedy cases against (mostly) Mexican seasonal exports to the United States. The proposal responds to complaints by some fruit and vegetable producers, mostly in Southeastern states, who claim to be adversely affected by import competition from Mexico. Antidumping (AD) and countervailing duties (CVD) address unfair trade practices by providing relief to U.S. industries and workers that are "materially injured," or threatened with injury, due to imports of like products that are sold in the U.S. market at less than fair value (AD) or where production has been subsidized by a foreign government or public entity (CVD). Dumping refers to a form of price discrimination whereby goods are sold in one export market at prices lower than the prices of comparable goods in the home market or in other export markets. Unfair subsidies refer to financial payments and other forms of government support to foreign manufacturers or exporters that might give them an unfair advantage over U.S. producers and comparable domestic goods. At the end of an investigative process, in AD cases, the remedy is an additional duty placed on the imported merchandise to offset the difference between the price (or cost) in the foreign market and the price in the U.S. market. In CVD cases, a duty equivalent to the amount of subsidy is placed on the imports. The U.S. International Trade Commission (USITC) determines if a U.S. industry has suffered material injury, and, if so, the International Trade Administration (ITA) of the U.S. Department of Commerce then determines the existence and amount of dumping or subsidy. AD and CVD provisions in U.S. law are in Title VII of the Tariff Act of 1930 (19 U.S.C. 1671-1677n, as amended). U.S. laws and those of other WTO members must comply with obligations under the WTO Antidumping and Subsidies Agreements. There are no seasonal provisions under current U.S. laws governing AD/CVD. CVD law and regulation establish standards for determining when an unfair subsidy has been conferred by a foreign government and is intended to offset any unfair competitive advantage that foreign manufacturers or exporters might have over U.S. producers because of foreign countervailable subsidies. Such subsidies provide financial assistance to benefit the production, manufacture, or exportation of goods (e.g., either through direct cash payments, export subsidies, import substitution subsidies, credits against taxes, or loans at terms below market rates). The amount of subsidies the foreign producer receives from the government is the basis for the subsidy rate by which the subsidy is offset, or "countervailed," through higher import duties. AD law and regulations authorize higher duties on imported goods if ITA determines that an imported product is being sold at less than its fair value and if the USITC determines that a U.S. producer is thereby being injured. If an AD/CVD investigation results in final affirmative determinations by both agencies, the ITA issues an AD or CVD order directing U.S. Customs and Border Protection to collect duties on the imported merchandise. Previous USITC investigations have highlighted the increased competitive market and trade pressures on U.S. fruit producers from lower-cost foreign fruit and vegetable producers (such as those in China, Thailand, Chile, Argentina, and South Africa) as well as from countries with subsidized fruit and vegetable production (such as in the European Union, including Spain). Import injury investigations initiated by the United States further highlight concerns that some countries might be supplying imports at prices below fair market value. Since the 1990s, dumping petitions filed by the U.S. fruit and vegetable sectors have included charges against imports of fresh tomatoes (Canada, Mexico), frozen raspberries (Chile), apple juice concentrate (China), frozen orange juice (Brazil), lemon juice (Argentina, Mexico), fresh garlic (China), preserved mushrooms (China, Chile, India, Indonesia), canned pineapple (Thailand), table grapes (Chile, Mexico), and tart cherry juice (Germany, former Yugoslavia). Many of these petitions were decided in favor of U.S. domestic producers and resulted in higher tariffs being assessed on U.S. imported products from some of these countries. In addition, seasonal tariffs--for example, higher import tariffs for certain fruits and vegetables imported during U.S. peak season--are already part of the U.S. tariff schedule for many fruits and vegetables imported from countries under most-favored-nation (MFN) status. In the United States, higher MFN seasonal tariffs apply to berries, melons, citrus, pears, stonefruit, tomatoes, cucumbers, asparagus, eggplant, cole crops, legumes, and tropical products. Specific details regarding USTR's perishable and seasonal proposal for NAFTA are not publicly available. However, according to groups that are supporting such a provision, the proposal would establish new rules for seasonal and perishable products, such as fruits and vegetables, and ensure that producers who are susceptible to trade surges at certain times of the year have recourse to trade remedies. It would also address practices that adversely affect trade in perishable and cyclical crops while also improving import relief mechanisms. Other reports indicate that the proposal seeks to modify U.S. AD/CVD laws by allowing growers to bring an injury case by domestic region and draw on seasonal data. This differs from current law, which requires that an injury case be supported by a majority (at least 50%) of the domestic industry, whereas USTRs seasonal proposal would allow regional groups representing less than 50% of nationwide seasonal growers to initiate an injury. This would make it easier for a group of regional producers to initiate trade remedy cases even if the majority of producers within the industry, or in other regions, do not support initiating an injury case. As will be discussed later, such a change to U.S. trade laws could further deepen divisions in the fruit and vegetable industry regarding the proposal. Also, under current law, three years of annual data are necessary to prove injury, whereas the proposal would allow for the use of seasonal data to prove injury. Although an industry can currently initiate an AD/CVD case under U.S. law, such efforts can often be costly to initiate, time-consuming, and difficult to prove. USTR's proposal would require a change in AD/CVD requirements, making it easier for a group of regional producers to initiate an injury case and make it easier to prove injury and thus institute higher tariffs on imported products. Mexico's production of some fruits and vegetables--tomatoes, peppers, cucumbers, squash, berries, and melons--has increased sharply in recent years. Increased supplies have contributed to increased U.S. imports for many types of fruits and vegetables from Mexico, particularly for tomatoes, avocados, peppers, and berries ( Figure 1 , Figure 2 ). Researchers at the U.S. Department of Agriculture (USDA) report that Mexico is the largest foreign supplier of U.S. imports of vegetables and fruits (excluding bananas). In large part, Mexico's increased production and export supplies are attributable to its investment in large-scale greenhouse production facilities and other types of technological innovations, among other factors. Studies have highlighted that Mexico's "protected agriculture" represents a "fast-growing activity in Mexico with a large potential to increase yield, quality, and market competiveness." Over the years, USDA has conducted a series of studies regarding greenhouse tomato production. These studies also highlight how rapidly increased greenhouse production has impacted North American markets, resulting in a series of AD cases among the NAFTA countries. The most well-known case dates back to 1996, when the U.S. tomato industry filed an AD petition alleging that Mexican tomato producers/exporters were selling tomatoes in the United States at less than fair value, which lasted until 2013 under an agreement suspending the AD investigation on fresh tomatoes from Mexico. Rising imports from Mexico are generally regarded as supporting rising consumer demand for fruits and vegetables by ensuring year-round counter-seasonal supplies of products, including during the U.S. off-season (or winter months) for some products. Counter-seasonal fruit and vegetable imports are said to complement U.S. production and are generally considered to have a positive impact on U.S. consumer demand by ensuring year-round supply. Fruit ( Figure 3 ) and vegetable ( Figure 4 ) imports from Mexico tend to be higher during the winter months (complementary). Counter-seasonal imports may also benefit consumers through lower costs, given a wider supply network, and may also stimulate additional demand by introducing new products and varieties. However, technological and production improvements may be further altering this trend. For example, greenhouse production may allow for year-round production, including during U.S. peak season. In addition, the development of early- and late-maturing varieties has expanded U.S. production seasons, allowing producers to grow many types of fruits and vegetables throughout the year. Improvements in transportation and refrigeration have also made it easier to ship fresh horticultural products. As the U.S. production season has expanded, the winter window for some imports has narrowed, and imports of some fruits and vegetables are now directly competing with U.S. production. Across all countries importing to the United States, products facing steeper competition from imports include fresh tomatoes, peppers, potatoes, onions, cucumbers, melons, citrus, grapes, apples, and other tree fruits. Imports of processed fruit and vegetable products, including fruit juices, directly compete with U.S. processed products year-round. With respect to U.S. imports from Mexico under NAFTA, analysis from USDA researchers suggest that although imports continue to supplement U.S. supplies during the year, imports from Mexico may be outcompeting certain Florida-grown crops, particularly for tomatoes, cucumbers, peppers, raspberries, and blueberries, particularly of greenhouse-grown crops. Rising imports also exacerbate an already sizeable and widening trade deficit in U.S. fruit and vegetable trade. As imports have risen, so have imports as a share of total U.S. domestic supplies and consumption for some fresh and processed fruits and vegetables, according to data from USDA ( Table 1 ). Total imports from all U.S. suppliers accounted for 32% of all U.S. fresh fruit supplies (excluding bananas) in 2007, rising to 38% in 2016. Fresh vegetable imports accounted for 20% of all U.S. supplies in 2007, rising to 31% in 2016. These averages mask even larger import shares for some fruits and vegetables. For example, imports of fresh cucumbers accounted for 52% of U.S. supplies in 2007, rising to 74% in 2016. Imports of fresh tomatoes rose from 41% of supplies in 2007 to 57% in 2016. Imports of avocados accounted for 86% in 2016, up from 65% a decade earlier. Imports of asparagus now account for nearly all U.S. supplies. The Florida Fruit and Vegetable Association (FFVA) claims that Mexico's investment in its greenhouse production has been supported by government subsidies that should be addressed through higher CVDs on U.S. imports of some products. Concerns have mostly centered on U.S. imports of tomatoes, peppers, strawberries, raspberries, and blueberries. Limited information is available regarding support or incentives for Mexico's fruit and vegetable sectors. Available information indicates that Mexico's agricultural ministry, SAGARPA, does not provide direct financial support to its produce growers. SAGARPA's primary agricultural support program, PROAGRO Productivo, comprises most of its agricultural budget. In general, Mexico's farm programs support rural and/or entrepreneurial development, including production by new farmers and women, and also domestic feeding programs. Overall, Mexico's producers of sugar, corn, and milk receive the highest level of support across all programs. (The Appendix provides additional information regarding the Mexican government's support for its agricultural sectors.) However, available support may be part of Mexico's overall support geared to rural and business development and other productivity improvements in Mexico's horticultural sectors. Such support may be assisting the cost of investments in Mexican greenhouses and shade houses but cannot be confirmed based on publicly available information. FFVA claims that SAGARPA spent $50 million from 2001 to 2008 on 1,220 hectares of greenhouses and other forms of protected agriculture and spent $189.2 million from 2009 to 2010 on 2,500 hectares of protected agriculture. FFVA claims that expenditures for 2009-2010 covered greenhouses (65%), shade houses (25%), macro-tunnels (7%), and micro-tunnels (3%). FFVA claims this support focused on production of tomatoes, cucumbers, bell peppers, berries, zucchini, grapes, brussels sprouts, habanero peppers, and green peppers, among other specialty products. Another 2010 study also highlights that support for greenhouse tomatoes was available from the Mexican government's Alianza program, which is still in operation. FFVA claims that SAGARPA has continued to provide support for its protected agriculture sectors. It contends that existing "regulations specifically authorize greenhouse 'incentives' of up to $48,000 per hectare" while "subsidies for new greenhouse installations are as high as $162,000 per agricultural project." FFVA claims that greenhouse funds can cover up to 50% of the investment costs and may be used to purchase materials, equipment, and infrastructure and for the management, conservation, and processing of greenhouse products. In addition, FFVA also claims that Mexico's fruit and vegetable imports are sold to the United States at prices below the cost of production and alternatively could be countered by imposing higher AD duties. FFVA further claims that Mexico's labor cost advantage in fruit and vegetable production gives Mexico additional competitive advantage over U.S. produce growers. The perishable and seasonal provisions in USTR's NAFTA objectives have divided the U.S. fruit and vegetable industry, and opinions are split between producers in some Southeastern states and producers in other states, such as California. Opinions in Congress are also divided. For example, at a House Agriculture Committee hearing in July 2017, producer groups representing FFVA broadly claimed that import competition from Mexico of fruits and vegetables under NAFTA is affecting producers across the United States, claiming that "all the specialty crop producers in this country are having a problem with the current NAFTA trade relationship." This claim was in part countered by a committee member, Representative Jimmy Panetta, who stated that NAFTA is benefitting fruit and vegetable producers in California and that countercyclical production between California and Mexico is complementary, as some producers have production facilities in both the United States and Mexico. Information on the extent that U.S. companies may be engaged in fruit and vegetable production in Mexico is not available. Some in Congress support USTR's seasonal proposal, claiming that it is necessary to address perceived unfair trading practices by Mexican exporters of fresh fruits and vegetables. Others in Congress oppose including the proposal, contending that seasonal production complements rather than competes with U.S. growing seasons. They also worry that it could open the door to an "uncontrolled proliferation of regional, seasonal, perishable remedies against U.S. exports." Most U.S. food and agricultural groups, including some U.S. fruit and vegetable producer groups, also oppose seasonal proposals. Some worry that efforts to push for seasonal protections, among other U.S. proposals, could derail agricultural provisions in the NAFTA renegotiation. Some claim that the proposal is intended to favor a few "politically-connected, wealthy agribusiness firms from Florida" at the expense of others in the U.S. produce industry and at the expense of both consumers and growers in other fruit and vegetable producing states, such California and Washington. In general, the U.S. agricultural sectors have not broadly supported proposals that could potentially damage existing export markets under NAFTA. Mexican trade officials do not support seasonal proposals, nor do they support limiting access for some products. Reports indicate that the United States intended to table the proposal during the first round of the negotiations, but pushback forced it to hold the proposal back. Other reports indicate that Mexico is considering retaliation by including its own list of protected products in response to the U.S. proposal. Such a list could include certain grain and pork products and other types of limitations to protect Mexican products in certain production areas. Some U.S. agricultural groups have expressed concerns about "negotiating at the edges" and carving out certain products for special treatment as part of the NAFTA renegotiation. Former U.S. trade officials have also expressed skepticism about whether efforts to limit imports would benefit U.S. producers. American food and agricultural producers continue to express concerns about the Trump Administration's threats to withdraw from the agreement. A broad coalition of U.S. agricultural groups claim that "withdrawal from NAFTA would result in substantial harm to the U.S. economy generally, and U.S. food and agriculture producers, in particular." Agriculture groups also remain concerned about growing uncertainty in U.S. trade policy and the potential for the ongoing NAFTA renegotiation to disrupt U.S. export markets. Economic studies commissioned by some U.S. agriculture groups claim that 43.3 million jobs--about one-fourth of all U.S. employment--are connected to the food and agriculture industries. Some in Congress continue to support maintaining U.S. agricultural export markets under most preferential trade agreements, including NAFTA. The U.S. food and agriculture industries have much at stake in the current NAFTA renegotiations. Canada and Mexico are the United States' two largest trading partners, accounting for 28% of the total value of U.S. agricultural exports and 39% of its imports in 2016. Under NAFTA, U.S. agricultural exports to Canada and Mexico have increased sharply, rising from $8.7 billion in 1992 to $38.1 billion in 2016. The United States supplies 58% of Canada's and 71% of Mexico's agricultural imports. Mexico's agricultural policies have undergone a series of changes in the past few decades. Previously, Mexico's policies were a combination of price support and general consumption subsidies. Starting in the 1980s, Mexico initiated unilateral reforms to its agricultural sector, eliminating its state enterprises related to agriculture and removing price supports and subsidies for staple commodities. In addition, as part of reforms to Mexico's agrarian laws, lands that had been distributed to rural community groups following the 1910 revolution were allowed to privatize. Additional domestic reforms in agriculture coincided with negotiations under NAFTA beginning in 1991 and continued beyond the implementation of NAFTA in 1994. Another major reform was the 1999 abolishment of CONASUPO, Mexico's primary agency for government intervention in agriculture. In 1993, Mexico introduced PROCAMPO (now named PROAGRO Productivo), a domestic agricultural support program with a budget of about U.S. $1 billion (2013 data) across all agricultural sectors. According to USDA: The program was created to facilitate the transition under NAFTA to more market oriented policies from the previous system of guaranteed prices. It provides direct cash payments at planting time on a per hectare basis to growers of many crops, including feed grains as well as oilseeds. Initially, PROCAMPO was designed to be in place until the 2008-2009 fall-winter crop cycles. However, the Felipe Calderon administration (2006-2012) decided to extend the program until 2012 with some minor changes. PROAGRO Productivo continues to target rural development and poverty alleviation and is intended to help producers cope with lower trade protections and the removal of direct price supports through direct payments to rural producers. The program grants direct supports to growers with farms in operation that are appropriately registered in the PROAGRO directory. It provides a flat rate payment to farmers with production areas based on the size of their production unit as follows: Subsistence growers with up to five hectares (about 12.4 acres) of non-irrigated land and 0.2 hectares (about 0.5 acres) of irrigated land, as well as subsistence growers with up to three hectares (about 7.4 acres) of non-irrigated land for units located within specific municipalities; Transition growers with more than five hectares and up to 20 hectares (about 50 acres) of non-irrigated land and more than 0.2 hectares and up to five hectares of irrigated land; and Commercial growers with more than 20 hectares non-irrigated land and more than five hectares irrigated land. "Subsistence" growers located within specific municipalities with up to three hectares of non-irrigated land receive the largest amount of support payment per hectare for their production units at 1,500 pesos (about $82/hectare or $33/acre). Others outside these municipalities get about 1,300 pesos (about $71/hectare or $29/acre). "Transition" production units receive 800 pesos per hectare (about $44/hectare or $18/acre) and "commercial" production units receive 700 pesos per hectare (about $38/hectare or $15/acre). The maximum subsidy amount that a grower can receive under PROAGRO Productivo cannot exceed 100,000 pesos (roughly U.S. $7,750) per crop cycle. Available information indicates that PROAGRO mostly supports corn, sorghum, wheat, and rice production. Other information further indicates that, overall, Mexico's producers of sugar, corn, and milk receive the highest level of support across all programs. As a member of the WTO, Mexico has committed to abide by WTO rules and disciplines, including those that govern domestic farm policy. The WTO's Agreement on Agriculture spells out the rules for countries to determine whether their policies for any given year are potentially trade-distorting, how to calculate the costs of any distortion, and how to report those costs to the WTO in a public and transparent manner. As part of each member's obligations and commitments, each country is required to file periodic notifications of its agricultural domestic support measures and export subsidies for review by the relevant bodies of the WTO. Mexico's most recent notification to the WTO of its domestic farm program spending lists the following agricultural support measures: Food Support Programme; Rural Supply Programme; Milk Supply Programme; PROMUSAG: Programme for Women Working in the Agricultural Sector; PROMETE: Programme in Support of Production Projects by Women Entrepreneurs; FAPPA: Support Fund for Production Projects in Agrarian Clusters; Young Rural Entrepreneur Programme; COUSSA: Conservation and Sustainable Use of Soil and Water; Small-Scale Hydraulic Works Construction Programme; Native Mexican Maize (Corn) Conservation Programme; PRODEZA: Arid Zone Development Programme; PESA: Strategic Food Security Programme; and PROAGRO Productivo (formerly PROCAMPO). In general, these programs provide support for rural and/or entrepreneurial development focused on poverty alleviatio n, domestic feeding programs, and production by new farmers and women. Mexico identifies each of these programs to be non-trade-distorting (i.e., "green box" programs that are considered to be minimally or non-trade distorting and are not subject to any spending limits under WTO rules). Overall, Mexico's producers of sugar, corn, and milk receive the highest level of support across all programs. There do not appear to be domestic farm programs that provide direct support to Mexico's fruit and vegetable growers among the notified programs listed above. Limited other information is available regarding support or incentives for Mexico's fruit and vegetable sectors. Available information indicates that Mexico does not provide direct financial support to its produce growers, which is similar to the situation that prevails in the United States. Mexico's notification of its agricultural export subsidies covers only maize (corn), beans, wheat, sorghum, and sugar. Available information does not indicate existing export subsidies benefitting Mexico's fruit and vegetable growers. For purposes of comparison with U.S. government support for its fruit and vegetable sectors, see CRS Report R42771, Fruits, Vegetables, and Other Specialty Crops: Selected Farm Bill and Federal Programs , and also CRS Report R43632, Specialty Crop Provisions in the 2014 Farm Bill (P.L. 113-79) .

The United States has initiated renegotiations of the North American Free Trade Agreement (NAFTA) with Canada and Mexico. Among the Administration's agriculture-related objectives in the renegotiation is a proposal to establish new rules for seasonal and perishable products, such as fruits and vegetables, which would establish a separate domestic industry provision for perishable and seasonal products in anti-dumping and countervailing duties (AD/CVD) proceedings. This could protect certain U.S. seasonal fruit and vegetable products by making it easier to initiate trade remedy cases against (mostly Mexican) exports to the United States and responds to complaints by some fruit and vegetable producers, mostly in Southeastern U.S. states, who claim to be adversely affected by import competition from Mexico. Mexico's production of some fruits and vegetables--tomatoes, peppers, cucumbers, berries, and melons--has increased sharply in recent years, in large part due to Mexico's investment in large-scale greenhouse production facilities and other types of technological innovations. Some claim that this investment is supported by government subsidies and should be addressed through higher countervailing duties (CVD) on U.S. imports of these products. They also claim that these imports are sold to the United States at prices below the cost of production and alternatively could be countered by higher anti-dumping (AD) duties. Concerns have mostly focused on U.S. imports of tomatoes, peppers, and berries. The Administration's seasonal proposal is among the more contentious of the agricultural proposals reportedly considered by U.S. negotiators. The proposal would likely require changes to U.S. AD/CVD laws by allowing growers to bring an injury case by domestic region and draw on seasonal data. Under current law, an injury case must be supported by a majority (at least 50%) of the domestic industry. The Administration's proposal could reportedly allow regional groups--representing less than 50% of producer nationwide--to initiate an injury, even if the majority of producers within the industry, or in other regions, do not support initiating an injury case. Also, under current law, three years of annual data is necessary to prove injury, whereas the proposal would allow for the use of seasonal data to prove injury. The seasonal proposal has divided the U.S. fruit and vegetable industry, and opinions are split between producers in some Southeastern states and producers in other states, such as California. Opinions in Congress are also divided. Some in Congress support the seasonal proposal, claiming that such a change is necessary to address perceived unfair trading practices by Mexican exporters of fresh fruits and vegetables. Others in Congress oppose including the proposal, contending that seasonal production complements rather than competes with U.S. growing seasons. They also worry that this change could open the door to retaliation by U.S. trading partners and to the imposition of similar regional and seasonal remedies against U.S. exports. Mexican trade officials also do not support including a seasonal AVD/CVD proposal as part of the NAFTA renegotiations, nor do they support limiting access for some products. Some reports indicate that Mexico is considering retaliation by including its own list of protected products in response to the U.S. proposal. Such a list could include certain grain and pork products and other types of limitations to protect Mexican products in certain production areas. The U.S. food and agriculture industries have much at stake in the current NAFTA renegotiations. Canada and Mexico are the United States' two largest trading partners, accounting for 28% of the total value of U.S. agricultural exports and 39% of its imports in 2016. Under NAFTA, U.S. agricultural exports to Canada and Mexico has increased sharply, rising from $8.7 billion in 1992 to $38.1 billion in 2016.

In December 2008, the National Bureau of Economic Research (NBER) announced that the economy was in a recession and that the recession had begun a year earlier in December 2007. However, some economists and forecasters had been concerned that a combination of factors might make this economic contraction much worse than other post-war slowdowns. At first, economic instability seemed limited to the housing sector as housing values decreased in many markets, forcing some subprime and highly leveraged home owners into foreclosure. The problems that began in housing, quickly spread to banking and financial services and were compounded earlier in 2008 by spikes in energy prices. The solvency of automobile manufacturers rapidly deteriorated, possibly due in part to tight credit policies, rising unemployment, and high fuel costs. National unemployment rose steadily throughout 2008 reaching 7.2% in December. Due to slower economic activity caused by the recession, many states also faced large tax revenue decreases, forcing them to reduce Medicaid eligibility and spending, just when the demand for additional public sector health care was expanding to fill the gap left when unemployed individuals no longer could afford employer-based health insurance for their families. Although by themselves the problems in housing, financial services, manufacturing, and energy sectors might not have forced the economy into recession, taken together these problems had contributed to the emergence of a recession and, if the underlying fundamentals have changed as some forecasters suspect, perhaps a prolonged, global economic slow down that could have widespread impact on living standards here and abroad. In response, policymakers quickly moved to prevent the instability in housing and financial services from spilling over into the broader economy. Looking to the future, members of Congress and the Obama Administration sought additional mechanisms to stimulate economic activity. Various approaches were considered to ensure that an economic stimulus package could reach many different segments of the economy, provide a sustained economic boost, and wide spread job growth. Some economic stimulus proposals included infrastructure spending, revenue sharing with states, middle class tax cuts, business tax cuts, unemployment benefits, and food stamps. On January 22, 2009 the House Committee on Energy and Commerce marked-up selected health components and approved a stimulus bill, the American Recovery and Reinvestment Act of 2009 (ARRA, H.R. 1 ). The full House amended and approved H.R. 1 on January 28, 2009. Similar legislation to H.R. 1 was introduced in the Senate (ARRA, S. 350 ) and referred to the Committee on Finance, among others, where provisions were approved on January 27. An amendment in the nature of a substitute ( S.Amdt. 570 ) was offered as a substitute for H.R. 1 and was approved by the full Senate on February 10, 2009. The Senate version of ARRA was referred to a joint Senate and House conference committee. The conference committee reached agreement and referred ARRA to the House and Senate, where it was passed on February 13, 2009. President Obama signed ARRA ( P.L. 111-5 ) on February 17, 2009. This report is a summary the Medicaid provisions in P.L. 111-5 . For more information on the Medicaid provisions included in House and Senate versions of ARRA, see CRS Report R40158, Medicaid Provisions in the House and Senate American Recovery and Reinvestment Act of 2009 (ARRA, H.R. 1, S.Amdt. 570) , coordinated by [author name scrubbed]. For further information on implementation of the FMAP adjustments in ARRA, see CRS Report RL32950, Medicaid: The Federal Medical Assistance Percentage (FMAP) . Table 1 displays a summary of the Medicaid provisions in P.L. 111-5 . Although Table 1 displays 14 Medicaid provisions, ARRA included only eight provisions. Some provisions presented separately in the Senate or House Bills were aggregated under one provision in P.L. 111-5 . For instance, there was one provision for Medicaid Indian protections in the Conference Agreement that included five provisions from the earlier House and Senate versions (premiums and cost sharing, eligibility determinations, estate recovery, consultation with Indian health programs, and managed care protections). In addition, the nursing home prompt payment provision from the Senate bill was integrated into the Temporary Federal Medical Assistance Percentage (FMAP) Increase provision in P.L. 111-5 , but $5 million in funding to implement the FMAP provision was added to ARRA in the Conference Agreement under the OIG Oversight provision from the Senate Bill. Thus, there are eight Medicaid provisions included in Title V of the Conference Agreement. An additional provision providing funding for Medicaid Health Information Technology (HIT) is in Title IV of P.L. 111-5 . The Congressional Budget Office (CBO) estimated that ARRA's Medicaid provisions (under TITLE V--State Fiscal Relief ) would increase federal expenditures by $33.96 billion in FY2009 and $89.74 billion from FY2009 to FY2013, although one provision, a temporary FMAP increase, accounts for $87.2 billion of the five-year increase. The federal medical assistance percentage (FMAP) is the rate at which states are reimbursed for most Medicaid service expenditures. It is based on a formula that provides higher reimbursement to states with lower per capita incomes relative to the national average (and vice versa); it has a statutory minimum of 50% and maximum of 83%. Exceptions to the FMAP formula have been made for certain states and situations. For example, the District of Columbia's Medicaid FMAP is set in statute at 70%, and the territories have FMAPs set at 50% (they are also subject to federal spending caps). Under the Jobs and Growth Tax Relief Reconciliation Act of 2003 ( P.L. 108-27 ), all states received a temporary increase in Medicaid FMAPs for the last two quarters of FY2003 and the first three quarters of FY2004 as part of a fiscal relief package. In addition to Medicaid, the FMAP is used in determining the federal share of certain other programs (e.g., foster care and adoption assistance under Title IV-E of the Social Security Act) and serves as the basis for calculating an enhanced FMAP that applies to the State Children's Health Insurance Program. . During a recession adjustment period that begins with the first quarter of FY2009 and runs through the first quarter of FY2011, the provision holds all states harmless from any decline in their regular FMAPs, provides all states with an across-the-board increase of 6.2 percentage points, and provides qualifying states with an additional unemployment-related increase. It allows each territory to choose between an FMAP increase of 6.2 percentage points along with a 15% increase in its spending cap, or its regular FMAP along with a 30% increase in its spending cap. States are evaluated on a quarterly basis for the unemployment-related FMAP increase, which equals a percentage reduction in the state share. The percentage reduction is applied to the state share after the hold harmless increase and after one-half of the 6.2 percentage point increase (i.e., 3.1 percentage points). For example, after applying the across-the-board increase, a state with a regular FMAP of 50% would have an FMAP of 56.20%. If the state share (after the hold harmless and one-half of the across-the-board increase) were further reduced by 5.5%, the state would receive an additional FMAP increase of 2.58 percentage points (46.9 state share * 0.055 reduction in state share = 2.58). The state's total FMAP increase would be 8.78 points (6.2 + 2.58 = 8.78), providing an FMAP of 58.78%. The unemployment-related FMAP increase is based on a state's unemployment rate in the most recent 3-month period for which data are available (except for the first two and last two quarters of the recession adjustment period, for which the 3-month period is specified) compared to its lowest unemployment rate in any 3-month period beginning on or after January 1, 2006. The criteria are as follows: unemployment rate increase of at least 1.5 but less than 2.5 percentage points = 5.5% reduction in state share; unemployment rate increase of at least 2.5 but less than 3.5 percentage points = 8.5% reduction in state share; unemployment rate increase of at least 3.5 percentage points = 11.5% reduction in state share. If a state qualifies for the unemployment-related FMAP increase and later has a decrease in its unemployment rate, its percentage reduction in state share could not decrease until the fourth quarter of FY2010 (for most states, this corresponds with the first quarter of SFY2011). If a state qualifies for the unemployment-related FMAP increase and later has an increase in its unemployment rate, its percentage reduction in state share could increase. The full amount of the temporary FMAP increase only applies to Medicaid, excluding disproportionate share hospital payments and expenditures for individuals who are eligible for Medicaid because of an increase in a state's income eligibility standards above what was in effect on July 1, 2008. A portion of the temporary FMAP increase (hold harmless plus across-the-board) applies to Title IV-E foster care and adoption assistance. To receive the increase, states are: required to maintain their Medicaid eligibility standards, methodologies, and procedures as in effect on July 1, 2008; prohibited from receiving the increase if they are not in compliance with requirements for prompt payment of health care providers under Medicaid, and required to report to the Secretary of HHS on their compliance; prohibited from depositing or crediting the additional federal funds paid as a result of the increase to any reserve or rainy day fund; required to ensure that local governments do not pay a larger percentage of the state's nonfederal Medicaid expenditures than otherwise would have been required on September 30, 2008; and required to submit a report to the Secretary regarding how the additional federal funds paid as a result of the temporary FMAP increase were expended. CBO estimated that ARRA's FMAP provision would increase federal spending by $87.2 billon over the five-year period from FY2009-2013. Medicaid law requires states to make Medicaid payment adjustments for hospitals that serve a disproportionate number of low-income patients with special needs. Payments to these hospitals that serve a large number of low-income individuals, disproportionate share hospital (DSH) payments, are specifically defined in Medicaid law, including, aggregate annual state-specific limits on federal financial participation and hospital-specific limits on DSH payments. Under those hospital specific limits, a hospital's DSH payments may not exceed the costs incurred by that hospital in furnishing services during the year to Medicaid beneficiaries and the uninsured, less other Medicaid payments made to the hospital, and payments made by uninsured patients (''uncompensated care costs''). States are required to provide an annual report to the Secretary describing the payment adjustments made to each DSH. This provision increases states' FY2009 annual DSH allotments by 2.5% above the allotment they would have received in FY2009 (in FY2009, DSH allotments increased by 4% over FY2008 allotment levels). In addition, states' DSH allotments in FY2010 would be equal to the FY2009 DSH allotment (with the adjustment) increased by 2.5%. After FY2010, states' annual DSH allotments will return to 100% of the annual DSH allotments as determined under current law. Under this provision, if states' annual DSH allotments grew at a greater rate than what they would have received without the 2.5% adjustment, then states will receive the higher DSH allotments without the recession adjustment. CBO estimated that the temporary increase in DSH allotments would increase federal expenditures by $228 million in FY2009 and $456 million for the period FY2009-FY2013. In 2007 and 2008, the Centers for Medicare and Medicaid Services (CMS), issued seven Medicaid regulations that generated controversy during the 110 th Congress. To address concerns with the impact of the regulations, several laws passed during the 110 th Congress imposed moratoriums on six of the Medicaid regulations until April 1, 2009 (excluding a rule on outpatient hospital facility and clinic services). CBO estimated that the extension of the Medicaid moratoria would increase federal expenditures by $105 million in FY2009, but would not have an additional spending increase beyond FY2009. The seven Medicaid regulations issued during the most recent Congress covered the following areas: Graduate Medical Education Most states make Medicaid payments to help cover the costs of training new doctors in teaching programs. The proposed rule would eliminate federal reimbursement for graduate medical education and change how Medicaid upper payment limits for hospital services are calculated. For more information on GME, see CRS Report RS22842, Medicaid and Graduate Medical Education , by [author name scrubbed] and [author name scrubbed]. Cost Limit on Public Providers Intergovernmental transfers (IGTs) are used by some states to finance the non-federal share of Medicaid costs. Certain IGTs are specifically allowed for funding the state share of program costs. Some states have instituted programs where the state shares of Medicaid spending is paid by hospitals or nursing homes that are public providers, but not units of government, or are units of government, but the state share is returned to the provider sometimes through Medicaid payments. Both a proposed and final regulation were issued, however, a federal court held that the rule had been improperly promulgated and remanded the rule back to CMS for further action. This regulation would clarify the types of IGTs allowable for financing a portion of Medicaid costs, impose a limit on Medicaid reimbursement for government-owned hospitals and other institutional providers, and require certain providers to retain all Medicaid reimbursement. For more information on cost limits on public providers, see CRS Report RS22848, Medicaid Regulation of Governmental Providers , by [author name scrubbed]. Rehabilitative Services Medicaid rehabilitative services include a full range of treatments designed to reduce physical or mental disability or restore eligible beneficiaries to their best possible functional levels. There has been enough misunderstanding about when Medicaid pays for and what constitutes rehabilitative services that both the executive and legislative branches have addressed this benefit repeatedly. The proposed rule defines the scope of the rehabilitation benefit and identifies services that could be claimed under Medicaid. For more information on rehabilitative services, see CRS Report RL34432, Medicaid Rehabilitation Services , by [author name scrubbed]. Case Management Case management services assist Medicaid beneficiaries in obtaining needed medical and related services. Targeted case management (TCM) refers to case management for specific beneficiary groups or for individuals residing in state-designated geographic areas. There has been considerable ambiguity about what services are covered and what is legitimately considered TCM. The case management regulation addresses a provision of the Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ) that clarifies and narrows the case management definition and directs the Secretary of HHS to issue regulations to guide states' claims for federal matching funds for case management. For more information on case management and targeted case management, see CRS Report RL34426, Medicaid Targeted Case Management (TCM) Benefits , by [author name scrubbed]. School-Based Services As a condition of accepting funds under the Individuals with Disabilities Education Act ( P.L. 108-446 , IDEA), public schools must provide special education and related services necessary for children with disabilities to benefit from public education. States can finance only a portion of these costs with federal IDEA funds. Medicaid may cover IDEA required health-related services for enrolled children as well as related administrative activities. According to federal investigations and congressional hearings, Medicaid payment to schools have sometimes been improper. To address these problems, CMS issued a regulation that would restrict federal Medicaid payments for school-based administrative activities (e.g., outreach, service coordination, referrals performed by school employees or contractors), and certain transportation services (e.g., from home to school and back for certain school-age children). For more information on school-based services under Medicaid, see CRS Report RS22397, Medicaid and Schools , by [author name scrubbed]. Provider Taxes States use provider-specific taxes to help finance their share of the Medicaid program. Under these funding methods, states collect funds (through taxes or other means) from providers and pay the money back to those providers as Medicaid payments, and claim the federal matching share of those payments. Once the state share has been subtracted, the federal matching funds may be used to raise provider payment rates, to fund other portions of the Medicaid program, or for other non-Medicaid purposes. Provider taxes must be consistent with federal laws and regulations, which may have been ambiguous or changing. CMS issued a provider tax regulation to address these issues. For more information on Medicaid provider taxes, see CRS Report RS22843, Medicaid Provider Taxes , by [author name scrubbed]. Outpatient Hospital Services Under Medicaid, outpatient hospital (OPH) services are a mandatory benefit for most beneficiaries. OPH services include preventive, diagnostic, therapeutic, rehabilitative, or palliative services provided under the direction of a physician or a dentist in the hospital. States use a number of different reimbursement methods for different types of services provided in OPH departments and clinics. CMS issued a regulation that would limit the definition and scope of Medicaid-covered OPH services. For more information on outpatient hospital services, see CRS Report RS22852, Medicaid and Outpatient Hospital Services , by [author name scrubbed] and [author name scrubbed]. P.L. 111-5 extends the existing moratoria on the final regulations on case management services, provider taxes, and school-based administrative and transportation services beyond April 1, 2009, when these moratoria expire, to July 1, 2009. In addition, this provision prohibits the Secretary of HHS from taking any action until after June 30, 2009 (through regulation, regulatory guidance, use of federal payment audit procedures, or other administrative action, policy, or practice, including Medical Assistance Manual transmittal or state Medicaid director letter) to implement the final regulation on OPH facility services (published November 7, 2008 and effective on December 8, 2008). Under current law, moratoria on further administrative action until April 1, 2009 for the regulations on cost limits for public providers, graduate medical education, and rehabilitative services. A Sense of the Congress clause in this ARRA provision indicates that the Secretary of HHS should not promulgate final regulations for rehabilitative services, cost limits on public providers, or graduate medical education. For more information on Medicaid regulations, see CRS Report RL34764, Select Bush Administration Medicaid Rulemakings: Congressional and Administrative Actions , by [author name scrubbed] and [author name scrubbed]. States are required to continue Medicaid benefits for certain low-income families who would otherwise lose coverage because of changes in their income. This continuation is called transitional medical assistance (TMA). Federal law permanently requires four months of TMA for families who lose Medicaid eligibility due to increased child or spousal support collections, as well as those who lose eligibility due to an increase in earned income or hours of employment. However, Congress expanded work-related TMA under Section 1925 of the Social Security Act in 1988, requiring states to provide at least six, and up to 12, months of coverage. Since 2001, these work-related TMA requirements have been funded by a series of short-term extensions, most recently through June 30, 2009. (For more details, see CRS Report RL31698, Transitional Medical Assistance (TMA) Under Medicaid , by [author name scrubbed].) The provision extends work-related TMA under Section 1925 through December 31, 2010. States can opt to treat any reference to a 6-month period (or 6 months) as a reference to a 12-month period (or 12 months) for purposes of the initial eligibility period for work-related TMA, in which case the additional 6-month extension does not apply. States can opt to waive the requirement that a family have received Medicaid in at least three of the last six months in order to qualify. Under the TMA provision, states are required to collect and submit to the Secretary of Health and Human Services (and make publicly available) information on average monthly enrollment and participation rates for adults and children under work-related TMA, and on the number and percentage of children who become ineligible for work-related TMA and whose eligibility is continued under another Medicaid eligibility category or who are enrolled in the Children's Health Insurance Program (CHIP). CBO estimated that the TMA provision would increase federal spending by $1.3 billion over the five-year period from FY2009-2013. Certain low-income individuals who are aged or have disabilities, as defined under the Supplemental Security Income (SSI) program, and who are eligible for Medicare are also eligible to have their Medicare Part B premiums paid for by Medicaid under the Medicare Savings Program (MSP). Eligible groups include Qualified Medicare Beneficiaries (QMBs), Specified Low-Income Medicare Beneficiaries (SLMBs), and Qualifying Individuals (QI-1s). QMBs have incomes no greater than 100% of the federal poverty level (FPL) and assets no greater than $4,000 for an individual and $6,000 for a couple. SLMBs meet QMB criteria, except that their incomes are greater than 100% of FPL but do not exceed 120% FPL. QI-1s meet the QMB criteria, except that their income is between 120% and 135% of poverty and they are not otherwise eligible for Medicaid. The QI-1 program is currently slated to terminate December 2009. This provision of P.L. 111-5 extends authorization for the QI-1 program through December 2010. In general, Medicaid payments are shared between federal and state governments according to a matching formula. Unlike the QMB and SLMB programs, federal spending under the QI-1 program is subject to annual limits. Expenditures under the QI-1 program are paid 100% by the federal government (from the Part B trust fund) up to a state's allocation level. States are required to cover only the number of people which would bring their annual spending on these population groups to their allocation levels. For the period beginning on January 1, 2009, and ending on September 30, 2009, the total allocation amount was $350 million. For the period beginning on October 1, 2009 and ending on December 31, 2009, the total allocation is $150 million. This provision allocates $412.5 million for the period that begins January 1, 2010, and ends September 30, 2010; and allocates $150 million for the period that begins October 1, 2010 and ends on December 31, 2010. P.L. 111-5 combined a number of provisions presented separately or together as protections for Indians under Medicaid and the Children's Health Insurance Program (CHIP). Five provisions from either the Senate or House Bills were combined in P.L. 111-5 , including premiums and cost sharing, eligibility determinations, estate recovery, managed care protections, and consultation with Indian health providers (IHP). CBO estimated that the Indian protections under Medicaid and CHIP would increase federal expenditures by $6 million in FY2009 and by $54 million from FY2009-FY2013. Premiums and Cost-Sharing Under Medicaid, premiums and enrollment fees generally are prohibited for most beneficiaries. Nominal amounts specified in federal regulations may be imposed on selected groups (e.g., certain families qualifying for transitional Medicaid, medically needy). Service-related cost-sharing (e.g., coinsurance, copayments) is prohibited for selected groups (e.g., children under 18, pregnant women) and selected benefits (e.g., hospice care, emergency services, family planning services and supplies). For most other groups and services, states may impose nominal cost-sharing amounts specified in federal regulations at state option. Premiums and cost-sharing may exceed nominal amounts for selected groups (e.g., workers with disabilities and individuals covered under Section 1115 waivers). The Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ) added a Medicaid state option for alternative premiums and cost-sharing for certain subgroups. Applicable maximum amounts vary by income level. Special rules apply to prescription drugs and non-emergency services provided in hospital emergency rooms. P.L. 111-5 specifies that no premiums, service-related cost-sharing or similar charges can be imposed on Indians who receive Medicaid services directly from the Indian Health Service (IHS), an Indian tribe (IT), a tribal organization (TO), an urban Indian organization (UIO), or through referral under the contract health service. Medicaid payments due to such providers for services rendered to a Medicaid-eligible Indian cannot be reduced by the amount of such cost-sharing that would otherwise apply to such an Indian. The new law also adds Indians receiving services through Indian entities to the list of individuals exempt from paying premiums or cost-sharing under the DRA option. The effective date of this provision is July 1, 2009. Treatment of Certain Property from Resources for Medicaid and CHIP Eligibility The federal Medicaid statute identifies more than 50 eligibility pathways. For some pathways, asset tests are required and for other pathways, such tests are optional. When asset tests apply, some pathways give states flexibility to define specific assets to be counted and which can be disregarded. For other pathways, primarily for people qualifying on the basis of a disability or who are elderly, asset tests are required. States generally follow asset guidelines specified in the Supplemental Security Income (SSI) Program. Medicaid also defines the rules for counting certain assets. Under SSI law, several types of assets related to certain Indian-related lands held in trust by the U.S., certain other Indian held lands, and certain distributions (including land or an interest in land) received by certain Alaskan Natives or their descendants are excluded. There is no similar provision in prior CHIP law. P.L. 111-5 prohibits consideration of four different classes of property from resources in determining Medicaid eligibility of an Indian. These include certain properties held in trust, certain other properties within the boundaries of a prior reservation, certain ownership interests related to natural resources, and certain other ownership interests not otherwise specified that have unique religious, traditional or cultural significance that support subsistence or a traditional lifestyle. The new law also applies this provision to CHIP in the same manner that it applies to Medicaid. The effective date of this provision is July 1, 2009. Continuation of Protections of Certain Indian Property from Medicaid Estate Recovery Under Medicaid, all states are required to recover property and assets of deceased Medicaid beneficiaries for outstanding services provided by Medicaid. At a minimum, states must seek recovery for certain services provided, including nursing home care, services provided by an intermediate care facility for the mentally retarded or other similar medical institutions, and Medicaid payments to Medicare for cost-sharing related benefits. States may grant an exemption if the recovery would place an undue hardship on the estate. The Secretary of HHS specifies the standards for a state hardship waiver for Medicaid estate recovery purposes. P.L. 111-5 stipulates that certain income, resources, and property remain exempt from Medicaid estate recovery, if they were exempted under Section 1917(b)(3) of the Social Security Act (allowing the Secretary to specify standards for a state hardship waiver of asset criteria) under instructions regarding Indian tribes and Alaskan Native Villages as of April 1, 2003. The new law also allows the Secretary to provide for additional estate recovery exemptions for Indians under Medicaid. The effective date of this provision is July 1, 2009. Rules Applicable Under Medicaid and CHIP to Managed Care Entities with Respect to Indian Enrollees and Indian Health Care Providers and Indian Managed Care Entities Under Title XIX, Section 1932(a)(2)(C) stipulates the rules regarding Indian enrollment in Medicaid managed care. A state may not require an Indian (as defined in Section 4(c) of the Indian Health Care Improvement Act or IHCIA) to enroll in a managed care entity unless the entity is one of the following (and only if such entity is participating under the plan): (1) the IHS, (2) an IHP operated by an Indian tribe or tribal organization pursuant to a contract, grant, cooperative agreement, or compact with the IHS pursuant to the Indian Self-Determination Act, or (3) an urban IHP operated by a UIO pursuant to a grant or contract with the IHS pursuant to Title V of the IHCIA. In general under Medicaid, Federally Qualified Health Centers (FQHCs) are paid on a per visit basis, using a prospective payment system that takes into account costs incurred and changes in the scope of services provided. Per visit payment rates are also adjusted annually by the Medicare Economic Index applicable to primary care services. When an FQHC is a participating provider with a Medicaid managed care entity (MCE), the state must make supplemental payments to the center in an amount equal to any difference between the rate paid by the MCE and the per visit amount determined under the prospective payment system. P.L. 111-5 requires that Indians enrolled in a non-Indian MCE with an IHP or UIO participating as a primary care provider be allowed to choose such an IHP or UIO as their primary care provider when (1) the Indian is otherwise eligible to receive services from such a provider and (2) the IHP or UIO has the capacity to provide primary care services to that Indian. Contracts between the state and such MCEs must include this requirement, and Medicaid payments to these entities would be conditional on meeting this requirement. Under P.L. 111-5 , Medicaid managed care contracts with MCEs and Primary Care Case Management (PCCMs) companies will be required to meet certain conditions to receive Medicaid payments, including: MCEs and PCCMs must demonstrate that the number of participating Indian health care providers is sufficient to ensure timely access to covered Medicaid managed care services for eligible Indian enrollees, and MCEs and PCCMs must agree to pay both participating and non-participating IHPs for services rendered to Indians at rates equal to the rates negotiated between these organizations and the provider involved, or, if such a rate has not been negotiated, at a rate that is not less than the level and amount of payment which the MCE or PCCM would make for services rendered by a participating non-Indian health care provider. In addition, P.L. 111-5 specifies that MCEs and PCCMs must agree to make prompt payment, as required under Medicaid rules for all providers, to Indian health care providers, and states would be prohibited from waiving requirements relating to assurance that payments are consistent with efficiency, economy, and quality. Further, ARRA applies special payment provisions to certain Indian health care providers that are FQHCs. For non-participating Indian FQHCs that provide covered Medicaid managed care services to Indian MCE enrollees, the MCE must pay a rate equal to the payment that would apply to a participating non-Indian FQHC. When payments to such participating and non-participating providers by an MCE for services rendered to an Indian enrollee with the MCE are less than the rate under the state plan, the state must pay such providers the difference between the rate and the MCE payment. Likewise, if the amount paid to a non-FQHC Indian provider (whether or not the provider participates with the MCE) is less than the rate that applies under the state plan, the state must pay the difference between the applicable rate and the amount paid by MCEs. Under this provision, Indian Medicaid MCEs are permitted to restrict enrollment to Indians and to members of specific tribes in the same manner as IHPs may restrict the delivery of services to such Indians and tribal members. Finally, P.L. 111-5 applies specific sections affecting Medicaid to the CHIP program, including (1) Section 1932(a)(2)(C) regarding enrollment of Indians in Medicaid managed care (e.g., states cannot require Indians to enroll in a MCE unless the entity is the IHS, certain IHPs operated by tribes or tribal organizations, or certain urban IHPs operated by Urban Indian Organizations (UIOs), and (2) the new provisions described above. The effective date of this provision is July 1, 2009. Consultation on Medicaid, CHIP and Other Health Care Programs Funded under the Social Security Act Involving Indian Health Programs and Urban Indian Organizations There are no provisions in prior Medicaid or CHIP law regarding a Tribal Technical Advisory Group (TTAG) within CMS, the federal agency that oversees the Medicare, Medicaid and CHIP programs. P.L. 111-5 requires the Secretary to maintain within CMS a TTAG, previously established in accordance with requirements of a charter dated September 30, 2003. ARRA also requires that the TTAG include a representative of a national urban Indian Health organization and the IHS. The representative of a national urban Indian Health organization will be exempt from the Federal Advisory Committee Act for certain meetings with federal officials. The P.L. 111-5 also requires certain states to establish a process for obtaining advice on a regular, on-going basis from designees of IHPs and UIOs regarding Medicaid law and its direct effects on those entities. Applicable states include those in which one or more IHPs or UIOs provide health care services. This process must include seeking advice prior to submission of state Medicaid plan amendments, waiver requests or proposed demonstrations likely to directly affect Indians, IHPs or UIOs. This process may include appointment of an advisory panel and of a designee of IHPs and UIOs to the Medicaid medical care advisory committee advising the state on its state Medicaid plan. The provision also applies this new language to CHIP in the same manner in which it applies to Medicaid. Finally, the new law prohibits construing these amendments as superseding existing advisory committees, working groups, guidance or other advisory procedures established by the Secretary or any state with respect to the provision of health care to Indians. The effective date of this provision is July 1, 2009. Oversight Under this provision, the Health and Human Services Office of the Inspector General (HHS OIG) will receive $31.25 million to ensure proper expenditure of federal Medicaid funds. These funds will be appropriated from any money in the Treasury not otherwise appropriated and are available throughout the recession period (defined as October 1, 2008-December 31, 2010). Amounts appropriated under this provision are available until September 30, 2012, without further appropriation, and are in addition to any other amounts appropriated or made available to HHS OIG.. Implementation of Increased FMAP This provision also includes a $5 million appropriation for FY2009 to be used by the Health and Human Services Secretary to implement the temporary increased FMAP provision described in the Conference Agreement under Sec. 5001. The implementation funding is available to the Secretary until the end of FY2011 (September 30, 2011). CBO estimated that the funding for the HHS Secretary for implementation of the temporary FMAP increase provision would increase federal expenditures by $5 million in FY2009, with no financial impact beyond FY2009. CBO also estimated that federal expenditures would increase by $31 million in FY2009 for the additional funds provided under this provision for the OIG to monitor the increased recession spending. There would be no financial impact beyond FY2009 for the OIG funding. Under this provision of P.L. 111-5 , the Comptroller General of the United States and the Government Accountability Office (GAO), are to study the current (on the date of enactment of the legislation) economic recession as well as previous national economic downturns since 1974. GAO is required to develop recommendations to address states' needs during economic recessions, including the past and projected effects of temporary increases in FMAP during these recessions. By April 1, 2011, GAO is required to submit a report to appropriate congressional committees that is to include the following: Recommendations for modifying the national economic downturn assistance formula for temporary Medicaid FMAP adjustments (a "countercyclical FMAP," as described in GAO report number, GAO-07-97), to improve the effectiveness of the countercyclical FMAP for addressing states' needs during national economic downturns. The report should address: what improvements are needed to identify factors to begin and end the application of a countercyclical FMAP; how to adjust the amount of a countercyclical FMAP to account for state and regional variations; and how a countercyclical FMAP could be adjusted to better account for actual Medicaid costs incurred by states during economic recessions. Analysis of the impact on states of recessions, including declines in private health insurance benefits coverage; declines in state revenues; and maintenance and growth of caseloads under Medicaid, CHIP, or any other publically funded programs that provide health benefits coverage to state residents. Identification of and recommendations for addressing the effects on states of any other specific economic indicators GAO determines appropriate.

The economy officially was considered in a recession in December 2008, but many forecasters had long recognized the downturn and some believed this economic contraction would be more severe than other post-World War II slowdowns. A combination of factors combined to present policymakers with difficult decisions on how best to stimulate the economy. Troubling instability in the housing and financial services sectors, weak auto manufacturing demand, and high energy costs earlier in 2008 had slowed growth dramatically and forced millions into unemployment. With declining tax revenue and increasing costs to provide unemployment and other benefits to unemployed workers, states were implementing measures to rein in spending, including restricting Medicaid eligibility and services. Congress considered legislation aimed at stimulating economic activity in selected industrial sectors to save existing and create new jobs, reduce taxes, invest in future technologies, and fund infrastructure improvements. In addition to reducing some taxes and funding infrastructure projects, ARRA provisions were designed to provide: temporary support to families and individuals by increasing unemployment compensation benefits; financial assistance for individuals to maintain their health coverage under provisions in the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA); temporary increases in Medicaid matching rates; and increases in disproportionate share hospital allotments. The House approved the American Recovery and Reinvestment Act of 2009 (H.R. 1) on January 28, 2009. The Senate passed an amendment (S.Amdt. 570) as a replacement for the House-approved version of ARRA on February 10, 2009. ARRA was referred to a joint House and Senate conference committee. The joint Senate and House Conference Committee reached agreement, and ARRA was passed by the House and Senate on February 13, 2009. President Obama signed ARRA (P.L. 111-5) into law on February 17, 2009. This report is a summary of ARRA's Medicaid provisions. For more information on the Medicaid provisions included in House and Senate versions of ARRA, see CRS Report R40158, Medicaid Provisions in the House and Senate American Recovery and Reinvestment Act of 2009 (ARRA, H.R. 1, S.Amdt. 570), coordinated by [author name scrubbed]. This report will not be updated. For further information on implementation of FMAP changes in ARRA, see CRS Report RL32950, Medicaid: The Federal Medical Assistance Percentage (FMAP).

Operation Enduring Freedom (OEF) began on October 7, 2001, and was primarily conducted in Afghanistan. On December 28, 2014, President Obama announced that OEF had ended. A "follow-on mission," Operation Freedom's Sentinel (OFS), was started on January 1, 2015, to "continue training, advising, and assisting Afghan security forces." Operation Iraqi Freedom (OIF) began on March 19, 2003, and was primarily conducted in Iraq. On August 31, 2010, President Obama announced that OIF had ended. A transitional force of U.S. troops remained in Iraq under Operation New Dawn (OND), which ended on December 15, 2011. Several thousand U.S. civilian personnel, contract personnel, and a limited number of U.S. military personnel remain in Iraq carrying out U.S. government business and cooperative programs under the auspices of agreements with the Iraqi government. On October 15, 2014, U.S. Central Command designated new military operations in Iraq and Syria against the Islamic State of Iraq and the Levant as Operation Inherent Resolve (OIR). (For more information on war and conflict dates, see CRS Report RS21405, U.S. Periods of War and Dates of Recent Conflicts , by [author name scrubbed].) Daily updates of total U.S. military and civilian casualties in OIF, OEF, OND, OIR, and OFS can be found at the Department of Defense's (DOD's) website, at http://www.defense.gov/news/casualty.pdf . Table 1 gives the overall casualties in OIF, OND, and OEF. The U.S. Army Office of the Surgeon General (OSG), using the Defense Medical Surveillance System (DMSS), provided data on the incidence of post-traumatic stress disorder (PTSD) cases. According to Dr. Michael Carino of the OSG, a case of PTSD is defined as an individual with two or more outpatient visits or one or more hospitalizations during which PTSD was diagnosed. The threshold of two or more outpatient visits is used in the DMSS to increase the likelihood that the individual has, or had, clinically diagnosable PTSD. A single visit on record commonly reflects a servicemember who was evaluated for possible PTSD, but did not actually meet the criteria for clinical diagnosis. In this data set, an incident of PTSD among deployed servicemembers is defined as occurring when a deployed servicemember was diagnosed with PTSD at least 30 days after being deployed. Many statistics on traumatic brain injury (TBI) are available to the public, at the Defense and Veterans Brain Injury Center, at http://dvbic.dcoe.mil/dod-worldwide-numbers-tbi . Unlike PTSD numbers, which are segmented by those deployed and those not previously deployed, TBI numbers represent medical diagnoses of TBI that occurred anywhere U.S. forces are located, including the continental United States. Table 4 shows the number of individuals with battle-injury major limb amputations for OEF, OFS, OIF, OND, and OIR. A major limb amputation includes the loss of one or more limbs, the loss of one or more partial limbs, or the loss of one or more full or partial hand or foot. The total number of individuals with major limb amputations as of June 1, 2015, is 1,645. Figure 3 charts the number of major limb amputations due to a battle injury in OIF, OND, OIR, OEF, and OFS from 2001 through June 1, 2015, for all services. DOD provides data on the demographics of servicemembers who have died or been wounded in action in OIF, OND, and OEF through the Defense Casualty Analysis System at https://www.dmdc.osd.mil/dcas/pages/casualties.xhtml . To find this information, select a conflict and select between "deaths" or "wounded in action," and then select from the demographic categories, including gender, age, race, and ethnicity. Similar data have not yet been publically released for OEF and OIR.

This report presents statistics regarding U.S. military and civilian casualties in the active missions Operation Freedom's Sentinel (OFS, Afghanistan) and Operation Inherent Resolve (OIR, Iraq and Syria) and, as well as operations that have ended, Operation New Dawn (OND, Iraq), Operation Iraqi Freedom (OIF, Iraq), and Operation Enduring Freedom (OEF, Afghanistan). It also includes statistics on post-traumatic stress disorder (PTSD), traumatic brain injury (TBI), and amputations. Some of these statistics are publicly available at the Department of Defense's (DOD's) website and others have been obtained through DOD experts. For more information on pre-2000 casualties, see CRS Report RL32492, American War and Military Operations Casualties: Lists and Statistics, by [author name scrubbed] and [author name scrubbed]. This report will be updated as needed.

In the 111 th Congress, legislation was introduced that sought to clarify the scope of the Clean Water Act (CWA) in the wake of two Supreme Court decisions that interpreted the law's jurisdiction more narrowly than prior case law. The Court's narrow interpretation involved jurisdiction over some geographically isolated wetlands, intermittent streams, and other waters. These cases dealt specifically with CWA section 404, the so-called "dredge and fill" program, under which permits are required for discharges of dredged or fill material. But the decisions are significant for the act as a whole, since the regulatory definitions at issue govern not only section 404, but also many other provisions and requirements of the law, including section 402 (permit program for point source discharges into navigable waters), section 303 (water quality standards for navigable waters), and section 311 (discharges of oil and hazardous substances into navigable waters). First, in Solid Waste Agency of Northern Cook County v. Army Corps of Engineers (SWANCC), 531 U.S. 159 (2001), the Court addressed the issue of CWA jurisdiction over "isolated waters"--waters that are not traditional navigable waters (sometimes called navigable-in-fact waters), are not interstate, are not tributaries of the foregoing, and are not hydrologically connected to navigable or interstate waters or their tributaries. The Court held 5-4 that the scope of jurisdiction under the CWA does not extend to isolated, nonnavigable, intrastate waters in cases where jurisdiction is asserted purely on the ground that they are or might by used by migratory birds that cross state lines. However, the ruling created uncertainty about what isolated waters and wetlands would no longer be subject to federal regulation, because scientists and regulators recognize that many types of isolated wetlands that provide important ecological functions are not physically adjacent to navigable waters. Second, in Rapanos v. United States, 547 U.S. 715 (2006), the Court addressed CWA jurisdiction over "adjacent wetlands," specifically wetlands adjacent to tributaries of traditional navigable waters. The Court issued a split 4-1-4 ruling. A four-justice plurality opinion, written by Justice Scalia, adopted a test restricting jurisdiction under section 404 of the act to relatively permanent bodies of water and wetlands with a continuous surface connection to waterbodies that are themselves waters of the United States. In a concurring opinion, Justice Kennedy proposed a case-by-case test to establish a significant nexus to waters of the United States for jurisdiction over adjacent wetlands to exist under the act. A wetland, he declared, has the requisite significant nexus if, alone or in combination with similarly situated lands in the region, it significantly affects the chemical, physical, and biological integrity of traditional navigable waters. These ecological functions include flood retention, pollutant trapping, and filtration. Under Kennedy's opinion, the waters that perform these functions may be intermittent or ephemeral, and they need not have a surface hydrological connection to other waters. When, in contrast, their effects on water quality are speculative or insubstantial, the wetland is beyond section 404's reach. Because no single opinion in Rapanos commanded the support of five or more Justices, the scope of CWA jurisdiction has remained unsettled, and lower courts have diverged as to the rule of decision to be applied in specific cases. Bills to nullify SWANCC , or in later versions SWANCC and Rapanos , and reinstate the interpretation of "waters of the United States" prevailing before those decisions, have been introduced in recent Congresses, but none had advanced until the 111 th Congress. Obama Administration officials have supported the need for legislative clarification of these issues, marking the first time that the Administration has done so. In May 2009, the heads of the Environmental Protection Agency (EPA) and U.S. Army Corps of Engineers (Corps), the Department of Agriculture, the Department of the Interior, and the Council on Environmental Quality jointly wrote to congressional leaders to express that view and to identify certain principles that might help guide legislative and other actions. The 111 th Congress legislation introduced in response to these rulings was S. 787 (the Clean Water Restoration Act), introduced by Senator Feingold and approved, with amendments, by the Senate Environment and Public Works Committee in June 2009, and H.R. 5088 (America's Commitment to Clean Water Act), introduced by Representative Oberstar on April 21, 2010. Proponents of the legislation contended that the Court's rulings in these cases, and subsequent regulatory guidance issued by the Corps and EPA in 2003, 2007, and 2008, have unsettled several decades' worth of case law, misreading or ignoring congressional intent, and thus reinterpreting and narrowing the jurisdictional scope of the act. The rulings and agency responses, they said, have removed regulatory protection from some waters and wetlands and thereby weakened protection of the nation's water quality. Supporters stated that the intention of the legislation was to return to the CWA regulatory jurisdiction that was recognized before the Court's 2001 and 2006 rulings. Both S. 787 and H.R. 5088 shared that objective, but they would have done so in somewhat different ways, as described in this report. On the other hand, critics contended that the bills would greatly expand federal regulatory jurisdiction of the CWA over the pre- SWANCC interpretation, not simply reaffirm congressional intent. They were concerned that the proposed definition of "waters of the United States" was ambiguous, and that the changes proposed by the bills would have the potential to be interpreted far more broadly than what was understood to be jurisdictional before 2001--thus causing more uncertainty, rather than clarifying the issue. In general, supporters of the bills included many states and state environmental organizations, environmental and conservation advocacy groups, as well as a number of outdoor, hunting, fishing, and sporting organizations, who argued that enactment of the bills would provide needed strengthening of CWA protection for water quality and wetlands. In general, critics and opponents included many manufacturing industry groups and agricultural interests, as well as land development and home builder organizations, who contended that the bills would fundamentally alter the regulatory reach and balance of federal and state authority under the CWA. The bill approved by the Senate Committee on Environment and Public Works was an amended version of legislation introduced by Senator Feingold in April 2009. Section 1 was the Short Title of the bill, and Section 2 described two purposes: "to reaffirm the original intent of Congress" in enacting the CWA in 1972 (P.L. 92-500; 33 U.S.C. SSSS 1257-1387) and to "clearly define the waters of the United States" subject to the CWA as the phrase was interpreted in applicable regulations and guidance in effect prior to the SWANCC ruling. Section 3 would have made 24 findings, including several about the economic and ecological importance of protecting intrastate waters and wetlands, and others about the importance of protecting small and intermittent streams from pollutant discharges. It also included findings that the legislation would overturn the Supreme Court's SWANCC and Rapanos rulings and reaffirm federal jurisdiction over all waters of the United States as the CWA was applied and interpreted in rules, guidance, and interpretations of EPA and the Corps prior to those decisions. The findings as approved by the Senate committee significantly modified findings in the bill as introduced, deleting many from the original bill and adding new findings. It should be noted that the findings in a statute are not binding, operative provisions, although they may influence to varying degrees agencies' regulatory decisions and the judicial interpretation of the operative provisions elsewhere in a statute or a court's assessment of a statute's constitutionality. Section 4 was the important definitional provision of the bill, because it would have affected the key CWA phrase which sets the act's reach, and which legislative history, regulations, and cases all attempt to interpret--the phrase "navigable waters." The current CWA defines "navigable waters" to mean "the waters of the United States, including the territorial seas." S. 787 would have struck this term and its definition and installed "waters of the United States" as the direct jurisdictional phrase, a term that is defined in EPA and Corps regulations, but currently not in statute (see Table A-1 which compares existing regulatory text and proposed statutory text). Section 4 would have defined the term "waters of the United States" in the CWA to mean all waters subject to the ebb and flow of the tide, the territorial seas, and all interstate and intrastate waters, including lakes, rivers, streams (including intermittent streams), mudflats, sandflats, wetlands, sloughs, prairie potholes, wet meadows, playa lakes, and natural ponds, all tributaries of any of the above waters, and all impoundments of the foregoing. Section 4 also would have excluded from the new statutory definition two terms that currently are excluded from jurisdiction by regulation only: prior converted cropland, and waste treatment systems. Prior converted cropland means a wetland that was manipulated or used to produce an agricultural commodity before December 23, 1985. Waste treatment systems refer to treatment ponds or lagoons designed to meet the requirements of the CWA, including only manmade bodies of water which neither were originally created in waters of the United States (such as disposal areas in wetlands), nor resulted from the impoundment of such waters. These two exemptions, not in S. 787 as introduced, were included in an amendment adopted during committee markup. Section 5 would have conformed the changes resulting from section 4 of the bill with the CWA as a whole by replacing the phrases "navigable waters of the United States" or "navigable waters" wherever they currently appear in the CWA with "waters of the United States." Section 6 was the Savings Clause. A savings clause is typically included in order to declare that the legislation preserves--or would not affect--provisions, such as exemptions, granted under existing law. Section 6 expressly would have preserved CWA permit exemptions found in two provisions of the act. First, subsections (6)(1) and (2) would have preserved two exemptions in CWA section 402(l), which is titled "Limitation on Permit Requirement." Section 402 is the section that authorizes National Pollutant Discharge Elimination System (NPDES) permits for point source discharges from, for example, municipal sewage treatment facilities and manufacturing plants. CWA section 402(l) prohibits the Administrator of EPA from requiring an NPDES permit for discharges composed entirely of return flows from irrigated agriculture, or for discharges of stormwater runoff from oil or gas mining operations. Complementing the exclusion of irrigated agricultural return flows in section 402(l) is this existing exclusion in the Definitions provision of the act: "This term ['point source'] does not include agricultural stormwater discharges and return flows from irrigated agriculture." Second, the legislation would have preserved six permit exemptions specified in CWA section 404(f)(1). As noted previously, section 404 authorizes the Corps to issue permits for dredged or fill materials into the navigable waters, including wetlands. Subsections 6(3) through (8) of S. 787 would have preserved the existing section 404 exemptions for normal farming, ranching, and silviculture; maintenance of currently serviceable structures; construction or maintenance of farm or stock ponds or irrigation and drainage ditches; temporary sedimentation basins on construction sites; farm or forest roads or temporary roads for moving mining equipment; and activities under a state program for placement of dredged or fill material (a program that is approved under CWA section 208(4)(B)). As approved by the committee, Section 6 only referenced the eight saved provisions by statutory citation. During markup, the committee adopted an amendment that dropped language in the bill as introduced that additionally would have paraphrased each provision. Critics of the legislation had argued that the paraphrasing language added confusion, rather than clarity. Section 7 would have directed EPA and the Corps, within 18 months of enactment, to promulgate such regulations as necessary to implement the legislation and amendments made by the legislation. Section 7 also stated that the term "waters of the United States" shall be construed consistently with the scope of federal jurisdiction under the CWA as interpreted and applied by EPA and the Corps prior to January 9, 2001 (the date of the SWANCC ruling), and "the legislative authority of Congress under the Constitution." The bill introduced by Representative Oberstar on April 21, 2010, was a modified version of legislation that he had introduced previously. Like the Senate measure, Section 1 was the Short Title of the bill, and Section 2 described the purposes of the legislation. It included two purposes similar to S. 787 : to "reaffirm the original objective of Congress" in enacting the CWA and to "reaffirm the definition of the waters of the United States" that are subject to the CWA consistent with interpretations prior to the two Supreme Court rulings. H.R. 5088 included a third purpose: to protect the "waters of the United States" as authorized by specific constitutional powers--section 8 of article I (scope of legislative power, including the Commerce Clause), section 2 of article II (presidential power, including treaties), and section 3 of article IV (congressional power over U.S. property) of the U.S. Constitution. Section 3 would have made 12 findings, for example about the importance of protecting small and intermittent streams, including seasonal streams and their headwaters, which can affect the introduction of pollutants to larger rivers and streams. It also included findings about the importance of water for agriculture, transportation, energy production, recreation, fishing and shellfishing, and municipal and commercial uses. Findings in H.R. 5088 would have stated that the SWANCC and Rapanos rulings impair the statutory protection of U.S. waters, contrary to congressional intent. Section 4 was the important definitional provision of the bill. Like the Senate committee bill, it would have affected the key CWA phrase which sets the act's reach. Also like the Senate committee bill, H.R. 5088 would have struck the term "navigable waters" and install "waters of the United States" as the direct jurisdictional phrase. A key difference between the bills, however, was that while S. 787 would have inserted the fairly short text quoted above, H.R. 5088 would have inserted a longer definition based closely on existing regulatory language of the Corps and EPA, but with some modifications (see Table A-1 which compares existing regulatory text and proposed statutory text). Section 4 of H.R. 5088 would have defined the term "waters of the United States" in the CWA as including (i) all waters that are currently used, were used in the past, or may be susceptible to use in interstate or foreign commerce, including all waters that are subject to the ebb and flow of the tide; (ii) all interstate and international waters, including interstate and international wetlands; (iii) all other waters, including intrastate lakes, rivers, streams (including intermittent streams), mudflats, sandflats, wetlands, sloughs, prairie potholes, wet meadows, playa lakes, or natural ponds, the use, degradation, or destruction of which does or would affect interstate or foreign commerce, the obligations of the United States under a treaty, or the territory or other property belonging to the United States; (iv) all impoundments of waters otherwise defined as waters of the United States under this paragraph; (v) tributaries of waters identified in clauses (i) through (iv); (vi) the territorial seas; and (vii) waters, including wetlands, adjacent to waters identified in clauses (i) through (vi). Section 4 of H.R. 5088 also would have excluded from the new statutory definition two terms that currently are excluded from jurisdiction by regulation only: prior converted cropland, and waste treatment systems, and it would expressly define both terms. As noted above, S. 787 similarly would have excluded both terms, but it did not include definitions. Section 5 would have conformed the changes resulting from section 4 of the bill with the rest of CWA as a whole by replacing the phrases "navigable waters of the United States" or "navigable waters" wherever they currently appear in the CWA with "waters of the United States." Unlike S. 787 , H.R. 5088 did not include a Savings Clause. The bill's principal sponsor said that creating a list of provisions not affected would be endless and of no legal value. Further, H.R. 5088 did not include either a provision addressing statutory construction or a provision calling for regulations. New regulations would be unnecessary, according to the bill's sponsor, because the legislation largely would codify existing regulatory language. Both proponents and critics of S. 787 and H.R. 5088 wanted to achieve predictability and certainty concerning what constitutes the geographic reach of CWA regulatory jurisdiction--that is, which waters are protected by the act and are subject to regulation, and which are not. Proponents worried that some waters are no longer protected, as a result of court rulings, while regulated entities said that uncertainties about interpreting the rulings have led to costly and time-consuming delays in obtaining jurisdictional determinations. But between the proponents and critics, there was wide disagreement whether the new statutory definition proposed in either bill, coupled with removing the word "navigable" from current law and other changes, would achieve the objective of clarity and certainty. The proposed definition of "waters of the United States" in both bills would have identified specific kinds of waters and wetlands that Congress intends be regulated. For example, prairie potholes and playa lakes are types of wetlands that typically are hydrologically isolated. Supporters said that including these as examples in the legislation would give a clear indication of congressional intent that the act's jurisdiction extends to hydrologically isolated waters--those waters that were the subject of the SWANCC ruling. The definitions in both bills were based on the existing Corps and EPA regulations, unchanged since 1993 (see footnote 9 ). Some stakeholder groups have urged Congress to codify the agencies' regulations verbatim in the statute in order to provide the greatest clarity of intent, but bill sponsors in the Senate rejected this approach and, instead, crafted a definition from several parts of the regulatory text (see Table A-1 ). Some said that complete regulatory codification alone would not solve all of the problems created by the Supreme Court's rulings, since those rulings were largely interpretations of those regulations. However, in a major change from the approach in prior House bills, the authors of H.R. 5088 in the 111 th Congress chose to include a statutory definition that more closely follows the full existing Corps-EPA regulatory language. Yet it also would have extended the regulatory definition in ways that some might criticize. In particular, H.R. 5088 would have included in the definition of "waters of the United States" "all ... international waters, including ... international wetlands," which are not included in the Corps-EPA regulations. Including "international waters" would seemingly extend the reach of the CWA beyond the traditional boundaries of national jurisdiction and could lead to disputes about whether particular international waters and wetlands are or should be regulated by the act. In another change from the regulatory definition, H.R. 5088 would have included in the term "waters of the United States" waters whose use, degradation, or destruction does or would affect "the obligations of the United States under a treaty, or the territory or other property belonging to the United States." One particular problem that both bills sought to remedy centers on the Court's discussion of "navigable waters." Proponents argued that the bills would restore the original intent of Congress when it enacted the Clean Water Act, which the Court misread, they contended. The conference report accompanying enactment of the CWA in 1972 contains this oft-quoted statement: The conferees fully intend that the term 'navigable waters' be given the broadest possible constitutional interpretation unencumbered by agency determinations which have been made or may be made for administrative purposes. For many supporters of S. 787 and H.R. 5088 , the core problem resulting from the Supreme Court's two rulings is the Court's discounting of the Corps' and EPA's broad interpretation of the word "navigable" in the statute. In SWANCC , the Court said, "the term 'navigable' in the statute has at least the import of showing us what Congress had in mind as its authority for enacting the CWA: its traditional jurisdiction over waters that were or had been navigable in fact or which could reasonably be so made." Further, the Scalia plurality opinion in Rapanos took a narrow view of jurisdiction, limiting the CWA's coverage to "those relatively permanent, standing or continuously flowing bodies of water: and "only those wetlands with a continuous surface connection to [other regulated wetlands.]" Environmentalists say that this would cut off jurisdiction for numerous waters and wetlands that may not be continuously, hydrologically connected to nearby waters and would put many upper-reach tributaries at risk of losing federal protection from pollution and destruction. In response, the 111 th Congress legislation was intended to clarify that Congress's primary concern in 1972 was to protect and broadly conserve waters from pollution. By removing the word "navigable" entirely from the statute, supporters said, the bills were intended to make clear Congress's original intent, while also following long-standing interpretation of the Corps and EPA. To supporters of the legislation, removing the word "navigable" is central to restoring the authority of the Clean Water Act. But retaining "navigable" is equally important to those who opposed the legislation. Critics contended that "navigability" is a term that has well recognized meaning. Without it, the scope of the law and federal jurisdiction would be overly broad, in their view, thus raising serious federalism issues, as a broadened CWA would conflict with the primary responsibility of states to manage and regulate water resources, including with regard to water allocation. The critics were not satisfied that the finding in section 2(5) of S. 787 , saying that Congress supports the policy in CWA section 101(g) regarding state authority over water rights and water allocation, would have addressed this concern. H.R. 5088 did not include a similar finding. Critics further contended that, by following the Corps' and EPA's long-standing interpretation, the legislation would have failed to do what its supporters asserted: rather than clarifying congressional intent, it would have expansively interpreted which waters are jurisdictional under the CWA. Both S. 787 and H.R. 5088 would have codified the regulatory encroachment that had developed in the years before the SWANCC ruling and that the Supreme Court sought to reverse, they said. Many environmentalists and other supporters of S. 787 and H.R. 5088 also were concerned that the Court's SWANCC and Rapanos rulings, while decided on statutory grounds, raised related questions about the outer limits of Congress's power to regulate waters with little or no connection to traditional navigable waters under the Commerce Clause of the Constitution. In particular, in the SWANCC ruling, the majority opinion stated: "Where an administrative interpretation of a statute invokes the outer limits of Congress' power, we expect a clear indication that Congress intended that result." In response, some commentators have argued that if Congress were to enact legislation to reverse the two rulings, it should definitively protect the nation's waters by explicitly stating the constitutional basis for the act's jurisdiction. Otherwise, they argue, future courts could build on past rulings to further challenge and limit Congress's authority in this area under the Constitution. One noted, "if Congress amends the CWA, it should include a clear jurisdictional element, even if that provision states only that the Act extends to the limits of, but not beyond, Congress' Commerce Clause power." As described above, section 7 of S. 787 would have included a Rule of Construction provision stating that the term "waters of the United States" shall be construed consistently with "the legislative authority of Congress under the Constitution." H.R. 5088 would have addressed this concern in section 2(3), stating that one of the purposes of the legislation was to define the term "waters of the United States" and to protect such waters, as authorized by provisions of the Constitution, including the Commerce Clause. Further, the definition in H.R. 5088 also would have applied to waters whose use, degradation, or destruction does or would affect U.S. treaty obligations (section 2 of article II) or U.S. territory or property (section 3 of article IV). However, legislative language addressing Congress's constitutional authority to regulate waters raised strong objections from critics who said that the language, together with eliminating "navigability" from the act, would have effectively expanded the law's reach, not simply clarified original congressional intent. Critics of the current legislation acknowledged that in the CWA Congress did broaden the federal regulatory authority over the nation's waters, but they contended that Congress intended to exercise its commerce power over navigation, and not its power over all things affecting interstate commerce. In response, supporters of S. 787 , who disputed the critics' narrow interpretation of the CWA's legislative history, pointed to another Rule of Construction provision in section 7 of that bill, which would have limited the term "waters of the United States" to the scope of federal jurisdiction under the CWA as interpreted and applied by EPA and the Corps prior to January 9, 2001 (the day of the SWANCC ruling). Likewise, section 3(12) of H.R. 5088 would have stated that the legislation would not affect the authority of the Corps or EPA under the provisions of the CWA as interpreted or applied by those agencies as of January 8, 2001 (the day before the SWANCC ruling). This point did not satisfy critics who were concerned that in the past the reach of the CWA has increased through "regulatory creep," and that this could well occur again in the future. The legislation approved by the Senate Environment and Public Works Committee in June 2009 was a modified version of the bill as introduced by Senator Feingold. During markup, the committee adopted an amendment co-sponsored by Senators Baucus, Klobuchar, and Boxer, while it rejected several amendments offered by Senators Barrasso and Vitter that would have limited the bill's application by, for example, striking some terms in the substitute amendment's definition of "waters of the United States" (e.g., prairie potholes, mudflats, wet meadows, and natural ponds) and exempting livestock production and agricultural cropping practices from CWA permitting requirements. Both before and after Senate markup, press accounts reported discussions about a number of legislative alternatives intended to, on the one hand, include additional permit exemptions sought by several industry groups, or, on the other hand, broaden bill language to more clearly assert constitutional authority to protect U.S. waters. Some of the requested exemptions were adopted (for example, for prior converted cropland), but others were not. The broadest possible language regarding constitutional authority, sought by many environmental groups, was not included in the bill as approved. After the committee's action, reports indicated that there continued to be great interest among both supporters and opponents in further changes to the bill. When he introduced H.R. 5088 , Representative Oberstar said that the House Transportation and Infrastructure Committee would not hold hearings on the bill, because it held three days of hearings on similar legislation in the 110 th Congress. The 111 th Congress bill reflected testimony at those hearings and subsequent comments, he said. No specific schedule for action on the bill was announced. The Administration did not take an official position on the legislation, although, as noted above, EPA, the Corps, and other agencies joined in a May 2009 letter expressing support for legislative clarification of issues raised by the two Supreme Court rulings. There was no further legislative action on either bill during the 111 th Congress. In light of the widely differing views of proponents and opponents, future prospects for similar legislation are highly uncertain. Future action also is uncertain because both of the two principal sponsors, Senator Feingold and Representative Oberstar, were defeated for re-election in November 2010. Nevertheless, the desire among stakeholders for greater certainty over which waters are jurisdictional under the Clean Water Act remains and could continue to draw attention in the 112 th Congress, although the direction of future legislation could differ from past proposals. One difficulty of legislating changes to the CWA in order to protect wetlands and other U.S. waters results from the fact that the complex scientific questions about such areas are not easily amenable to precise resolution in law. The debate over revising the act highlights the challenges of using the law to do so. The legal and policy questions associated with the SWANCC and Rapanos cases--concerning the outer geographic limit of CWA jurisdiction and the consequences of restricting that scope--have challenged regulators, landowners and developers, policymakers, and courts for more than 35 years. Ultimately, if Congress were to enact legislation like that in the 111 th Congress or an alternative, the implications of defining "waters of the United States" and making other statutory changes proposed in the legislation would depend on several factors: the new statutory language itself, accompanying legislative history, new regulations that the Corps and EPA might promulgate to implement the legislation, and interpretive case law resulting from likely future legal challenge.

In the 111th Congress, legislation was introduced that sought to clarify the scope of the Clean Water Act (CWA) in the wake of Supreme Court decisions in 2001 and 2006 that interpreted the law's jurisdiction more narrowly than prior case law. The Court's narrow interpretation involved jurisdiction over some geographically isolated wetlands, intermittent streams, and other waters. The two cases are Solid Waste Agency of Northern Cook County v. Army Corps of Engineers (SWANCC) and Rapanos v. United States. Bills to nullify the Court's rulings have been introduced repeatedly since the 107th Congress, but none had advanced until the 111th Congress. In June 2009, a Senate committee approved S. 787, the Clean Water Restoration Act. Companion legislation in the House, H.R. 5088 (America's Commitment to Clean Water Act), was introduced in April 2010. No further legislative action occurred on either bill. Under current law, the key CWA phrase which sets the act's reach is the phrase "navigable waters," defined to mean "the waters of the United States, including the territorial seas." Proponents of the current legislation contend that the Court misread Congress's intent when it enacted the CWA, and consequently the Court's ruling unduly restricted the scope of the act's water quality protections. Both S. 787 and H.R. 5088 would have replaced the phrase "navigable waters" in the CWA with "waters of the United States" and would have installed a definition of "waters of the United States," not found in the law now. The bills differed in how they would define the phrase. The Senate committee bill included a definition drawn from one paragraph of existing federal regulatory text, while H.R. 5088 included a longer definition based on the same regulatory language, but with some modifications. Both bills also included provisions affirming the constitutional basis for the act's jurisdiction. These provisions were intended to address the concern that the Court's rulings, while decided on statutory grounds, raised related questions about the outer limits of Congress's power to regulate waters with little or no connection to traditional navigable waters under the Commerce Clause of the Constitution. Proponents of the legislation, including many states and environmental advocacy groups, contended that the Court's ruling in these cases, and subsequent regulatory guidance by federal agencies, have unsettled several decades' worth of case law, misreading or ignoring congressional intent, and thus reinterpreting and narrowing the jurisdictional scope of the act. Supporters said that the intention was to return to the CWA regulatory jurisdiction that prevailed before the Court's rulings. On the other hand, critics, including many industry groups and development and home builder organizations, contended that the legislation would greatly expand federal regulatory jurisdiction of the CWA beyond interpretations that existed before the two Supreme Court rulings, not simply reaffirm congressional intent. They were concerned that the legislation, were it enacted, had the potential to be interpreted far more broadly than what was previously understood to be jurisdictional--thus causing more uncertainty, rather than clarifying the issue. Between proponents and critics, there was wide disagreement whether the new statutory definition proposed in either bill, coupled with other changes, would achieve the objective of clarity and certainty that has been broadly desired. In light of the differing views on the issues, future prospects for similar legislation in the 112th Congress are highly uncertain. The legal and policy questions associated with the SWANCC and Rapanos cases--concerning the outer geographic limits of CWA jurisdiction and consequences of restricting that scope--have challenged regulators, landowners and developers, and policymakers for more than 35 years.

The Department of Veterans Affairs (VA) provides an array of benefits to veterans and to certain members of their families. These benefits include, but are not limited to, disability compensation, education and training benefits, dependent and survivor benefits, medical treatment, life insurance and burial benefits, and home loan guaranty. In order to apply for these benefits, in most circumstances, the claimant will send an application to his or her local VA office. The local VA Regional Office (RO) will review the application and make an initial determination as to whether the claimant is entitled to the benefit. If, after the local VA makes a determination on the claim, the claimant is not satisfied with the results, he or she has the right to appeal that decision. This report provides an overview of the VA appeal process from the first stages of the appeal through review by the Supreme Court of the United States. The introduction to this report will discuss the types of decisions that can be appealed, introduce the various actors in the appeal process, briefly describe the two avenues for appeal within the VA, and address the rights of a claimant to be represented during the appeal process. The report will then provide a step-by-step breakdown of the appeal process within the Department of Veterans Affairs followed by a description of further judicial review from the Court of Appeals for Veterans Claims, the U.S. Court of Appeals for the Federal Circuit, and the Supreme Court of the United States. In order to apply for VA benefits, an applicant must file a claim at the local VA office, VA medical facility, or online at the VA's eBenefits website (www.ebenefits.va.gov). Veterans Service Organizations (VSO) are available to provide assistance with applying for benefits. Once the VA has received a completed application for benefits, the VA will review the claim and determine whether to allow or deny the claim. The VA will mail the determination to the claimant. If the claimant is not satisfied with the VA's determination, he or she may appeal the decision. After the VA Regional Office mails the claimant an initial determination, the claimant may initiate the appeal process. The claimant will be notified of the right to appeal when the initial determination is issued. The claimant is permitted to appeal any decision reached on a claim for benefits. The BVA's regulations, at 38 C.F.R. SS20.101(a), provide a long, but not exhaustive, list of the types of decisions that can be appealed to the BVA, including decisions related to service-connected disability benefits, benefits for survivors, education assistance benefits, and burial benefits. A claimant can appeal a partial or complete denial of a claim. Furthermore, if a claimant successfully receives a benefit from the RO, the claimant may still appeal the amount awarded. For example, if an RO determines that a veteran is entitled to a 30% disability rating, but the claimant believes that percentage should be higher, the determination may also be appealed. Although a claimant may appeal determinations related to eligibility for hospitalization, outpatient treatment, and access to medical devices, a claimant is not permitted to appeal certain medical determinations made by medical providers. For example, a veteran is not permitted to appeal a physician's decision to prescribe or not to prescribe certain drugs or specific treatments. The Board does not have jurisdiction over these types of claims. When making an appeal on an initial determination, the claimant may choose to proceed with the traditional method of review or may choose to have a Decision Review Officer (DRO) review the case. Both forms of review are discussed in detail in this report. Briefly stated, under the traditional review process, the local VA office will review the claim folder to ensure that there are no obvious errors in the claim, prepare the case for review, and send the case to the Board of Veterans' Appeals (BVA). The BVA will then provide a de novo review of the case and reach a determination. Under DRO review, a Decision Review Officer, at the local VA office making the initial determination, will review the claim folder de novo . After reviewing the claim, the DRO will make a supplemental determination. Seeking DRO review does not preclude the claimant from pursuing the traditional review process. If the claimant is not satisfied with the DRO's decision, the claimant may proceed with the traditional review process and have the appeal heard by the BVA. During the appeal process for veterans' claims, various different officials will handle the claim. This section provides a brief introduction to the decision makers who will potentially review an appeal. Each VA Regional Office has at least one Decision Review Officer on staff. The DRO is a "senior technical expert who is responsible for holding post-decisional hearings and processing appeals." A DRO may hear any appeal that may be heard by the Board of Veterans' Appeals. During DRO review, a DRO will review the claim de novo --that is, a new and complete review of the appealed issue with no deference given to the decision being appealed. The DRO may not revise the initial decision "in a manner that is less advantageous to the claimant" unless the DRO finds an instance of "clear and unmistakable error." In order to have an appeal reviewed by a DRO, the claimant must ask to take DRO review. Otherwise, the traditional form of review, directly through the Board of Veterans' Appeals, will proceed. If a claimant opts for DRO review, the claimant may still have the BVA review the claim if the DRO's decision is not favorable to the claimant. When a claimant is not satisfied with the initial determination on the application for benefits, an appeal can be made to the Board of Veterans' Appeals (BVA or Board). The BVA is part of the Department of Veterans Affairs, located in Washington, DC, and makes the final determination on an appeal within the VA. The Board consists of experienced attorneys in the field of veterans law. Board members are appointed by the Secretary of the VA, with the approval of the President. As of 2015, the Board consisted of 63 members. These Board members make the ultimate conclusion on appeals within the VA. The BVA also employs staff attorneys that assist the Board members while preparing a decision for a claim, much like a clerk for a judge. The BVA has a significant work load--in the 2015 fiscal year (FY), the BVA received and docketed 69,957 appeals. The BVA expects that number to climb to 88,183 for FY2016. If a claimant is not satisfied with the decision from the BVA, the claimant has the option of appealing to the Court of Appeals for Veterans Claims (CAVC). The CAVC is an Article I court, established by Congress, which has exclusive jurisdiction over appeals from the BVA. The Court is authorized seven permanent judges and two additional judges as part of a temporary expansion provision. The VA's General Counsel will defend the BVA decision before the court. In FY2015 the CAVC received 4,506 appeals. If the claimant is dissatisfied with the determination reached by the CAVC, the claimant may appeal the decision to the Court of Appeals for the Federal Circuit (Federal Circuit). The scope of review on veterans' appeals provided by the Federal Circuit is limited by statute. The Federal Circuit can set aside regulations that are arbitrary or capricious, unconstitutional, in excess of statutory jurisdiction, or procedurally deficient. Generally, the Federal Circuit is not permitted to review any challenge to a factual determination, or a "challenge to a law or regulation as applied to the facts of a particular case." The Federal Circuit provides the last appeal of right for claimants appealing decisions made by the BVA. Finally, if the claimant is still not satisfied by the decision reached by the Court of Appeals for the Federal Circuit, the claimant may petition the Supreme Court for certiorari. The Supreme Court may or may not decide to hear the case--the claimant is not guaranteed to have the Supreme Court hear the appeal. If the Supreme Court grants certiorari (hears the case), any decision provided by the Supreme Court is final. The VA has established that a claimant "will be accorded full right to representation in all stages of an appeal by a recognized organization, attorney, agent, or other authorized person." The VA sets out certain requirements that a representative must meet in order to assist a claimant during the appeal process. The VA strongly encourages claimants to seek representation and a vast majority of claimants are represented. Claimants, however, are not required to have representation in the appeal process and may represent themselves. Veterans Service Organizations (VSO) may provide trained representatives to the claimant free of charge. The vast majority of claimants are represented by VSO representatives--in 2000, the BVA noted that approximately 85% of claimants were represented by a VSO. Other claimants elect to hire an attorney or a recognized "agent" to represent them during the appeal. Attorneys and recognized agents, however, may charge for their services rendered. Regulations provide that fees "may be based on a fixed fee, hourly rate, a percentage of benefits recovered, or a combination of such bases." Fees must be reasonable, and fee agreements must be filed with the VA Office of the General Counsel. Veterans must fill out VA Form 21-22 if they wish to be represented by a VSO or fill out VA Form 21-22a if they wish to have an attorney or authorized agent provide representation. The VA has various legal obligations to assist the claimant and to ensure that a proper claim for benefits is filed. These obligations include assisting the claimant to obtain evidence, ensuring the claimant has the necessary forms and instructions, and notifying the claimant if additional information is needed. Federal regulations further require the VA to render a "decision which grants every benefit that can be supported in law while protecting the interests of the Government." Therefore, the VA is obligated to consider every legal theory that could support a claim for benefits. Finally, the VA is obligated to weigh evidence in favor of the claimant when reaching its determination. Under 38 U.S.C. SS5107(b), "[w]hen there is an approximate balance of positive and negative evidence regarding any issue material to the determination of a matter, the Secretary shall give the benefit of the doubt to the claimant." Therefore, in order to deny a claim for benefits, the preponderance of the evidence must show that the claimant should not be entitled to the benefits sought. Whenever the VA reaches a determination, both on the initial application and on appeal, the VA must provide notice of the decision and "an explanation of the procedure for obtaining review of the decision." After a claimant has received an initial determination from the local RO, an unsatisfied claimant may initiate the appeal process. In order to begin the appeal, the claimant must first submit a Notice of Disagreement (NOD). The NOD is the first step in notifying the VA that a claimant wishes to appeal a decision. Claimants must file an NOD on a standardized form, when that form is provided to the claimant by the VA. However, if the VA does not provide an NOD form to a claimant, then the VA would accept a traditional NOD. The claimant should be specific about whether the entire decision is being appealed or only part of the decision is being appealed. Also, at this stage of the appeal process, a claimant may make a request to undergo DRO review, instead of taking the traditional review straight to the BVA. In most circumstances, the NOD must be sent to the local office that made the initial determination. However, if the claimant's records have been moved to a different VA office, the NOD should be submitted to the new local VA office handling the claim. The NOD must be submitted within one year from when the local VA office mails the initial determination. After one year has passed, the decision is deemed to be final, except in rare circumstances. If the claimant decides to pursue the traditional review process, either a Rating Veterans Service Representative (RSVR) or a DRO will reexamine the claim file and determine whether additional review or development is warranted. If the claimant requests DRO review, the DRO will begin to look over the claim again from scratch. Under DRO review, the DRO will review the claim de novo --that is, they will provide no deference to the initial decision reached by the VA. In this form of review, there does not need to be any new evidence nor any clear and unmistakable error for the DRO to overturn the initial decision. The DRO may not revise the initial decision "in a manner that is less advantageous to the claimant" unless the DRO finds an instance of "clear and unmistakable error." The DRO may hold informal conferences as well as formal hearings with the claimant regarding the claim. After reviewing the claim, the DRO will send a new decision to the claimant along with "a summary of the evidence, a citation to pertinent laws, a discussion of how those laws affect the decision, and a summary of the reasons for the decision." Regardless of whether the claimant elects DRO review or the traditional review, the reviewer will make a decision to allow or deny the claim. If the reviewer allows the claim, then the claimant has won his appeal and the appeal process ends. If the reviewer decides not to grant the claimant's request for benefits, then he will send a notice to the claimant and the claimant may continue with the appeal process. When the VA provides the claimant with notice stating that the claim will be denied, it will also provide the claimant with a Statement of the Case (SOC). The SOC is a document that summarizes the evidence, laws, and regulations that were used to make a determination in the claim and explains why the VA reached the decision. The local VA office will also send a blank VA Form 9--Appeal to Board of Veterans' Appeals--which must be filled out and returned to continue the appeal process. The VA will send the claimant a blank VA Form 9 along with the SOC. The VA Form 9 must be filled out to continue the appeal process. The claimant has 60 days from when the SOC was mailed or one year from when the initial determination was mailed, whichever period ends later, to submit the VA Form 9 to the local VA office. The claimant may seek a deadline extension for submitting the VA Form 9, but must show good cause by providing an explanation for why the additional time is needed. When filling out the form, the claimant will have the opportunity to state whether he/she wishes to have a hearing with the BVA, to point out any mistakes that were made on the SOC, and to establish why the claimant believes the VA made an incorrect decision when determining the claim. The form provides detailed instructions for properly completing the substantive appeal. The claimant may add new evidence when the VA Form 9 is submitted to the VA office. If the VA office receives any new evidence from the claimant, the VA office will prepare a Supplemental Statement of the Case (SSOC) and mail it to the claimant. The claimant will then have 30 days to notify the VA office of any mistakes found in the SSOC. Once the VA Form 9 has been completed and submitted, the claimant has fulfilled his obligations for filing the appeal. The local VA office will certify the case to the BVA after it receives the completed VA Form 9. Once the case has been certified to the BVA, the BVA will then give the claim a docket number. The claim will be heard in the order in which it was received, as the BVA is obligated by law to hear claims on a first come, first served bases. A claimant may file "a motion to advance on the docket" in order to have their case heard more quickly. However, these motions are only granted under rare circumstances--the claimant will have to provide the BVA, in writing, a strong reason for moving the claim up on the docket, such as an imminent foreclosure, bankruptcy, or terminal illness. The claimant should also provide any evidence of such a situation to the BVA at the time the motion is filed. When the claimant submits VA Form 9, the claimant will indicate whether he wishes to have a hearing with a Board member from the BVA. There are three kinds of hearings: (1) an in-person hearing at the local RO; (2) an in-person hearing in Washington, DC; or (3) a teleconference hearing. The teleconference hearing takes place at a local VA office, while the Board member is in Washington, DC. The BVA notes that teleconference hearings are typically the fastest to arrange, as they do not require any travel. Unlike court proceedings, hearings are informal and nonadversarial. The Board member generally will explain how the hearing will take place, ask the claimant to take an oath, and provide the claimant with the opportunity to present any information or evidence that the claimant believes is relevant and material. The presiding Board member "may set reasonable time limits" for the argument and may exclude evidence that is "not relevant or material to the issue." The claimant can be represented at a BVA hearing. The hearing may be documented in a transcript, which is also added to the file for review by the Board. A veteran is permitted to submit additional evidence prior to the BVA reviewing the claim file. The claimant may even submit additional evidence at the hearing, if the claimant has elected to have a hearing with a Board member. Therefore, the claimant should submit any new medical evidence from recent treatments, additional statements, and anything else the claimant believes is material to the claim as soon as the claimant receives it. If the claimant's file is still located at the local VA office, any additional evidence should be submitted to that office. At this point, as stated earlier, the local VA office will provide the claimant with a Supplemental Statement of the Case. As the claim gets close to being considered by the BVA, the local VA office will forward the claim file to the BVA. The local office will send the claimant a notice, informing him/her that the claim file has been transferred to the BVA. The claimant must submit any additional evidence, or a request for a hearing (if the claimant had not already requested one), within 90 days after the BVA has received the claim file, or up until the BVA actually decides the case (whichever comes first). If the claimant wishes to submit information or evidence after the 90 days have passed, he or she must submit a motion to the BVA asking for the evidence to be accepted and must show good cause for missing the deadline. However, the claimant may present additional evidence during the hearing, even if the hearing is held following the expiration of the 90-day period. After the hearing, a Board member and a staff attorney will be assigned to review the claim file. The Board member will ensure the file is complete and evaluate all the evidence, forms, written arguments, and hearing transcripts. The staff attorney will function similarly to a clerk for a judge and perform any additional research that is necessary. The staff attorney may also make recommendations for the Board member to review. At this point, the Board member will make a decision on the appeal. It is uncertain how long it may take the BVA to reach a decision on an appeal. According to the 2015 BVA's Report of the Chairman, the "average length of time between the filing of an appeal ... and the Board's disposition of the appeal was 1,029 days." The BVA will notify the claimant of its decision by mailing a notice to the claimant's address as listed in the claim file. The notice will state the decision and explain the legal basis for reaching that conclusion. The BVA will reach one of three decisions. First, the Board may approve the claim and grant the claimant the benefit sought. If the BVA approves the claim, the claimant wins and the appeal is over. Second, the Board may remand the claim. If the Board remands the claim, the Board member has determined that additional information is needed in order to make the proper decision on the appeal. Upon remand, the claim folder will be returned to the local VA office to perform the additional work needed on the claim. The local VA office, after obtaining the necessary information, will then make another decision on the claim. If the local VA office still believes that the claim cannot be approved, the local VA office will send the claim folder back to the BVA. The claim will maintain its initial place on the BVA docket, so it will be heard by the Board more quickly upon its return. The BVA will then review the claim file again and reach a decision. Third, the BVA may deny the claim. If the BVA denies the claim, the Board member has determined that the claimant is not entitled to the compensation or benefit sought. The BVA will provide a statement outlining the claimant's rights and explaining what further steps may be taken to review the decision. The claimant may continue with the appeal, as discussed below, or accept the BVA's decision. If a claimant wishes to appeal the BVA's decision, the claimant may make an appeal to the United States Court of Appeals for Veterans Claims (CAVC), discussed below. However, there are also additional motions the claimant may file directly with the BVA in order to have the decision reconsidered. If the claimant is able to demonstrate that the BVA made an obvious error of fact or law in its decision, the claimant may file a "motion to reconsider" with the BVA. A motion for reconsideration "may be filed at any time." This motion should be sent directly to the BVA and not to the local VA office. If the motion is allowed by the BVA, the claimant may request an additional hearing before the Board. In order to be successful, the claimant must show that the BVA made an obvious error of law or fact, and that the BVA's decision would have been different if the error had not occurred. The Code of Federal Regulations sets forth the information that must be included with the motion in order for the motion to be considered. The claimant may request to have the case reopened only if the claimant has obtained "new and material" evidence relating to the claim. Evidence will only be considered "new and material" if it relates to the original case and was not included in the claims folder at the time the BVA reviewed the case. In order to reopen a case, the claimant should submit the new evidence to the local VA office, not to the BVA. If the appellant believes that the BVA made a crucial error in reaching the decision, the appellant may file a motion with the BVA to revise the determination for "clear and unmistakable error" (CUE). In order to succeed, the BVA must determine that, but for the error, the BVA would have reached a different decision. A mere difference in opinion is not sufficient. Regulations promulgated by the VA provide a few examples of what does not constitute a clear and unmistakable error, including a changed medical diagnosis, a changed interpretation of a statute or regulation, or the failure to fulfill the VA's duty to assist the claimant. This list illustrates the difficulty of establishing a clear and unmistakable error. If a CUE motion is denied, the appellant cannot request another CUE review on the same issue. The claimant may file a CUE motion at any time by sending the motion directly to the BVA. However, if the appellant files a motion for CUE after filing an appeal to the Court of Appeals for Veterans Claims, or if the appellant files an appeal to the Court of Appeals for Veterans Claims prior to the BVA reaching a determination on the motion, the BVA will stay the CUE proceeding until the CAVC appeal has been concluded. The Court of Appeals for Veterans Claims, an Article I court, has exclusive jurisdiction over appeals from the Board of Veterans Appeals. In order to have the CAVC hear an appeal from the BVA, the appellant must submit a notice of appeal to the court within 120 days of the date that the BVA mailed its decision. Only the claimant may file an appeal to the CAVC; the VA does not have the right to have a decision of the BVA reviewed. The CAVC will reach its determination by reviewing the record from the BVA and the written arguments provided by the appellant and the VA. Although the CAVC is authorized to hear oral arguments, a vast majority of cases are decided without such argument. The CAVC is not permitted to review de novo a determination of fact made by the BVA. Depending on the nature and complexity of the case, either one judge, a panel of three judges or the entire court will render a decision on the case. In a vast majority of cases, one judge will make a decision on the case. If the CAVC rules in favor of the appellant, the case can be remanded to the BVA in order to implement the CAVC's ruling. If the CAVC denies the appellant's claim, the appellant may seek further review at the United States Court of Appeals for Federal Claims. The VA may also appeal a CAVC decision. For years, the 120-day deadline was viewed as a procedural requirement, and thus subject to equitable tolling--that is, missing the deadline did not automatically preclude review by the CAVC. After the Supreme Court decision in Bowles v. Russell , the CAVC and U.S. Court of Appeals for Federal Claims determined that the deadline was actually a jurisdictional requirement--that is, an appeal made after the deadline could not be heard by the CAVC for any reason. However, in 2011, the Supreme Court clarified that the CAVC deadline was not jurisdictional and, therefore, an appeal will not necessarily be precluded if the deadline is missed. In 2001, David Henderson filed a claim with the VA for compensation based on his need for in-home care. His claim was denied by the VA Regional Office and was subsequently denied by the BVA. After the BVA denied his claim, Henderson appealed the decision to the CAVC. However, his notice of appeal was filed 15 days after the 120-day filing deadline had expired. The CAVC, in a 2-1 decision, relied on the Supreme Court's Bowles v. Russell decision and dismissed his appeal for lack of jurisdiction due to the missed deadline. The Court of Appeals for Federal Claims concurred with the CAVC, noting that the 120-day deadline was jurisdictional, and thus mandatory. The Supreme Court granted certiorari. The Court reviewed whether "a veteran's failure to file a notice of appeal within the 120-day period should be regarded as having 'jurisdictional' consequences." The Court unanimously determined that the deadline was not jurisdictional and that missing the deadline does not necessarily preclude the CAVC from hearing an appeal. The Court noted that Congress had taken great care to ensure that the system for awarding veterans benefits greatly favors veterans. Thus, the Court determined that Congress did not intend the 120-day deadline to be a jurisdictional rule. However, the Court did state that the deadline is an "important procedural rule" and remanded the case to the Federal Circuit to determine whether the appellant's "case falls within any exception to the rule." Therefore, although the Court established that the deadline was not mandatory, it provided no guidance for when a case could still be heard even after the deadline was missed. The CAVC, in Bove v. Shinseki , issued a ruling that provides context to when the court would still hear an appeal even after the deadline is missed. The CAVC, prior to its decision in Henderson v. Shinseki , already had a test for determining when equitable tolling would be permissible. Therefore, it returned to its previous jurisprudence on the issue. It stated, The doctrine of equitable tolling has generally established parameters, and over time decisions of the Federal Circuit and this Court have addressed those parameters in the context of appeals to this Court. Thus, for example, equitable tolling was not applied when failure to file was due to general negligence or procrastination. Rather, it was applied only when circumstances precluded a timely filing despite the exercise of due diligence, such as (1) a mental illness rendering one incapable of handling one's own affairs or other extraordinary circumstances beyond one's control, (2) reliance on the incorrect statement of a VA official, or (3) a misfiling at the regional office or the Board. The CAVC held that if an appellant accidentally files the notice of appeal at the wrong location--for example, at the BVA instead of with the CAVC--but the notice of appeal is otherwise timely, equitable tolling is appropriate. It also held that, although mental illness can be a reason to find equitable tolling to be appropriate, the appellant must demonstrate that he is actually " incapable of functioning or making decisions due to mental illness, that his mental illness prevented him from filing his appeal or seeking the assistance of counsel, or that his mental disabilities were related directly to his untimely filing." Therefore, although the 120-day deadline is not "jurisdictional," it still precludes review from the CAVC in many circumstances. However, it should be noted, the Federal Circuit overruled Bove in Dixon v. McDonald . In Bove , the CAVC had held that it had the authority to address untimely filings and equitable tolling sua sponte --that is, on its own accord without prompting from either party--and that the 120-day time period in which to file an appeal is not subject to waiver or forfeiture by the Secretary. The Federal Circuit overruled the CAVC with respect to its sua sponte authority "to resolve timeliness in the face of the Secretary's waiver by granting him relief that he explicitly declined to seek." The Federal Circuit determined that the CAVC's conclusion was wrong for three reasons: (1) it failed to account for statutory limits to its jurisdiction; (2) it misread Supreme Court precedent; and (3) it misconstrued the relevant policy considerations. Thus, the Federal Circuit held that the CAVC does not have the sua sponte authority to grant relief on a non-jurisdictional timeliness defense when the Secretary has waived the defense. However, the first holding in Bove , that the 120-day period in which to file an appeal is subject to equitable tolling, was not overruled and remains valid. The U.S. Court of Appeals for the Federal Circuit (Federal Circuit) has exclusive jurisdiction to hear appeals from a CAVC decision. The Federal Circuit provides the last appeal of right during the appeal process. By statute, the review provided by the Federal Circuit is rather limited. The Federal Circuit is not permitted to review "(A) a challenge to a factual determination, or (B) a challenge to a law or regulation as applied to the facts of a particular case." The Federal Circuit can only review actions to see if they are arbitrary or capricious, unconstitutional, in excess of statutory jurisdiction, or procedurally deficient. The Federal Circuit may modify, reverse, or remand decisions by the CAVC, as appropriate. If either party is dissatisfied with the ruling from the Federal Circuit, an appeal may be made to the Supreme Court of the United States. The Supreme Court does not have to hear the case and may deny certiorari. If the Supreme Court decides to hear the case, any decision reached by the Court is final.

Congress, through the U.S. Department of Veterans Affairs (VA), provides a variety of benefits and services to veterans and to certain members of their families. These benefits include disability compensation and pensions, education benefits, survivor benefits, medical treatment, life insurance, vocational rehabilitation, and burial and memorial benefits. In order to receive these benefits, a veteran (or an eligible family member) must apply for them by submitting the necessary information to a local VA office. The local VA office will make an initial determination on the application for benefits. Any veteran who is not satisfied with the local VA's determination is permitted to appeal the decision. This report provides a step-by-step breakdown of the appeal process for veterans' claims. When making an appeal on an initial determination, the claimant may choose to proceed with the traditional review process or may choose to have a Decision Review Officer (DRO) at the local VA office review the case. In the event the veteran opts for a DRO review and is not satisfied with the result, the claimant may still avail himself/herself of the traditional process and appeal to the Board of Veterans' Appeals (BVA). The local VA office will prepare the claim file for the appeal and provide the claimant with a blank VA Form 9--a form that must be completed to make an appeal to the BVA. Claimants must follow specific procedures to request the appeal and must meet certain deadlines for submitting the proper information. The claimant may choose to have a hearing with the BVA during the appeal process. There are three different types of hearings that the claimant may choose (1) an in-person hearing with a BVA member, held in Washington, DC; (2) an in-person hearing with a BVA member, held at a local VA office; or (3) a teleconference hearing. The hearings with the BVA are informal and nonadversarial in nature. The claimant will be given the opportunity to explain the reasons for the appeal and to submit additional evidence during the hearing. The claimant may be represented during the appeal process. After the BVA reaches a decision on the appeal, there are further options the claimant may pursue if he or she is still not satisfied with the BVA decision. A claimant may file a notice of appeal with the Court of Appeals for Veterans Claims (CAVC). The CAVC, an Article I court, has exclusive jurisdiction to review decisions of the BVA. A claimant must submit a notice of appeal within 120 days of receiving the decision from the BVA. However, the Supreme Court in Henderson v. Shinseki clarified that the 120-day deadline is not a "jurisdictional" deadline. Therefore, an appeal to the CAVC will not necessarily be dismissed for missing the deadline. However, the claimant must have a good reason for filing late, such as an inability to meet the deadline due to mental incapacity. The U.S. Court of Appeals for the Federal Circuit (Federal Circuit) has exclusive jurisdiction to hear appeals from a CAVC decision. The Federal Circuit provides the last appeal of right during the appeal process. If either party is dissatisfied with the ruling from the Federal Circuit, an appeal may be made to the Supreme Court of the United States. The Supreme Court does not have to hear the case and may deny certiorari. If the Supreme Court decides to hear the case, any decision reached by the Court is final.

RS21237 -- Indian and Pakistani Nuclear Weapons Updated February 17, 2005 Almost 50 years of nuclear ambiguity were swept away by the May 1998 nuclear tests of India and Pakistan. Optimists hoped that overt nuclear weapons capabilities could help providemore conventional stability and that limited nuclear arsenals might dampen competition in missile development. (1) The 1999 conflict in Kargil and 2002 crisis in Kashmirchallengedthis viewpoint. (2) South Asia remains a nuclearflashpoint, and, potentially, a source for terrorists of access to weapons of mass destruction. India began its nuclear program shortly after independence in 1947. After a humiliating defeat in a border war with China in 1962, followed by China's first nuclear test in 1964, thedrive for nuclear weapons intensified. The 1974 test of a "peaceful nuclear device" was an important milestone,but it took several more years to develop a nuclear weapons capability. Simultaneously, India developed a nuclear infrastructure that supported both civilian and military purposes. Forexample, India's development of reprocessing capabilities supportedboth its use of mixed oxide fuel (plutonium and uranium) for its nuclear power plants and its plutonium-basedweapons. The size of India's nuclear stockpile has been a topic of considerable debate within scientific and defense communities. (3) Estimates vary from a few to 100,but several converge onaround 30-35 weapons, probably stored in component form. The U.S. Department of Defense believes that Indiais capable of manufacturing complete sets of components forplutonium-based weapons and has a small stockpile of such components. India "probably can deploy a few nuclearweapons within a few days to a week...and can deliver these weaponswith fighter aircraft." (4) Most agree that India isexpanding its stockpile, and that if India uses unsafeguarded reactor-grade plutonium, the potential to expand itsstockpile is verysignificant. India's delivery capability has long reflected two very different contingencies -- China and Pakistan. Because of the distances involved and India's lack of long-range bombers,capability against China inevitably required ballistic missiles. Against Pakistan, however, Indian officialsrecognized early on that aircraft would be more valuable, particularly in aretaliatory strike; the Indian air force is significantly more sophisticated and capable than Pakistan's. (5) India has some 35 Mirage 2000 fighters that arenuclear-capable, although otheraircraft could also be used. Ballistic missiles add considerable instability into the security equation because they are high priority targets; the pressure to use them quickly and, for the other side, to strike thempreemptively, is great. Indian officials have said short-range Prithvi ballistic missiles (150km and250km ranges) are conventionally armed. While nuclear-capable and able to reachalmost all of Pakistan, the use of nuclear-armed Prithvi s could pose major risks of fallout to India. (6) India has deployed Agni-II missiles witha 1500 km range and tested an 800 kmrange version of the Agni earlier this year. These solid-fueled missiles, which reportedly can belaunched within minutes, considerably enhance India's ability to respond rapidly in acrisis situation. In January 2003, the Ministry of External Affairs released to the public a short document on India's nuclear doctrine. The doctrine reiterated some of the points in the 1999 draftdocument on nuclear doctrine produced by the National Security Advisory Board. and refined others. In summary,the document committed India to a credible minimum deterrent,defined as: 1. a posture of "No First Use" and no use against non-nuclear weapon states, with the exception of theright to retaliate with nuclear weapons against a "major attack againstIndia, or Indian forces anywhere, by biological or chemical weapons;" 2. Civil control in the form of the PrimeMinister as head of the Nuclear Command Authority; 3. Nuclearretaliation against a first strike as massive and designed to inflict unacceptable damage. (7) The document described the Nuclear Command Authority as being composedof a PoliticalCouncil (chaired by the Prime Minister and authorize the use of nuclear weapons) and an Executive Council (chairedby the National Security Advisor). Pakistan's nuclear program dates back to the 1950s, but it was the humiliating loss of East Pakistan (now Bangladesh) that reportedly triggered a political decision in January 1972 (justone month later) to begin a crash nuclear weapons program. Unlike India, Pakistan focused on the uranium routeto weapons. Pakistan sought technology from many sources, includingChina and North Korea. (8) This extensive assistanceis reported to have included, among other things, uranium enrichment technology from Europe, blueprints for asmall nuclearweapon from China and missile technology from China. Most observers estimate that Pakistan has enough nuclear material (highly enriched uranium and a small amount of plutonium) for 30 to 50 nuclear weapons. (9) LikeIndia, Pakistan isthought to have "a small stockpile of nuclear weapons components and can probably assemble some weapons fairlyquickly." (10) Pakistan could deliver its nuclear weapons using F-16s it purchased from the United States (28 F-16 and 12 trainer aircraft; 8 are no longer in service), provided the appropriate "wiring"has been added to make them nuclear-capable. In the 1980s, Pakistan moved assiduously to acquire ballistic missilecapabilities and now deploys short-range ballistic missiles and asmall number of medium-range missiles. AQ Khan, former head of Khan Research Laboratories, maintained thatonly the medium-range Ghauri missiles would be usable in a nuclearexchange (given fall-out effects for Pakistan of shorter-range missiles). Other observers view the 30 to 50 Hatf2 short-range (300km) missiles (modified Chinese M-11s) as potentialdelivery vehicles for nuclear weapons. Ghauri missiles (1350 and 2300km), which reportedly are basedon the North Korean No-Dong and Taepo-Dong-1 , are capable of reaching NewDelhi with large payloads. (11) Pakistan has not yet enunciated a nuclear doctrine, but it is clear that Pakistan's nuclear arsenal is seen as the key to military parity with India. Because of its fears of being overrun bylarger Indian forces, Pakistan has rejected the doctrine of no-first-use. In May 2002, Pakistan's ambassador to theUN, Munir Akram, stated that "We have not said we will use nuclearweapons. We have not said we will not use nuclear weapons. We possess nuclear weapons. So does India ...Wewill not neutralize the deterrence by any doctrine of no first use." (12) On June 4, 2002, President Musharraf went further: "The possession of nuclear weapons by any state obviouslyimplies they will be used under some circumstances." (13) In recent years, Pakistan apparently has taken steps toward refining command and control of nuclear weapons. In April 1999, General Musharraf announced that the Joint StaffHeadquarters would have a command and control arrangement and a secretariat, and a strategic force commandwould be established. (14) The connection to civilianleadership wasunclear, given a recent account of the 1999 Kargil incursion which suggested that Prime Minister Sharif wasunaware that his own nuclear missile forces were being prepared foraction. (15) Pakistan established a NationalCommand Authority (NCA) in February 2000, but little is publicly known about it. Pakistani officials haverepeatedly said that their nuclearcapabilities are safe. The new NCA is believed to be responsible for nuclear doctrine, as well as nuclear researchand development, wartime command and control, and advice toPresident Musharraf about the development and employment of nuclear weapons. (16) Kashmir has been a flashpoint since Indian and Pakistani independence in 1947. Many analysts have feared that nuclear weapons could be used if conventional hostilities over Kashmirwere to spiral out of control, especially if, as in 1965 Indo-Pakistan conflict, India opened a new front on the Punjabplains to break a stalemate in Pakistan or attempt to settle the issuedecisively by confronting Pakistan with a mortal threat to its territorial integrity. (17) Under these circumstances, some have suggested Pakistan might be temptedto detonate a smallnuclear weapon on its own territory to halt forward Indian movement. Other observers, however, believe such astrategy would be akin to a state acting as a suicide bomber. (18) Somemedia reports have suggested that paradoxically, "the fact that both countries have very small nuclear arsenalsincreases the pressure on both sides to use their weapons againsthigh-value targets." (19) Regardless of whethernuclear weapons might be used to stop war or to gain a military advantage, many observers agree that uncertaintyabout intentions couldworsen stability. Since 1998, both India and Pakistan appear to be integrating nuclear weapons into security strategy and planning. With the ominous logic of nuclear deterrence, each side's desire tomake its nuclear forces more credible may make those nuclear forces more usable. Ballistic missiles offer both sidesadvantages over using aircraft as delivery vehicles, but the shortranges create a hair-trigger situation. From launch to impact, missile flight times may be as short as 5 minutes. Inthe past, both sides appeared to use the separation of warheadcomponents as a form of command and control (in the sense of lowering the risk of unauthorized or accidental use). Some observers have noted that this approach becomes risky whenthe other side can launch short-range ballistic missiles against which there is no defense. These observers havecalled for improving command and control of nuclear forces, whilenoting, ironically, that reduced ambiguity could conversely increase the likelihood of war. (20) The Defense Intelligence Agency reportedly has estimated that a nuclear exchange could kill between 9 and 12 million persons on both sides, with 2 to 6 million injured. Theseestimates are likely predicated on nuclear exchanges aimed at cities; e.g., Indian Defense Secretary Yogendra Narainsuggested in 2002 that "India would retaliate against Pakistaniaggression and that both sides should be prepared for mutual destruction." President Musharraf's interview in June2002 with CNN offered respite from the nuclear rhetoric when hestated, "I don't think either side is that irresponsible to go to that limit [i.e., nuclear conflict]. ... One shouldn't evenbe discussing these things, because any sane individual cannot eventhink of going into this unconventional mode, whatever the pressures." (21) India and Pakistan have a 30-year history of confidence-building measures. These include hotlines between army commanders and prime ministers, a joint India-Pakistan MilitaryCommission (created in 1990), and agreements to provide prior notification of troop movements and ballistic missiletests. In 1991, both sides agreed not to attack nuclear facilities. (22) Implementation, however, has been sporadic. (23) In February 1999, the two parties concluded the Lahore Agreement. That agreement envisioned a plan for futurework, to includemeasures to reduce the risk of unauthorized or accidental use of nuclear weapons, reviews of confidence-buildingmeasures and communications links, prior notification of ballisticmissile tests, continuation of unilateral moratoria on nuclear testing, and dialogue on nuclear and security issues. The Lahore process was undermined by the summer 2001 militaryincursion by Pakistan in the vicinity of Kargil, but the two sides began a dialogue in 2004. In September 2004, Indiaand Pakistan announced 13 confidence-building measures. Threesecurity-related ones included: Experts' meetings on conventional and nuclear CBMs, including discussions on a draft agreement on advance notification of missile tests; Biannual meeting between Indian Border Security Force (BSF) and Pakistan Rangers; Implementation of the agreement reached between the defense secretaries in their talks in August todiscuss "modalities for disengagement and redeployment" onthe Siachen glacier. (24) Foreign secretaries reported progress in their discussions on missile notifications in December 2004. (25) Since the passage of the 1978 Nuclear Nonproliferation Act, Congress has been closely involved in efforts to prevent or slow the development of nuclear arsenals by India and Pakistan. In the light of the global war on terrorism, and limited Pakistani cooperation in nonproliferation, Congress mightconsider the following questions: What sources of leverage does the U.S. now have toward India and Pakistan? Are new sources of leverage vis-a-vis Indian and Pakistani proliferation needed? Should new leveragebe focused on averting nuclear use rather than on limitingnuclear proliferation? Should India and Pakistan be priority recipients of cooperative threat reduction assistance? Whatoptions exist in this regard that do not undermine U.S. obligationsas a party to the Nuclear Nonproliferation Treaty? How effective are economic or other sanctions, and which might work best?

Until 2005, India and Pakistan were the only states outside the NuclearNonproliferation Treaty to declare, openly, their nuclear weaponscapability. In 1998, they tested nuclear weapons and since then, deployed ballistic missiles, enunciated nucleardoctrine, and made organizational changes to their nuclearestablishments. In 2002, they teetered on the brink of war in Kashmir. This paper summarizes Indian and Pakistaninuclear weapon capabilities and thinking, and discusses someconfidence-building measures in place intended to help avert nuclear war. It will be updated as events warrant.

As Congress investigates the issues surrounding the September 11, 2012, attacks on U.S. facilities in Benghazi, Libya, some Members have questioned whether security funding was adequate or was a factor that may have contributed to inadequate security at that facility. The State Department Basic Authorities Act of 1956 authorizes the Department of State to "use appropriated and other funds to provide the maximum security of U.S. government-owned or leased properties and vehicles abroad." After several attacks occurred on U.S. facilities and other American interests in Beirut, Lebanon and Kuwait in the early 1980s, Congress passed the Diplomatic Security Act of 1986, further emphasizing the role the Secretary of State plays in providing funding for the security of U.S. diplomatic facilities and personnel worldwide (hereinafter referred to in this report as diplomatic/embassy security). Following the August 1998 bombings of U.S. Embassies in Kenya and Tanzania, an independent panel, chaired by Admiral William Crowe, reported that it was "most disturbed by two inter-connected issues: First, the inadequacy of resources to provide protective measures against terrorist attacks; and second, the relative low priority accorded security concerns throughout the US Government by the Congress, the Department, other agencies in general, and the part of many employees--both in Washington and in the field." Responding to that panel, Congress, within the Secure Embassy Construction and Counterterrorism Act of 1999 (SECCA), established more stringent security requirements and mandated additional training, authorized $900 million to be spent annually for Embassy Security, Construction, and Maintenance (ESCM) for the next five years (FY2000-FY2004), and mandated the Secretary of State to convene an Accountability Review Board (ARB) whenever serious injury, loss of life, or significant destruction of property occurs. It required co-location of virtually all agency personnel in a country and 100-foot perimeters around diplomatic facilities, but also provided waiver authority for those measures. After the September 11, 2012, attacks on the U.S. facilities in Benghazi, a new ARB was convened. Its report, referring to the State Department's need for risk mitigation at U.S. facilities around the world, states: For many years the State Department has been engaged in a struggle to obtain the resources necessary to carry out its work, with varying degrees of success. This has brought about a deep sense of the importance of husbanding resources to meet the highest priorities, laudable in the extreme in any government department. But it has also had the effect of conditioning a few State Department managers to favor restricting the use of resources as a general orientation. Experienced leadership, close coordination and agility, timely informed decision making, and adequate funding and personnel resources are essential.... One overall conclusion in this [ARB] report is that Congress must do its part to meet this challenge and provide necessary resources to the State Department to address security risks and meet mission imperatives. Congress annually appropriates funds for the security of diplomatic personnel and facilities within the Department of State, Foreign Operations and Related Programs appropriation, which is about 1% of the total federal budget. Security funding amounts to about 9% of that appropriation. (See Figure 1 below.) Congress has not enacted a stand-alone State Department appropriation prior to the start of the fiscal year since 1995 and has not passed a stand-alone Foreign Relations Authorization law since 2002. Both could have been legislative vehicles for debate regarding Administration of Foreign Affairs, including diplomatic/embassy security funding and priorities. Instead, Congress has provided ongoing security funding within Continuing Resolutions (CRs) that have delayed by several months the full-year appropriation eventually provided. Funding within a CR is usually based on the previous year's funding levels. Furthermore, if spending was not in the previous-year's appropriation (as was the case with Benghazi in 2012), it would not be funded by a CR. Only after the final appropriation is passed by Congress and signed into law by the President would State Department officials know what level of funding they can allocate on a daily/weekly/monthly basis over the 275 worldwide diplomatic posts (or 1,600 work facilities) and over the remainder of the fiscal year. Congress provides funding for diplomatic/embassy security within the Department of State, Foreign Operations, and Related Programs appropriations. The bulk (typically more than 90%) of the funding is provided by two subaccounts: Worldwide Security Protection (WSP), within the Diplomatic and Consular Programs (D&CP) account, and Worldwide Security Upgrades (WSU) within the Embassy Security, Construction, and Maintenance (ESCM) account. Funds within both of these accounts are typically available until expended. Other appropriations are within the subaccounts Diplomatic Security (DS) and Counterterrorism (both within D&CP), and Diplomatic Security (DS) within the Border Security Program (BSP). A brief description of each follows: WSP, the largest component of security-related funding within Department of State appropriations, supports numerous security programs addressing the security of life, property, and information, including a worldwide guard force protecting overseas diplomatic missions and residences, as well as domestic facilities. In FY2015, for the first time, many DS-related salaries and related costs from DS and other bureaus have been requested under WSP rather than in Diplomatic and Consular Programs as part of what the Department calls a Security Realignment Initiative. WSU, within ESCM, provides funding for bricks and mortar-type of security. It funds the Department of State's portion of the Capital Security Cost Sharing program that combines with funds from other agencies represented overseas for planning, design and construction of secure new embassy compounds. It also funds ongoing security activities and security-related maintenance. The Bureau of Diplomatic Security (DS), funded under D&CP, is the law enforcement and security arm of the Department of State. DS protects people, property, and information. It conducts international investigations, provides threat analysis, and focuses on cyber security, counterterrorism, personnel security, and security technology. The Bureau manages much of the WSP funding. The Bureau of Counterterrorism (CT), funded within D&CP, leads the U.S. government in counterterrorism diplomacy and provides an on-call capability to respond to terrorist incidents worldwide. Funding within the Border Security Program (BSP) is allocated to DS to fund the protection of consular affairs facilities in the United States. The subaccount also funds the coordination and investigation of security issues related to U.S. visas and passports. The Appendix presents annual diplomatic/embassy security requests and actual funding levels from FY2008 to the FY2015 request. Base funding (also referred to as regular or enduring appropriations) is available to U.S. facilities worldwide. Total security funding includes the base funding plus supplemental and/or Overseas Contingency Operations (OCO) funding for diplomatic/embassy security that has been available primarily for Iraq, but also for Afghanistan and Pakistan. Supplemental security funds (excluding those available only for Iraq) were requested and enacted for FY2008 and FY2009. OCO funds were requested and enacted for FY2012, FY2013, FY2014, and have been requested for FY2015. Following are some observations derived from the data shown in the Appendix and in the related Figures 2-5 : The peak years since FY2008 for requests for security funding and funds that Congress made available were in FY2013-FY2015 request, the fiscal years following the Benghazi attacks. (See Figure 2 .) The FY2015 request represents the largest request for total security funding at $4.7 billion, following recent-year increases in base funding. OCO had been nearly half of the request in FY2013, but in FY2015, requests for OCO are about one-third of the total. (See Figure 3 .) FY2013 and FY2014 were peak years for total security funding made available by Congress. In FY2013, of the total $4.5 billion, nearly 50% was OCO funding, largely because Congress provided transfer authority of OCO funds previously identified for Iraq to be used for broader security needs following the Benghazi attacks. In FY2014, of the total $4.68 billion, 19% was OCO. (See Figure 3 .) For total security funding, Congress provided less than was requested every year except FY2009 and FY2014. The FY2013 total security request was $4.6 billion, including the request for transfer authority of OCO funds. That year, Congress provided a total of $4.5 billion, including transfer authority. (See Figure 4 .) Total security funding as a portion of Administration of Foreign Affairs expenditures was highest (40%) in FY2014 and also was the highest (32%) as a portion of total State Department funding that same year. (See Figure 5 .) Figure 2 illustrates the trend line for State Department total diplomatic/embassy security expenditures using data from the Appendix . After trending upward between FY2008 and FY2009, the funding declined to the recent-year low in FY2011and was virtually flat in FY2012. In 2009, the United States was transitioning control of the "green zone" to the Iraqi government. Also that year, President Obama announced his intention of ending military operations in 2010. With the diminishing role of the U.S. military in Iraq and increasing security needs in Iraq, Afghanistan, and Pakistan, Congress supported more funds for DS, WSP, and WSU than were sought. Congress provided increased security funding in FY2013, the fiscal year following the Benghazi attacks and the first full fiscal year after the troops left Iraq in December 2011, when security efforts became the responsibility of the Department of State. Figure 3 illustrates diplomatic/embassy security funding data from the Appendix broken out by base and supplemental/OCO funding. FY2010 and FY2011 were the only years without broadly available security supplemental or OCO funds. (There may have been some, not shown below, that were exclusively for Iraq, however.) The FY2012 budget provided OCO funds for WSP, but not WSU. FY2013, starting about three weeks after the Benghazi attacks, was the peak year for supplemental/OCO and total security funding. The FY2014 estimates show an increase in enduring funds while OCO declines. The FY2015 request includes more OCO funds than were available in the FY2014 estimate, while the total funding is slightly more. Some observers question the increased use of OCO, in the absence of newly identified needs, as possibly a way to avoid exceeding the International Affairs spending caps established by the Budget Control Act of 2011. Figure 4 shows Administration requests for diplomatic/embassy security were greater than actual funding levels (including OCO and transfer authority) every year except FY2009 and FY2014. For the other years, the smallest funding gap compared with the request was $11.0 million in FY2008. The largest gaps between the request and actual funding occurred in FY2011 ($185.4 million) and FY2012 ($236.9 million). While Congress appropriated other OCO funds for security in Iraq, they were not broadly available for security in other facilities. In FY2013, the Administration sought transfer authority to use $1.419 billion of Iraq OCO funds for WSP and WSU expenses as part of what it termed an Increased Security Proposal. In FY2014, the funds made available that exceeded those requested were mostly WSP OCO funds for "extraordinary costs of operations in Afghanistan, Pakistan, Iraq, and other areas of unrest." Figure 5 illustrates the trends regarding the proportion of expenditures that were allocated toward diplomatic/embassy security out of the Administration of Foreign Affairs (State operations) budget and the State Department total budget. These trends mirror those of actual dollars spent over the same years, with the proportions decreasing in FY2011and FY2012, but expanding in FY2009 with the transition in Iraq, and FY2013-FY2014, the years following the Benghazi attack. Some budget analysts regard enacted rather than actual funding as more closely reflecting the intent of Congress, since actual funding levels include transfers that occurred at the agency. Worldwide Security Protection (WSP) and Worldwide Security Upgrades (WSU) make up the bulk of the diplomatic/embassy security budget and are the only diplomatic/embassy security line-items that appear in the Administration's budget request, the Department of State, Foreign Operations and Related Programs House and Senate appropriations legislation, and the enacted appropriations laws. Table 1 provides the Administration's requests, as well as House-proposed, Senate-proposed, and enacted levels for WSP and WSU from FY2008-FY2014, in reverse order. In contrast to actuals in the Appendix , FY2014 was the only year that WSP and WSU enacted funding levels were greater than those requested. For FY2013 which began October 1, 2012, less than a month after the Benghazi attacks, Secretary of State Hillary Clinton requested transfer authority from Congress for $1.4 billion of OCO funds previously appropriated for Iraq as part of what was termed an Increased Security Proposal. Congress agreed to much of that increase, but sequestration mandated by the Budget Control Act of 2011 was applied to the funds, which caused the enacted levels to be about 3% below what would have been appropriated. The grand total of WSP and WSU funds requested from FY2008-FY2014 is $220.4 million more than what Congress enacted. Congress appropriated 6% less funding than was requested in the years leading up to Benghazi, but appropriated 6% more in the years following the attacks. The Senate-proposed security funds exceeded House-proposed levels every year except FY2008. The Senate levels, however, were not always as much as was requested by the Administration, nor as much as appropriated, in some years. FY2008 was the only year that the House-proposed diplomatic/embassy security funding levels were greater than the Administration request, the Senate-proposed, or enacted levels. (In FY2014, the House-proposed levels matched the Administration request.) Also noteworthy is the delay in the passage of every appropriation from FY2008-FY2014. When a new fiscal year starts and appropriations have not been passed and signed into law, Congress typically passes continuing resolutions (CRs) to keep the government funded until a budget is passed. Typically, CRs base funding levels for budget accounts on the past-year spending levels, perhaps increasing or decreasing by a certain percentage. Congress has consistently enacted international affairs appropriations long after the start of the fiscal year. Delayed appropriations, some have argued, make planning to meet security and other needs challenging. In recent years, for example, Congress approved and sent its final FY2011 and FY2013 budgets to the President in April and March, respectively, six to seven months into the fiscal year. Another concern expressed by foreign affairs budget experts is the combining of several or all appropriations into an omnibus, consolidated, or full-year continuing resolution that occurred every year from FY2008-FY2014. Passage of stand-alone State-Foreign Operations appropriations legislation, analysts suggest, provides a greater opportunity for congressional oversight and deliberation on sensitive issues, such as security spending. (See Table 1 below.) Complexities surrounding the security funds available for Benghazi include whether the facility was designated as temporary, the date its lease would be up, and the timing of available funding, among other things. Officials at the Department of State may disagree as to what qualifies as a temporary facility and what funds are available to those facilities. For example, Overseas Building Operations (OBO) uses temporary to mean those facilities that can be moved, such as trailers and modular structures. Other State Department officials may use temporary to mean short-term. A Senate committee report on the Benghazi attack found that because the Benghazi facility was designated as temporary, no security standards applied to it. Furthermore, additional physical barriers to enter the facility were not in place due to time and money constraints. The lack of dedicated security resources for Benghazi contributed to those constraints, according to the report. Compounding the definitional issue is that the State Department lacks a process to re-evaluate security at temporary facilities that are being used longer than first anticipated. The Benghazi facility was first opened in 2011 and was to close later that year. In December 2011, the State Department decided to extend the Benghazi mission until December 2012. The Department did make note of needed corrective security measures for the mission and made a number of security enhancements [using WSP funds]. (See Table 2 below.) According to the Benghazi ARB report, "OBO does not fund security upgrades [ESCM/WSU] for 'temporary' facilities." Appearing to support that statement, the Senate Select Committee on Intelligence said in its January 15, 2014 report: "... the uncertain future of the [Benghazi] Mission facility, due to its one-year expiration in December 2012, contributed to a lack of continuity for security staff, and constrained decision-makers in Washington regarding the allocation of security enhancements to that facility." Differing views on the definition of "temporary" and the related eligibility for security funding has led to confusion about whether or not the Benghazi facility qualified for WSU funding. According to State Department officials, the facilities in Benghazi would have been eligible for the Compound Security Program under WSU funding. Although ESCM/WSU does not fund security upgrades for temporary facilities, it does fund security upgrades for permanent facilities. For the purposes of funding, the Department defines temporary facilities as those that are not permanent structures, such as modular units or structures that can be relocated. The facilities in Benghazi were permanent structures. Based on that definition, lease terms or length of mission would not determine the qualification to use WSU funding. According to State Department officials, OBO received no requests to execute or fund a compound security upgrade in Benghazi with WSU funding. With regard to the available funding in FY2012, according to the Department of State, the Benghazi facilities were short-term leased residential villas that were used for housing and office space. The leases for the three villas in Benghazi ($336,000/year, $168,000/year, and $336,000/year) were funded from FY2012 ESCM appropriations. WSP funds were available and were used for security enhancements prior to the attack. Delayed enactment of appropriations also may have had consequences for the implementation of security upgrades. According to one Senate Committee report, a State Department Regional Security Officer (RSO) stated that Continuing Resolutions had two detrimental effects on efforts to improve security in Benghazi. First, the Department of State would only allow funds to be expended at a rate of 80 percent of the previous year's appropriations level, so as not to risk a violation of the Anti-Deficiency Act [not obligating more than may eventually be appropriated by Congress]. Second, in the absence of a supplemental appropriation or reprogramming request, security funds for Benghazi had to be taken 'out of hide' from funding levels for Libya because Benghazi was not included in the previous budget.

Congressional investigations into the September 11, 2012, attacks on U.S. facilities in Benghazi, Libya, have focused on a number of issues, including the extent to which overall funding levels may have played a role in the security measures in place at that U.S. facility. While several factors may have been involved in the Benghazi situation, this report focuses only on funding for security of U.S. diplomatic personnel and facilities abroad, hereinafter referred to in this report as diplomatic/embassy security. (For other CRS reports on the Benghazi attacks and a list of CRS experts, go to CRS.gov and search "Benghazi.") The report of the Accountability Review Board for Benghazi (ARB) report highlighted the funding complexities at the Department of State: For many years the State Department has been engaged in a struggle to obtain the resources necessary to carry out its work, with varying degrees of success. This has brought about a deep sense of the importance of husbanding resources to meet the highest priorities, laudable in the extreme in any government department. But it has also had the effect of conditioning a few State Department managers to favor restricting the use of resources as a general orientation. Experienced leadership, close coordination and agility, timely informed decision making, and adequate funding and personnel resources are essential.... One overall conclusion in this [ARB] report is that Congress must do its part to meet this challenge and provide necessary resources to the State Department to address security risks and meet mission imperatives. (Department of State, Accountability Review Board for Benghazi Attack of September 2012, December 19, 2012, p. 3. Available at http://www.state.gov/documents/organization.202446.pdf.) Other post-Benghazi reports have pointed out how security funding for overseas staff and posts depends on the designation of the facility as office space, warehouse, or residence, and whether a facility is considered by State Department officials as permanent, temporary, or interim. Even the definition of each of those designations may differ within the Department of State. Further, some reports suggest that the inability to get more funds to improve security--whether because Congress does not appropriate enough, delays passing budgets, or because the Department of State is unwilling or unable to fully fund resource requests from its overseas posts--may contribute to an attitude by officials in the field that a combination of elevated threat and restricted resources to meet that threat should not be questioned. In that case, security officers requesting more funds simply may give up. This report presents a history and analysis of the requested and actual funding for diplomatic/embassy security since FY2008--what actually became available for the Department of State to spend after rescissions, sequestration, and transfers. It also provides funding data that was requested by the Administration, passed by the House of Representatives, passed by the Senate, and enacted by Congress for the two accounts that provide the bulk of the funding: the Worldwide Security Protection (WSP) and Worldwide Security Upgrades (WSU). Combined, these two subaccounts in most years comprise more than 90% of the funding available for diplomatic/embassy security. This report will continue to track diplomatic/embassy security appropriations and will be updated as changes occur.

The purpose of this report is to provide Congress with an overview of the nature and statusof the designated foreign terrorist organizations list (FTO list), as a potential tool in overseeing theimplementation and effects of U.S. legislation designed as a basis for imposing sanctions onterrorists. The report centers on the list of terrorist groups that are formally designated by theSecretary of State pursuant to section 219 of the Immigration and Nationality Act (8 U.S.C. 1101 et seq .), as amended under the Antiterrorism and Effective Death Penalty Act of 1996 ( P.L.104-132 ). These groups are often collectively referred to as the "terrorist group list" or "FTO list." The focus here is on the operation and effectiveness of the FTO list as a U.S.counterterrorism tool. The first part of the report provides a background on the process fordesignating a group, as well as the procedure used to remove a group. It describes the administrationof the list and the role of the various Executive agencies involved in maintaining it. (1) Next follows a sectionexplaining the distinctions between the FTO list and other terrorist lists that are maintained by theU.S. government, with an emphasis on both tracing the complicated interplay among the numerouslists and untangling their confusing acronyms. The arguments in favor and against the FTO list arethen discussed, with information about the practicalities of implementing it. The report concludeswith a discussion of potential policy options for Congress, including some of the recently proposedamendments to the legislation that establishes it. The potential issue for Congress is to assess, as part of its oversight responsibility, theeffectiveness of the FTO list in confronting terrorist groups that are a threat to the United States. This report will be updated as events warrant. The 1996 Antiterrorism and Effective Death Penalty Act (AEDPA), which amends section219 of the Immigration and Nationality Act (P.L. 82-414; 8 U.S.C. 1101 et. seq .), states that theSecretary of State is authorized to designate an organization as a "foreign terrorist organization" ifthree conditions are met: 1. The organization is foreign; 2. The organization engages in terrorist activity; 3. The terrorist activity threatens the security of United States citizens or the nationalsecurity of the United States. (2) If the Secretary of State decides that an organization meets these conditions, he or she may add it tothe terrorist group list at any time by informing Congress and publishing a notice to that effect in the Federal Register . Designations last for two years, at which time they may be renewed. Groups canalso be removed from the list at any time, either by the Secretary of State or by Act of Congress. Thecriteria for removal by the Secretary are general and are subject to interpretation: the Secretary ofState may revoke a designation if he or she finds either that the circumstances that were the basis forthe designation have changed, or that the national security of the United States warrants a revocationof the designation. (3) Designations normally occur after an involved interagency process; but the Secretary of State makesthe ultimate decision. Although the State Department officially designates a group and takes the lead, there are anumber of agencies involved in administering the FTO list. Before the determination, theintelligence community is an important player, because the designation is based upon evidence ofa group's terrorist activity. This often involves classified information and entails assembling anadministrative record that will potentially stand up in court. The intelligence community alsoprovides the information upon which decisions to renew an organization's designation arebased. (4) The JusticeDepartment weighs the legal evidence before the designation is approved, and when renewal is beingconsidered. The Department of Homeland Security is also consulted before designations are made. After the designation, the Treasury Department may block financial transactions involvingan organization's assets and determine whether U.S. banks are complying with the law. The JusticeDepartment determines whether or not to prosecute offenders who violate any aspect of the TreasuryDepartment's sanctions. Judges from the Department of Justice's Executive Office of ImmigrationReview decide immigration cases, with appeals potentially going all the way to the Attorney General. A variety of different agencies in the Department of Homeland Security are then involved in carryingout immigration sanctions, including deportations. Thus, from the perspective of the members of a group, the legal consequences of beingdesignated a foreign terrorist organization are in two general areas: financing and immigration. Under the AEDPA, people who provide funds or other material support to a designated FTO arebreaking the law and may be prosecuted. (5) This applies to both the members of a group and to those who maybe sympathizers. If Treasury imposes sanctions, U.S. financial institutions are required to block thefunds of designated FTOs and their agents and to report that blockage to the Treasury Department. This can have important consequences for a designated terrorist organization's ability to access itsresources. As for immigration, members of designated FTOs can be denied visas or excluded fromentering the United States, and/or they can be deported once they are in the country. The FTO list is not the only so-called "terrorist list" that the U.S. government keeps. (6) There are a number of others,and it is important to clarify the distinctions among them. (7) Probably the best known is the "state-sponsors of terrorism" list, which is pursuant to section6(j) of the Export Administration Act of 1979 ( P.L. 96-72 ; 50 U.S.C. app. 2405(j)(asamended)). (8) Under theterms of the act, the Secretary of State provides Congress with the list of countries that have"repeatedly provided support for acts of international terrorism." There are currently seven stateson the state sponsors of terrorism list: Cuba, Iran, Iraq, Libya, North Korea, Sudan, and Syria. (9) Being on the list subjects acountry to a range of severe U.S. export controls, especially of dual-use technology and militaryweapons. The provision of U.S. foreign aid (except humanitarian assistance) is also prohibited. The state sponsors of terrorism list has been remarkably static since its initiation in 1979,with only two states ever having been removed: South Yemen, which was removed in 1990 whenit effectively ceased to exist, merging with North Yemen to form the current state of Yemen; andIraq, which was removed from the list in1982 (when it was allied with the United States) and wasreturned to the list in 1990 (after its invasion of Kuwait). (10) This list differs from the FTO list, as it is directed specificallytoward states, not substate actors -- like the terrorist groups that the states allegedly support. It alsoderives from different legislation. (11) At least three other important U.S. "terrorist lists" are in use. The "specially designatedterrorists" (SDTs) list was generated pursuant to the International Emergency Economic Powers Act( P.L. 95-223 ; 50 U.S.C. 1701 et seq .). It was initiated under Presidential Executive Order 12947 on25 January 1995 and was specifically oriented toward persons (individuals and entities) who threatento disrupt the Middle East Peace Process. Later, following the events of September 11, 2001, thePresident invoked the same emergency authorities in Presidential Executive Order 13224, to block"all property and interests in property" of certain designated terrorists and individuals and entitiesmaterially supporting them. (12) This established another, much longer list, known as theSpecially Designated Global Terrorists (SDGTs) list. There are currently over three hundred personsidentified as SDGTs. These two lists are especially targeted toward blocking terrorist financing, andthey do not have an immigration element. The Treasury Department maintains the so-called SDT and SDGT lists, and, unlike the FTOlist, the Secretary of the Treasury takes the lead in adding individuals or organizations to the lists andthen freezing the assets of persons or entities that are on them. The lists have grown to include morethan 200 entities, organizations, and/or individuals. They derive from different legislation and,again, are not the same as the designated FTO list. (13) The SDT, SDGT, state sponsors, and (as of October 2002) FTO lists were placed togetherin a new, larger roster called the "Specially Designated Nationals and Blocked Persons" (SDN) listmaintained by the Office of Foreign Assets Control of the Treasury Department. (14) Although the individuallists retain separateness pursuant to their legislation, this comprehensive SDN list presents in oneplace all of the terrorist entities that are economically sanctioned through having their assets blocked. (It also includes individuals and organizations that are sanctioned by having their assets blocked fornarcotics trafficking and other activities.) There are thus fourteen different sanctions programsincluded in the SDN list, not all of which pertain to terrorists. The list is accessible via the Internetand is frequently updated to reflect the fluid nature of U.S. economic sanctions. (15) There is also the so-called "Terrorist Exclusion List" or "TEL," which is pursuant to Section411 of the USA Patriot Act of 2001 ( P.L. 107-56 ; 8 U.S.C., 1182). It authorizes the Secretary ofState, in consultation with (or at the request of) the Attorney General, to designate terroristorganizations strictly for immigration purposes. Individuals associated with organizations on theTEL list are prevented from entering the United States and/or may be deported if they are alreadyhere. (16) (It is worthnoting, that none of these immigration sanctions has an effect on the behavior of U.S. citizens.) TheTEL list expands the grounds for exclusion from the United States and has a broader standard andless detailed administrative procedure than does the FTO list. The State Department maintains theTEL list. (17) In sum, with respect to sanctions against terrorists, the Executive branch maintains anintricate array of lists pursuant to various legislation and Executive Orders. These lists do overlap;however, the Executive Branch implements sanctions against state sponsors of terrorism, terroristorganizations, and individual terrorists somewhat differently depending upon which legislationapplies, what the purpose is, and which list is being considered. There are also international listsmaintained by the United Nations and the European Union, for example, that are not considered here. This report looks in detail only at the designated FTO list and its sanctions, which the StateDepartment takes the lead in administering and which names only specially designated terroristorganizations. The FTO list has unique importance not only because of the specific measuresundertaken to thwart the activities of designated groups but also because of the symbolic, public roleit plays as a tool of U.S. counterterrorism policy. The first terrorist organizations were designated and put on the FTO list in October 1997,about eighteen months after the passage of the AEDPA. There were thirty organizations on thatinitial list. In October 1999, the first review and redesignation occurred. Of the 30 groups originallyon the list, 27 were redesignated, three were allowed to lapse, and one more group was added. (18) Notably, the group thatwas added to the FTO list that year was Al Qaeda, which was designated a foreign terroristorganization especially because of its involvement in the August 1998 bombings of the U.S.embassies in Nairobi, Kenya, and Dar Es Salaam, Tanzania. The first exercise of the Secretary of State's ability to add a group outside the usual two-yearcycle occurred in 2000, when the Islamic Movement of Uzbekistan was designated on its own. Thenin the regular biennial review in 2001, the State Department added two new groups, the Real IrishRepublican Army (RIRA) and the United Self-Defense Forces/Group of Colombia (AUC), andcombined two other groups (Kahane Chai and Kach) into one. (19) That brought the total to28 FTOs. Since that time, the list has grown significantly. There have been eight groups added tothe FTO list since October 5, 2001: the Al-Aqsa Martyrs Brigade (which is an armed wing of theFatah movement), 'Asbat al-Ansar (a Lebanese-based group associated with Al Qaeda), theCommunist Party of Philippines/New People's Army (CPP/NPA) (a Maoist group),Jaish-e-Mohammed (JEM) (an Islamic extremist group based in Pakistan), Jemaah Islamiya (JI) (asoutheast Asian terrorist network connected with Al Qaeda), Lashkar-e-Tayyiba (LT) (aPakistan-based group fighting in Kashmir), and Salafist Group for Call and Combat (GSPC)(apparent outgrowth of the Algerian GIA, active in Europe, Africa and the Middle East). There are36 groups currently designated as foreign terrorist organizations. (See Appendix A.) There are advantages and disadvantages for the United States in using a formal list as amechanism for counterterrorism purposes. (20) Chief among the advantages is the fact that the FTO list bringslegal clarity to efforts to identify and prosecute members of terrorist organizations and those whosupport them. Having the designated FTO list helps to target U.S. counterterrorist sanctions underthe AEDPA because there is no ambiguity about which groups are included and which are not. Ifa group is on the FTO list, then the AEDPA sanctions apply; if not, they do not. Thus, being addedto the list can have very substantial implications for both the organization and for U.S.counterterrorist efforts. In practical bureaucratic terms, the FTO list also provides lucidity in the often complicatedinteragency process of coordinating the actions of Executive agencies, by giving them a central focalpoint upon which the efforts converge. U.S. counterterrorism is therefore potentially more effective. State, Treasury, Justice, Homeland Security, and other agencies all recognize that groups on the listare subject to scrutiny and sanctions. And these measures arguably make Americans more securefrom terrorist attacks, for example, by cutting down on terrorist organizations' access to resourcesand preventing terrorist group members from entering the country. Specifically, the departments ofHomeland Security and Justice have used affiliation with an FTO as grounds for deportation ofaliens. (21) The TreasuryDepartment, working with the interagency and international communities, has used the FTO list(among the other U.S. terrorist sanctions programs) in its effort reportedly to block more than $125billion in assets worldwide. (22) And, of course, the Justice Department has prosecutedindividuals affiliated with FTOs. (23) Having a focal point for agency coordination enhances theeffectiveness of government implementation and may also serve as a deterrent to organizations thatconsider engaging in illegal behavior. Likewise, the FTO list is a useful mechanism in dealing with other governments, especiallythose that are coordinating counterterrorism efforts with the United States. Labeling and listingterrorist organizations also opposed by other states can be an important source of convergence inbilateral national relations. There is a sense of alliance against a common enemy. Often importantbenefits are derived in counterterrorism or other aspects of the bilateral relationship as a result. Moreover, states that are, actually or potentially, supporting organizations on the list can be left inno doubt about U.S. policy on the issue. Clearly labeling what the United States governmentconsiders a foreign terrorist organization can have significant domestic and international foreignpolicy advantages. It can be a powerful diplomatic tool, residing in the State Department's Officeof the Coordinator for Counterterrorism. Another important benefit is the attention that the FTO list gives to the organizations that areon it. Drawing attention to terrorist groups aids in identifying them not only for states but fornongovernmental organizations and individuals. And likewise the terrorist organizations are fullyplaced on notice that someone is watching what they do. This can make it more difficult for themto operate. The groups on the FTO list are stigmatized. Many modern terrorist organizations have avaried portfolio of activities, some of which may be ostensibly legitimate. Some who may havepreviously viewed an organization primarily as a charity or as a public advocacy group mayreconsider supporting it. Publicizing which groups are formally designated has important legalimplications: since the law punishes those who wittingly support terrorist organizations, ignoranceof a listed organization's activities is less defensible. Potential donors may not necessarily be willingto contribute to an organization that is designated as "terrorist," especially if the gift may result inprosecution under U.S. law. The moral relativity that some people claim dogs the "terrorist" labelis removed, at least as far as official U.S. policy is concerned. Although it has important legal and symbolic significance, some argue that having a "list"is overly mechanistic, restrictive and inflexible, especially in an area of foreign policy that requiresflexibility. Nonstate actors such as terrorist organizations are often able to change their names and/orcharacteristics much more quickly than ponderous bureaucratic lists can reflect. This is a seriousproblem in an era when international terrorism is increasingly globalized in its reach and capabilities,with borders becoming more permeable and less relevant, in an age of Internet links and open tradeareas. (24) Likewise,such lists are not very effective in dealing with ad hoc activities engaged in by "volunteers," whomay not have a clear long-term relationship with an organization. This has become a particularworry with respect to Al Qaeda, for example. (25) The statement that a group is "on the list" or "off the list" can be very misleading, and itssignificance is often misunderstood. It is true that the FTO list is generally considered the primarymeans of imposing sanctions against terrorist organizations. However, not being on the FTO listdoes not necessarily mean that the U.S. government has failed to recognize that a group is engagedin terrorism, is a threat, and should be subject to sanctions. Sometimes, for various reasons,groups (26) are not on theFTO list, but are on the SDT or SDGT list. They can also be on the Terrorist Exclusion List. Theremay be competing priorities in dealing with a group, such as a desire to engage a group innegotiations or to use the FTO naming as leverage for another foreign policy aim. Without a fullappreciation of the interplay among different sanctioning lists, not to mention the interplay betweencompeting foreign policy goals and all of the sanctioning lists, statements about whether or not agroup is on a particular list may ring hollow. It is not necessarily the case that the FTO list is the most effective or prosecutable mechanismto act against terrorist organizations, if that is the aim. Sometimes it is easier to prosecuteorganizations or their associates by using the Executive Orders under IEEPA. For example, it canbe more difficult to prove that someone is materially supporting, or working for or on behalf of, anFTO under AEDPA than it is to prove that someone is violating the terms of Executive Order 13224. In that case, it might be to the benefit of U.S. counterterrorism efforts to name a group a SDGTrather than an FTO. If a group is then also put on the Terrorism Exclusion List, the combined effectsof the sanctions overall could be comparable to being formally named an FTO. (27) Of course, the publicattention and diplomatic leverage that goes along with being on the better-known FTO list is notequalled; however, the point is that in terms of the results with respect to fighting an organization'sactivities, the U.S. sanctions regime is far more complicated than either being "on" the list or "off"the list would imply. Competing foreign policy concerns often result in decisions to keep groups off the list. Thisis not necessarily a problem, as U.S. foreign policy considers numerous competing priorities in anygiven situation. The law "authorizes" but does not require the Secretary of State to make any givendesignation. If there are countervailing foreign policy priorities, then his or her judgment prevails. Nonetheless, inconsistencies of standards from the perspective strictly of terrorism can make the U.S.government appear hypocritical, especially in the eyes of those who see the FTO list only in blackand white terms and may not appreciate the existence of other terrorist lists. Statements aboutorganizations that are not designated regularly appear in the press, journals and academic writing,for example. (28) Havingsuch a high-profile list can politicize and oversimplify what is actually a complex web of legalsanctions that may be in addition to, or instead of, those pursuant to the AEDPA. Furthermore, as noted, above, the FTO list is subject to judicial review. Thus, on a numberof occasions, groups have filed law suits to be removed from it. For example, the Mujahedin-eKhalq (MEK) and the Liberation Tigers of Tamil Eelam (LTTE, or Tamil Tigers) in 1999 both filedsuits in the District of Columbia arguing that they had been denied due process; but they lost incourt. (29) A separatelegal challenge was undertaken by the LTTE and the Turkish Kurdistan Workers' Party (PKK),which argued that the FTO portion of the AEDPA was unconstitutional. The suit was brought byindividuals and groups seeking to make contributions to the designated organizations. They also losttheir case; however, the ability to win in court has at times evidently been an element in the initialdecision whether or not to designate a group. (30) This may mean that the designation has more to do with thelegalities of the evidence than with the protection of U.S. national security from a terrorist threat. In the 108th Congress, a number of amendments have been offered to change the AEDPAlegislation so as to improve the effectiveness and ease of implementation of the FTO list. Some haveproposed that the law should be changed so that the designation does not lapse if the Secretary ofState fails to renew it every two years. It is a significant bureaucratic burden to ensure that thedesignations are appropriately reviewed, investigated, the administrative record updated, theappropriate agencies consulted, and the public statement of renewal made every two years after theinitial designation. Some might argue that the burden of proof should be placed on the terroristorganization, and that the designations should stand unless a successful appeal is placed by theorganization. The requirement for renewal is one of the aspects that some believe make the FTO listless desirable than the other sanctioning tools available under IEEPA and the relevant ExecutiveOrders. On the other hand, opponents may point out that the powers of the federal government underthe Patriot Act are already extensive, and that placing the burden of proof on designated FTOsessentially makes them guilty until they prove themselves innocent. The state sponsors of terrorismlist has been largely static in part because states remain on the list until the Secretary of State is ableto attest to listed states having stopped being involved in supporting terrorism. It is always difficultto prove a negative. Some might argue that the FTO list is a more flexible document with the currentarrangement regarding renewals and should be kept that way. The FTO list provides a public venuefor the State Department periodically to reemphasize the importance U.S. foreign policy places uponcountering these organizations. Another idea is to remove the requirement for judicial review of the FTO list. This wouldmake it much harder for terrorist organizations to appeal their placement on the list. The argumentsfor and against this suggestion are similar to those presented above, since judicial review is animportant mechanism available for organizations whose members believe that they have beenwrongly labeled and punished. There is a precedent for trying this suggestion. The ForeignNarcotics Kingpin Designation Act (passed in December 1999) originally contained a "no judicialreview provision." This caused concern among some owners of private businesses who feared thatthey might somehow be added to the list for unwitting business relationships with narcoticstraffickers. Shortly thereafter, legislation was passed to remove the provision, and judicial reviewwas restored. Abu Nidal organization (ANO) Abu Sayyaf Group (ASG) Al-Aqsa Martyrs Brigade Armed Islamic Group (GIA) 'Asbat al-Ansar Aum Supreme Truth (Aum) Aum Shinrikyo, Aleph Basque Fatherland and Liberty (ETA) Communist Party of Philippines/New People's Army (CPP/NPA) Al-Gama'a al-Islamiyya (Islamic Group, IG) HAMAS (Islamic Resistance Movement) Harakat ul-Mujahidin (HUM) Hizballah (Party of God) Islamic Movement of Uzbekistan (IMU) Jaish-e-Mohammed (JEM) Jemaah Islamiya (JI) Al-Jihad (Egyptian Islamic Jihad) Kahane Chai (Kach) Kurdistan Workers' Party (PKK, KADEK) Lashkar-e-Tayyiba (LT) Lashkar I Jhangvi (LJ) Liberation Tigers of Tamil Eelam (LTTE) Mujahedin-e Khalq Organization (MEK or MKO) National Liberation Army (ELN -- Colombia) Palestine Islamic Jihad (PIJ) Palestine Liberation Front (PLF) Popular Front for the Liberation of Palestine (PFLP) Popular Front for the Liberation of Palestine-General Command (PFLP-GC) Al Qaeda Real IRA (RIRA) Revolutionary Armed Forces of Colombia (FARC) Revolutionary Nuclei Revolutionary Organization 17 November (17 November) Revolutionary People's Liberation Party/Front (DHKP/C) Salafist Group for Call and Combat (GSPC)] Sendero Luminoso (Shining Path or SL) United Self-Defense Forces/Group of Colombia (AUC) Source: U.S. Department of State, Patterns of Global Terrorism 2002, published April 2003;accessible at http://www.state.gov/s/ct/rls/ , p. 99ff. (Some spellings have been adapted.)

The purpose of this report is to provide Congress with an overview of the nature and statusof the designated foreign terrorist organizations list, as a potential tool in overseeing theimplementation and effects of U.S. legislation designed to sanction terrorists. It centers on the listof terrorist groups that are formally designated by the Secretary of State pursuant to section 219 ofthe Immigration and Nationality Act, as amended under the Antiterrorism and Effective DeathPenalty Act of 1996 ( P.L. 104-132 ). These groups are often collectively referred to as the "FTO list." FTO list designations, which last for two years and must be renewed, occur after aninteragency process involving the departments of State, Justice, Homeland Security, and theTreasury. Since the designations can be challenged in court, they require a detailed administrativerecord often based on classified information. An organization that is placed on the FTO list issubject to financial and immigration sanctions, potentially including the blocking of assets, theprosecution of supporters who provide funds, refusal of visas, and deportations of members. Therehave been a number of designations and changes since the list was established, but it currentlyincludes thirty-six organizations. (See Appendix A.) The FTO list is often confused with some of the other "terrorist lists" that are maintained bythe U.S. government. These include the "state-sponsors of terrorism" list, which is pursuant toSection 6(j) of the 1979 Export Administration Act ( P.L. 96-72 ; 50 U.S.C. app. 2405(6)(j)); the"Specially Designated Terrorists" (SDTs) list, which is pursuant to the International EmergencyEconomic Powers Act ( P.L. 95-223 ; 50 U.S.C. 1701 et seq .) and was initiated in 1995 underPresidential Executive Order 12947; the "Specially Designated Global Terrorists" (SDGT) list,initiated in 2001 under Presidential Executive Order 13224; and, finally, the "Specially DesignatedNationals and Blocked Persons" (SDN) list, a master list that contains the other lists. All of theseare summarized and maintained by the Office of Foreign Assets Control of the Treasury Department. Lastly, the "Terrorist Exclusion List" or "TEL," which relates to immigration and is pursuant toSection 411 of the USA Patriot Act of 2001 (8 U.S.C.1182) is maintained by the State Department. Like the FTO list, the TEL includes the names of terrorist organizations, but it has a broader standardfor inclusion, is subject to less stringent administrative requirements, and is not challengeable incourt. There is a complicated interplay among all of these lists, and it is important to distinguishthem from the better-known FTO list. The FTO list has been of considerable interest to Congress, and there are arguments in favorand against it. It publicly stigmatizes groups and provides a clear focal point for interagencycooperation on terrorist sanctions; however, some argue that it is inflexible and misleading, sincegroups that are not on the list are still often subject to U.S. sanctions. The report concludes with adiscussion of potential policy options for Congress, including some of the recently proposedamendments to the legislation that establishes it. It will be updated as events warrant.

RS21510 -- NATO's Decision-Making Procedure Updated March 8, 2004 In February 2003, the United States asked that NATO begin planning to provide Turkey with defensive systems in the event of an attack by Iraq during theimpending war with Saddam Hussein's regime. The request also asked that NATO members backfill for some U.S.forces in the Balkans, needed for thepossible conflict with Iraq. France, Germany, and Belgium objected in the North Atlantic Council (NAC), NATO'ssupreme political body. They contendedthat granting the request would be the equivalent of acknowledging that Iraq had impeded U.N. weaponsinspections, as yet unproven in the view of the threegovernments, and be a pretext for war. NATO Secretary General Robertson at that point invoked the "silenceprocedure," under which any membergovernment objecting to the request must send him a formal letter stating its opposition. The three governmentssent such a letter in the stated time frame,stymieing the U.S. request. Turkey itself then asked for consultations concerning its defense needs under ArticleIV of the North Atlantic Treaty. The United States asked that Turkey's request for assistance be discussed in the Defense Planning Committee (DPC), where France is not a member. TheGerman government was willing to grant the request for assistance to Turkey, and dropped its opposition. TheBelgian government, now isolated, dropped itsobjection. The DPC then granted the request for defense planning, which resulted in the deployment of AWACS,Patriot missiles, and other defensive systemsto protect Turkey. Consensus in the NAC is generally sought when allied governments must formulate policy on an important strategic issue. Examples include approval ofNATO's Strategic Concept (NATO's document that serves as a strategic guideline), relations with Partnership forPeace countries, the NATO budget,deployment of forces for peace operations, and invocation of Article V. Consensus is clearly differentiated from"unanimity," which NATO does not seek. Unanimity would require an actively stated vote in favor of a measure. Structure and Process. NATO has a civil and a military structure. The supreme political decision-makingbody, the North Atlantic Council (NAC), sits in Brussels, and is chaired by the Secretary General. Each of the 19member states has a representative on theNAC. Key proposals for military decisions are made by the Military Committee (MC). A senior European military officer chairs the Military Committee. The MChas 18 members because France withdrew from the alliance's integrated military structure in 1966. France sendsan observer, without a vote, to the MC. France has full representation on the NAC, however, as Paris did not withdraw from NATO's politicaldecision-making structure. The NAC has the authorityto approve all key MC documents. Normally, any government may have two opportunities to influence a major NATO decision. For example, the MC established a working group at the level ofcolonel to work out the deployment and responsibilities of NATO member state forces to be sent to Bosnia for peaceoperations in the 1990s. The 18representatives on the working group met for eight months, and eventually drafted a document that was approvedby the MC. The MC then sent the documentto the NAC's international staff. Ultimately, all 19 representatives on the NAC refined the document's language,and approved it. Reaching consensus is therefore a process in which member governments have ample opportunity to provide language to NATO documents and decisions thatreflect national governments' individual views. The North Atlantic Council (NAC). The NAC achieves consensus through a process in which nogovernment states its objection. A formal vote in which governments state their position is not taken. During theKosovo conflict, for example, it was clear toall governments that Greece was uncomfortable with a decision to go to war. NATO does not require a governmentto vote in favor of a conflict, but rather toobject explicitly if it opposes such a decision. Athens chose not to object, knowing its allies wished to take militaryaction against Serbia. In contrast toNATO, the EU seeks unanimity on key issues. Unanimity characterizes EU decision-making when, for example,new members are invited to join, or revisionsto the Union's governing treaties must be adopted. At NATO, the "silence procedure" may be used for any decision requiring a consensus. At times, the procedure allows governments in opposition to a measureto avoid confronting other allies around the table during a session of the NAC. The procedure can also providecover for a government from unwanted pressreporting that might characterize its policy as out of step with other allies. By not sending a letter to the SecretaryGeneral within a specified time period, agovernment can avoid the step of stating its explicit objection to a policy if it believes other allies are set on a courseof action. This procedure failed in theeffort to begin defense planning for Turkey when three governments were in opposition. The procedure can be moresuccessful if only one government is put inthe position of having to take the formal step of sending a letter of opposition to the Secretary General, and mayrefrain from doing so to avoid being isolated. NATO uses the same principle of consensus in the DPC, where 18 members make proposals on such matters as force structure. Normally, the DPC's proposalsare sent to the Military Committee or to the NAC for approval. When France withdrew from the MilitaryCommittee in 1966, it also surrendered its seat on theDPC. NATO in the past has made important preliminary decisions on military operations in the DPC. However,in 1992, when NATO decided to enforce thearms embargo in the Adriatic Sea against the countries of the disintegrating Yugoslavia, France wished to participatein the decision and to send forces as partof the operation. For this reason, NATO transferred the decision to the NAC, where France could play a role. Thispractice set a precedent for subsequentNATO military operations. The NAC made the decisions to establish SFOR, approve the plan for OperationAllied Force in Kosovo, and establish KFOR inthe conflict's aftermath, each time because France wished to participate in these operations. When France (andBelgium and Germany) objected in February2003 to military assistance to Turkey, however, the United States was instrumental in the maneuver to move outof the NAC and back to the DPC to approveAnkara's request for assistance under Article IV. The maneuver raised the question of whether the United States,and other allies, were attempting to avoid orweaken the principle of consensus. Within the U.S. government and in allied governments, there is varied support for preserving decision-making by consensus. Most senior U.S. officialsassociated with NATO affairs contend that they support the principle of consensus, although some acknowledgethat forging consensus in an era when NATOmay go out-of-area is likely to be difficult. Support for preserving the principle of consensus centers upon a desire to maintain political solidarity for controversial measures. In this view, the consent of19 sovereign governments, each taking an independent decision to work with other governments, is a formidableexpression of solidarity. At the same time,there can be political costs due to the sparring and the time involved in reaching consensus. NATO's decision togo to war against Serbia in 1999 was anexample of such an instance. Military action against Serbia had been postponed for a number of days, whilecivilians were losing their lives in Kosovo. Theallies first made an effort to achieve legitimization for the operation in the U.N., but did not submit the requisiteresolution when Russia signalled that it wouldcast a veto. The allies decided to debate in the NAC the issue of going to war without such a resolution, in the enddeciding that 19 governments consenting tothe use of military force supplied a measure of political legitimacy. Officials involved in that NAC debate say thatthe need for obtaining consensus outweighedthe need for acting quickly. The Kosovo conflict illustrated some of the difficulties involved in maintaining consensus. Some critics of management of the conflict, including someMembers of Congress, criticized the target-selection process. Press reports indicated that all governments in theNAC had to approve NATO's individualtargets for Serbia. France, in particular, was singled out in press reports for criticism for objecting to specifictargets. In fact, NATO was following a verydifferent procedure for target selection. Member governments, including the United States, wished to be carefulto avoid civilian casualties, particularly in theabsence of a U.N. resolution that might be cited to legitimize the ends used to compel the Milosevic governmentto cease ethnic cleansing. They made adecision before the conflict began, after an initial operational plan produced by the MC, to attack targets in threephases. Each phase marked an escalation overthe previous one; stepping up to the next phase - and not individual targets - required consent from the NAC. PhaseI targets were indisputably militarytargets, such as air defense systems, airfields, and troop concentrations, and there was strong agreement that thesemust be struck. Phase II targets wereinfrastructure, such as bridges and petroleum depots, that might serve both civilian and military usage, and weretherefore more controversial. Phase III targetswere "the more significant targets associated with Serb repression," such as police headquarters involved in ethniccleansing, often located in urban centers suchas Belgrade. According to then SACEUR General Wesley Clark, and to sources interviewed, it was the Pentagonand the White House, as well as the Britishgovernment, that above all raised barriers and sought delays before attacking Phase II and III targets, with Franceand other governments raising occasionalobjections. (2) The Kosovo conflict underscores the political pressure placed on the NAC in maintaining consensus when military action comes into play, and the fact that theFrench government has often been singled out when disagreements arise. Different governments place varyingdegrees of emphasis on civilian control of themilitary, and on the reactions of their own populations when there are civilian casualties. The United Statesgovernment tends to have more confidence in itsarmed forces in target selection and in making decisions on the battlefield than do most allied governments. Someallies, given the recent history of theirmilitaries stepping into political affairs or using excessive force against civilians, place greater restraints on theirarmed forces. In France, the effort by armyofficers to overthrow President de Gaulle's government in 1960-62, and in Germany, excesses of the Wehrmacht and the Gestapo in the Second World War, arewithin the memory of many leaders and populations, and affect how these governments seek to manage militaryconflict. The diversity of viewpoints in theNAC means that constant negotiation is necessary in providing authority to the SACEUR to plan and execute amilitary operation. Wrangling over precisephrasing of a document can be a means to provide clarity for decision-makers; in contrast, it can also be meant toprovide vagueness that gives political cover toa member government that may give its own interpretation to its populace about the purpose of a NATO decision. Altering or abandoning the principle of consensus at a moment when NATO may accept new members poses other problems. For candidate state governments,the prospect of such a change raises the question of whether the United States and other current members lackconfidence in the candidates to participate in thefull range of allied decision-making. Representatives of some of these governments also express displeasure withthe tendency of some Administration officialsto divide the continent into an "old" and "new" Europe, even if the characterization is meant to favor them. Sucha division suggests a possible marginalizationof France and Germany, and of an alliance where member states are set against each other, implicit for some in anyabandonment of the consensus principle. Some officials view any prospective effort by the United States to move away from the consensus principle as aversion of U.S. "unilateralism," in whichWashington might pressure weaker or small-state governments to follow its lead, an issue raised when the BushAdministration sought support of several alliedgovernments in the coalition against Iraq. The political complexities inherent in NAC and MC debates mean that there is no simple fix to improve NATO decision-making. At the same time, some U.S.officials believe that the growing necessity for out-of-area missions indicates a clear need to develop a new processto permit participation under NATOauspices by willing allies in such operations. (3) Some U.S. officials, without enthusiasm, suggest an EU model, where member states' votes are weighted, based on their populations. This form of "qualifiedmajority voting" (QMV) gives greater influence to the largest countries, but small states may still band together toblock an initiative. Critics of adopting suchan approach for NATO point out that the alliance is a mutual defense organization, where supreme national interestssuch as the survival of a country and thelives of a government's soldiers are at issue. In such circumstances, they believe that the EU's mechanistic approachto decision-making over less momentousissues is inappropriate for NATO. The EU is different in nature from NATO. The EU must grapple with issuesinvolving the sharing of national sovereignty ona wide range of issues. As a result, extensive deal-making has been part of the EU (earlier, the EuropeanCommunity) since its origins, but has not beenprevalent in NATO. Nonetheless, QMV in NATO could lead, as it often does in the EU, to faction-building orextended horse-trading. However, one system used in elements of EU decision-making is drawing interest from those in NATO who support coalitions of the willing and capable. Forissues that involve only selected governments, the EU has devised "committees of contributors." In this concept,governments that wish to participate in aproject receive general approval from a principal EU governing body to proceed among themselves, while the othergovernments take a general interest and aresponsibility that might involve oversight. An element of the concept involves "constructive abstention," in whichgovernments with interests not directlyaffected stand aside and permit action by those with interests that are directly in play. A "committee of contributors" in NATO might follow a similar outline, and might appeal especially to governments that are both NATO and EU members. Countries on the committee for a military operation, for example, would be those willing to contribute troops andother assets. The committee would formulatea general plan for operations, and submit it to the NAC for a "blessing." The NAC might allow the committee touse NATO assets, such as AWACS and theplanning staff. The NAC, in effect, would endorse the right of committee members to act in their own interests, butnot specifically endorse the operation itself. Committee members among themselves could then make key decisions, possibly based on consensus, such as howmuch authority to delegate to SACEUR forcontingency planning and target selection. The committee would keep the NAC informed on a regular basis. Shouldthe NATO Response Force (NRF),comprised of 25,000 troops, be fully developed for "expeditionary" operations beyond the Treaty area, "committeesof contributors" could be a means tostreamline decision-making and keep it within the ken of interested governments. Such committees could serve to avoid the recent maneuver of having to go to the DPC, since that step is effective only for sidelining France. France, after all,has been involved in virtually all key NATO military operations, and might in the future wish to participate inmissions. France's forces constitute a largecomponent of the Eurocorps, one of the high-value multinational military formations available to NATO. France,with Britain, has the only other continental"expeditionary" military able to serve in high-intensity conflicts. The "committees of contributors" might isolatesmall countries such as Belgium, which inrecent times has increasingly criticized NATO as a "toolbox" of U.S. policy, and opposed out-of-area operations,but has only minimal military capability tocontribute in any event. Some officials who have served at NATO make a contrary argument to the possible usefulness of "committees of contributors." They believe that smallcountries such as Belgium might insist that any out-of-area mission be decided by the NAC as a whole, since assets(AWACS, intelligence) being used wouldbelong to NATO as a whole, and would thus be assets for which, in part, each country pays.

This report provides a brief analysis of NATO's decision-making procedures, withseveral examples of how theallies have handled sensitive issues in the past. It describes the February 2003 dispute over providing NATO defenseplanning and equipment to Turkey, andanalyzes the debate over the decision-making process, including possible alterations of that process. This reportwill be periodically updated. See also CRS Report RS21354, The NATO Summit at Prague, 2002.

Section 221, among other things, offers two new sex trafficking offenses. One, aggravated sex trafficking (proposed 18 U.S.C. 2429), would replace 18 U.S.C. 1591, but without the requirement that the defendant charged with persuasion, enticement, transportation, etc. of a child must be shown to have known that the child was underage. The other, sex trafficking (proposed 18 U.S.C. 2430), expands federal jurisdiction to reach persuasion, inducement, or enticement to engage in unlawful prostitution when it occurs in or affects interstate or foreign commerce, without regard to the age of the beguiled or the absence of coercion, fraud, or force. Proposed 18 U.S.C. 2429 would condemn knowingly recruiting, enticing, harboring, transporting, providing or obtaining another individual, in or affecting interstate or foreign commerce or within U.S. special maritime and territorial jurisdiction, with the knowledge that the individual would be used to engage in a commercial sex act either as child or through force, fraud or coercion. The proposed section would condemn profiting from such a venture as well. In either case, offenders would face imprisonment for any term of years not less than 15 years or for life (not less than 10 years if the child were 14 years of age or older). The proposal is essentially the same as 18 U.S.C. 1591, but for knowledge of the minority of a juvenile victim upon which Section 1591 insists. Proposed 18 U.S.C. 2430 would represent an expansion of federal authority to punish sex trafficking if the offense occurs in or affected interstate or foreign commerce. It features a more expansive jurisdictional base than 18 U.S.C. 1591. The proposed section would match the jurisdiction reach of Section 1591 and its proposed replacement Section 2429 (in or affecting interstate or foreign commerce, etc.), but unlike those sections, Section 2430 would cover attempted violations. It would also cover persuasion, inducement or enticement to commit consensual acts of prostitution involving only adults (i.e., unlike Section 1591 and proposed Section 2429, it would not require that the offense involve either a child under the age of 18 or the use of fraud, force, or coercion as a means of persuasion, inducement or enticement). It would prohibit persuasion, inducement or enticement of an adult to engage in a commercial sex act when it would affect interstate commerce. Such conduct is only a federal crime now if actual interstate or foreign travel is involved. The expansion could be significant, since in other contexts the courts have often held that the prosecution need show no more than a de minimis impact on interstate or foreign commerce to satisfy the "affects commerce" standard. Subsection 221(b) proposes amendments to 18 U.S.C. 1592 (seizure of another's passport and immigration documents trafficking purposes) that also would duplicate and enlarge without repeal or amendment the coverage of 18 U.S.C. 1589 (forced labor). In its current form, Section 1592 proscribes the knowing destruction, concealment, or possession of another person's passport or similar documentation, either (1) in the course of a trafficking offense, or (2) with the intent to commit a trafficking offense, or (3) to unlawfully restrict the travel of a trafficking victim. Section 1589 prohibits providing or obtaining labor or services through physical violence, the threat of physical violence, or abuse or threatened abuse of the law. The proposed amendment to Section 1592 recasts its components in three areas. First, it streamlines the document-seizure prohibition. Second, like Section 1589, it outlaws obtaining labor or services through an abuse of authority or legal process. Unlike Section 1589 which only applies to forced labor, it outlaws such abuse when used to obtain either labor or commercial sex acts. Third, like Section 1589, it outlaws obtaining labor or services using a threat of harm. Unlike Section 1589, it specifies financial harm rather than physical harm, and it reaches threats to secure either labor or commercial sex acts. Offenders would be punished by imprisonment for not more than 5 years. Subsection 221(g) would create a new federal offense, arranging sex tourism, proposed 18 U.S.C. 2431. The new section would outlaw knowingly (and for profit) arranging, inducing, or procuring an individual's travel in foreign commerce in order to permit the individual to engage in a commercial sex act, or attempting to so arrange, induce or procure, proposed 18 U.S.C. 2431(a). Violations would be punishable by imprisonment for not more than 10 years, but not more than 30 years if the commercial sex act involved a child under the age of 18, proposed 18 U.S.C. 2432(a), (b). Under existing law, it is a federal crime for an American to travel in foreign commerce for the purpose of engaging in a commercial sex act with a child, 18 U.S.C. 2423(b), (f). It is also a federal crime to arrange, induce, procure, or facilitate such travel if done for profit, 18 U.S.C. 2423(d). Both offenses are punishable by imprisonment for not more than 30 years, 18 U.S.C. 2423(b),(d). It is not a federal crime for an American to travel in foreign commerce for the purpose of engaging in a commercial sex act with an adult. And it is not a federal crime for an American to attempt to travel in foreign commerce for the purpose of engaging in a commercial sex act with a child. Subsection 221(g) would replicate existing law except to the extent that it would prohibit (1) arranging, inducing or procuring - for profit - the foreign travel of an American to engage in a commercial sex act even though the underlying travel for such purpose is not itself a federal crime, (2) attempting to arrange, induce, or procure for profit such travel, or (3) attempting to arrange, induce, or procure - for profit - the foreign travel of an American to engage in a commercial sex act with a child. Criminalizing an attempt to induce others to engage in innocent conduct (e.g., foreign travel for the purpose of engaging in a lawful commercial sex act with an adult) even when done for profit, may raise First Amendment implications. Subsection 221(h) would call upon the Sentencing Commission to consider any appropriate adjustments in the Sentencing Guidelines to reflect the creation of the offenses established in subsections 221(f)(sex trafficking) and 221(g)(sex tourism). Subsection 221(e) would amend the federal witness tampering and retaliation provisions to prohibit the use of physical force, threats, corrupt persuasion, or deception to prevent another from disclosing information concerning a federal employment-related visa, labor or employment law, relating to aliens, or retaliating against another for his having done so, or attempting to so tamper or retaliate. By operation of the existing penalty restructure, offenders would face imprisonment for not more than 20 years for the use or attempted use of physical force to tamper and not more than 10 years in all other instances. Under existing law, it is a federal crime punishable by imprisonment for not more than 20 years to obstruct enforcement of the peonage prohibition. The general federal witness tampering statute, among other things, proscribes the use of physical force, threats, intimidation or corrupt persuasion in order to prevent a witness from informing federal law enforcement officials of information relating to the commission of a federal crime. The witness retaliation statute, among other things, proscribes retaliating against a witness for providing information relating to the commission of a federal crime to federal law enforcement officials. Unlike the proposed amendment, present law does not outlaw obstruction or retaliation relating to the investigation of noncriminal alien employment violations. Subparagraph 202(g)(6)(D) of Section 202 would establish a cause of action including reasonable attorneys' fees for the victims of the proposed obstruction of justice offenses. Subsection 221(c) would amend 1594 to require the Attorney General to return to victims property seized or confiscated under the involuntary servitude and trafficking chapter. It would permit the Attorney General to return property confiscated under other laws to trafficking victims. As a general rule, restoration or remission is only possible where the claimant has or had a legally-recognized interest in the confiscated property and where the claimant played no part in the offense which gave rise to the forfeiture. The proposed amendments appear designed to overcome the second limitation; they permit victims to recover notwithstanding their participation in the confiscation-triggering offense. The courts, however, may find in the use of the terms "restoration and remission" an intent to continue in place the ownership requirement. Under the proposals, exploited victims might be thought entitled to no more than the return of property that can be shown to once have been theirs. It seems possible that rather than permitting victims to recover property confiscated from them because of violations of the peonage and trafficking laws, drafters intended to require or permit victim restitution to be paid out of forfeited assets of their oppressors. The proposed amendments might prove inadequate for that purpose. Subsection 221(d) would enlarge the civil cause of action available to victims of violations of the involuntary servitude and trafficking provisions. It would also provide an explicit 10-year statute of limitations within which such suits would have to be filed, proposed 18 U.S.C. 1595(c). Paragraph 214(b)(1) of Section 214 would amend the Victims of Crime Act of 1984. The Crime Victims Fund finances victim compensation and assistance grants using the fines imposed for violation of federal criminal law, 18 U.S.C. 10601(b), although Congress has capped the amount annually available from the fund. The new section would trump any coverage limitations based on the characteristics of the victim of the crime to be compensated or assisted. It would define "victim," "crime victim" and "victim of crime" for purposes of the federal crime victims compensation and assistance grants and related activities to include individuals "exploited or otherwise victimized" by a violation of 8 U.S.C. 1328 (importation of an alien for prostitution or other immoral purposes) or of any of the prohibitions in 18 U.S.C. ch. 117 (transportation of illegal sexual purposes including proposed and enlarged 18 U.S.C. 2430) or comparable offenses under state law - without any expressed regard for the victim's age, gender, consent, culpability, or participation in commercial sexual activity. Section 222 would establish extraterritorial jurisdiction over various peonage and trafficking offenses when the offender or the victim is an American or when the offender is in the United States. Section 222 provides a statement of extraterritorial jurisdiction in some instances when it seems likely that federal courts would assume it even in the absence of such an explicit provision. On the other hand, the application of proposed Section 1596 might prove more problematic when the only contact with the United States or its nationals or interests is the fact the offender is found or has been brought to the United States. Federal prosecution under 18 U.S.C. 1589 (forced labor) might be problematic, for example, when the misconduct occurs entirely within another country and neither the offender nor any of the victims of the offense are Americans. Subsection 223(a) would streamline Section 278 of the Immigration and Nationality Act (8 U.S.C. 1328) with little change in substance. The proposal would omit the venue language now found in the section that permits prosecution in any district into which the alien is imported. The existing provision duplicates the otherwise available venue options under which prosecution is possible in any district through or into which an imported person moves. Subsection 234(a) renames the Justice Department's Child Exploitation and Obscenity Section and expands the responsibilities of the Innocence Lost Task Forces to include sex trafficking (proposed 18 U.S.C. 2430) offenses involving sexually exploited adults. The Section would become known as the Sexual Exploitation and Obscenity Section. The Child Exploitation and Obscenity Section now prosecutes offenses involving federal obscenity, child pornography, interstate trafficking for sexual purposes, international sexual child abuse, and international parental kidnapping. In 2003, the Section together with the Federal Bureau of Investigation (FBI) and the National Center for Missing & Exploited Children started an Innocence Lost Initiative in 2003. The proposed amendment would greatly expand the Section's jurisdiction, given the accompanying expansion of federal jurisdiction occasioned by proposed Section 2430 which would outlaw trafficking in commercial sexual activity occurring in or affecting interstate or foreign commerce regardless of age or willingness of the individual trafficked. Subsection 202(g) would require those who recruit foreign workers to disclose various specifics regarding the circumstances and conditions of employment to recruits. Paragraph 202(g)(3) would proscribe knowingly making a material false or misleading statement in such disclosures and would declare that, "The disclosure required by this section is a document concerning the proper administration of a matter within the jurisdiction of a department or agency of the United States for the purposes of section 1519 of title 18, United States Code." Section 1519 of Title 18, United States Code, proscribes the knowing falsification of records with the intent to impede, obstruct, or influence the proper administration of any matter within the jurisdiction of any department or agency of the United States. Violations are punishable by imprisonment for not more than 20 years. In the absence of a reference to Section 1519, the proposed offense would instead be subject to the general false statement statute, 18 U.S.C. 1001, which makes violations punishable by imprisonment by not more than 8 years if the offense relates to an offense under 18 U.S.C. 1591 (sex trafficking of children or by force, fraud or coercion); or 18 U.S.C. ch. 109A (sexual abuse), ch. 110 (sexual exploitation of children), or ch. 117 (transportation for illegal sexual activities). The Justice Department drafted a Model State Anti-Trafficking Criminal Statute in 2004. The Model includes suggested language of state criminal laws relating to trafficking in persons, involuntary servitude, sexual servitude of a minor and trafficking in persons for forced labor or services. A number of states have adopted comparable statutes. Section 224 would direct the Attorney General to provide a similar model reflecting the misconduct proscribed in 18 U.S.C. chs. 77 (involuntary servitude) and 117 (Mann Act) as those chapters would be amended by H.R. 3887 . It would also instruct the Attorney General to post the model on the Department's website, distribute it to the states, assist the states in its implementation, and report annually to House and Senate Judiciary Committees and the House Foreign Affairs Committee as well as the Senate Foreign Relations Committee on the results of such efforts.

The William Wilberforce Trafficking Victims Protection Reauthorization Act of 2007 (H.R. 3887), passed by the House on December 4, 2007, continues and reenforces the anti-trafficking efforts that began with Trafficking Victims Protection Act of 2000. That legislation sought to protect the women and children most often the victims of both international and domestic trafficking with a series of diplomatic, immigration, and law enforcement initiatives. H.R. 3887 follows in its path. This report is limited to the bill's law enforcement initiatives or more precisely its proposals to amend federal criminal law. Representative Lantos introduced H.R. 3887 on October 17, 2007, for himself and several other Members. The House Committee on Foreign Affairs reported an amended version of the bill on November 6, 2007. A further revised version passed under suspension of the rules on December 4, 2007. When the bill reached the Senate its criminal law proposals included newly assigned sex trafficking offenses, a sex tourism offense, a coerced services offense, obstruction of justice offenses, an importation of prostitutes offense, a false statement offense, and provisions for civil liability, victim assistance, forfeiture, extraterritorial jurisdiction, Justice Department reorganization, and a model state statute. This is an abridged version of CRS Report RL34323, William Wilberforce Trafficking Victims Protection Reauthorization Act of 2007 (H.R. 3887 as Passed by the House): Criminal Law Provisions, by [author name scrubbed] without the footnotes, quotations, or citations to authority found in the longer report.

This report analyzes Division C of the Department of Defense Emergency Supplemental Appropriations, P.L. 109-148 , which was signed into law on December 30, 2005, and which limits liability with respect to pandemic flu and other public health countermeasures. Division C, which is titled the "Public Readiness and Emergency Preparedness Act," (PREP Act) created SS 319F-3 of the Public Health Service Act, which provides that, except in one circumstance (discussed below under "New Federal Cause of Action"), a "covered person" would be immune from suit and liability for "all claims for loss caused by, arising out of, relating to, or resulting from the administration to or the use by an individual of a covered countermeasure if a declaration ... has been issued with respect to such countermeasure." The declaration referred to is a declaration by the Secretary of Health and Human Services (HHS) of a public health emergency or the credible risk of such emergency. Division C defines a "covered person" to include the United States and a (i) manufacturer, (ii) distributor, (iii) program planner, (iv) qualified person who prescribed, administered, or dispensed a covered countermeasure, or (v) official, agent, or employee of (i) through (iv). Under the Federal Tort Claims Act (FTCA), officials, agents, and employees of the United States are already immune from tort liability. Immunity is granted "to any claim for loss that has a causal relationship with the administration to or use by an individual of a covered countermeasure, including a causal relationship with the design, development, clinical testing or investigation, manufacture, labeling, distribution, formulation, packaging, marketing, promotion, sale, purchase, donation, dispensing, prescribing, administration, or use of such countermeasure." A "covered countermeasure" includes (A) "a qualified pandemic or epidemic product," (B) "a security countermeasure," or (C) a drug, biological product, or device that is authorized for emergency use in accordance with section 564 of the Federal, Food, Drug, and Cosmetic Act (FDCA). Each of the terms in (A), (B), and (C) is itself defined in Division C as follows: A. "Qualified pandemic or epidemic product" is defined as a drug, biological product, or device, as these three terms are defined in the FDCA, with the additional limitation that all three terms apply only to "a product manufactured, used, designed, developed, modified, licensed, or procured ... to diagnose, mitigate, prevent, treat, or cure a pandemic or epidemic," or "a serious or life-threatening disease or condition caused by [such] a product"--but only if such a product meets one of three other qualifications under the FDCA. B. "Security countermeasure" is defined in Division C as it is defined in SS 319F-2(c)(1)(B) of the Public Health Service Act, as a drug, biological product, or device (as those terms are defined in the FDCA) that the Secretary of HHS approves as necessary to diagnose, mitigate, prevent, or treat harm from any biological, chemical, radiological, or nuclear agent. C. "Drug," "biological product," and "device" are all defined by the FDCA. On January 26, 2007, Secretary Michael O. Leavitt made the first such declaration "to provide targeted liability protections for pandemic countermeasures based on a credible risk that an avian influenza virus spreads and evolves into a strain capable of causing a pandemic of human influenza." Since then, the Secretary of HHS has issued additional declarations covering various countermeasures against anthrax, botulism, acute radiation syndrome, smallpox, and various strains of influenza. Most recently, in response to the H1N1 influenza pandemic, Secretary Kathleen Sebelius issued declarations limiting liability for harm arising from the use of certain influenza antivirals and vaccines. The single circumstance in which Division C allows a covered person to be held liable is when a "death or serious physical injury" was caused by the "willful misconduct" of a covered person. Division C defines "willful misconduct" as an act or omission that is taken "(i) intentionally to achieve a wrongful purpose; (ii) knowingly without legal or factual justification; and (iii) in disregard of a known or obvious risk that is so great as to make it highly probable that the harm will outweigh the benefit." In addition, the Secretary of HHS, in consultation with the Attorney General, "shall promulgate regulations ... that further restrict the scope of actions or omissions by a covered person that may qualify as 'willful misconduct.'" Furthermore, "the plaintiff shall have the burden of proving by clear and convincing evidence willful misconduct by each covered person sued and that such willful misconduct caused the death or serious physical injury." The "clear and convincing" standard is higher than the usual burden of proof in civil cases, which is proof by a "preponderance of the evidence." Finally, if an act or omission by a manufacturer or distributor is subject to regulation by Division C or by the FDCA, then such act or omission shall not constitute willful misconduct if neither the Secretary of HHS nor the Attorney General has initiated an enforcement action with respect to the act or omission, or if such an enforcement action has been initiated and the enforcement action has been terminated or finally resolved without a specified penalty imposed on the covered person. The proceeding in which an injured party may seek to prove that a covered person had engaged in willful misconduct is a new federal cause of action that Division C created; suits under state tort law are prohibited. Subsection (d) of the new SS 319F-3 provides: "For purposes of section 2679(b)(2)(B) of title 28, United States Code, such a cause of action is not an action brought for violation of a statute of the United States under which an action against an individual is otherwise authorized." This apparently means that the new federal cause of action may not be brought against a federal employee. Division C provides that suits under the new federal cause of action may be brought only in the U.S. District Court for the District of Columbia, and that such court, with exceptions noted below, shall apply the substantive law, including choice of law principles, of the state in which the alleged willful misconduct occurred. The reference to "choice of law principles" means that the court will apply the law of the state in which the alleged willful misconduct occurred, but, if that state's law provides that a different state's law should apply, then the court will apply the other state's law. Although federal district court cases are usually heard by a single judge, cases under Division C's new federal cause of action will be "assigned initially to a panel of three judges. Such panel shall have jurisdiction over such action for purposes of considering motions to dismiss, motions for summary judgment, and matters related thereto. If such panel has denied such motions, or if the time for filing such motions has expired, such panel shall refer the action to the chief judge for assignment for further proceedings, including any trial." This suggests that the panel's jurisdiction is limited to pretrial motions, and that a single judge will run the trial, including ruling on motions to dismiss and motions for summary judgment that were made after the trial began. Under the new federal cause of action, certain matters are not governed by state law. Damage awards will be reduced by the amount of collateral source benefits, with "collateral source benefits" defined to include amounts the plaintiff is entitled to receive from any governmental program, workers' compensation law, health or disability insurance, and the like. Collateral sources will have no right of subrogation, which means that they could not recover, out of the damages the plaintiff recovers in a lawsuit brought under the new federal cause of action, benefits that they had paid the plaintiff. Under the new federal cause of action, noneconomic damages, which are damages for pain and suffering and other non-monetary losses, "may be awarded only in an amount directly proportional to the percentage of responsibility of a defendant for harm to the plaintiff." This means that, if two defendants are found liable for willful misconduct, then they will not be jointly and severally liable for noneconomic damages, which means that they will not each be liable for the full amount of the plaintiff's noneconomic damages. If, for example, one of the two defendants was 25% responsible for the harm and the other was 75% responsible for the harm, then the plaintiff may recover no more than 25% of his noneconomic damages from the first, even if the second is insolvent. With respect to economic damages, however, the plaintiff may recover up to 100% from either liable party, if the relevant state law provides for joint and several liability. Under the new federal cause of action, Rule 11 sanctions against attorneys, law firms, or parties, for filing frivolous claims or defenses or filing papers for improper purposes, are mandatory. Rule 11 currently makes sanctions discretionary on the part of the court. Division C also created a new section 319F-4 of the Public Health Service Act which, upon issuance by the Secretary of the declaration referred to in the first paragraph of this report, would establish in the Treasury the "Covered Countermeasure Process Fund." "[T]he Secretary shall, after amounts have by law been provided for the Fund under subsection (a) provide compensation to an eligible individual for a covered injury [i.e., serious physical injury or death] directly caused by the administration or use of a covered countermeasure pursuant to such declaration." Despite the "shall" quoted in the previous sentence, an eligible "individual has an election to accept the compensation or to bring an action under" the new federal cause of action, but may not do both. Compensation under this fund would be in the same amount as is prescribed by sections 264, 265, and 266 of the Public Service Health Act for persons injured as a result of the administration of certain countermeasures against smallpox. These three sections provide, respectively, medical benefits, compensation for lost employment income, and death benefits, but do not provide damages for pain and suffering. Congress has enacted other tort reform statutes to limit liability under state law. The rest of this report describes the broad categories into which these statutes may be placed, so that Division C can be compared with them. Some federal statutes have eliminated tort liability with no exceptions, and without providing an alternative means of compensation. Other federal statutes have eliminated tort liability for ordinary negligence but not for gross negligence or willful misconduct. Division C eliminated tort liability except for willful misconduct, and therefore falls in between these two categories. In addition, Division C would allow injured persons to recover compensation from the Covered Countermeasure Process Fund, if Congress appropriates money for it. More than 50 federal statutes provide total immunity to particular private parties, but make the U.S. government liable, under the Federal Tort Claims Act, in their stead. There are situations, however, in which the U.S. government may not be held liable under the FTCA, and, in those situations, victims may be left without a remedy. Even when the United States may be held liable under the FTCA, it may never be held liable for punitive damages, even in states that authorize punitive damages awards. Occasionally Congress immunizes private parties but establishes a federal compensation program. Examples include the Radiation Exposure Compensation Act, which immunizes government contractors who carried out atomic weapons testing programs from 1946 to 1962, as well as the National Childhood Vaccine Injury Compensation Act of 1986 and the September 11 th Victims Compensation Fund of 2001. Finally, some federal tort reform statutes do not eliminate the right to sue and do not establish alternative compensation mechanisms. Rather, they cap noneconomic and punitive damages, limit each defendant's share of the total liability to its share of responsibility for the plaintiff's injuries, or take other steps to limit recovery. Division C substitutes a federal cause of action for state causes of action, but continues to apply state law.

Division C of P.L. 109-148 (2005), 42 U.S.C. SSSS 247d-6d, 247d-6e, also known as the Public Readiness and Emergency Preparedness Act (PREP Act), limits liability with respect to pandemic flu and other public health countermeasures. Specifically, upon a declaration by the Secretary of Health and Human Services of a public health emergency or the credible risk of such emergency, Division C would, with respect to a "covered countermeasure," eliminate liability, with one exception, for the United States, and for manufacturers, distributors, program planners, persons who prescribe, administer or dispense the countermeasure, and employees of any of the above. The exception to immunity from liability is that a defendant who engaged in willful misconduct would be subject to liability under a new federal cause of action, though not under state tort law, if death or serious injury results. Division C's limitation on liability is a more extensive restriction on victims' ability to recover than exists in most federal tort reform statutes. However, victims could, in lieu of suing, accept payment under a new "Covered Countermeasure Process Fund," if Congress appropriates money for this fund. The first PREP Act declaration was issued on January 26, 2007, to limit liability for the administration of the H5N1 influenza vaccine. Since then, declarations have been issued covering countermeasures against other strains of influenza (including H1N1), anthrax, botulism, small pox, and acute radiation syndrome.

M ore than two dozen legislative proposals in the 114 th Congress included provisions concerning water use efficiency, or water conservation. These legislative proposals did not seek to set specific enforceable water use efficiency standards or goals. Rather, most sought to encourage or provide incentives for practices, technologies, and measures to achieve improved water use efficiency. Some of the proposals were standalone bills that solely addressed water use efficiency and conservation. Some were components of bills that addressed western U.S. drought; critical water resource conditions in western states have contributed to national policy proposals that include water use efficiency. Some of the water use efficiency proposals were included in comprehensive energy policy bills. That is, water efficiency and energy efficiency were linked in some legislation, although water use efficiency was generally the secondary policy consideration in such bills. Many of the water use efficiency proposals also had been introduced in previous Congresses, but did not advance. The 114 th Congress legislation can be broadly grouped in five categories of proposals, which are described in this report. Codifying the WaterSense program, Research and development, Water use efficiency in buildings, especially federal buildings, Financial and technical assistance, and Tax incentives. A few bills passed the Senate or House, and one measure that addressed water use efficiency in part (i.e., water use in buildings) was enacted. WaterSense is a voluntary labeling and recognition program created by the Environmental Protection Agency (EPA) in 2006 as a companion to Energy Star, which is a similar program administered by EPA and the Department of Energy (DOE). Energy Star is authorized in law (Energy Policy Act of 2005, P.L. 109-58 , 42 U.S.C. SS6294a), while WaterSense is not. Both programs involve partnerships between government, manufacturers, and others that seek to help consumers and businesses easily identify highly efficient products, homes, and buildings, with Energy Star focusing on energy efficiency and WaterSense focusing on water efficiency. While the latter program's central focus is on reducing water use, EPA recognizes that water efficiency also results in energy savings. The program's overall goal is to identify and certify through labeling products that are at least 20% more efficient than standard products available in the market. Through WaterSense, EPA has so far issued performance-based water-use specifications for seven product categories and has others under development. EPA also has issued a New Home Specification that incorporates existing criteria for indoor products and outdoor uses. Once a specification for a product category is established, in order to obtain a WaterSense label, manufacturers submit their products for testing by third-party laboratories or certifying bodies that have been licensed by EPA. Legislative proposals to formally establish the program in law have been introduced a number of times since the 111 th Congress. One of the arguments in support of codifying the WaterSense program legislatively has been that, because the program is an EPA administrative initiative, it is difficult for EPA program managers and supporters to call on resources to expand its activities; establishing the program in law, especially with authorization of appropriations, would give the program status to address this problem, proponents say. The program is funded through regular appropriations to EPA that have been less than $5 million annually, or less than 10% of amounts appropriated for the Energy Star program. A number of bills were introduced in the 114 th Congress to codify in law a WaterSense program at EPA, direct the EPA Administrator to establish and maintain water-efficiency performance standards, promote the WaterSense label, review and update WaterSense specifications, and provide information to the public. Bills to establish WaterSense in law included the following. S.Amdt. 3221 , an amendment to S. 2012 , the Energy Policy Modernization Act, was approved by the Senate on April 19, 2016. It would, among other provisions, direct EPA to review existing WaterSense specifications not more than six years after adoption and make revisions to achieve additional water savings. Language identical to the provision in S. 2012 was included in S. 2848 , the Water Resources Development Act of 2016, which the Senate passed on September 15, 2016. Comprehensive water resources development legislation subsequently was passed by the House and Senate ( S. 612 ), but it did not include the WaterSense provisions. Another comprehensive energy policy bill introduced in the Senate, S. 2089 , the American Energy Innovation Act, included a provision to codify WaterSense. It proposed to authorize appropriations of $5 million annually for four years, to be adjusted for inflation in subsequent fiscal years. S. 176 , the Water in the 21 st Century Act, proposed to codify the WaterSense program at EPA and authorize a total of $50 million in appropriations over four years, beginning at $5 million and increasing to $20 million in the fourth year. Similar House legislation was H.R. 291 . Three bills that expressly addressed the western U.S. drought, S. 1894 and S. 2533 / H.R. 5247 , proposed to similarly codify the program. These bills proposed to authorize appropriations of $5 million annually for five years. H.R. 8 , the North American Energy Security and Infrastructure Act, a comprehensive energy policy bill passed by the House in December 2015, included a provision to codify the WaterSense program; however, this bill did not authorize appropriations to implement the program. H.R. 3720 , the Water Advanced Technologies for Efficient Resource Use Act, likewise proposed to establish the program in law. It proposed to authorize a total of $87.5 million in appropriations, beginning at $7.5 million and increasing to $50 million in the fourth year, to be adjusted for inflation in subsequent fiscal years. Bills in the 114 th Congress included varied approaches to research and development of technologies to achieve improved water use efficiency. S. 653 , the Water Resources Research Amendments Act of 2015, proposed to reauthorize the Water Resources Research Act (P.L. 88-379, as amended) and provide grant funding to Water Resources Research Institutes in each state, territory, and the District of Columbia for applied water supply research through FY2020. This bill, which the Senate passed in June 2015, added research into alternative approaches to water use efficiency and energy efficiency of wastewater treatment works to the scope of the nation's water research agenda. Other bills with similar provisions included H.R. 291 , S. 176 , and S. 2848 . Several bills concerned with the western U.S. drought included provisions directing the U.S. Geological Survey to establish a water data system to "advance the availability, timely distribution, and widespread use of water data and information for water management, education, research, assessment, and monitoring purposes." Underlying these provisions is concern that there is need for more and better data on water use that would assist decisionmaking by government, water managers, communities, and the private sector. Bills with these "open water data system" provisions included H.R. 291 , S. 176 , S. 1837 , and S. 1894 . The purpose of S. 1485 , the Water Efficiency Innovation Act, was "to provide for the advancement of energy-water efficiency research, development, and deployment activities." To do so, it proposed to direct the Department of Energy to advance energy efficiency in water and wastewater treatment facilities, including systems that treat municipal, industrial, and agricultural waste. H.R. 4653 was a bill that broadly addressed financial and technical management of water systems that are subject to requirements of the Safe Drinking Water Act. Among its provisions, this bill proposed to direct EPA to develop criteria for effective water loss and leak control technology to be used by water systems. Leak detection has been referred to as an "under-appreciated" water conservation strategy. Buildings are estimated to account for approximately 13% of total water consumed in the United States per day. Of that total, 26% is estimated to be used by commercial building occupants, and 74% by homeowners. EPA's WaterSense program focuses primarily on water use efficiency of products used inside and outside residential buildings, but some of its specifications (e.g., for bathroom fixtures) also apply to products used in commercial buildings such as hotels, motels, restaurants, schools, and office buildings. It is sometimes argued that, on matters of policy, the federal government should lead by example. In that regard several existing policy requirements direct federal agencies to use water-efficient products and services. Section 423 of the Energy Independence and Security Act of 2007 ( P.L. 100-140 , 42 U.S.C. SS17083) directs the energy managers of federal buildings to conduct water and energy evaluations of their buildings and to implement energy and water efficiency measures identified through those audits. Executive Order 13423 (January 26, 2007) directed federal agencies to reduce water consumption intensity through life-cycle cost-effective measures by 2% annually, or 16% by the end of FY2015, and to acquire goods and services that are energy-efficient, water-efficient, and use recycled content. Executive Order 13693 (May 25, 2015) is the most recent Executive Order concerned with federal environmental, energy, and transportation management. In particular, it extends to FY2025 the schedule in E.O. 13423 requiring federal buildings to reduce water consumption intensity by 2% annually, or by 36% relative to a FY2007 baseline. It also broadens the mandate to include reducing agency potable water consumption intensity; reducing agency industrial, landscaping, and agricultural water consumption; installing water meters in federal buildings to improve water conservation and management; and installing green infrastructure features to help with stormwater and wastewater management. It directs that all new construction of federal buildings greater than 5,000 gross square feet be designed, where feasible, to be "water net-zero" by FY2030 (i.e., to return the equivalent amount of water as was withdrawn from all sources through practices such as recycle and reuse). Further, it directs agencies to give purchase preference to WaterSense-certified products and services and products designated under the Department of Energy's Federal Energy Management Program (FEMP). Several bills in the 114 th Congress addressed aspects of water use efficiency in federal buildings. H.R. 3720 proposed to build on E.O. 13693 to direct federal agencies to give purchase preference to WaterSense-certified products and services and FEMP-designated products. S. 869 , the All-of-the-Above Federal Building Energy Conservation Act, proposed to authorize DOE to establish energy performance requirements for federal buildings that consider energy and water savings. It also proposed to require federal energy managers to perform energy and water evaluations and to implement energy and water savings measures. Similar provisions were included in S. 720 / H.R. 2177 , the Energy Savings and Industrial Competitiveness Act. H.R. 614 , the Savings, Accountability, Value, and Efficiency (SAVE) Act, similarly proposed to direct federal building energy managers to adopt identified energy and water conservation savings. Two bills included provisions that addressed the energy and water savings potential of thermal insulation. The bills were H.R. 568 , the Thermal Insulation Efficiency Improvement Act, and H.R. 8 . They proposed to require DOE to report to Congress on the impact of thermal insulation on both energy and water use systems for potable hot and chilled water in federal buildings, and the return on investment of installing such insulation. One enacted bill, S. 535 , the Energy Efficiency Improvement Act of 2015 ( P.L. 114-11 ) in part addresses energy and water use efficiency in commercial buildings. Among its provisions, the bill requires the General Services Administration (GSA) to develop and publish model leasing provisions to encourage building owners and tenants to use cost-effective energy efficiency and water efficiency measures in commercial buildings. It also requires GSA to develop policies and best practices to implement the measures for the realty services provided by the GSA to federal agencies and to make these policies and practices available to state, county, and municipal governments for their use in managing owned and leased buildings. The largest number of water use efficiency bills in the 114 th Congress proposed to provide technical and financial assistance for adopting or demonstrating practices or measures that conserve water. A number of the bills proposed to assist owners and operators of public water systems and water utilities in adopting or installing water-efficient systems, while a few proposed to help provide incentives for consumers to purchase and install water-efficient products or services. Several bills ( H.R. 8 , S. 2012 , S. 2089 , S. 886 , and H.R. 3143 ) included similar provisions to establish a Smart Energy and Water Efficiency Pilot Program administered by DOE to award grants to water systems, utilities, and water districts to demonstrate innovative technologies for energy and water efficiency. The House passed H.R. 8 in December 2015, and the Senate passed S. 2012 in April 2016. Separate legislation, S. 2673 , proposed to establish a grant program at EPA for technical assistance and financing of innovative technologies to be used by public water and wastewater systems to address a range of project types including water conservation, water quality, drinking water, and treating agricultural, municipal, and industrial wastewater. Authorized funding under this program would be $50 million per year. S. 2848 included a similar grant program. H.R. 2177 and S. 720 included provisions directing the Department of Energy to work with manufacturers to identify opportunities for improved water-efficient processes in manufacturing, along with technical assistance on energy efficiency, pollution prevention, and natural resource conservation in manufacturing. Several bills ( S. 176 , H.R. 291 , S. 741 , H.R. 1278 , and H.R. 4653 ) included provisions that proposed to authorize EPA to award grants to owners and operators of water systems to increase the systems' resilience to changes in hydrologic conditions. Among other eligible uses would be projects to conserve water or enhance water use efficiency of the water system. The legislation proposed to authorize $50 million per year for five years. Two bills that addressed the western U.S. drought ( S. 1837 and H.R. 2983 ) and two standalone measures ( H.R. 1775 and S. 896 ) included provisions that proposed to authorize EPA to award planning, development, and implementation grants for innovative stormwater management projects. A fifth bill ( H.R. 4648 ), while not directly authorizing assistance, proposed to establish in law the authority to reserve a portion of Clean Water Act infrastructure funding for such projects. Innovative stormwater management techniques, such as green infrastructure projects using natural systems (e.g., planting trees and restoring wetlands), are intended to mimic natural systems as a way to reduce and treat stormwater at its source, thus saving the water resource and improving water quality. Three bills ( S. 176 , H.R. 291 , and H.R. 3720 ) proposed to authorize assistance to state, local, or tribal governments; wastewater, water, or energy utilities; or nonprofit organizations to support incentive programs for residential water-efficient products and services. Throughout the United States, a number of local governments and water and energy utilities offer rebates, vouchers, or other types of incentives to consumers, but providing resources to support such programs can be challenging. The legislation proposed to authorize EPA to provide assistance to eligible entities for such consumer incentive programs. Finally, several bills in the 114 th Congress proposed to establish a new federal financing program for water infrastructure projects in western states. One of the goals of funded projects would be water efficiency and energy efficiency in development of water supply projects. The proposal, called the Reclamation Infrastructure Finance and Investment Act (RIFIA), is modeled after Water Infrastructure Finance and Investment Act (WIFIA) legislation that Congress enacted in 2014 ( P.L. 113-121 ). WIFIA is to be implemented by EPA and the Army Corps of Engineers throughout the United States; RIFIA would be implemented by the Bureau of Reclamation solely in western states. Bills that contained provisions to provide federal credit assistance to projects in the western states include S. 176 / H.R. 291 , S. 1837 , S. 1894 , S. 2533 / H.R. 5247 , and H.R. 6022 . The final category of bills in the 114 th Congress proposed to use the federal tax code to provide incentives for improved water use efficiency. Two bills ( H.R. 2983 and S. 1837 ) proposed to amend the Internal Revenue Code of 1986 to provide a refundable federal tax credit for the purchase and installation of a qualified water-harvesting system. Rain barrels and similar rainwater harvesting systems collect stormwater runoff and store the water for subsequent uses such as irrigation, toilet flushing, washing clothes, or washing vehicles, thus reducing water use and managing stormwater. A few states (for example, Arizona and Texas) currently allow tax exemption under state law for installing such systems. Two other bills ( H.R. 3720 and H.R. 4615 ) proposed to amend the Internal Revenue Code of 1986 to provide that rebates or other types of financial incentives received for installing water conservation measures are exempt from federal taxation. Energy efficiency rebates have been exempt from federal tax since 1992. These bills were intended to achieve the same treatment for rebates or other assistance provided for water efficiency equipment or measures. This report has identified five categories of bills in the 114 th Congress that addressed water use efficiency, or water conservation, approaches and policy. A significant number of bills--often more than two dozen--have similarly been introduced in prior Congresses. Many of the 114 th Congress proposals have been introduced multiple times. For example, five bills to establish the WaterSense program in law were introduced in the 111 th Congress, and eight measures to do so were introduced in 2015 and 2016. The number of bills that proposed to authorize grants or other financial assistance has increased--five bills were proposed in the 111 th Congress, while 20 were introduced in 2015 and 2016. Some of the policy approaches described in this report were included in bills that addressed multiple aspects of water use efficiency. One such bill is H.R. 3720 , with provisions that touched on four aspects of the issue--WaterSense, water use in buildings, financial assistance, and tax incentives. In other proposals, water use efficiency was one of a number of issues, but not the main issue, contained in comprehensive policy proposals on topics such as energy policy (e.g., H.R. 8 , S. 2012 , and S. 2089 ), water policy generally ( H.R. 291 and S. 176 ), or solutions to the western U.S. drought ( S. 1837 , S. 1894 , S. 2533 / H.R. 5247 , and H.R. 2983 ). The Senate and House passed separate energy policy bills ( S. 2012 and H.R. 8 ), but did not reach consensus on a final bill before the end of the 114 th Congress. In December 2016, Congress enacted legislation that addressed western U.S. drought ( S. 612 ), but it did not include the water efficiency provisions of separate drought bills. In the area of energy policy, including energy efficiency considerations, a body of legislation exists that broadly defines a federal role in research, technical and financial assistance, and information. Currently, no similar statement of federal policy exists regarding water use efficiency or conservation. At the same time, interest has increased to address the pressures on water resources--pressures of access, scarcity, and quality due to population and economic growth, pollution, and other challenges--which some analysts believe is equally important as a national issue as is energy.

More than two dozen legislative proposals in the 114th Congress were introduced that included provisions concerning water use efficiency, or water conservation, in nonagricultural sectors. These legislative proposals did not seek to set specific enforceable water use efficiency standards or goals. Rather, most sought to encourage or provide incentives for adoption of practices, technologies, and measures to achieve improved water use efficiency. The 114th Congress legislation can be broadly grouped in five categories of proposals. Codifying the WaterSense program. WaterSense is a voluntary labeling and recognition program that seeks to help consumers and businesses identify highly water-efficient products, services, and homes. It was established administratively by the Environmental Protection Agency in 2006. Nine legislative measures included provisions to establish the program in law. Research and development. Several bills focused on research and development aspects of water use efficiency, including proposals that addressed needs for more and better water use data. Research also is examining technology advances in water and wastewater treatment facilities that would achieve water and energy savings. Water use efficiency in buildings. Buildings are estimated to account for about 13% of total water consumed in the United States; one-quarter of that total is used by commercial buildings, and three-quarters by residences. It is sometimes argued that the federal government should lead by example. Thus, several bills in the 114th Congress addressed aspects of water use efficiency in federal buildings. Financial and technical assistance. The largest number of bills in the 114th Congress proposed to provide technical and financial assistance for identifying, adopting, or demonstrating practices or measures that conserve water. A number of the bills proposed to assist owners and operators of public water systems and water utilities in adopting or installing water-efficient systems, while a few proposed to help provide incentives for consumers to purchase and install water-efficient products or services. Federal tax incentives. Several bills proposed to use the federal tax code to provide incentives for adopting or installing equipment or practices to save water, such as a federal tax credit for purchasing qualified equipment or federal tax exemption of rebates or other financial incentives received for installing water conservation measures. Some of the policy approaches described in this report were included in bills that addressed multiple aspects of water use efficiency alone, such as WaterSense and financial assistance. In other proposals, water use efficiency was one of a number of issues, but not the main issue, contained in a comprehensive policy proposal on topics such as energy policy, water policy generally, or solutions to the western U.S. drought. A few of the bills discussed here passed the Senate or House during the 114th Congress, and one measure that addressed water use efficiency in part (i.e., water use in buildings) was enacted. Many of these proposals also were introduced in previous Congresses.

The Constitution states that those accused of a federal crime shall be tried in the state in which the crime occurred and by a jury selected from the district in which the crime occurred: The Trial of all Crimes . . . shall be by Jury . . . held in the State where the said Crimes shall have been committed; but when not committed within any State, the Trial shall be at such Place or Places as the Congress may by Law have directed. In all criminal prosecutions, the accused shall enjoy the right to . . . trial, by an impartial jury of the State and district wherein the crime shall have been committed, which district shall have been previously ascertained by law. . . . The Federal Rules of Criminal Procedure mirror the Constitution's requirements: "Unless a statute or these rules permit otherwise, the government must prosecute an offense in a district where the offense was committed. . . ." Statutory provisions supplement the rules, and the courts implement them in light of constitutional demands. Subject to constitutional or statutory limitations, the government decides where a prosecution is to begin and bears the burden of establishing that the place it has selected is permissible. This obligation extends to every count within the indictment or information. Courts differ over whether venue can be accurately described as an element of the offense, but agree that the government need only establish venue by a preponderance of the evidence. Moreover, venue is not considered jurisdictional. Therefore, a court in an improper venue enjoys the judicial authority to proceed to conviction or acquittal, if the accused waives objection. If the absence of proper venue is apparent on the face of indictment or information, failure to object prior to trial constitutes waiver. If the failure of proper venue is not apparent on the face of the charging document and is not established during the presentation of the government's case in the main, objection may be raised at the close of the government's case. Absent a contrary statutory provision, the district in which venue is proper, the district in which the offense was committed, "the ' locus delicti [of the charged offense,] must be determined from the nature of the crime alleged and the location of the act or acts constituting it.' In performing this inquiry, a court must initially identify the conduct constituting the offense (the nature of the crime) and then discern the location of the commission of the criminal acts." The words Congress uses when it drafts a criminal proscription will establish where the offense occurs and therefore the district or districts in which venue is proper. For some time, the courts and academics used a so-called "verb test" as one means of identifying where an offense was committed. So, for example, an offense that applied to anyone who received a bribe could be tried where a bribe was received. The test may still be useful to determine where venue is proper, but particularly in the case of purported multi-district offenses it is not necessarily the last word. As the Supreme Court explained in United States v. Rodriguez-Moreno , "the 'verb test' certainly has value as an interpretative tool; it cannot be applied rigidly, to the exclusion of other relevant statutory language. The test unduly limits the inquiry into the nature of the offense and thereby creates a danger that certain conduct prohibited by statute will be missed." The test endorsed in Rodriguez-Moreno looks to where the "conduct" element or elements of the offense occur. Other than when the accused seeks a change of venue, venue is only an issue when a crime occurs, or can be said to occur, in more than one district or outside of any district. Section 3237 governs venue for certain multi-district crimes. It consists of three parts: one for continuing offenses generally, another for offenses involving elements of the mails or interstate commerce, and a third for tax offenses. The first paragraph of Section 3237 is the oldest portion of the statute. Originally enacted during Reconstruction as part of the general conspiracy statute now found in 18 U.S.C. SS 371, the Revised Statutes made it applicable to all multi-district federal crimes. Slightly modified in the 1948 revision, it now provides Except as otherwise expressly provided by enactment of Congress, any offense against the United States begun in one district and completed in another, or committed in more than one district, may be inquired of and prosecuted in any district in which such offense was begun, continued, or completed. Over the years, there has been a certain ebb and flow in the Supreme Court's reading of the venue requirements of the section. The Court first considered the provision in 1890 in Palliser v. United States , when it held that prosecution of an offense under the postal bribery statute might be held in the District of Connecticut in which the letter offering a bribe was received even though the accused had acted entirely outside of the district. The Court expressed no opinion as to whether the offense might also have been tried in the district in New York from which the letter had been sent. Two years later, the Court held that the trial of an indictment for causing the mail delivery of lottery material might be held in the district in which the mail was delivered, but observed that "perhaps" trial might also be held in the district in which the material was deposited in the mail. In later years, the Court concluded that the failure to file required documentation with immigration officials was not a continuous offense and must be prosecuted in the district where the document had to be filed; but that an alien crewman's unlawfully remaining in the United States was a continuous offense and consequently that venue "lies in any district where the crewman willfully remains." In 1998, in United States v. C abrales , the Supreme Court held that money laundering and the crimes that generated the laundered funds did not automatically form one continuous criminal episode. Thus, Cabrales's offense of laundering drug proceeds, generated by drug trafficking in Missouri, but laundered in Florida, should not have been tried in Missouri. The Court was quick to point out, however, that under different circumstances, venue over a money laundering charge might be proper in the district in which its predicate offenses occurred. The next year, the Court confirmed in United States v. Rodriguez-Moreno that venue is proper in any district in which a conduct element of the offense occurs. Conspiracy, with its multiple players with multiple roles, would seem to fit Section 3237's description of a crime that may begin, continue, or end in more than one district. The crime of conspiracy under the general statute is not complete until one of the conspirators takes some affirmative action in furtherance of the criminal scheme. This affirmative action (overt act) is an element of the crime. In such cases, it would come as no surprise if venue were said to be proper wherever an overt act was committed, that is, wherever a conduct element of the crime occurred. An overt act, however, is not an element of several individual federal conspiracy statutes, such as the controlled substance conspiracy statute, for example. In such cases, is venue nevertheless proper wherever an overt act in furtherance of the conspiracy is committed? It appears so. At least one federal appellate court has muffled the impact of the overt act rule by limiting it to cases in which a co-conspirator's venue-expanding overt act is foreseeable by his fellows. Those who aid and abet the commission of a federal crime are punishable as principals. The government may try aiders and abettors either where they provided assistance or where the underlying offense may be prosecuted. As early as 1908 in Armour Packing Co. v. United States , the Supreme Court upheld a conviction following a trial in the Western District of Missouri for the offense of continuous carriage by rail of the defendant's products from Kansas to New York at an illegally reduced rate. The Court concluded that for venue purposes "[t]his is a single continuing offense ... continuously committed in each district through which the transportation is received at the prohibited rate." The Court's most recent venue decision in 1999 confirmed the continued vitality of this view when it held that if Congress so crafts a criminal offense as to embed as one of its elements a predicate continuing offense, venue over the new crime is proper either wherever the new offense is committed or wherever the continuing predicate offense occurs. In United States v. Rodriguez-Moreno , the defendant had been tried in New Jersey for using a firearm in Maryland during and in relation to a crime of violence, i.e., a kidnapping that had begun in New Jersey. The Court pointed out that the crime in question, 18 U.S.C. SS 924(c)(1), "contains two distinct conduct elements - as is relevant in this case, the 'using and carrying' of a gun and the commission of a kidnaping." A defendant commits a crime and may be tried where he commits any of its conduct elements, it explained. Kidnaping is a crime that continues from capture until release and therefore can be tried in any place from, through, or into which the victim is taken, and the appended gun charge travels with it. As the Court explained: The kidnaping, to which the SS924(c)(1) offense is attached, was committed in all of the places that any part of it took place, and venue for the kidnaping charge against respondent was appropriate in any of them. (Congress has provided that continuing offenses can be tried 'in any district in which such offense was begun, continued, or completed,' 18 U.S.C. SS 3237(a).) Where venue is appropriate for the underlying crime of violence [, in this case kidnaping,] so too it is for the SS 924(c)(1) offense. In addition to kidnaping, the lower federal appellate courts have found venue proper based on the continuing nature of violations involving, e.g., (1) failure to pay child support (18 U.S.C. SS 228); (2) unlawful possession of a firearm (18 U.S.C. SS 922(g)); (3) false statements (18 U.S.C. SS 1001); (4) mail fraud (18 U.S.C. SS 1341); (5) wire fraud (18 U.S.C. SS 1343); (6) bank fraud (18 U.S.C. SS 1344); (7) violent crimes in aid of racketeering (18 U.S.C. SS 1959); and (8) possession of controlled substances with the intent to distribute (21 U.S.C. SS 841). Continuing offenses and the first paragraph of subsection 3237(a) present one other puzzle: is venue proper in any district in which the crime's effects are felt? The Court expressly declined to address the issue in Rodriguez-Moreno : "The Government argues that venue also may permissibly be based upon the effects of a defendant's conduct in a district other than the one in which the defendant performs the acts constituting the offense. Because this case only concerns the locus delicti , we express no opinion as to whether the Government's assertion is correct." The government's brief in the case declared that "[v]enue may also be based on the effects of a defendant's conduct in another district," and cited Armour Packing Co. (multi-state rail transportation at unlawful rate), supra , and the mail cases discussed below. The brief also cited lower court obstruction of justice and Hobbs Act cases. The Hobbs Act outlaws the obstruction of interstate or foreign commerce through the use of violence or extortion. Venue for a Hobbs Act violation is generally considered proper in any district in which there is an obstruction of commerce. An earlier line of cases suggested that an obstruction of justice--intimidation or bribery of witness, bail jumping, or the like--might be tried in the district in which the proceedings were conducted even when the act of obstruction occurred elsewhere. The line gave birth to a suggestion that venue might be predicated upon the impact of the crime within a particular district especially when the offense involved other "substantial contacts" with the district of victimization. After Rodriguez-Moreno , the courts continue to refer to an "effects" or "substantial contacts" test for venue. Some have held that the effect must also constitute a "conduct element" under the statute defining the offense; and that venue may not be based on elements of the offense which are not conduct elements. Yet, the courts are divided over the question of whether venue can be proper in a district based only on effect or substantial contacts there. The second paragraph of Section 3237(a) authorizes the prosecution of offenses involving importing, travel in interstate or foreign commerce, or use of the mail in any district from, through, or into which "commerce, mail matter, or [an] imported object or person moves." The paragraph first appeared in the revision of Title 18 of the United States Code in 1948. In 1944, the Supreme Court in United States v. Johnson had held that under the statute at issue an unlawful use of the mail had to be tried in the place from which the mail was sent rather than in the place in which it was received. The Reviser's Notes that accompany Section 3237 explain that the subparagraph is a response to the decision in Johnson . One scholar has questioned whether the Court's Johnson decision warranted such an expansive response. Perhaps for this reason although the subsection has been used under a wide range of circumstances, its invocation has not always been successful. The tax subsection of the multi-district provision, Subsection 3237(b), is in fact a limited transfer provision under which the accused may ask to be tried in the district in which he resided at the time when the alleged offense occurred. Subsection 3237(b) applies only in the case of prosecutions under 26 U.S.C. SS 7203 (willful failure to file a return, supply information or pay a tax), or, if the government seeks to prosecute in a district where venue exists solely because of a mailing to the Internal Revenue Service, under 26 U.S.C. SS 7201 (attempted tax evasion) or SS 7206(1), (2), or (5) (various frauds and false statements). Congress added Subsection 3237(b) in 1958 under the view that prosecution in the district where a return was received or due rather than the district in which the taxpayer resided visited inappropriate inconvenience and expense upon taxpayers, their attorneys and witnesses. A qualified defendant must file his request to be tried in his home district within 20 days. The court may not grant a request that is not timely. Sections 3235 and 3236 provide special venue requirements in murder cases. Section 3235 dates from the First Congress, and states that "the trial of offenses punishable with death shall be had in the county where the offense was committed, where that can be done without great inconvenience." The cases under the section are few and rarely seem to favor the accused. For instance, more than one court has held that the section does not apply to offenses punishable with death unless the charges are for "unitary" murder offenses. As in other instances, the benefits of Section 3235 can be waived if the accused fails to move to dismiss for improper venue. Moreover, the determination that the benefit can be denied in the face of "great inconvenience" is a matter within the trial court's discretion. Courts have found great inconvenience when there was no federal courthouse within the county in which the crime was committed; when a majority of the government's witnesses were located outside of the county in which the crime was committed; and when observance would overburden court resources. Section 3236 provides that for venue purposes in murder and manslaughter cases, the offense will be deemed to have occurred where the death-causing act is committed. Congress enacted Section 3236 in apparent reaction to a Supreme Court observation that a federal murder case could not be brought if an injury were inflicted within a district in the United States but death occurred elsewhere. Here too the case law is sparse. Two trial courts have held that Section 3236 only applies to "unitary" murder cases and thus does not apply to murders committed in aid of racketeering in violation of 18 U.S.C. SS 1959. A third held that Section 3236 must yield where Section 3237 (venue in multiple districts) is applicable. And an appeals court has held that under Section 3236 a father who battered his three-year-old daughter in one district may be tried in a second district where she died of pneumonia as a consequence of his negligence there. Occasionally, Congress has enacted special venue provisions for particular crimes. These provisions dictate venue decisions unless they contravene constitutional requirements e.g ., (1) 8 U.S.C. SS 1328 (importation of aliens for immoral purposes); (2) 8 U.S.C. SS 1329 (immigration offenses generally); (3) 15 U.S.C. SS 80a-43 (investment company offenses); (4) 15 U.S.C. SS 298 (falsely stamped gold or silver); (5) 18 U.S.C. SS 228(e) (failure to pay legal child support obligations); (6) 18 U.S.C. SS 1073 (flight to avoid prosecution); (7) 18 U.S.C. SS 1074 (flight to avoid prosecution for property damage); (8) 18 U.S.C. SS 1512( i ) (obstruction of justice); (9) 18 U.S.C. SS 1956( i ) (money laundering); (10) 18 U.S.C. SS 2339(b) (harboring terrorists); (11) 18 U.S.C. SS 2339A(a) (material support of terrorists); (12) 21 U.S.C. SS 959(d) (manufacturing or distributing controlled substances abroad for importation into the United States); and (13) 46 U.S.C. SS 70504(b) (Maritime Drug Law Enforcement offenses). Special venue provisions governing prosecution of a few other crimes simply replicate the features of Rule 18, i.e. , a violation is to be prosecuted in the district in which it occurs: (1) 15 U.S.C. SS 78aa (securities offenses); (2) 15 U.S.C. SS 80b-14 (investment adviser offenses); (3) 15 U.S.C. SS 715i(c) (interstate transportation of petroleum products); (4) 15 U.S.C. SS 717u (natural gas offenses); and (5) 21 U.S.C. SS 17 (falsely labeled dairy or food products). The Constitution recognizes that certain crimes, like piracy, may be committed beyond the geographical confines of any federal judicial district. Article III, after declaring that the trial of crimes shall be in the state in which they are committed, adds, "but when not committed within any State, the Trial shall be at such Place or Places as the Congress may by Law have directed." The First Congress decided that "the trial of crimes committed on the high seas, or in any place out of the jurisdiction of any particular state, shall be in the district where the offender is apprehended, or into which he may first be brought." The approach changed little over the years until the early 1960s. Then, Congress amended the provision to address two problems: (1) to permit a single trial for crimes committed overseas by a group of offenders who scattered when they returned to this country, and (2) to toll the statute of limitations by permitting indictment when the suspect was overseas but not clearly a fugitive. Section 3238 now reads as follows: The trial of all offenses begun or committed upon the high seas, or elsewhere out of the jurisdiction of any particular State or district, shall be in the district in which the offender, or any one of two or more joint offenders, is arrested or is first brought; but if such offender or offenders are not so arrested or brought into any district, an indictment or information may be filed in the district of the last known residence of the offender or of any one of two or more joint offenders, or if no such residence is known the indictment or information may be filed in the District of Columbia. The federal appellate courts disagree over whether Section 3238 may apply when an offense is committed in part within the United States and in part outside the United States. The Ninth Circuit and perhaps the Second Circuit believe that Section 3238 only applies to offenses that, as the caption says, are "not committed in any district." The Third, Fourth, and Fifth Circuits believe that it need not be restricted to offenses committed wholly outside the United States, and applies to offenses that, as the section says, are "begun or committed ... elsewhere." The district to which Section 3238 refers includes the districts of the U.S. District Courts in the territories, but does not include the geographical confines of the other courts of the U.S. territories that have not been designated "district courts." The district in which a defendant is first arrested for purposes of Section 3228 is the district "where the defendant is first restrained of his liberty in connection with the offense charged ." Thus, venue in a particular district by operation of Section 3238 is no less proper because the defendant was initially arrested in another district under another charge, or because he entered the United States in another district prior to his indictment in the District of Columbia and subsequent arrest. Conversely, venue is not proper in a second district after an accused has been arrested for the extraterritorial offense in another district. The "last known address" or District of Columbia basis for venue under Section 3238 is an alternative basis for venue over an extraterritorial offense available to the exclusion of venue elsewhere when the offender has not first been arrested in or brought to another district. In the case of multiple co-defendants, venue over an extraterritorial offense is proper for all offenders in any district in which it is proper for one of them. Venue is no less proper because the authorities arranged for the arrest of a co-defendant within a particular district. There is another, alternative venue statute for certain espionage related cases, Section 3239: The trial for any offense involving a violation, begun or committed upon the high seas or elsewhere out of the jurisdiction of any particular State or district, of-- (1) section 793, 794, 798, [espionage] or section 1030(a)(1) [obtaining classified information by unauthorized computer access] of this title; (2) section 601 of the National Security Act of 1947 (50 U.S.C. 421)[disclosure of the identities of covert agents]; or (3) section 4(b) or 4(c) of the Subversive Activities Control Act of 1950 (50 U.S.C. 783(b) or (c))[receipt of classified information by foreign agents]; may be in the District of Columbia or in any other district authorized by law. Section 3239 affords the government the option to bring an exterritorial espionage case in the District of Columbia when it would otherwise be precluded from doing so under Section 3238. Section 3238 permits the government to bring an extraterritorial espionage case in the District of Columbia if the offender's residence is unknown. If the offender's last address in this country is known, Section 3238 requires that the case be brought there or in the district in which the offender is first arrested or brought or any other district in which venue is otherwise proper. But without more the option to bring an extraterritorial espionage case in the District of Columbia is not necessarily available in all cases under Section 3238. Section 3239 changes that. For Prejudice : While the Constitution promises the accused a trial in the district in which the offense was committed, it also promises him a trial by an impartial jury. To fulfill this second promise, Rule 21(a) of the Federal Rules of Criminal Procedure entitles the accused to a change of venue for trial in another district when "so great a prejudice against the defendant exists in the transferring district that the defendant cannot obtain a fair and impartial trial there." Pre-trial publicity usually supplies the basis for a change of venue request under Rule 21(a). The applicable standard is a demanding one. A transfer will ordinarily only be granted when no less disruptive curative measures will suffice. To create so great a prejudice that an impartial trial is not possible, media coverage must have been pervasive, inflammatory, contemporaneous to trial, and produced a serious contamination of the jury pool. Courts have rejected transfer requests under Rule 21(a) in the face of one or more factors suggesting a fair trial was possible or had been conducted: for example, when the pool of potential jurors was large and diverse; when the coverage was less than pervasive; when the coverage had subsided between the commission or discovery of the crime or arrest of the accused and the time of trial; when the coverage was not overwhelmingly inflammatory or sensational; when prospective jurors were subject to thorough voir dire, particularly if the defendant raised no objections at the time; or when evidence suggested that an untainted jury nevertheless might be or might have been selected. In a compelling case, the court may order trial to be held elsewhere within the district under Rule 18, which allows the trial court to set the place of trial, and in a rare case may grant a change of venue. In some instances, a superseding indictment from the original district may follow the defendant to the district to which his case has been transferred. For Convenience : Under Rule 21(b) of the Federal Rules of Criminal Procedure, "Upon the defendant's motion, the court may transfer the proceeding, or one or more counts, against that defendant to another district for the convenience of the parties, any victim, and witnesses and in the interest of justice." When weighing a motion for a transfer under Rule 21(b), the lower federal courts frequently point to the 10 factors mentioned in the Supreme Court's 1994 decision, Platt v. Minnesota Mining & Manufacturing Co. : (1) location of [the] defendant; (2) location of possible witnesses; (3) location of events likely to be in issue; (4) location of documents and records likely to be involved; (5) disruption of defendant's business unless the case is transferred; (6) expense to the parties; (7) location of counsel; (8) relative accessibility of place of trial; (9) docket condition of each district or division involved; and (10) any other special elements which might affect the transfer. The motion runs to the discretion of the trial court, and an appellate court will only overturn the trial court's decision for an abuse of discretion, such as a failure to apply the proper standard. The defendant bears the burden of establishing that convenience and the interests of justice compel a transfer. Courts often begin with the observation that, basic venue requirements having been satisfied, trial should be held in the original district, i.e ., where the government elected to bring the case. Even if the prospective inconvenience for witnesses and prosecutors does not trump a defendant's transfer request, the interests of the court may. For Plea and Sentencing : A defendant, charged with an indictable offense in another district who wishes to plead guilty, may petition the court in that district for a transfer of venue to the district in which he is located. By definition, the rule requires the pendency of an indictment, information, or complaint in the district from which the accused seeks the transfer of venue. Prosecutors in both districts must concur. Should the defendant subsequently fail to plead as agreed or should the receiving court refuse to accept the plea, the transfer is revoked. Juveniles who wish to waive federal delinquency proceedings enjoy similar benefits.

The United States Constitution assures those charged with a serious federal crime that they will be prosecuted in the state and district in which the crime occurred. A crime occurs in any district in which any of its "conduct" elements are committed. Some offenses are committed entirely within a single district; there they may be tried. Other crimes have elements that have occurred in more than one district. Still other crimes have been committed overseas and so have occurred outside any district. Statutory provisions, court rules, and judicial interpretations implement the Constitution's requirements and dictate where multi-district crimes or overseas crimes may be tried. Most litigation involves either a question of whether the government's selection of venue in a multi-district case is proper or whether the court should grant the accused's request for a change of venue. The government bears the burden of establishing venue by a preponderance of the evidence. The defendant may waive trial in a proper venue either explicitly or by failing to object to prosecution in an improper venue in a timely manner. Section 3237 of Title 18 of the U.S. Code supplies three general rules for venue in multi-district cases. Tax cases may be tried where the taxpayer resides. Mail and interstate commerce offenses may be tried in any district traversed during the course of a particular crime. And continuous or overlapping offenses may be tried in any district in which they begin, continue, or are completed. For example, conspiracy, perhaps the most common continuous offense, may be tried where the scheme is joined or where any overt act in its furtherance is committed. These general rules aside, a few crimes, like murder or immigration offenses, have individual venue provisions. In most instances, overseas crimes are tried in the district in which the accused is arrested or into which he is first brought from abroad. An accused may request a change of venue for reasons of prejudice, convenience, plea, or sentence. Besides his venue rights, an accused is entitled to trial by an impartial jury. Inflammatory pre-trial publicity and other circumstances may hopelessly taint the pool of potential jurors. Nevertheless, before granting a change of venue, the courts will ordinarily exhaust alternative measures such as examination of potential jurors to ensure their impartiality. Beyond prejudice, a court may also grant a change of venue for the convenience of the accused, the government, the victim, or the witnesses. It rarely does. Finally, with the government's concurrence, the court may grant a defendant's request to plea or be sentenced in the district in which they are found. "Venue" ordinarily refers to both where a crime may be tried and the district from which the trial jury must be drawn, although technically the latter is more properly referred to as vicinage.

Most Americans with private group health insurance are covered through an employer, or through the employer of a family member. In 2012, about 61% of private employers offered health insurance coverage to their full-time employees, and most employers extended those health benefits to the families of their workers. A recent study by the Robert Wood Johnson Foundation found that in 2012, 59.5% of insured Americans had their insurance through an employer. When workers lose their jobs, they can also lose their health insurance. If that health insurance is family coverage, then a worker's family members can also become uninsured. Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA; P.L. 99-272 ) requires employers who offer health insurance to continue coverage for their employees under certain circumstances. Congress enacted the legislation to expand access to coverage for at least those people who became uninsured as a result of changes in their employment or family status. Although the law allows employers to charge 102% of the group plan premium, this can be less expensive than similar coverage available in the individual insurance market. The law affects private sector employer group health plans through amendments to the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. COBRA continuation coverage for employees of state and local governments is required under amendments to the Public Health Service Act. Continuation coverage similar to COBRA is provided to federal employees and employees of the Washington, DC, district government through the law authorizing the Federal Employees Health Benefits program under Title 5 of the U.S. Code . Before enactment of COBRA, if an employee's job was terminated (voluntarily or involuntarily), the insurance offered by the employer also ceased, usually within 30 to 60 days. Women were especially vulnerable to loss of insurance coverage if they became unemployed, widowed, or divorced. Although some employers offered the option of buying into the group plan, there was no certainty of that option. In 1985, 10 states had laws requiring insurance policies sold in their states to include a continuation of coverage option for laid-off workers. However, self-insured employers (employers that assume the risk of the health care costs of their employees rather than using private insurers) were not regulated by these state-mandated benefit laws; self-insured plans were regulated at the federal level under ERISA. Health insurance coverage for these affected workers and their families was not consistently available. "COBRA" refers to Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, P.L. 99-272 . The regulations for COBRA are written by the Department of Labor (DOL) and the Internal Revenue Service (IRS). This section provides a simplified explanation of who qualifies and how, what the responsibilities of the employer are, and what the employee is responsible for. More detailed information is available from DOL's COBRA Continuation Coverage, Employee Benefits Security Administration, at http://www.dol.gov/ebsa/cobra.html . Under COBRA, employers who provide health insurance benefits must offer the option of continued health insurance coverage at group rates to qualified employees and their families who are faced with loss of coverage due to certain events. Coverage generally lasts 18 months but, depending on the circumstances, can last for longer periods. COBRA requirements also apply to self-insured firms. An employer must comply with COBRA even if it does not contribute to the health plan; it needs only maintain such a plan to come under the statute's continuation requirements. COBRA covers all employers, with the following exceptions: Small employers. Employers with fewer than 20 employees are not covered under COBRA. An employer is considered to meet the small employer exception during a calendar year if on at least 50% of its typical business days during the preceding calendar year it had fewer than 20 employees. Church plans. Federal, state, and local governments. Although federal employees are not covered under COBRA, they and employees of the Washington, DC, district government have been entitled to temporary continuation of coverage (TCC) under the Federal Employees Health Benefits Program (FEHB) since 1990. Continuation coverage for state and local employees is mandated under the Public Health Service Act with provisions very similar to COBRA's protections. See 42 U.S.C. Section 300bb-1 et seq. In general, a qualified beneficiary is an employee covered under the group health plan who loses coverage due to termination of employment or a reduction in hours; a retiree who loses retiree health insurance benefits due to the former employer's bankruptcy under Chapter 11; a spouse or dependent child of the covered employee who, on the day before the "qualifying event" (see below), was covered under the employer's group health plan; or any child born to or placed for adoption with a covered employee during the period of COBRA coverage. Circumstances that trigger COBRA coverage are known as "qualifying events." A qualifying event must cause an individual to lose health insurance coverage. Losing coverage means ceasing to be covered under the same terms and conditions as those available immediately before the event. For example, if an employee is laid off or changes to part-time status resulting in a loss of health insurance benefits, this is a qualifying event. Events that trigger COBRA continuation coverage include termination (for reasons other than gross misconduct) or reduction in hours to the point where the employee no longer qualifies for the benefit. Spouses and dependent children can experience the following qualifying events leading to their loss of health insurance coverage: the death of the covered employee, divorce or legal separation from the employee, the employee's becoming eligible for Medicare, and the end of a child's dependency under a parent's health insurance policy. Under the following circumstances, a covered employer must offer a retiring employee access either to COBRA or to a retiree plan that satisfies COBRA's requirements for benefits, duration, and premium: If a covered employer offers no retiree health plan, the retiring employee must be offered COBRA coverage. If the employer offers a retiree health plan but it is different from the coverage the employee had immediately before retirement the employer must offer the option of COBRA coverage in addition to the offer of the alternative retiree plan. If the retiring employee opts for the alternative coverage and declines COBRA coverage, then she or he is no longer eligible for COBRA. If the employer's retiree health plan satisfies COBRA's requirements for benefits, premium, and duration, the employer is not required to offer a COBRA option when the employee retires, and the coverage provided by the retiree plan can be counted against the maximum COBRA coverage period that applies to the retiree, spouse, and dependent children. If the employer terminates the plan before the maximum coverage period has expired, COBRA coverage must be offered for the remainder of the period. The only other access a retiree has to COBRA coverage is when a former employer terminates the retiree health plan under Chapter 11 bankruptcy reorganization. This option would be available only to those retirees who are receiving retiree health insurance. In this case, the coverage can continue until the death of the retiree. The retiree's spouse and dependent children may purchase COBRA coverage from the former employer for 36 months after the retiree's death. The continuation coverage must be identical to that provided to "similarly situated non-COBRA beneficiaries." The term similarly situated is intended to ensure that beneficiaries have access to the same options as those who have not experienced a qualifying event. For example, if the employer offers an open season for non-COBRA beneficiaries to change their health plan coverage, the COBRA beneficiary must also be able to take advantage of the open season. By the same token, COBRA continuation coverage can be terminated if an employer terminates health insurance coverage for all employees. The duration of COBRA coverage can vary, depending on the qualifying event. In general, when a covered employee experiences a termination or reduction in hours of employment, the continued coverage for the employee and the employee's spouse and dependent children may continue for 18 months. Retirees who lose retiree health insurance benefits, due to the bankruptcy (a reorganization under Chapter 11) of their former employer, may elect COBRA coverage that can continue until their death. The spouse and dependent children of the retiree may continue the coverage for an additional 36 months after the death of the retiree. For all the other qualifying events listed above (death of employee, divorce or legal separation from employee, employee becoming eligible for Medicare, the end of a child's dependent status under the parents' health policy), the coverage for the qualified beneficiaries may be continued for 36 months. Different provisions apply to disabled individuals. If the Social Security Administration (SSA) makes a determination that the date of an individual's onset of disability occurred during the first 60 days of COBRA coverage or earlier, the employee and the employee's spouse and dependents are eligible for an additional 11 months of continuation coverage. This is a total of 29 months from the date of the qualifying event (which must have been a termination or reduction in hours of employment). This provision was designed to provide a source of coverage while individuals wait for Medicare coverage to begin. After a determination of disability, there is a five-month waiting period for Social Security disability cash benefits and another 24-month waiting period for Medicare benefits. See the section below regarding the premium for this additional 11 months. Under some conditions, COBRA coverage can end earlier than the full term. Although coverage must begin on the date of the qualifying event, it can end on the earliest of the following: the first day for which timely payment of the premium is not made (payment is timely if it is made within 30 days of the payment due date and payment cannot be required before 45 days after the date of election (see below)); the date on which the employer ceases to maintain any group health plan; the first day after the qualified beneficiary becomes actually covered (and not just eligible to be covered) under another employer's group health plan, unless the new plan excludes coverage for a preexisting condition; or the date the qualified beneficiary is entitled to Medicare benefits, if this condition is specified in the group health plan. If a COBRA-covered beneficiary receiving coverage through a region-specific plan (such as a managed care organization) moves out of that area, the employer is required to provide coverage in the new area if this can be done under one of the employer's existing plans. For example, if the employer's plan is through an insurer licensed in the new area to provide the same coverage available to the employer's similarly situated non-COBRA employees. Further, if this same coverage would not be available in the new area, but the employer maintains another plan for employees who are not similarly situated to the beneficiary (such as a plan offered to management or another group within the firm) that would be available in the new area, then that alternative coverage must be offered to the beneficiary. If, however, the only coverage offered by the employer is not available in the new area, the employer is not obliged to offer any other coverage to the relocating beneficiary. COBRA coverage varies for Medicare beneficiaries depending on whether they become eligible for COBRA before or after they become eligible for Medicare. Medicare law requires that certain employers (those with 20 or more employees) provide their employees who are Medicare beneficiaries with the same coverage offered to their other employees. This includes family coverage, if it is offered. If a working Medicare beneficiary experiences a qualifying event (e.g., retirement, job termination), he or she becomes eligible for 18 months of COBRA coverage from the date of the qualifying event. If the beneficiary's family members lose coverage because of the qualifying event, they would be eligible for COBRA coverage for up to 36 months from the date on which the employee became eligible for Medicare . For example, if an employee becomes eligible for Medicare in January 2013 and then retires 12 months later in January 2014, the covered family members would be eligible for 24 months of COBRA coverage, rather than 36 months. However, no matter when the second qualifying event occurs, COBRA coverage for qualified family members can never be less than 18 months. On the other hand, if an individual is receiving COBRA benefits and becomes eligible for Medicare during the 18 month period, COBRA coverage can be terminated early (see above, under " Duration of Coverage "). In this case, the individual's covered family members can continue their COBRA coverage for up to 36 months from the date of the original qualifying event. Employers, employees, and the employer's health plan administrators all have to meet requirements for notifying each other regarding COBRA. At the time an employee first becomes covered under a health plan, the plan administrator must provide written notification to the employee and his or her spouse regarding COBRA rights if a qualifying event should occur. If a qualifying event occurs, other notices are required. The employer must notify the plan administrator of the event within 30 days of the death of the employee, a termination, or reduction in hours, the employee's becoming entitled to Medicare, or the beginning of bankruptcy proceedings. Within 14 days of receiving the employer's notice, the plan administrator must notify, in writing, each covered employee and his or her spouse of their right to elect continued coverage. The employee must notify the employer or plan administrator within 60 days of a divorce or legal separation of a covered employee or a dependent child's ceasing to be a dependent of the covered employee under the policy. COBRA beneficiaries who are determined by the SSA to have been disabled within the first 60 days of COBRA coverage must notify the plan administrator of this determination to be eligible for the additional 11 months of coverage. They must provide this notice within 60 days of receiving the SSA's decision. A qualified individual must choose whether to elect COBRA coverage within an election period. This period is 60 days from the later of two dates: the date coverage would be lost due to the qualifying event or the date that the beneficiary is sent notice of his right to elect COBRA coverage. The beneficiary must provide the employer or plan administrator with a formal notice of election. Coverage is retroactive to the date of the qualifying event. The employee or other affected person may also waive COBRA coverage. If that waiver is then revoked within the election period, COBRA coverage must still be provided. However, coverage begins on the date of the revocation rather than the date of the qualifying event. The Trade Act of 2002 ( P.L. 107-210 ) provided a temporary extension of the election period for those individuals who qualified for the Health Coverage Tax Credit (HCTC). Under the provision, qualified individuals who did not elect COBRA coverage during the regular election period can elect continuation coverage within the first 60-day period beginning on the first day of the month when they were determined to have met the qualifications. Employers are not required to pay for the cost of COBRA coverage. They are permitted to charge the covered beneficiary 100% of the premium (both the portion paid by the employee and the portion paid by the employer, if any), plus an additional 2% administrative fee. For disabled individuals who qualify for an additional 11 months of COBRA coverage, the employer may charge 150% of the premium for these months. The plan must allow a qualified beneficiary to pay for the coverage in monthly installments, although alternative intervals may also be offered. Some states require insurers to offer group health plan beneficiaries the option of converting their group coverage to individual coverage. Conversion enables individuals to buy health insurance from the employer's plan without being subject to medical screening. Under the Health Insurance Portability and Accountability Act (HIPAA; P.L. 104-191 ), a person moving from the group to individual insurance market is guaranteed access to health insurance coverage either under federal requirements or an acceptable alternative state mechanism. The beneficiary must have exhausted all COBRA coverage before moving to the individual market. Although the policy must be issued, the premium might be higher than the premium under a group plan. Despite the higher premiums, the conversion option may be attractive to a person who would otherwise have difficulty obtaining health insurance because of a major illness or disability. Private group health plans are subject to an IRS excise tax for each violation involving a COBRA beneficiary. In general, the tax is $100 per day per beneficiary for each day of the period of noncompliance. ERISA also contains civil penalties of up to $100 per day for failure to provide the employee with the required COBRA notifications. State and local plans covered under the Public Health Service Act are not subject to the same financial penalties provided under the tax code or ERISA. However, state and local employees have the right to bring an "action for appropriate equitable relief" if they are "aggrieved by the failure of a state, political subdivision, or agency or instrumentality thereof" to provide continuation health insurance coverage as required under the act. COBRA was enacted to provide access to group health insurance for people who lose their employer-sponsored coverage, and thus to help reduce the number of uninsured. However, the law has limitations in its effectiveness in covering persons leaving the workforce and, from the point of view of both employees and employers, has costs that can be burdensome. Many COBRA beneficiaries are concerned about the cost of COBRA coverage. A Kaiser study provides figures for the average premiums for employer-sponsored health insurance coverage. The average annual premium for employer-sponsored health insurance in 2012 was $5,615 for single coverage and $15,745 for family coverage. Covered-current employees contribute on average 18% of the premium for single coverage and 28% of the premium for family coverage. Under COBRA, former employees may be required to pay up to 102% of the premium. This can be a hardship for newly unemployed individuals. Employers also express concerns about costs. Spencer & Associates, in its 2009 survey, reported that average claim costs for COBRA beneficiaries exceeded the average claim for an active employee by 53%. The average annual health insurance cost per active employee was $7,190, and the COBRA cost was $10,988. The Spencer & Associates analysts contend that this indicates that the COBRA population is sicker than active-covered employees and that the 2% administrative fee allowed in the law is insufficient to offset the difference in actual claims costs. It could be that the monthly expense of COBRA benefits contributes to "adverse selection" among the pool of potential beneficiaries. Healthy individuals may decide against COBRA benefits, while sicker individuals, anticipating medical expenses that would exceed the monthly premium, opt in. The Affordable Care Act (ACA) did not eliminate COBRA, and it made no direct changes to COBRA benefits. However, effective in 2014, ACA enacts health insurance reforms, establishment of newly established health insurance exchanges, and premium credits for certain individuals. When the newly established health insurance exchanges are operational in 2014, it is expected that higher-quality health insurance will be available to uninsured individuals for purchase. If that is the case, will COBRA benefits still be relevant, or will the newly unemployed prefer to purchase policies on the exchange? How the ACA provisions will impact demand for COBRA coverage may vary by individual. In the absence of premium credits, some young and healthy individuals may find COBRA coverage more affordable than coverage in the exchange, whereas the opposite might occur for older workers. In addition, access to premium credits for individuals with income up to 400% of the federal poverty level may improve affordability of coverage. Employers, health care policy groups, and benefit advisors see an ongoing role for COBRA. They expect that employees will see value in continuing their employer benefits, despite the cost: COBRA will still provide a ready bridge for those who expect to be re-employed with new health benefits. People with pre-existing conditions and a network of health care providers may feel better served by their COBRA coverage. The Affordable Care Act requires employers to provide "Summaries of Benefits and Coverage" to their employees. This will make it easier for employees to compare their health benefits under COBRA with the other options available to them. The status of the exchanges and the quality/cost of the products sold on the exchanges are still unknown. Statistical data on COBRA beneficiaries are sparse; however, some data are collected. The Medical Expenditure Panel Survey, Agency for Healthcare Research and Quality, U.S. Department of Health and Human Services, provides an annual estimate of COBRA beneficiaries based on survey data: 2011: 2,616,000 2010: 3,443,000 2009: 3,190,000 2008: 2,832,000 Charles D. Spencer & Associates, a company that provides employee benefits analysis, surveyed 120 employers who subscribe to its service regarding COBRA, capturing information on the 2008 plan year for about 1.6 million workers. Its 2009 COBRA survey found that less than 10% of those who were eligible for COBRA benefits elected to take them, down significantly from the 2006 survey that showed about 27% of those eligible elected coverage. Average length of COBRA coverage was the lowest since the survey started in 1994. The average beneficiary under an 18-month qualifying event kept COBRA coverage for 7.5 months, down from 8.3 months in 2006 and 10.1 months in 1999. The average beneficiary under a 36-month qualifying event kept coverage for 14.2 months, down from 16.6 months in 2006 and 23.4 months in 1999. COBRA is a method for retaining health insurance coverage, but many workers are excluded: Individuals who declined their employer-sponsored benefits do not qualify for COBRA. Workers who did not qualify for their employer-sponsored benefits, hourly and seasonal employees for example, do not qualify for COBRA benefits. The small employer exception exempts employers with fewer than 20 employees from providing COBRA coverage. COBRA coverage is not extended to individuals who work for an employer, regardless of size, that does not offer group health insurance. COBRA does not provide for continuation of coverage for family members unless an employer offers a family option. If an employer declares bankruptcy under Chapter 7 or simply discontinues operation, COBRA is not an option for employees who might otherwise have been eligible for COBRA benefits. In 2009, The Commonwealth Fund estimated that about 66% of currently working Americans, or about 79 million workers, would qualify for COBRA benefits if they became unemployed. Currently, COBRA provides an exception for employers with fewer than 20 employees. According to the Census Bureau's Statistics of U.S. Business , in 2010, approximately 5.2 million firms employed 20.5 million people, or about 18% of employees covered in the survey. These workers would not be covered by COBRA because their employer had fewer than 20 employees at that firm. According to The Commonwealth Fund, in 2007, 5% of insured adults aged 19 to 64 were ineligible for COBRA because their employer-sponsored insurance was provided through a firm with fewer than 20 employees. Forty states and the District of Columbia have attempted to address this issue through "mini-COBRA" laws, which require that continuation coverage be offered to employees in smaller firms. However, in some states, the continuation coverage may be offered for a shorter period or provide fewer benefits than federal COBRA law requires. Almost all Americans over the age of 65 qualify for Medicare--the federal health insurance program for the elderly. But many people retire before age 65. In 2012, the Social Security Administration reported that nearly 60% of Social Security beneficiaries retired before the age of 65. These retirees, separated from employment, are often separated from their former source of health insurance. Some retirees obtain health insurance coverage through retiree plans offered by their former employers, but the number of employers who offer retiree plans has been falling. In 2008, 22% of workers were employed at a private establishment that offered health benefits to early retirees, down from 31% in 1997, and 17% of workers were employed at a private establishment that offered health benefits to Medicare-eligible retirees, down from 28% in 1997. The 2010 Kaiser annual employer survey reported that the percentage of employers with 200+ employees who offered retiree health benefits had dropped from 66% in 1988 to 28% in 2010. Small firms are even less likely to offer such coverage: 3% of firms with 3 to 199 workers offered retiree plans in 2010. For retirees who are under the age of 65, and the near-elderly, those aged 55 to 65, separated from employment, COBRA coverage can be an important source of health insurance: the 18 months of COBRA benefits provide a bridge to Medicare for those who are close to the age of 65. When COBRA benefits run out, the near-elderly can have unique problems finding health insurance coverage on the individual market. Currently, there is no legislation in the 113 th Congress to amend COBRA. In the 112 th Congress, legislation to extend COBRA coverage to additional people, domestic partners for example, or expand COBRA coverage, to span the time between retirement and Medicare eligibility for example, was introduced, but no major action was taken. Throughout 2008-2009, the unemployment rate in the United States climbed from 5% to a peak of 10% in October 2009. A slow recovery was predicted and many who lost their jobs anticipated a long period of being either underemployed or unemployed. As a result, many who were eligible to continue their employer-sponsored health insurance did not elect coverage under COBRA, leaving their families at risk. The 111 th Congress addressed this problem by creating a temporary COBRA premium subsidy under Title III of the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ). The subsidy was limited to 15 months and covered 65% of the COBRA premium. The individuals had to pay the remaining balance. This provision has since expired. The COBRA subsidy, as amended by subsequent laws, was available to individuals who met the income test and who were involuntarily terminated on or after September 1, 2008, and before June 1, 2010.

Health insurance helps to protect individuals and families against financial loss. Having health insurance also promotes access to regular health care. Most Americans with private health insurance are covered through an employer, or through the employer of a family member. A recent study by the Robert Wood Johnson Foundation found that in 2012, 59.5% of insured Americans had their insurance through an employer. When an employee is terminated, his or her employer-sponsored health insurance usually ends within 30 to 60 days. If that health insurance is family coverage, then a worker's family members can also become uninsured. Even if the worker finds another job with health benefits, a family can experience long periods of uninsurance, as they wait to qualify for the new benefit. This same problem is also faced by families that experience a reduction in hours in the workplace, the death of a worker, or a divorce. In 1985, Congress passed legislation to provide the unemployed temporary access to their former employer's health insurance. Under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA; P.L. 99-272), an employer with 20 or more employees who provided health insurance benefits must provide qualified employees and their families the option of continuing their coverage under the employer's group health insurance plan in the case of certain events. The former employee is responsible for paying the entire premium. Employers who fail to provide the continued health insurance option are subject to penalties. COBRA coverage usually lasts for 18 months, but it can be extended up to a total of 36 months, depending on the nature of the triggering event. Those who take up their COBRA benefits are required to pay up to 100% of the premium, which averaged $15,745 for a family in 2012, plus an additional 2% for the administrative costs incurred. COBRA can be an important source of health insurance for the recently unemployed, but it also benefits the disabled, the retired, the divorced, and their families. For example, spouses and dependent children can also qualify for COBRA benefits in the event of divorce or the death of the family member with employer-sponsored health coverage. Since 2009, about 3 million individuals and families have used COBRA benefits each year. Critics argue that COBRA addresses the health insurance problems of only a small number of Americans, and that the high cost of premiums makes COBRA coverage unaffordable to many who need it. Others maintain that COBRA has resulted in extra costs for employers, as well as the added administrative burden of providing benefits to people no longer working for them. Implementation of Affordable Care Act provisions, such as the health insurance exchanges, insurance reforms, and premium subsidies for lower-income individuals in 2014, may make COBRA benefits less valuable for certain individuals and families. This report provides background on COBRA, a brief explanation of the program, its origins, issues, and how the Affordable Care Act might impact COBRA.

Federal government agencies and programs work to accomplish widely varying missions. These agencies and programs use a number of public policy approaches, including federal spending,tax laws, tax expenditures, (1) and regulation. (2) In FY2004, estimated federal spending was $2.3 trillion,and taxexpenditures totaled approximately $1 trillion. Estimates of the off-budget costs of federalregulations have ranged in the hundreds of billions of dollars, and corresponding estimates ofbenefits of federal regulations have ranged from the hundreds of billions to trillions of dollars. (3) Given the scope and complexity of these various efforts, it is understandable that citizens,their elected representatives, civil servants, and the public at large would have an interest in theperformance and results of government activities. Evaluating the performance of governmentagencies and programs, however, has proven difficult and often controversial: Actors in the U.S. political system (e.g., Members of Congress, the President,citizens, interest groups) often disagree about the appropriate uses of public funds; missions, goals,and objectives for public programs; and criteria for evaluating success. One person's key programmay be another person's key example of waste and abuse, and different people have differentconceptions of what "good performance" means. Even when consensus is reached on a program's appropriate goals andevaluation criteria, it is often difficult and sometimes almost impossible to separate the discreteinfluence that a federal program had on key outcomes from the influence of other actors (e.g., stateand local governments), trends (e.g., globalization, demographic changes), and events (e.g., naturaldisasters). Federal agencies and programs often have multiple purposes, and sometimesthese purposes may conflict or be in tension with one another. Finding and assessing a balanceamong priorities can be controversial and difficult. The outcomes of some agencies and programs are viewed by many observersas inherently difficult to measure. Foreign policy and research and development programs have beencited as examples. There is frequently a time lag between an agency's or program's actions andeventual results (or lack thereof). In the absence of this eventual outcome data, it is often difficultto know how to assess if a program is succeeding. Many observers have asserted that agencies do not adequately evaluate theperformance or results of their programs -- or integrate evaluation efforts across agency boundaries-- possibly due to lack of capacity, management attention and commitment, or resources. (4) In spite of these and other challenges, (5) in the last 50 years both Congress and the President haveundertaken numerous efforts -- sometimes referred to as performance management, performancebudgeting, strategic planning, or program evaluation -- to analyze and manage the federalgovernment's performance. Many of those initiatives attempted in varying ways to use performanceinformation to influence budget and management decisions for agencies and programs. (6) The Bush Administration'srelease of PART ratings along with the President's FY2004 and FY2005 budget proposals, and itsplans to continue doing so for FY2006 and subsequent years, represent the latest of these efforts. The PART was created by OMB within the context of the Bush Administration's broaderBudget and Performance Integration (BPI) initiative, one of five government-wide initiatives underthe President's Management Agenda (PMA). (7) According to the President's proposed FY2005 budget, the goal ofthe BPI initiative is to "have the Congress and the Executive Branch routinely consider performanceinformation, among other factors, when making management and funding decisions." (8) In turn, [the PART] is designed to help assess the managementand performance of individual programs. The PART helps evaluate a program's purpose, design,planning, management, results, and accountability to determine its ultimate effectiveness. (9) The PART evaluates executive branch programs that have funding associated with them. (10) The Bush Administrationsubmitted approximately 400 PART scores and analyses along with the President's FY2004 andFY2005 budget proposals, (11) with the intent to assess programs amounting to approximately20% of the federal budget each fiscal year for five years, from FY2004 to FY2008. For FY2004,OMB assessed 234 programs. For FY2005, a further 173 programs were assessed. (12) For these two yearscombined, OMB said that about 40% of the federal budget, or nearly $1.1 trillion, had been"PARTed." In releasing the PART, the Bush Administration asserted that Congress's current statutoryframework for executive branch strategic planning and performance reporting, the GovernmentPerformance and Results Act of 1993 (GPRA), [w]hile well-intentioned ... did not meet its objectives. Through the President's Budget and Performance Integration initiative, augmented by the PART, theAdministration will strive to implement the objectives of GPRA. (13) As discussed later in this report, this move and the PART's perceived lack of integration with GPRAwas controversial among some observers, in part because OMB, and by extension the BushAdministration, were seen as "substituting [their] judgment" about agency strategic planning andprogram evaluations "for a wide range of stakeholder interests" under the framework established byCongress under GPRA. (14) Under GPRA, 5 U.S.C. SS 306 requires an agency whendeveloping its strategic plan (15) to consult with Congress and "solicit and consider the views andsuggestions of those entities potentially affected by or interested in such a plan." Some observershave recommended a stronger integration between PART and GPRA, thereby more stronglyintegrating executive and congressional management reform efforts. (16) OMB developed seven versions of the PART questionnaire for different types ofprograms. (17) Structurally, each version of the PART has approximately 30 questions that are divided into foursections. Depending on how the questionnaire is filled in and evaluated, each section provides apercentage "effectiveness" rating (e.g., 85%). The four sections are then averaged to create a singlePART score according to the following weights: (1) program purpose and design, 20%; (2) strategicplanning, 10%; (3) program management, 20%; and (4) program results/accountability, 50%. Under the overall supervision of OMB and agency political appointees, OMB's programexaminers and agency staff negotiate and complete the questionnaire for each "program" -- therebydetermining a program's section and overall PART scores. In the event of disagreements betweenOMB and agencies regarding PART assessments, OMB's PART instructions for FY2005 stated that"[a]greements on PART scoring should be reached in a manner consistent with settling appeals onbudget matters." (18) Under that process, scores are ultimately decided or approved by OMB political appointees and theWhite House. When the PART questionnaire responses are completed, agency and OMB staffprepare materials for inclusion in the President's annual budget proposal to Congress. According to OMB's most recent guidance to agencies for the PART, the definition of program will most often be determined by a budgetary perspective. That is, the "program" thatOMB assesses with the PART will most often be what OMB calls a program activity , or aggregationof program activities , as listed in the President's budget proposal: One feature of the PART process is flexibility for OMBand agencies to determine the unit of analysis -- "program" -- for PART review. The structure thatis readily available for this purpose is the formal budget structure of accounts and activitiessupporting budget development for the Executive Branch and the Congress and, in particular,Congressional appropriations committees.... Although the budget structure is not perfect for programreview in every instance -- for example, "program activities" in the budget are not always theactivities that are managed as a program in practice -- the budget structure is the most readilyavailable and comprehensive system for conveying PART results transparently to interested partiesthroughout the Executive and Legislative Branches, as well as to the public at large. (19) The term program activity is essentially defined by OMB's Circular No. A-11 as the activities andprojects financed by a budget account (or a distinct subset of the activities and projects financed bya budget account), as those activities are outlined in the President's annual budget proposal. (20) As noted later, thisbudget-centered approach has been criticized by some observers, because this budget perspective didnot necessarily match an agency's organization or strategic planning. For each program that has been assessed, OMB develops a one-page "Program Summary"that is publicly available in electronic PDF format. (21) Each summary displays four separate scores, as determined byOMB, for the PART's four sections. OMB also made available for each program a detailed PART"worksheet" to briefly show how each question and section of the questionnaire was filled in,evaluated, and scored. (22) OMB states that the numeric scores for each section are used to generate an overalleffectiveness rating for each "program": [The section scores] are then combined to achieve anoverall qualitative rating of either Effective, Moderately Effective, Adequate, or Ineffective. Programs that do not have acceptable performance measures or have not yet collected performancedata generally receive a rating of Results Not Demonstrated. (23) The PART's overall "qualitative" rating is ultimately driven by a single numerical score. However,none of OMB's FY2005 budget materials, one-page program summaries, or detailed worksheetsdisplays a program's overall numeric score according to OMB's PART assessment. OMB stated thatit does not publish these single numerical scores, because "numerical scores are not so precise as tobe able to reliably compare differences of a few points among different programs.... [Overall scores]are rather used as a guide to determine qualitative ratings that are more generally comparable acrossprograms." (24) However,these composite weighted scores can be computed manually using OMB's weighting formula. (25) The only PART effectiveness rating that OMB defines explicitly is "Results NotDemonstrated," as shown by the excerpt above. (26) The Government Accountability Office (GAO, formerly theGeneral Accounting Office) has stated that "[i]t is important for users of the PART information tointerpret the 'results not demonstrated' designation as 'unknown effectiveness' rather than as meaningthe program is 'ineffective.'" (27) The other four ratings, which are graduated from best to worst,are driven directly by each program's overall quantitative score, as outlined in the following table. Table 1. OMB Rating Categories for thePART Source : OMB's website, at http://www.whitehouse.gov/omb/part/2004_faq.html , "PARTFrequently Asked Question" #29. This website appears to be the only publicly available locationwhere OMB indicates how OMB translated numerical scores into overall "qualitative" ratings. OMB has stated that it wants to make the PART process and scores transparent, consistent,systematic, and objective. To that end, OMB solicited and received feedback and informalcomments from agencies, congressional staff, GAO, and "outside experts" on ways to change theinstrument before it was published with the President's FY2004 budget proposal in February2003. (28) In an effortto increase transparency, for example, OMB made the detailed PART worksheets available for eachprogram. To make PART assessments more consistent, OMB subjected its assessments to aconsistency check. (29) That review was "examined," in turn, by the National Academy of Public Administration(NAPA). (30) To makethe PART more systematic, OMB established formal criteria for assessing programs and created aninstrument that differentiated among the seven types of programs (e.g., credit programs, research anddevelopment programs). With regard to the goal of achieving objectivity, OMB made changes to the draft PARTbefore its release in February 2003 with the President's budget. For example, OMB eliminated adraft PART question on whether a program was appropriate at the federal level, because OMB foundthat question "was too subjective and [assessments] could vary depending on philosophical orpolitical viewpoints." (31) However, OMB went further to state: While subjectivity can be minimized, it can never becompletely eliminated regardless of the method or tool. In providing advice to OMB Directors,OMB staff have always exercised professional judgment with some degree of subjectivity. That willnot change.... [T]he PART makes public and transparent the questions OMB asks in advance ofmaking judgments, and opens up any subjectivity in that process for discussion and debate. (32) OMB career staff are not necessarily the only potential sources for subjectivity in completing PARTassessments. Subjectivity in completing the PART questionnaire and determining PART scorescould potentially also be introduced by White House, OMB, and other political appointees. Furthermore, in a guidance document for the FY2005 and FY2006 PARTs, OMB has notedthat performance measurement in the public sector, and by extension the PART, have limitations,because: information provided by performance measurement isjust part of the information that managers and policy officials need to make decisions. Performancemeasurement must often be coupled with evaluation data to increase our understanding of whyresults occur and what value a program adds. Performance information cannot replace data onprogram costs, political judgments about priorities, creativity about solutions, or common sense. Amajor purpose of performance measurement is to raise fundamental questions; the measures seldom,by themselves, provide definitive answers. (33) In OMB's guidance for the FY2006 PART, OMB stated that "[t]he PART rel[ies] on objective datato assess programs." (34) Former OMB Director Mitchell Daniels Jr. also reportedly stated, with release of the President'sFY2004 budget proposal, that "[t]his is the first year in which ... a serious attempt has been made toevaluate, impartially on an ideology-free basis, what works and what doesn't." (35) Other points of viewregarding how the PART was used are discussed later in this report, in the section titled "Third PartyAssessments of the PART." In the President's FY2005 budget proposal, OMB stated that PART ratings are intended to"affect" and "inform" budget decisions, but that "PART ratings do not result in automatic decisionsabout funding." (36) InOMB's guidance for the FY2004 PART, for example, OMB said: FY 2004 decisions will be fundamentally grounded inprogram performance, but will also continue to be based on a variety of other factors, includingpolicy objectives and priorities of the Administration, and economic and programmatic trends. (37) In addition, OMB's FY2006 PART guidance states that [t]he PART is a diagnostic tool; the main objective ofthe PART review is to improve program performance. The PART assessments help linkperformance to budget decisions and provide a basis for making recommendations to improveresults. (38) The President's budget proposals for FY2004 and FY2005 both indicated that the PART processinfluenced the President's recommendations to Congress. (39) An analysis of the Bush Administration's FY2005 PART assessments by the PerformanceInstitute, a for-profit corporation that has broadly supported the President's Management Agenda,stated that "PART scores correlated to funding changes demonstrates an undeniable link betweenbudget and performance in FY '05." (40) The Performance Institute noted that the President made thefollowing budget proposals for FY2005: Programs that OMB judged "Effective" were proposed with average increasesof 7.18%; "Moderately Effective" programs were proposed with average increases of8.27%; "Adequate" programs were proposed with decreases of1.64%; "Ineffective" programs were proposed with average decreases of 37.68%;and "Results Not Demonstrated" programs were proposed with average decreasesof 3.69%. The Performance Institute further asserted that the PART had captured the attention of federalmanagers, resulted in improved performance management, resulted in better outcome measures forprograms, and served as a "quality control" tool for GPRA. (41) The company also assertedthat Congress, which had not yet engaged in the PART process, should do so. The PART. According to a news report, oneprominent scholar in the area of program evaluation offered a mixed assessment of the PART: Some critics call PART a blunt instrument. But HarryR. Hatry, the director of the public-management program at the Urban Institute, a Washington thinktank, said the administration appears to be making a genuine effort to evaluate programs. He serveson an advisory panel for the PART initiative. "All of this is pretty groundbreaking," he said. Mr.Hatry argues that it's important to examine outcomes for programs, and that spending decisionsought to be more closely tied to such information. That said, he did caution about how far PARTcan go. "The term 'effective' is probably pushing the word a little bit," he said. "It's almostimpossible to extract in many of these programs ... the effect of the federal expenditures." Ultimately, while Mr. Hatry is enthusiastic about adding information to the budget-making process,he holds no illusions that this will suddenly transform spending decisions in Washington. "Politicalpurpose," he said, "is all over the place." (42) Scholars have also begun to analyze the PART using sophisticated statistical techniques,including regression analysis. (43) One team investigated "the role of merit and politicalconsiderations" in how PART scores might have influenced the President's budget recommendationsto Congress for FY2004 and FY2005 for individual programs. (44) In summary, they foundthat PART scores were positively correlated with the President's recommendations for budgetincreases and decreases (i.e., a higher PART score was associated with a higher proposed budgetincrease, after controlling for other variables). The team also found what they believed to be someevidence (i.e., statistically significant regression coefficients) that politics may have influenced thebudget recommendations that were made, and how the PART was used, for FY2004, but not forFY2005. They also found what they believed to be evidence that PART scores appeared to haveinfluence for "small-sized" programs (less than $75 million) and "medium-sized" (between $75 and$500 million) programs, but not for large programs. (45) PART and Performance Budgeting. Observershave generally considered the PART to be a form of "performance budgeting," a term that does nothave a standard definition. (46) In general, however, most definitions of performance budgetinginvolve the use of performance information and program evaluations during a government's budgetprocess. Scholars have generally supported the use of performance information in the budgetprocess, but have also noted a lack of consensus on how the information should be used and thatperformance budgeting has not been a panacea. In state governments, for example: Practitioners frequently acknowledge that the processof developing measures can be useful from a management and decision-making perspective. Budgetofficers were asked to indicate how effective the development and use of performance measures hasbeen in effecting certain changes in their state across a range of items, from resource allocationissues, to programmatic changes, to cultural factors such as changing communication patterns amongkey players.... Many respondents were willing to describe performance measurement as "somewhateffective," but few were more enthusiastic.... Most markedly, few were willing to attach performancemeasures to changes in appropriation levels.... Legislative budget officers ranked the use ofperformance measures especially low in [effecting] cost savings and reducing duplicative services....Slightly more than half the respondents "strongly agreed" or "agreed" when asked whether theimplementation of performance measures had improved communication between agency personneland the budget office and between agency personnel and legislators. (47) Another scholar asserted that, among other things, "[p]erformance budgeting is an old idea with adisappointing past and an uncertain future," and that "it is futile to reform budgeting without firstreforming the overall [government] managerial framework." (48) GAO recently undertook a study of how OMB used the PART for the FY2004 budget. (49) Specifically, GAOexamined: (1) how the PART changed OMB's decision-making process in developing thePresident's FY2004 budget request; (2) the PART's relationship to the [Government Performanceand Results Act] planning process and reporting requirements; and (3) the PART's strengths andweaknesses as an evaluation tool, including how OMB ensured that the PART was appliedconsistently. (50) GAO asserted that the PART helped to "structure and discipline" how OMB usedperformance information for program analysis and the executive branch budget developmentprocess, (51) made OMB'suse of performance information more transparent, and "stimulated agency interest in budget andperformance integration." (52) However, GAO noted that "only 18 percent of the [FY2004PART] recommendations had a direct link to funding matters." (53) GAO also concluded "themore important role of the PART was not in making resource decisions but in its support forrecommendations to improve program design, assessment, and management." (54) More fundamentally, GAO contended that the PART is "not well integrated with GPRA --the current statutory framework for strategic planning and reporting." Specifically, GAO said: OMB has stated its intention to modify GPRA goals andmeasures with those developed under the PART. As a result, OMB's judgment about appropriategoals and measures is substituted for GPRA judgments based on a community of stakeholderinterests.... Many [agency officials] view PART's program-by-program focus and the substitutionof program measures as detrimental to their GPRA planning and reporting processes. OMB's effortto influence program goals is further evident in recent OMB Circular A-11 guidance that clearlyrequires each agency to submit a performance budget for fiscal year 2005, which will replace theannual GPRA performance plan. (55) Notably, GPRA's framework of strategic planning, performance reporting, and stakeholderconsultation prominently includes consultation with Congress. Furthermore, GAO said: Although PART can stimulate discussion onprogram-specific performance measurement issues, it is not a substitute for GPRA's strategic,longer-term focus on thematic goals, and on department- and governmentwide crosscuttingcomparisons. Although PART and GPRA serve different needs, a strategy for integrating the twocould help strengthen both. (56) GAO performed regression analysis on the Bush Administration's PART scores and fundingrecommendations. (57) In particular, GAO estimated the relationship of overall PART scores on the President'srecommended budget changes for FY2004 (measured by percentage change from FY2003) for twoseparate subsets of the programs that OMB assessed with the PART for FY2004. For mandatory programs, GAO found no statistically significant relationship between PART scores and proposedbudget changes. (58) For discretionary programs as an overall group, GAO found a statistically significant, positiverelationship between PART scores and proposed budget changes. (59) However, when GAO ranseparate regressions on small, medium, and large discretionary programs, GAO found a statisticallysignificant, positive relationship only for small programs. GAO also came to the following determinations: OMB made sustained efforts to ensure consistency in how programs wereassessed for the PART, but OMB staff nevertheless needed to exercise "interpretation and judgment"and were not fully consistent in interpreting the PART questionnaire (pp. 17-19). Many PART questions contained subjective terms that contributed tosubjective and inconsistent responses to the questionnaire (pp. 20-21). (60) Disagreements between OMB and agencies on appropriate performancemeasures helped lead to the designation of certain programs as "Results Not Demonstrated" (p.25). (61) A lack of performance information and program evaluations inhibitedassessments of programs (pp. 23-24). The way that OMB defined program may have been useful for a PARTassessment, but "did not necessarily match agency organization or planning elements" andcontributed to the lack of performance information (pp. 29-30). (62) In response to these issues, GAO recommended that OMB take several actions, includingcentrally monitoring agency implementation and progress on PART recommendations and reportingsuch progress in OMB's budget submission to Congress; continuing to improve the PART guidance;clarifying expectations to agencies on how to allocate scarce evaluation resources; attempting togenerate early in the PART process an ongoing, meaningful dialogue with congressionalappropriations, authorization, and oversight committees about what OMB considers the mostimportant performance issues and program areas; and articulating and implementing an integrated,complementary relationship between GPRA and the PART. (63) In OMB's response, OMBDeputy Director for Management Clay Johnson III stated "We will continually strive to make thePART as credible, objective, and useful as it can be and believe that your recommendations will helpus to that. As you know, OMB is already taking actions to address many of them." (64) In addition, GAO suggested that while Congress has several opportunities to provide itsperspective on performance issues and performance goals (e.g., when establishing or reauthorizinga program, appropriating funds, or exercising oversight), "a more systematic approach could allowCongress to better articulate performance goals and outcomes for key programs of major concern"and "facilitate OMB's understanding of congressional priorities and concerns and, as a result,increase the usefulness of the PART in budget deliberations." Specifically, GAO suggested that Congress consider the need for a strategy that couldinclude (1) establishing a vehicle for communicating performance goals and measures for keycongressional priorities and concerns; (2) developing a more structured oversight agenda to permita more coordinated congressional perspective on crosscutting programs and policies; and (3) usingsuch an agenda to inform its authorization, oversight, and appropriations processes. (65) Previous sections of this report discussed how the PART is structured, how it has been used,and how various actors have assessed its design and implementation. This section discusses potentialcriteria for evaluating the PART or other program evaluations, which might be considered byCongress during the budget process, in oversight of federal agencies and programs, and regardinglegislation that relates to program evaluation. (66) Should Congress focus on the question of criteria, the programevaluation and social science literature suggests that three standards or criteria may be helpful: theconcepts of validity , reliability , and objectivity . Validity has been defined as "the extent to which any measuring instrumentmeasures what it is intended to measure." (67) For example, because the PART is supposed to measure theeffectiveness of federal programs, its validity turns on the extent to which PART scores reflect theactual "effectiveness" of those programs. (68) Reliability has been described as "the relative amount of random inconsistencyor unsystematic fluctuation of individual responses on a measure"; that is, the extent to which severalattempts at measuring something are consistent (e.g., by several human judges or several uses of thesame instrument). (69) Therefore, the degree to which the PART is reliable can be illustrated by the extent to which separateapplications of the instrument to the same program yield the same, or very similar,assessments. Objectivity has been defined as "whether [an] inquiry is pursued in a way thatmaximizes the chances that the conclusions reached will be true." (70) Definitions of the wordalso frequently suggest concepts of fairness and absence of bias. The opposite concept is subjectivity , suggesting, in turn, concepts of bias, prejudice, or unfairness. Therefore, making ajudgment about the objectivity of the PART or its implementation "involves judging a course ofinquiry, or an inquirer, against some rational standard of how an inquiry ought to have been pursuedin order to maximize the chances of producing true findings " (emphasis in original). (71) Although these three criteria can each be considered individually, in application they may prove tobe highly interrelated. For example, a measurement tool that is subjectively applied may yield resultsthat, if repeated, are not consistent or do not seem reliable. Conversely, a lack of reliable results maysuggest that the instrument being used may not be valid, or that it is not being applied in an objectivemanner. In these situations, further analysis is typically necessary to determine whether problemsexist and what their nature may be. With regard to the PART, the Administration has made numerous assessments regardingprogram effectiveness. But how should one validly , reliably , and objectively determine a programis effective ? Should Congress wish to explore these issues regarding the PART or other evaluations,Congress might assess the extent to which the assessments have been, or will be, completed validly,reliably, and objectively. Different observers will likely have different views about the validity, reliability, andobjectivity of OMB's PART instrument, usage, and determinations. Nonetheless, some previousassessments of the PART suggest areas of particular concern. For example, in its study of the PART,GAO reported that one of the two reasons why programs were designated by the Administration as"results not demonstrated" (nearly 50% of the 234 programs assessed for FY2004) was that OMBand agencies disagreed on how to assess agency program performance, as represented by "long-termand annual performance measures." (72) Different officials in the executive branch appeared to havedifferent conceptions of what the appropriate goals of programs, and measures to assess programs,should be -- raising questions about the validity of the instrument. It is reasonable to conclude thatactors outside the executive branch, including Members of Congress, citizens, and interest groups,may have different perspectives and judgments on appropriate program goals and measures. UnderGPRA, stakeholder views such as these are required to be solicited by statute. Under the PART,however, the role and process for stakeholder participation appears less certain. Other issues that GAO identified could be interpreted as relating to the PART instrument's validity in assessing program effectiveness (e.g., OMB definitions of specific programs inconsistentwith agency organization and planning); its reliability in making consistent assessments anddeterminations (e.g., inconsistent application of the instrument across multiple programs); and its objectivity in design and usage. To illustrate with some potential examples of objectivity issues,subjectivity could arguably be resident in a number of PART questions, including, among others,when OMB conducted its assessment for FY2005: (73) whether a program is "excessively" or "unnecessarily" ... "redundant orduplicative of any other Federal, State, local, or private effort" [question 1.3, p. 22]; (74) whether a program's design is free of "major flaws" [question 1.4, p. 23]; (75) whether a program's performance measures "meaningfully" reflect theprogram's purpose [question 2.1, p. 25]; (76) and whether a program has demonstrated "adequate" progress in achievinglong-term performance goals [question 4.1, p. 47]. Use of such terms that, in the absence of clear definitions, are subject to a variety of interpretationscan raise questions about the objectivity of the instrument and its ratings. In one of its earliest publications on the PART, OMB said that "[w]hile subjectivity can beminimized, it can never be completely eliminated regardless of the method or tool. (77) OMB went on to say,though, that the PART "makes public and transparent the questions OMB asks in advance of makingjudgments, and opens up any subjectivity in that process for discussion and debate." That said, thePART and its implementation to date nevertheless appear to place much of the process for debatingand determining program goals and measures squarely within the executive branch.

Federal government agencies and programs work to accomplish widely varying missions. These agencies and programs employ a number of public policy approaches, including federalspending, tax laws, tax expenditures, and regulation. Given the scope and complexity of theseefforts, it is understandable that citizens, their elected representatives, civil servants, and the publicat large would have an interest in the performance and results of government agencies and programs. Evaluating the performance of government agencies and programs has proven difficult andoften controversial. In spite of these challenges, in the last 50 years both Congress and the Presidenthave undertaken numerous efforts -- sometimes referred to as performance management,performance budgeting, strategic planning, or program evaluation -- to analyze and manage thefederal government's performance. Many of those initiatives attempted in varying ways to useperformance information to influence budget and management decisions for agencies and programs. The George W. Bush Administration's release of the Program Assessment Rating Tool (PART) isthe latest of these efforts. The PART is a set of questionnaires that the Bush Administration developed to assess theeffectiveness of different types of federal executive branch programs, in order to influence fundingand management decisions. A component of the President's Management Agenda (PMA), the PARTfocuses on four aspects of a program: purpose and design; strategic planning; program management;and program results/accountability. The Administration submitted PART ratings for programs alongwith the President's FY2004 and FY2005 budget proposals, and plans to continue doing so forFY2006 and subsequent years. This report discusses how the PART is structured, how it has been used, and how variouscommentators have assessed its design and implementation. The report concludes with a discussionof potential criteria for assessing the PART or other program evaluations, which Congress mightconsider during the budget process, in oversight of federal agencies and programs, and inconsideration of legislation that relates to the PART or program evaluation generally. Proponents have seen the PART as a necessary enhancement to the Government Performanceand Results Act (GPRA), a law that the Administration views as not having met its objectives, inorder to hold agencies accountable for performance and to integrate budgeting with performance. However, critics have seen the PART as overly political and a tool to shift power from Congress tothe President, as well as failing to provide for adequate stakeholder consultation and publicparticipation. Some observers have commented that the PART has provided a needed stimulus toagency program evaluation efforts, but they do not agree on whether the PART validly assessesprogram effectiveness. This report will be updated as events warrant.

Funding for the U.S. Department of Energy (DOE), including the Office of Energy Efficiency and Renewable Energy (EERE), is provided in the annual Energy and Water Development (E&W) Appropriations bill. EERE supports renewable energy and end-use energy efficiency technology research, development, and implementation. The funding level Congress decides to provide for FY2018 could impact goals set by EERE and priorities identified in the Administration's FY2018 budget request. President Trump submitted his FY2018 budget request to Congress on May 23, 2017. The budget requests $28.2 billion for DOE, a decrease of nearly $3 billion, or 9.5%, from the FY2017 enacted level. Nearly half of the reduction ($1.5 billion) in the DOE budget request would come from EERE programs. The request specifies two EERE program eliminations: the Weatherization Assistance Program and the State Energy Program. The funding level Congress provides could affect continued support for these programs and other efforts within EERE including sustainable transportation, renewable energy, and energy efficiency. This report discusses the FY2018 EERE budget request and the proposed EERE funding levels and priorities in the related E&W appropriations bills. It 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 support research, accelerate development, and facilitate deployment of energy efficiency and renewable energy technologies. 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 what it considers to be the highest-impact activities. The office collaborates with industry, academia, national laboratories, and others to develop technology-specific road maps and then focuses funding on early stage research and development (R&D), technology validation and risk-reduction activities, and the reduction of 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 schools. 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 funding is provided from the annual E&W appropriations bill. During the last several years of the Obama Administration, the budget request sought to increase funding to support EERE programs and objectives. Congress provided funding at levels lower than the request. Appropriations for EERE have averaged $2.0 billion annually for the last three years in current dollars (see Table 1 ). DOE categorizes EERE funding into four major categories: sustainable transportation, energy efficiency, renewable energy, and corporate support (e.g., program administration). From FY2015 to FY2017, approximately 30% of EERE appropriations supported sustainable transportation, 35% went to energy efficiency, 23% went to renewable energy, and 12% went to corporate support. President Trump submitted his FY2018 budget request to Congress on May 23, 2017. The budget requests $28.2 billion for DOE, a decrease of nearly $3 billion, or 9.5%, from the FY2017 enacted level. Nearly half of the reduction ($1.45 billion) in the DOE budget request comes from EERE programs. The EERE request of $636 million is a nearly 70% decrease from FY2017. According to the budget request, funding for EERE would focus on "early-stage R&D, where the Federal role is critically important, and reflects an increased reliance on the private sector to fund later-stage research, development, and commercialization of energy technologies." For FY2018, the bulk of the EERE request would be split among three areas: about 29% for sustainable transportation programs, 25% for energy efficiency programs, and 21% for renewable energy programs. Under the request, funding for both the Office of Sustainable Transportation and Office of Renewable Power would decrease by 70% from FY2017 enacted levels. The Office of Energy Efficiency would see funding decrease by 79% from FY2017 enacted levels, and funding for corporate support would decrease by 18%. The budget request specifies two EERE program eliminations: the Weatherization Assistance Program and the State Energy Program, which received FY2017 appropriations of $225 million and $50.0 million, respectively. The request would reduce EERE funded full-time equivalents (FTE) by approximately 30%. Some of the goals, highlights, and major changes presented in the EERE FY2018 request, as reported by DOE, are discussed below. The Administration's request for the Office of Sustainable Transportation is $184 million for FY2018, $429 million (70.0%) less than the FY2017 enacted level of $613 million. Sustainable transportation includes vehicle technologies, bioenergy technologies, and hydrogen and fuel cell technologies. Research priorities for FY2018 in vehicle technologies include the following: Explore new battery chemistry and cell technologies to reduce the cost of electric vehicle batteries by more than 50% (the ultimate goal is $80/kWh with a near-term goal of $125/kWh by 2022), to increase range to 300 miles, and to decrease charge time to 15 minutes or less. [$36.3 million] Improve understanding of combustion processes to support industry development of next generation engines and fuels to improve passenger vehicle fuel economy by 50% from a 2009 baseline. [$22.0 million] Create modeling, simulations, and high-performance computing-enabled data analytics to contribute to the energy efficiency of automobiles, trucks, and other vehicles building upon the prior-year Transportation as a System initiative. [$12.2 million] Continue to support advanced materials research to enable lightweight, multi-material structures that could reduce light-duty vehicle weight by 25% as compared to a 2012 baseline. [$7.5 million] According to the request, activities identified as later-stage development or a lower priority would be terminated. These include but are not limited to electric drive technologies R&D, advanced electrode processing research for lithium ion batteries, SuperTruck II, advanced vehicle testing and evaluation (AVTE), work to optimize vehicle powertrains, engine enabling technologies, particulate emissions control/after-treatment, lubricant R&D, reactivity controlled compression ignition, advanced high-strength steel, safety statistics, vehicle technologies deployment (including Clean Cities coalitions and Alternative Community Partner projects), and advanced vehicle competitions. Research priorities for bioenergy technologies in the FY2018 request include the following: Develop a fundamental understanding of feedstock preprocessing and the deconstruction of polymers within biomass to improve downstream conversion efficiency and throughput. [$6 million] Develop new advanced algal strains, approaches to culture management, and methods of crop protection. [$5 million] Support R&D in synthetic biology through the Agile BioFoundry and in new catalysts through the Chemical Catalysis for Bioenergy (ChemCatBio) consortium. [$34.6 million] Collaborate with the Vehicle Technologies Program on the co-optimization of fuels and engines to develop bio-based fuels/additives to enable 15-20% fuel economy gain beyond projected results of existing R&D efforts. [$6 million] Analyze pathways and strategies to achieve $2 per gallon gasoline-equivalent (gge) and conduct sustainability research. [$5 million] The proposed reduction in funding would include the termination of later-stage bioenergy R&D activities including, but not limited to, pilot-scale and demonstration-scale projects. Priorities for FY2018 hydrogen and fuel cell technologies research include the following: Support fuel cell R&D in catalysts, membranes, performance, and durability. Conduct proof-of-concept testing and technical analysis coupled with high-performance modeling to enable development of platinum group metal-free (PGM-free) catalysts and electrodes. [$15 million] Focus on applied materials research and early-stage component and process development for hydrogen production, delivery, and storage. [$29 million] Identify key areas for prioritization by assessing R&D gaps, planning, budgeting, and identifying synergies with other energy sectors such as natural gas and nuclear. [$1 million] The FY2018 request for hydrogen and fuel cell technologies would discontinue or reduce later-stage and lower-priority research in several areas including but not limited to low-PGM catalysts, balance of plant, low-cost 700 bar composite tanks, storage balance of plant components, cryo-compressed on-board hydrogen storage R&D, measurement of program impacts and return on investment, infrastructure financing analysis, and codes and standards support. The Administration's request for the Office of Renewable Energy is $134.3 million for FY2018, $317 million (70.2%) less than the FY2017 enacted level of $451 million. Renewable energy includes solar energy, wind energy, water power, and geothermal technologies. Research priorities in the FY2018 request for solar energy include the following: Address the challenges of higher levels of grid integration and focus on tools and technologies to measure, analyze, predict, protect, and manage the impacts of solar generation on the grid. [$18 million] Support research to better understand high temperature component design for higher efficiencies. Investigate advanced diffusion-bonded heat exchangers and new concepts for collecting and harvesting light. [$8 million] Support 2030 SunShot target through research on emerging photovoltaic technologies and physics and materials science to improve microelectronics reliability, performance, and durability. [$43.7 million] The FY2018 request for solar energy would discontinue funding for the Balance of Systems Soft Cost Reduction subprogram and Innovations in Manufacturing Competitiveness subprogram. Priorities for FY2018 wind energy research include the following: Continue to support the Atmosphere to Electrons (A2e) initiative to develop modeling and simulation capabilities that enable performance optimization of wind plants. Address R&D challenges to the design and manufacture of low-specific power rotors. [$26.7 million] Continue research to improve wind energy grid integration and develop and evaluate technology solutions to inform processes to address deployment issues such as radar interference. [$3.8 million] Refocus modeling and analysis on evaluation of early-stage, transformative science and technology opportunities. [$1.2 million] The FY2018 request for wind energy would discontinue funding for later-stage R&D including the technology validation and market transformation subprogram and wind plant performance benchmarking. Research priorities for water power in FY2018 include the following: Support early-stage research in modular hydropower systems, hydropower grid reliability services, and novel hydropower turbines. [$11.7 million] Develop tools to model and evaluate control strategies for marine hydrokinetic (MHK) and test full sensor-based control algorithms in a wave tank setting. Develop instrumentation for environmental monitoring instruments for harsh marine environments. [$8.8 million] The FY2018 request for water power would discontinue funding for later-stage development and testing of MHK systems and components and research on the environmental impacts of MHK technologies. Priorities in the FY2018 request for geothermal technologies include the following: Support research in the enhanced geothermal system (EGS) in the fundamental relationships between seismicity, stress state, and permeability, and the validation and verification of thermal hydro mechanical chemical models. These concepts would be directly applied at the Frontier Observatory for Research in Geothermal Energy (FORGE) EGS field laboratory. [$5.4 million] Conclude final year of three-year hydrothermal effort at three national laboratories targeting research on microhole drilling applications, self-healing cements, and subsurface imaging. Support R&D in waterless stimulation to reduce impact of geothermal development in water-limited areas. [$6 million] Continue to support data collection and dissemination including input into the Geothermal Electricity Technology Evaluation Model (GETEM), deployment of a node on the National Geothermal Data System (NGDS) for researchers, and deployment of integrated hydrothermal datasets into the NGDS to reduce time and cost of determining geothermal potential. [$1 million] The FY2018 request for geothermal technologies would discontinue funding for later-stage R&D in the EGS topics of advanced stimulation, zonal isolation, and fracture propping tools; the hydrothermal topics of wellbore integrity, subsurface stress and induced seismicity, and new subsurface signals; and all low-temperature and co-produced resource topics. The Administration's request for the Office of Energy Efficiency is $159.5 million for FY2018, $602 million (79%) less than the FY2017 enacted level of $762 million). Energy Efficiency includes advanced manufacturing, the federal energy management program, building technologies, and the weatherization and intergovernmental programs. Priorities for FY2018 for advanced manufacturing include the following: Support advanced manufacturing R&D for energy applications in high-impact foundational technology areas. Prioritize high-performance computing for manufacturing. [$41 million] Support the manufacturing demonstration facility (MDF) and the Carbon Fiber Test Facility (CFTF). Additional support would focus on early stage applied research to address challenges in key technical areas for semiconductors and manufacturing cybersecurity. [$27.5 million] Continue to engage with the private sector to ensure that technical knowledge and results from R&D are effectively transferred to the private sector for further development or commercialization. [$13.5 million] The request does not include funds for the Critical Materials Hub, Clean Water Hub, the five Clean Energy Manufacturing Innovation Institutes in the National Network for Manufacturing Innovation (NNMI) program, or the Industrial Assessment Centers (IACs). The request notes that these hubs and institutes previously supported later-stage demonstration and deployment activities. Prior year balances would be used to wind down and terminate existing institutes. The federal energy management program would focus on the following: Continue to support federal agencies in meeting statutory energy and water management related goals and requirements and focus on reducing government operating costs. [$10 million] The request would not support the Federal Energy Efficiency Fund/AFFECT subprogram, which previously provided grants to federal agencies to meet energy management requirements. The request for building technologies would focus on the following priorities in FY2018: Support building energy R&D priorities such as cyber-physical systems for buildings-to-grid R&D and solid state cooling and non-vapor compression solutions for HVAC and refrigeration. Refocus on early-stage R&D for solid state lighting, building envelope, and building energy modeling. Continue to support fulfillment of U.S.-China Clean Energy Research Center. [$29.5 million] Refocus commercial and residential buildings integration on early-stage R&D with emphasis on connected, efficient, and secure building systems and advanced construction and retrofit design principles. [$12 million] Limit energy conservation standard compliance activities to the minimum to maintain compliance with statute. [$26 million] The request would not support late-stage R&D. This includes but is not limited to eliminations of funding for technology application R&D for solid-state lighting; cooperative research and development agreements (CRADAs) for heating, ventilation, air conditioning, and refrigeration; demonstration and deployment of transactive controls at the campus- and neighborhood-level; early adoption efforts for high impact technologies; commercial buildings funding opportunity announcements; and research evaluating linkages between energy efficiency and building financial performance metrics. Energy Star efforts that would be eliminated include Home Performance with Energy Star, test procedure development, and performance verification. The Administration's budget for FY2018 requests no funding for the Weatherization and Intergovernmental Programs that partner with state and local organizations to facilitate investments in states' energy priorities. The House Appropriations Committee reported its version of the FY2018 Energy and Water Development Appropriations bill with a manager's amendment by voice vote on July 12, 2017. The bill would provide funding for EERE of $1.1 billion--$1.0 billion below FY2017 and $449 million above the Administration request ( H.R. 3266 ). H.R. 3266 was incorporated as Division D of H.R. 3219 , the Defense, Military Construction, Veterans Affairs, Legislative Branch, and Energy and Water Development National Security Appropriations Act, 2018 (also referred to as the Make America Secure Appropriations Act, 2018). The House passed H.R. 3219 on July 27, 2017. H.R. 3219 was received in the Senate on July 31, 2017. The Senate Committee on Appropriations reported its version of the FY2018 Energy and Water Appropriations bill, S. 1609 , on July 20, 2017. S. 1609 would provide $1.9 billion for EERE--$153 million below the FY2017 level and $1.3 billion above the Administration request ( S.Rept. 115-132 ). The President signed P.L. 115-56 , Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017 on September 8, 2017, providing appropriations at the FY2017 level through December 8, 2017. There are several EERE issues before the 115 th Congress. Concerns may include not only the level of EERE appropriations for FY2018, but also which activities EERE should support. Congress might consider whether the goals of EERE can be met with the proposed funding cuts in the Administration's request, or whether to limit the scope of federal R&D activities. The issues described in this section--listed approximately in the order they appear in the Energy and Water Development appropriations bills--were selected based on the total funding involved, the percentage increases or decreases proposed by the Administration, and their possible impact on broader public policy considerations. For H.R. 3219 , the funding levels for specific offices and programs are those specified in H.Rept. 115-230 , the report accompanying H.R. 3266 , which reported $1.104 billion in total funding for EERE. The House-passed version of H.R. 3219 would provide $1.086 billion for EERE, $18.4 million less than the committee-reported bill. It is unclear how this reduction would be implemented. For S. 1609 , the funding levels for specific offices and programs are those that are in S.Rept. 115-132 , the report accompanying the committee-passed version of the bill. The reported funding levels are consistent with the total funding for EERE that would be provided in the Senate committee bill. According to the budget request, funding for EERE would focus on "early-stage R&D," and would result in a decrease of nearly 70% for EERE programs. The two appropriation bills before Congress-- H.R. 3219 and S. 1609 --address the Administration's request for EERE to focus on "early-stage R&D" in different ways. According to H.Rept. 115-230 , the report accompanying H.R. 3266 , the House appropriations bill reflects "a gradual shift towards early stage research and development activities," and includes "a limited scope of deployment activities." The appropriation recommendation in S. 1609 affirms "the importance of the development and deployment of energy efficiency and renewable energy technologies, which are critical to expanding U.S. energy security and global leadership." Both statements are supported with proposed appropriations that would fund most EERE programs at levels above the Administration's request. Both H.R. 3219 and S. 1609 would provide appropriations for FY2018 above the Administration's request of $184 million for sustainable transportation. H.R. 3219 would appropriate $268 million for sustainable transportation in FY2018, while S. 1609 would appropriate $553 million. Both appropriations reports also express continued support for the following programs within vehicle technologies that the Administration's request would terminate: SuperTruck II, the Clean Cities program, and efforts to reduce energy consumption of the commercial off-road vehicle sector. H.R. 3219 would support these and other projects within vehicle technologies at $125 million, while S. 1609 would provide approximately $278 million. H.R. 3219 and S. 1609 both recommend appropriations for FY2018 above the Administration's request of $134 million for renewable energy. H.R. 3219 would appropriate nearly $190 million, while S. 1609 would appropriate nearly $390 million. Both bills would provide support for later-stage R&D and deployment projects in contrast to the Administration's request. For solar energy, both the House bill and Senate committee bill support research in thin-film photovoltaics. H.R. 3219 would also encourage access to solar energy for low-income communities. S. 1609 would support solar workforce development training for veterans and continued research for systems integration, balance of system cost reduction, and innovations in manufacturing competitiveness. For wind energy, the House bill supports efforts to lower market barriers for distributed wind including small wind for rural homes, farms, and schools. The Senate committee bill would support demonstration projects for distributed wind and offshore wind and would support testing facilities such as the National Wind Technology Center. For the water program, H.R. 3219 would continue to support the HydroNEXT initiative and research, development, and deployment of marine energy components and systems for marine hydrokinetic technology. S. 1609 would support funding for commercial viability of pumped storage hydropower and research into mitigation of marine ecosystem impacts and continued construction of an open-water wave energy test facility. For geothermal, there were no specific comments in H.Rept. 115-230 ; S. 1609 would continue to support low-temperature co-produced resources and FORGE in FY2018. Both bills would provide appropriations for FY2018 above the Administration's request of $160 million for energy efficiency. H.R. 3219 would appropriate nearly $481 million, while S. 1609 would appropriate nearly $737 million. For advanced manufacturing, H.R. 3219 would provide funds for improvements in steel industry and transient kinetic analysis, and would also support advanced textile research. The House bill would follow the Administration's request to eliminate funding for the Critical Materials Energy Innovation Hub, the Energy Water Desalination Hub, and the Clean Energy Manufacturing Innovation Institutes; however, the bill would support phasing out operations that ensure that the most promising early stage R&D efforts of the hubs and institutes are continued through competitive awards in similar areas. In contrast, S. 1609 would provide funding for the Manufacturing Demonstration Facility, the Critical Materials Energy Innovation Hub, the Energy Water Desalination Hub, and Clean Energy Manufacturing Innovation Institutes. It would also support the Combined Heat and Power Technical Assistance Partnerships (CHP TAPs) and related activities, and Industrial Assessment Centers, among other efforts. For building technologies, H.R. 3219 would continue to support the goals of the Transformation in Cities initiative and the research, development, and market transformation of direct use of natural gas in residential applications. S. 1609 would support ongoing efforts to work with state and local agencies to incorporate the latest technical knowledge and best practices into construction requirements and to engage with industry teams to facilitate widespread deployment. For commercial buildings, the report on S. 1609 encourages support for more cost-effective integration techniques and technologies to facilitate deep retrofits. S. 1609 also would support emerging technologies efforts, including transactive controls R&D, regional demonstration of utility-led efforts advancing smart grid systems in communities, advanced solid-state lighting technology, and R&D for energy efficiency efforts for natural gas applications. S. 1609 would also provide funding for equipment and building standards. The Administration's budget for FY2018 would terminate the Weatherization and Intergovernmental Programs. The Weatherization Assistance Program (WAP) provides funding through formula grants to states, tribes, the District of Columbia, and U.S. territories to provide weatherization services that reduce energy costs for low-income households by increasing the energy efficiency of their homes. The State Energy Program (SEP) provides funding and technical assistance to states, the District of Columbia, and U.S. territories to promote the efficient use of energy and reduce the rate of growth of energy demand through the development and implementation of specific state energy programs. Both H.R. 3219 and S. 1609 do not follow the Administration's request to terminate these programs and would continue to support WAP and SEP. The House bill would continue those programs at FY2017 funding levels--$225 million for WAP and $50 million for SEP. The Senate committee bill would fund those programs at $212 million for WAP and $50 million for SEP.

The U.S. Department of Energy's (DOE's) Office of Energy Efficiency and Renewable Energy (EERE) administers renewable energy and end-use energy efficiency technology programs in research, development, and implementation. EERE works with industry, academia, national laboratories, and others to support research and development (R&D). EERE also works with state and local governments to assist in technology implementation and deployment. EERE supports nearly a dozen offices and programs including vehicle technologies, solar energy, advanced manufacturing, and weatherization and intergovernmental programs, among others. Funding for EERE is provided in the annual Energy and Water Development (E&W) Appropriations bill. At issue for the 115th Congress is the level of EERE appropriations and which activities EERE should support, including whether to continue support for specific initiatives and programs. On May 23, 2017, the Trump Administration submitted the budget proposal for FY2018. The FY2018 budget request for DOE is $28.2 billion of which about 2% is for EERE. The budget request for EERE is $636.1 million, a decrease of $1.5 billion, or nearly 70%, from the FY2017 enacted level of approximately $2.1 billion. The proposed reduction, if enacted, would affect all offices within EERE. For FY2018, the bulk of the EERE request is allocated to three areas: 25% for energy efficiency programs, 21% for renewable energy programs, and about 29% for sustainable transportation programs. The request estimates that two-thirds of the current portfolio of 2,500 multi-year projects (e.g., early-stage R&D projects) would remain active in FY2018. DOE anticipates that eliminating one-third of these projects would result in a reduction of approximately 30% in EERE-funded full-time equivalent staff. The President's request would include two specific program eliminations: the Weatherization Assistance Program and the State Energy Program, which received FY2017 appropriations of $225.0 million and $50.0 million, respectively. The President's request for EERE emphasizes early-stage R&D, limited validation testing and simulation to inform R&D, and analysis to support regulatory activities. The DOE budget justification states that funding for EERE would focus on "early-stage R&D, where the Federal role is critically important, and reflects an increased reliance on the private sector to fund later-stage research, development, and commercialization of energy technologies." There are several bills before Congress that recommend FY2018 appropriations for EERE. The bills contain EERE funding levels that are below the FY2017 enacted level, but higher than the President's budget request. The House passed H.R. 3219, the Defense, Military Construction, Veterans Affairs, Legislative Branch, and Energy and Water Development National Security Appropriations Act, 2018, on July 27, 2017. Division D of H.R. 3219--which contains the E&W appropriations--provides funding of $1.1 billion for EERE, $1.0 billion below the FY2017 enacted level and $449 million above the request. Floor amendments to H.R. 3219 reduced funding for EERE in H.R. 3219 by $18.4 million from H.R. 3266, the House Appropriations Committee version of the FY2018 E&W appropriations bill. H.R. 3266 would provide funding of $1.1 billion to EERE--$986 million below the FY2017 enacted level and $468 million above the request (H.Rept. 115-230). The Senate Committee on Appropriations reported S. 1609, the Energy and Water Development and Related Agencies Appropriations Act of 2018, on July 20, 2017. S. 1609 would appropriate $1.9 billion to EERE--$153 million below the FY2017 enacted level and $1.3 billion above the request (S.Rept. 115-132). The President signed P.L. 115-56, the Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017 on September 8, 2017, providing FY2018 funding at the FY2017 appropriations level through December 8, 2017.

The United Nations (U.N.) Conference on Sustainable Development (UNCSD or "Rio+20") will convene June 20-22, 2012, in Rio de Janeiro, Brazil. This conference marks the 20 th anniversary of the U.N. Conference on Environment and Development (UNCED) in Rio in 1992 and the 10 th anniversary of the World Summit on Sustainable Development (WSSD) in Johannesburg, South Africa. As many as 115 heads of state may attend, with up to 50,000 other participants. Rio+20 organizers seek three objectives: securing renewed political commitment to sustainable development, assessing the progress and implementation gaps in meeting already agreed commitments, and addressing new and emerging challenges. No legally binding agreements are expected to be made at the meeting. Government delegations may agree to a process to identify new Sustainable Development Goals (SDGs). In addition, reform of international environmental institutions is on the conference agenda, with a focus on the U.N. Commission on Sustainable Development and the U.N. Environment Program (UNEP). In 1992, governments attending the "Rio" conference (formally called the United Nations Conference on Environment and Development or UNCED) politically endorsed the objective of "sustainable development"--achieving economic, environmental, and social development that "meets the needs of the present without compromising the ability of future generations to meet their own needs ." High-level government representatives produced a political declaration, Agenda 21, and a Statement of Forest Principles--none of which contain legally binding commitments. Agenda 21 led to establishment of the U.N. Commission on Sustainable Development, under the U.N. Economic and Social Council, as well as creation of national commissions on sustainable development in many countries, including the United States. The Rio meeting also opened for signature two treaties: the United Nations Framework Convention on Climate Change (UNFCCC) and the United Nations Framework Convention on Biological Diversity (CBD). This report summarizes the objectives and major issues of Rio+20 and gives a sampling of the wide diversity of views to be discussed by government officials; non-governmental organizations (NGOs); business leaders and trade associations; and representatives of youth, women, land-locked countries, cities, researchers, artisans, farmers, and many, many others who will be present at Rio+20. It also outlines United States policy toward the conference and possible issues for congressional consideration, including possible action on conference outcomes, the role of Agenda 21, and, more broadly, the possible role of sustainable development in the United States and U.S. foreign policy. Few Members of Congress or their staffs are expected to attend Rio+20. Many experts anticipate no legally binding or immediately consequential outcomes from the conference and some might question the relevance of the conference to Congress. Nonetheless, it is possible that some elements of any communique may serve U.S. national interests and foreign policy. These may merit examination through briefings or hearings. Members of Congress may find it useful to be apprised of the active discussion occurring mostly outside the United States on sustainable development. Background documents prepared for Rio+20, including the Global Environmental Outlook, may provide data and descriptions of circumstances and policies in other countries that may be useful to congressional decision-making. There may be additional issues for Congress related to Rio+20 that merit attention or communication with constituents. For example, there may be differences of view between the federal executive and legislative branches of the United States on sustainable development and implementation of its principles. Also, some segments of the U.S. population have expressed suspicion and opposition to what they perceive sustainable development to be, and particularly about its potential impact on national sovereignty; some may query their Members' offices. Some have offered their concerns about Agenda 21 (see adjoining box), which is likely to be referenced in the 2012 conference. More broadly, there is some debate regarding the role of sustainable development in the United States. For much of the world, the striving for sustainable development is of central economic, social, and environmental importance. In the United States, there is lack of accord on the intersection among economic, social, and environmental policies. Almost any topic containing "sustainable" or "green" may elicit controversy in the United States. Dialogue in Congress on the concepts behind them may provide constructive opportunities for identifying common ground. Over the past decade, many stakeholders have grown increasingly impatient with, and resistant to, "top-down" decision-making by national governments and international entities. International processes have witnessed a shift toward greater inclusion of and decision-making by civil society, local communities, and the private sector. This movement seems welcomed by a large majority of Rio+20 participants. The broad inclusiveness of the conference may produce outputs that more resemble a cacophony of messages than an orchestrated plan with broad consensus. Like many international documents on issues that are complex, the output may offer length and ambiguity rather than clarity and consensus. Rio+20 is premised on analysis showing that the objectives of sustainable development of the 1992 Rio conference have not been achieved. The fifth Global Environmental Outlook (GEO-5, see section below) concluded in early June 2012 that significant progress has been made on only 4 of 90 assessed, internationally agreed goals associated with sustainable development. Nonetheless, the Rio+20 website indicates that "[g]overnments are expected to adopt clear and focused practical measures for implementing sustainable development, based on the many examples of success we have seen over the last 20 years." For optimistic observers, "the second Earth summit is a chance to take honest stock of the situation and present ways to break political deadlock and hasten progress on the ground, in the air and in the oceans." Others see the process in a stalemate that leaders in Rio are unlikely to resolve, and call for wholesale, perhaps radical, change. Among the jaded, one observer commented that "the United Nations seems to be more concerned about the number of paragraphs agreed upon than about concepts." Rio+20 includes three days of public meetings (Sustainable Development Dialogues), followed by three days of meetings among diplomatic delegations from 193 nations, including many heads of state. Governments outlined three overall objectives for the conference: 1. securing a renewed political commitment for sustainable development; 2. assessing progress and remaining gaps in implementation of sustainable development efforts; and 3. addressing new and emerging challenges. As part of these objectives, governments are expected to assess the implementation of international environmental agreements, such as the Kyoto Protocol under the U.N. Framework Agreement on Climate Change (UNFCCC), and the Millennium Development Goals (MDGs), a set of eight internationally agreed-to development goals created in 2000. Many participants and observers hope that Rio+20 outcomes will address the Rio+20 objectives in a Communique from high level officials, which may contain agreement to a process to produce new Sustainable Development Goals, and affirmation of--and a Framework for Action to implement--internationally agreed goals. The draft Communique, entitled The Future We Want , is eclectic and sweeping, like the background reports and side meetings. As of the beginning of the third and last Preparatory Committee, only one-quarter of the draft text had been agreed and was "unbracketed" (i.e., does not contain proposed alternative language). Tens of pages, however, had been eliminated from earlier drafts. Delegations will likely continue previous differences over proposals to create a new global environment agency, "strengthen" financing, enhance technology transfer, and increase capacity in nations. In addition, the Rio+20 conference process includes collection of voluntarily submitted commitments to action from all stakeholders. The U.N. established a registry for such commitments. The preparatory committees identified two main themes: the green economy in the context of sustainable development and poverty eradication; and the institutional framework for sustainable development (IFSD). The first theme of Rio+20 is "The Green Economy." Government delegations agreed that "[e]ach country will choose its own green economy approach and policy mix, assessing national priorities and adapting measures to national institutions and economic systems." A major point of discussion, however, has been lack of agreement on what the green economy is, and what its relationship to sustainable development may be. Some see it as an element of achieving sustainable development, which was described in 1992 as consisting of three "pillars"--economic, social, and environment--all of which were critical to supporting the edifice of development. Rio+20 organizers described the green economy as "the intersection between environment and economy"; others expressed concern that this formulation gave too much emphasis to the economic pillar and not enough to social aspects (e.g., equality of women, engagement of civil society in decision-making, etc.), and risked supplanting the three-pillar concept of sustainable development. Organizers may wish to see high-level officials agree at Rio+20 on policy options to facilitate the green economy and foster greater international cooperation. Background documents and side meetings identify a host of practices to foster a green economy by community, national, international, and corporate actors. The conference preparations emphasize a diversity across regions and countries of meanings and approaches to sustainable development. One element of the green economy that seems to enjoy widespread agreement is the importance of the private sector in sustainable development. Some observers have suggested that one outcome from the proceedings may be a large number of private deals on renewable energy, pollution control, water infrastructure, and other commercial and development investments. Issues of trade also have been examined, including risks of protectionism, subsidization, compatibility of national measures with World Trade Organization (WTO) rules, and the importance of countries' domestic conditions and institutions (e.g., protection of intellectual property) to enable trade. For example, participants may debate how technologies essential to environmentally compatible development should be developed and disseminated across countries, with disagreements on such topics as "transfer" versus commercial sales. The second theme of Rio+20 is the institutional framework for sustainable development (IFSD). Many stakeholders agree that reform of existing international processes and institutions on environmental matters could benefit the effectiveness and efficiency of environmental protections. There also seems to be general agreement on some type of high-level, intergovernmental body on sustainable development. Many stakeholders would like to strengthen the U.N. Environment Programme (UNEP); among these, some propose to make UNEP a "specialized agency" of the United Nations, with greater authority and standing than the current program. Some European delegations proposed creating a world environmental agency under the United Nations that would have stronger regulatory and compliance authority; such concepts are strongly opposed by the United States and many other countries, for both pragmatic and sovereignty reasons. Other proposals would expand membership in UNEP to all countries, and increase its financial base. Some delegations have proposed to create a new Council for Sustainable Development in the United Nations, parallel to the Economic and Social Council and the Security Council. Other proposals would strengthen the U.N. regional councils and support national sustainable development councils. Others seek greater engagement of the public ("civil society") in the United Nations and national decision-making regarding sustainable development. Rio+20 may launch a new process to develop Sustainable Development Goals to succeed and extend the MDGs ( Appendix B ). Some participants propose that SDGs could provide a framework for work toward sustainable development beyond 2015. Many ideas put forward for individual SDGs would expand the scope of the MDGs, and there remains little agreement on specific language. Moreover, views differ on whether the SDGs would be applicable to all countries and applicable uniformly, or whether there would be differentiation among categories of countries. The wealthier countries emphasize the growing importance of rapidly developing economies, and that the choices made in developing countries will have greatest effect on people and the global environment. Lower-income countries point to the greater capacities of the wealthier economies and argue that they must take on greater responsibilities and augment assistance to lower-income countries. If there is agreement to create SDGs, there are at least three remaining areas of contention: Integration : There remain differences of views on how the three "pillars" of sustainable development--social, economic, and environmental--might be integrated in the SDGs. Some participants have expressed concerns that social and economic priorities may not receive sufficient emphasis in SDGs, and some observers have expressed concern that SDGs risk evolving into a distinct track parallel to a post-MDG path. Others suggest that SDGs and post-2015 MDGs would be complementary. Process : The process by which SDGs may be developed remains unresolved as well. G-77 countries prefer that it be "inter-governmental" without oversight by the General Assembly or the Secretary-General, as was done for the MDGs. Others contend that a process would need guidance from some office or agency, with the Secretary General's office as the most likely contender, under the General Assembly. Priorities : While delegations appear to generally agree that priorities should be set among emergent SDGs, they diverge on what the priority areas should be. The United States, for example, has opposed inclusion of "equity" and "sustainable production and consumption" in a priority list. Of all the proposals, only two SDGs were agreed to ad referendum by government delegations in the early June preparatory meeting: SDG 1. We underscore that the MDGs are a useful tool in focusing achievement of specific development gains as part of a broad development vision and framework for the development activities of the United Nations, for national priority setting and for mobilisation of stakeholders and resources towards common goals. We therefore remain firmly committed to their full and timely achievement. SDG 2. We recognize that the development of goals could also be useful for pursuing focused and coherent action on sustainable development. We further recognize the importance and utility of a set of sustainable development goals, which are based on Agenda 21 and JPOI [Johannesburg Plan of Implementation], fully respect the Rio Principles, in particular common but differentiated responsibilities, build upon commitments already made, respect international law and contribute to the full implementation of the outcomes of all major Summits in economic, social and environmental fields, taking into account that these goals should ensure a holistic coherence with the goals set out in Agenda 21. These goals should address and incorporate in a balanced way all three dimensions of sustainable development and their inter-linkages. These goals should be incorporated and integrated in the United Nations Development Agenda beyond 2015, thus contributing to the achievement of sustainable development and serving as a driver for implementation and mainstreaming of sustainable development in the United Nations system as a whole. The development of these goals should not divert focus or effort from the achievement of the Millennium Development Goals. One of the key background documents for Rio+20 is the fifth Global Environmental Outlook (GEO-5), prepared under UNEP. Its "Summary for Policymakers" was negotiated and endorsed by many governments, including the United States, in January 2012. It concludes that, despite moderate successes in some areas on some environmental problems, neither the scope nor speed of adverse environmental changes worldwide has decreased over the past five years. GEO-5 identified 4 of 90 internationally agreed goals related to sustainable development on which significant progress has been made. Some progress has been made on 40 goals, such as reducing rates of deforestation and expanding protected areas. Little progress has occurred for others, such as abating human-induced climate change, preventing desertification, and maintaining fish stocks. The report observed deterioration for 8 goals, such as protecting coral reefs. GEO-5 raises many unresolved challenges of degrading "natural capital," on which the productivity of economies and human well-being depend. GEO-5 reports that statistics show deteriorating air quality and rising concentrations of greenhouse gases in the atmosphere; depleting groundwater reservoirs; eutrophying coastal waters and acidifying ocean waters; losses of vertebrate biodiversity of up to 30% in some areas with thousands more species at risk; declining reporting on hazardous wastes; and other problems. Many of these problems are most acute in rapidly developing but low-income countries that may lack adequate financial, institutional, and technical capacity to address them. Many of these problems also flow across national boundaries. In addition, GEO-5 urges more reliable and systematic monitoring by nations of their environments and of related economic, social, and environmental processes, in order to inform decision-making. It stresses the importance of improved standardization of methods and access by the public to data. The report identifies a host of best practices by issue area. Regarding the potentially controversial topic of environmental governance, GEO-5 identifies best practices as Multi-level/multi-stakeholder participation; increased introduction of the principle of subsidiarity; governance at local levels; policy synergy and removal of conflict; strategic environmental assessment; accounting systems that value natural capital and ecosystem services; improved access to information, public participation and environmental justice; capacity strengthening of all actors; improved goal setting and monitoring systems. To illustrate how U.S. interests, and therefore congressional interests, relate to the Rio+20 event and negotiations, this section discusses the U.S. interest in sustainable development and security issues related to freshwater in the international context. Water has played a prominent role in the dialogue leading up to Rio+20. While freshwater is not the focus of Rio+20 or other recent international negotiations (e.g., the climate change negotiations in Durban, South Africa, in 2011), the natural resource management challenge of water and attention to water's role in achieving poverty, health, and climate objectives is generating water-related discussions at U.N. conferences. Water was selected as a priority issue in all the GEO-5 scoping consultations (see "Water in GEO-5" box for assessment of progress on water indicators). International freshwater issues are receiving rising attention in the United States and elsewhere as a security issue. Although the argument that water and other environmental conditions can contribute to either improving or deteriorating community safety and political stability is not a new concept, attention to and analysis of the global water situation, its stressors, and linkages to other sectors is growing rapidly. A February 2012 Intelligence Community Assessment of Global Water Security illustrates the rising view of water as critical not only to public or environmental health but also to political stability, food and energy supplies, and climate change mitigation and adaptation. Specifically, the report warns that water is anticipated to increasingly contribute to instability in nations important to U.S. national security interests. Consequently, some U.S. decision makers and stakeholders are evaluating what actions and opportunities are available for influencing the future role of water in fostering improved international security. Rio+20 is seen by some stakeholders as one such opportunity. In preparation for Rio+20, conference organizers distributed for discussion a "zero draft" of the Communique. No legally binding commitments are expected in the version high-level officials may adopt. The portion of the draft specific to water reiterated the right to safe and clean drinking water and sanitation as a human right. This aim would be consistent with the 2010 United Nations Human Rights Declaration by the U.N. General Assembly on access to safe and clean drinking water and sanitation as a human right essential to the full enjoyment of life and all other human rights. The zero draft also supported "the necessity of setting goals for wastewater management" and proposed renewed commitment to integrated water resources management and water efficiency plans. These would be encouraged through capacity development; exchange of experiences, best practices, and lessons learned; and sharing appropriate environmentally sound technologies and know-how. In addition to the language in the zero draft, there were proposals for specific water targets and water-related discussion in other background and advocacy documents (e.g., how to meet and manage water use and promote water use efficiency in both agriculture and in energy development, water's role in natural disasters and resiliency to disasters and climate change, emerging water quality concerns). As previously noted, Rio+20 could launch a process to develop Sustainable Development Goals by 2015. These may supplement or replace the current MDGs; like the MDGs they would almost certainly be non-binding. Among the eight current MDGs ( Appendix B ), the one to "Ensure Environmental Sustainability" includes the target to "[h]alve, by 2015, the proportion of people without sustainable access to safe drinking water and basic sanitation." One proposal in the SDG discussion would elevate water to its own goal-"safe drinking water and sanitation for all," rather than water as a quantifiable target within a broader goal. Some proposals would give more attention to sanitation given the slow progress on it under the MDGs. The United States provided a submission of its views on November 1, 2011, entitled Sustainable Development for the Next Twenty Years . It identifies three "key messages" that guide the U.S. approach to Rio+20: 1. The Built Environment: Clean Energy and Urbanization , addressing Clean Energy, New Infrastructure, and Access for All; Urbanization and Sustainable Cities; Water Systems; Sustainable Manufacturing and Environmental Goods and Services; and Human Capacity and Green Jobs. 2. The Natural Environment: Ecosystem Management and Rural Development , comprised of Food Security and Sustainable Agriculture; Oceans, Coasts, and Fisheries; and Ecosystem Services and Natural Resource Management. 3. The Institutional Environment: Modernizing Global Competition , including Making New Connections: Linking Governments, Communities, and Businesses for Action; Transforming Traditional Institutions; Strengthening International Environmental Governance; and Informing Decisions, Catalyzing Action, and Measuring Progress. No comprehensive statement is available of how this U.S. vision translates into positions on specific elements of the Rio+20 proposals. Still, some views may be distilled from statements. As examples, the United States agrees with strengthening international environmental institutions, but opposes adding a Council on Sustainable Development to the U.N. architecture or making UNEP a specialized agency of the United Nations; views the transfer of technology as outside the scope of sustainable development commitments; opposes discussion of intellectual property rights; opposes a call for a new agreement to protect biodiversity in the marine environment in the high seas (i.e., outside of national jurisdictions); opposes proposals for significant new funding for sustainable development; encourages actions toward sustainable development by stakeholders, especially women and youth; seeks greater emphasis globally on transparency and public awareness of corporate and governmental performance on environmental responsibilities, facilitated by new communication technologies; and resists commitments related to climate change or other issues addressed in other fora. Appendix A. Timeline of Environment and Development Discussions Appendix B. The Millennium Development Goals (2000) On September 8, 2000, the United Nations General Assembly adopted the United Nations Millennium Declaration (A/RES/55/2). Among other aspects of the Declaration, the General Assembly adopted what are commonly called the eight Millennium Development Goals (MDGs), most to be achieved by 2015. The MDGs are aspirational and not legally binding. The Goals and their respective targets are described below. Eradicate extreme hunger and poverty 1. Reduce by half the proportion of people living on less than a dollar a day; 2. Achieve full and productive employment and decent work for all, including women and young people; 3. Reduce by half the proportion of people who suffer from hunger. Achieve universal primary education 1. Ensure that, by the same date, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling and that girls and boys will have equal access to all levels of education. Promote gender equality and empower women 1. Eliminate gender disparity in primary and secondary education preferably by 2005, and at all levels by 2015. Reduce child mortality 1. Reduce by two-thirds the mortality rate among children under age five. Improve maternal health 1. Reduce by three-quarters the maternal mortality ratio. Combat HIV/AIDS, malaria, and other diseases 1. Halt and begin to reverse the spread of HIV/AIDS; 2. Achieve, by 2010, universal access to treatment for HIV/AIDS for all those who need it; 3. Halt and begin to reverse the incidence of malaria and other major diseases. Ensure environmental sustainability 1. Integrate the principles of sustainable development into country policies and programs; reverse loss of environmental resources; 2. Reduce by half the proportion of people without sustainable access to safe drinking water and basic sanitation; 3. Achieve significant improvement in lives of at least 100 million slum dwellers, by 2020. Develop a global partnership for development 1. Develop further an open, rule-based, predictable, non-discriminatory trading and financial system; 2. Address the special needs of landlocked developing countries and small island developing states; 3. Deal comprehensively with the debt problems of developing countries; 4. In cooperation with pharmaceutical companies, provide access to affordable essential drugs in developing countries; 5. In cooperation with the private sector, make available the benefits of new technologies, especially information and communications.

The United Nations (U.N.) Conference on Sustainable Development (UNCSD or "Rio+20") convenes June 20-22, 2012, in Rio de Janeiro, Brazil. This conference marks the 20th anniversary of the U.N. Conference on Environment and Development (UNCED) in Rio in 1992. Governments participating in the 1992 meeting politically endorsed the objective of "sustainable development" as achieving economic, environmental, and social development that "meets the needs of the present without compromising the ability of future generations to meet their own needs." Rio+20 begins from the premise and findings that the objectives of the 1992 Rio conference have not been achieved. The U.N.'s fifth Global Environmental Outlook, published in June 2012, found significant progress toward only 4 of 90 internationally agreed goals associated with sustainable development. It found back-tracking on 8 goals. Stakeholders widely agree that changes in policies and institutions are desirable to improve implementation, but do not agree on means. It seems unlikely that Rio+20 will produce any agreements that would require congressional action or be legally binding. Some proceedings, however, may engender congressional interest in concepts proposed for simultaneously achieving economic, social, and environmental objectives. Rio+20 could influence views and actions internationally on development paths and practices, thereby affecting regional and global economies, demand for development aid, transnational environmental issues, and conflict incidence and resolution. Therefore, Congress may take interest in the conference. In addition, proceedings may reference the non-binding Agenda 21 produced at UNCED in 1992; media coverage could raise questions from constituents that Members may wish to address. The Rio+20 organizers indicate that "[g]overnments are expected to adopt clear and focused practical measures for implementing sustainable development, based on the many examples of success we have seen over the last 20 years." However, with strongly divergent views among the expected 115 Heads of State and up to 50,000 participants, Rio+20 may be more like a trade show than political negotiations. Indeed, some observers suggest that the conference may yield many deals among private participants. It is not expected to produce a treaty or any other binding commitments of national governments. Some observers wonder whether a meaningful communique can be successfully negotiated. High-level participants will be prompted to address issues that include the definition of "green economy," and whether a definition gives adequate emphasis to social aspects (e.g., "fairness") of sustainable development; whether "Sustainable Development Goals" (SDGs) should replace or supplement the Millennium Development Goals (MDGs), agreed by the U.N. General Assembly in 2000 and expected to end in 2015, as well as how SDGs might be negotiated, and what priorities might be set among them; how to reform international environmental institutions, particularly whether the United Nations Environmental Program should be strengthened; what actions, if any, might lead to improved implementation of existing sustainable development goals, given slow progress so far; whether governments may commit to greater financial and technological assistance to low-income countries to support their sustainable development.

Paragraph 5(a) of Senate Rule XXVI, sometimes referred to as the "two-hour rule," restricts the times that most Senate committees and subcommittees can meet when the full Senate is in session. The rule, which has evolved over the years, is intended to help balance the Senate's committee and floor work and to minimize the logistical conflicts that Senators face between participating in committee hearings and markups and attending to their duties on the chamber floor. The two-hour rule applies to all committee meetings, including hearings and markups. Pursuant to paragraph 5(a) of Senate Rule XXVI, no Senate committee or subcommittee (except for the Appropriations and Budget Committees and their subcommittees) can meet after the Senate has been in session for two hours or past 2:00 p.m. unless both the majority and minority leaders (or their designees) agree to permit the meeting and their agreement has been announced on the floor. The Senate can also, by unanimous consent, grant permission for committees to meet, and until recently the practice was for a Senator to ask unanimous consent that committees be authorized to meet, rather than for the leaders to announce their agreement that meetings be permitted. A third but arguably impractical option is for the Senate to adopt a privileged motion to allow the meeting. Most of the time, the restrictions of the two-hour rule are not invoked. It is a routine, often daily, occurrence for committees to be given permission to meet during periods proscribed by the rule after agreements are announced on the Senate floor that grant them the authority to do so. Committee staff, when preparing for a hearing or a markup, routinely notify floor staff of the time and date of the meeting to ensure it is included in any unanimous consent agreement or joint leadership announcement. Sometimes, however, the two-hour rule's restrictions on committee meeting are insisted upon, most commonly as a form of protest or to delay a committee's action on a specific measure or matter. To invoke the rule does not necessarily require any formal parliamentary action. Senators can object if a unanimous consent agreement for committees to meet is propounded on the floor. In practice, however, informal communication with leadership is likely required to invoke the rule. This is true not only because the leaders alone could grant permission for committees to meet but also because, from a practical perspective, it would be difficult for Senators to predict when any unanimous consent agreement might be propounded so that they could arrange to be present to object. It was the long-standing practice of the Senate that, after receiving the requests from committees and clearing them with the minority leader, the majority leader (or a designee) would state on the floor I have [number] unanimous consent requests for committees to meet during today's session of the Senate. They have the approval of the majority and minority leaders. I ask consent that these requests be agreed to and these requests be printed in the R ecord . If no Senator objected, the Congressional Record would print, as if they were spoken on the floor, a series of unanimous consent requests for each committee to meet at stated times, each request being ordered "without objection." Perhaps partly due to this practice, it was widely understood in the Senate that unanimous consent was necessary to permit committees to meet after the Senate was in session for two hours or past 2:00 p.m. If leaders usually honored any request to prevent committees from meeting, then that practice would also leave the impression that unanimous consent was required. Currently, permission for Senate committees to sit during times prohibited by the two-hour rule is being granted almost exclusively by joint leadership agreement instead of by unanimous consent, a change from prior practice. A Senator on the floor now typically states I have [number] requests for committees to meet during today's session of the Senate. They have the approval of the majority and minority leaders. The presiding officer responds, "duly noted" to the Senator; no opportunity is afforded for a Senator to object, because unanimous consent is not requested. The list of committees authorized to meet is then printed in the Congressional Record following the statement made on the floor . Joint leadership permission has been used over 130 times since November 30, 2016, to authorize one or more Senate committees to meet during restricted hours and now appears to be the preferred way to provide a waiver of the rule. The change in practice might be in response to an apparent increase in invoking the rule, discussed in the final section of this report. The consequences for a Senate committee of violating the two-hour rule are potentially significant. Any action taken by a committee during a meeting prohibited by the rule is "null, void, and of no effect." For example, a nomination reported by a committee when it did not have authority to meet "is not properly before the Senate and, on a point of order, will be returned to committee." If a Senate committee was meeting without permission, it would immediately have to adjourn when the restricted hour arrived in order to comply with the rule. In response to the two-hour rule being invoked, a Senate committee could cancel its meeting or reschedule it to periods not covered by the rule--for example, meeting early in the morning before the Senate has convened or after it has adjourned. The Senate could also recess or adjourn in order for a committee to sit during the hours restricted by the two-hour rule, and in some cases it has done so in order for a committee to hear testimony or act on an important measure or matter. There are examples of Senate committees adjourning an official hearing pursuant to the two-hour rule and continuing to interact with witnesses in a non-formal setting, characterized as a "briefing" or "listening session." Such gatherings are not official, however, and do not enjoy the same powers and protections of actual Senate hearings. For example, witnesses could not testify under oath at such a meeting, and no official transcript of the interactions would be kept. Senate rules restricting committee meeting times have existed for over 70 years and have evolved over time. A rule limiting committees from sitting while the Senate is in session was first enacted in Section 134(c) of P.L. 79-753, the Legislative Reorganization Act (LRA) of 1946, which stated No standing committee of the Senate or the House, except the Committee on Rules of the House, shall sit without special leave, while the Senate or the House, as the case may be, is in session. The stated intent of the1946 rule was to reduce scheduling conflicts between committee and floor work. The Senate committee report accompanying the 1946 act predicted that the new rule would "make for closer concentration on committee work, on the one hand, and for fuller attendance on the floor, on the other." Under the 1946 form of the rule, all Senate committees had to cease sitting when the Senate went into session unless the unanimous consent of the Senate to meet was obtained. The provisions of the 1946 LRA were superseded on January 30, 1964, by Senate adoption of S.Res. 111, which placed an amended restriction on committee meetings in (then) paragraph 5 of Rule XXV of the standing rules of the Senate. As adopted, S.Res.111 stated Sec.1 No standing committee shall sit without special leave while the Senate is in session after (1) the conclusion of the morning hour, or (2) the Senate has proceeded to the consideration of unfinished business, pending business, or any other business except private bills and the routine morning business, whichever is earlier. Sec.2 Section 134(c) of the Legislative Reorganization Act of 1946 shall not be applicable to the standing committees of the Senate. The 1964 amendment to the standing rules was intended to provide additional periods for Senate committees to meet. Legislative history documents accompanying S.Res.111 make clear that many Senators felt the 1946 LRA rule had been too restrictive and had impeded the ability of committees to conduct their work. As two Senators noted in individual views in the committee report accompanying S.Res.111 Every Senator has had the experience of having consideration of a measure in which he is vitally interested repeatedly put off because of the inability of standing committees to meet ... while the Senate is in session. The problem has now assumed a chronic and persistent character. Objections against committees sitting are lodged as a matter of course, and often it is only in the exceptional case that a committee is able to secure unanimous consent to sit.... As the sessions of the Congress drag on through the year, the problem of finding time for committee work grows progressively worse. Daily sessions of the Senate begin earlier and end later, occupying an increasingly greater share of the working hours of the day. And, as if matters were not bad enough, as the time available for committee work decreases, the need for time to clear committee dockets before the end of the session grows more urgent. Whereas, under the 1946 LRA provision, no Senate committee could meet at any time that the Senate was in session, the 1964 amendment effected by S.Res. 111 permitted committees to sit during the first two hours of Senate session on a new legislative day (a period known as the "Morning Hour") and immediately thereafter if the Senate was engaged in routine "housekeeping" business or the processing of private bills. Subsequently, Section 117(a) of P.L. 91-510, the Legislative Reorganization Act of 1970, enacted on October 26, 1970, established a provision in law that supplemented the 1964 version of the rule contained in paragraph 5 of Senate Rule XXV. That statutory provision stated Except as otherwise provided in this subsection, no standing committee of the Senate shall sit, without special leave, while the Senate is in session. The prohibition contained in the preceding sentence shall not apply to the Committee on Appropriations of the Senate. Any other standing committee of the Senate may sit for any purpose while the Senate is in session if consent therefor has been obtained from the majority leader and the minority leader of the Senate. In the event of the absence of either of such leaders, the consent of the absent leader may be given by a Senator designated by such leader for that purpose. Notwithstanding the provisions of this subsection, any standing committee of the Senate may sit without special leave for any purpose as authorized by paragraph 5 of rule XXV of the Standing Rules of the Senate. The cumulative effect of the 1970 statutory provision and the still-existing provisions of Senate Rule XXV adopted in 1964 were to exempt the Appropriations Committee from any restrictions on meeting and to permit a committee to sit during a restricted period not just if it obtained the unanimous consent of the Senate to do so but also if the majority and minority leaders (or their designees) jointly authorized it to do so. The present form of the two-hour rule, which combined the provisions of the 1964 standing rule and the 1970 statutory provision, was adopted by the Senate on February 4, 1977, via Section 402 of S.Res. 4 , a resolution implementing the recommendations of the Temporary Select Committee to Study the Senate Committee System. The 1977 rules change added an exception for the Committee on the Budget, created in 1974, from the existing restrictions on meeting. Subsequent Senate action relocated the two-hour rule unchanged from Rule XXV to its current place in Section 5(a) of Rule XXVI. Table 1 lists examples identified by CRS of the enforcement of the two-hour rule between 1985 and 2017. The table includes the date the rule was invoked; where possible, an identification of the committee or committees affected; a summary of the proceedings; and a citation to the Congressional Record page, news account, or hearing transcript used to identify the table entry. In preparing the table, CRS conducted full-text searches in the Congressional Record and electronic news databases for either discussion of the rule or instances of objection to unanimous consent requests authorizing committees to meet. Not included in the table are instances where Senators or their staff indicated an intention to invoke the two-hour rule but for which no further evidence demonstrates that the rule was enforced. CRS cannot guarantee that these records are comprehensive of all instances of the two-hour rule being invoked. First, as discussed above, public action is not necessary to invoke the rule. As seen from the cases in Table 1 , sometimes no statement regarding authority for committees to meet was made on the floor. The majority leader was simply made aware that there was not an agreement and therefore no consent request or announcement was ever made on the floor. In 2017, in contrast, announcements were sometimes made when agreement was not reached, an apparently new practice that could affect results. Second, because the research is necessarily partly dependent on news accounts, variations in the nature of reporting on Senate action could potentially affect the results, although it is reasonable to expect unexpected adjustments to committee meetings and schedules to be newsworthy over the entire period under study. Third, and finally, various full-text search strategies employed may not necessarily identify every reported instance or every objection to a unanimous consent request made on the floor. Nevertheless, the cases identified suggest two general trends in the use of the two-hour rule. First, as has been noted, for the life of the two-hour rule, it has been a routine occurrence for committees to be given permission to meet during restricted periods. In recent years, however, it appears that the restrictions on sitting contained in the rule are being invoked more frequently. Over the 32-year period examined, CRS identified 47 occasions where one or more Senate committees had a meeting restricted by invocation of the two-hour rule. Over half of these instances have occurred since 2005. The eight instances identified by CRS as occurring in 2017 represent the highest number in any year over the period. Second, these data suggest that, since 1985, when the two-hour rule restrictions on committee meetings have been invoked, it appears to have been done in a large majority of cases as a form of protest or to delay committee action on a specific measure or matter. Invoking the rule to delay the consideration of judicial nominations has been particularly common.

Paragraph 5(a) of Senate Rule XXVI, sometimes referred to as the "two-hour rule," restricts the times that most Senate committees and subcommittees can meet when the full Senate is in session. The rule is intended to help balance the Senate's committee and floor work and to minimize the logistical conflicts that Senators face between participating in committee hearings and markups and attending to their duties on the chamber floor. Under the terms of the rule, no Senate committee or subcommittee (except the Committees on Appropriations and Budget and their subcommittees) can meet after the Senate has been in session for two hours or past 2:00 p.m. unless one of the following things occur: (1) the Senate grants unanimous consent for them to meet; (2) both the majority and minority leaders (or their designees) agree to permit the meeting, and their agreement has been announced on the Senate floor; or (3) the Senate adopts a privileged motion to allow the meeting. Should a committee meet during a restricted time period without being granted permission, any action that it takes--such as ordering a bill or nomination reported to the Senate--is considered "null, void, and of no effect." Senate rules restricting committee meeting times have existed for over 70 years and have evolved over time. A rule limiting committees from sitting while the Senate is in session was first enacted in Section 134(c) of P.L. 79-753, the Legislative Reorganization Act (LRA) of 1946. Rules regulating the meeting times of Senate committees were amended in 1964 and again in 1970. The Senate adopted the present form of the two-hour rule on February 4, 1977, via Section 402 of S.Res. 4, a resolution implementing the recommendations of the Temporary Select Committee to Study the Senate Committee System. Permission for committees to sit during the hours restricted by the rule is routinely granted in the Senate. On occasion, however, the two-hour rule is invoked, most often as a form of protest or in order to delay committee action on a particular measure or matter. Invoking the rule for these reasons has increased in recent years. Permission to sit during times prohibited by the rule is now most often granted by joint leadership agreement instead of by unanimous consent, a change from prior practice.

Canada has long been the United States' most important energy partner. Canada is the single largest foreign supplier of petroleum products, natural gas, and electric power to the United States--and the United States is the dominant consumer of Canada's energy exports. Canada is also the primary recipient of U.S. energy exports. The value of the energy trade between the two countries totaled nearly $100 billion in 2010, helping to promote general economic growth and directly support thousands of energy industry and related jobs on both sides of the border. Increased energy trade between the United States and Canada--a stable, friendly neighbor--is viewed by many as a major contributor to U.S. energy security. The U.S.-Canada energy relationship is increasingly complex, however, and is undergoing fundamental change, particularly in the petroleum and natural gas sectors. Congress has been facing important policy questions in the U.S.-Canada energy context on several fronts, including the siting of major cross-border pipelines, increasing petroleum supplies from Canadian oil sands, increasing natural gas production from North American shales, and the construction of new facilities for liquefied natural gas (LNG) exports. Legislative proposals in the 112 th Congress could directly influence these developments. For example, H.R. 1938 would direct the President to expedite the consideration and approval of the Keystone XL pipeline linking Canadian oil sands production to refineries in the Gulf of Mexico. H.R. 909 would encourage petroleum and natural gas production on the outer continental shelf, would prescribe requirements for coordination with adjacent states regarding associated pipeline construction, and would allow production of petroleum and natural gas from the Arctic National Wildlife Refuge, among other provisions. S. 304 would support a program to train workers in the construction, operation, maintenance, and performance of all related environmental processes involving oil and gas infrastructure in Alaska. Other proposals in Congress affecting hydraulic fracturing operations for natural gas production, offshore drilling, or U.S. oil shale development could also affect the U.S.-Canada energy trade. While specific energy policy issues arising in the United States and Canada may appear to be independent of one another, many have important physical, economic, and environmental links. Thus, U.S.-Canada energy policies established in one context may have important implications in others. This report provides an overview of the U.S.-Canada energy trade, with a focus on petroleum and natural gas. It summarizes important trends in both of these sectors and identifies key connections among these trends. Finally, the report discusses possible implications for the U.S.-Canada energy relationship going forward, highlighting considerations for Congress as it continues its oversight of the energy industry and considers new energy legislation. Although the report raises environmental issues in specific contexts, a broad discussion of environmental impacts from North American energy production and consumption is beyond its scope. In 2010, 30% of primary energy consumed in the United States was imported ( Figure 1 ). Approximately 29% of these energy imports were Canadian petroleum (18%) and Canadian natural gas (11%). Taken together, Canadian petroleum and natural gas accounted for 9% of total U.S. primary energy consumption in 2010, the largest contribution from any one foreign supplier. The value of energy imports from Canada in 2010 was $83.6 billion, accounting for about 3.5% of all U.S. imports of goods and services that year. These payments were primarily for petroleum and natural gas ( Figure 2 ). In addition to these imports, the United States exported $13.5 billion worth of energy commodities to Canada, including $5.3 billion of refined petroleum products. The North America Free Trade Agreement's (NAFTA's) extensive energy provisions have facilitated energy trade between the United States and Canada, underscoring the importance of this trade for both countries. NAFTA states, in part, "it is desirable to strengthen the important role that trade in energy and basic petrochemical goods plays in the free trade area...." By virtue of NAFTA and the private sector orientation of the energy sectors in both countries, U.S. and Canadian companies have become integrated in the development, production, transportation, and marketing of petroleum and natural gas. Joint ventures between U.S. and Canadian companies on petroleum and natural gas projects are common. These close connections, and geographic proximity, have led the U.S. and Canadian energy markets to be viewed as one. The United States and Canada are connected by high capacity pipelines carrying crude oil, other petroleum products, and natural gas. As Figure 3 shows, pipelines originating in Canadian supply basins are linked to major markets across the United States, comprising a large part of the North American pipeline system. There are five major Canadian petroleum export pipelines, discussed later in this report. Canadian natural gas exports cross into the United States at 25 entry points across the length of the border through major and minor pipelines. The primary receiving states are Idaho (21%), New York (20%), Montana (15%), North Dakota (15%), and Minnesota (15%). While pipelines carry most Canadian energy exports to the United States, significant volumes are also transported by truck, train, and marine vessel. Although the United States and Canada have a long-established trade relationship in petroleum and natural gas--both have been shipped across the border since the late 1800s--several aspects of that relationship have been undergoing a transformation in recent years. These changes include the rapid growth in petroleum supplies from Canadian oil sands, the siting of major cross-border petroleum pipelines, renewed attempts to commercialize Arctic natural gas, a sharp rise in natural gas production from U.S. shales, and the development of new liquefied natural gas (LNG) facilities. In each of these areas new technology and infrastructure investments may have a significant effect on the balance of energy supply, demand, and trade between the United States and Canada. In some cases, they may also create new competition between the two countries in developing specific mineral resources and infrastructure projects. In 2010, Canada was the largest supplier of imported petroleum to the United States. Of the 11.8 million barrels per day (Mbpd) the United States imported last year, Canada supplied 2.5 Mbpd (22%), more than the imports from the next two largest suppliers combined--Mexico and Saudi Arabia ( Figure 4 ). Canadian imports have grown fairly steadily since the early 1980s and are expected to continue growing as new U.S.-Canada pipeline capacity is added and Canadian petroleum resource development expands. The Canadian Association of Petroleum Producers (CAPP) projects crude oil output to increase more than 50% from 2010 to 2025, with most of this production destined for the United States. As noted earlier, the United States also exports a limited amount of petroleum to Canada, mostly as refined products. Petroleum production from oil sands is the key driver behind the growth in Canadian petroleum exports. Oil sands are mixtures of sand, water, and bitumen. When oil sands, also known as tar sands, are included, Canada's petroleum reserves rank second in the world behind Saudi Arabia's. Canada has an estimated 143.1 billion barrels of petroleum reserves, of which 81% are from oil sands. According to CAPP projections, by 2025, oil sands will account for about 80% of total Canadian oil production, up from 50% currently. Notwithstanding its rapid growth, petroleum production from Canadian oil sands is controversial because it has significant environmental impacts, including emissions of greenhouse gases during extraction and processing (that exceed emissions from conventional oil production), disturbance of mined land, and impacts on wildlife and water quality. Since bitumen in oil sands cannot be pumped from a conventional well, it must be mined, usually using strip mining or open pit techniques, or the oil can be extracted using underground heating methods, which require large amounts of water and natural gas (for heating). The magnitude of the environmental impacts of oil sands production, in absolute terms and compared to conventional oil production, has been the subject of numerous, and sometimes conflicting, studies and policy papers. Cross-border pipeline infrastructure for Canadian petroleum exports to the United States has been growing rapidly. Five major pipelines with a combined capacity of 3.3 Mbpd currently link Canadian petroleum producing regions to markets in the United States ( Table 1 ). Two of these pipelines, Alberta Clipper and Keystone, with a combined capacity of just under 0.9 Mbpd (26% of the total) began service last year. A permit application for a sixth pipeline, Keystone XL, which would add an additional 0.8 Mbpd of capacity, is in the final stages of review by the U.S. State Department. If approved and constructed, Keystone XL would bring Canada's total U.S. petroleum export capacity to over 4.1 Mbpd, enough capacity to carry over 34% of U.S. petroleum imports in 2010. Given that Canada actually supplied the United States 2.5 Mbpd in 2010, large increases in Canadian supply will ultimately be possible, although the industry anticipates significant excess pipeline capacity for the next decade. In addition, several large pipeline projects are proposed within the United States to increase movements of Canadian petroleum to key U.S. market hubs, including refineries in the Midwest and on the Gulf Coast that employ complex technology in order to process "heavy" crude oils like those from Canada, Mexico, and Venezuela. Note that whether a pipeline is located in one country or the other has little bearing on its ownership; Kinder Morgan is a U.S. company while Enbridge and TransCanada are Canadian companies ( Table 1 ). The recent expansion of petroleum pipelines from Canada has generated considerable controversy in the United States. Proponents of these pipelines, including Canadian government agencies, petroleum industry stakeholders, and pipeline construction workers, have based their public interest justifications primarily on increasing the diversity of the U.S. petroleum supply and on expected economic benefits to the United States, including near-term job creation associated with pipeline construction and operation. Opponents, primarily environmental groups and affected communities along pipeline routes, have objected to these projects principally on the grounds that Canadian oil sands development has negative environmental impacts and that it promotes continued U.S. dependency on fossil fuels. Some opponents also argue that, given the excess capacity anticipated in the existing Canadian petroleum pipelines noted above, additional pipelines are not needed. These issues have come into particular focus in the context of the Keystone XL pipeline proposal, which applied for a Presidential Permit from the U.S. Department of State in 2008. The State Department expects to make a decision regarding this permit by the end of 2011. H.R. 1938 (Sec. 3) would require this decision by November 1, 2011. The Arctic region has substantial natural gas resources. For example, the U.S. Geological Survey (USGS) estimates that conventional natural gas reserves just on Alaska's North Slope potentially exceed 100 trillion cubic feet (Tcf), over four times the total annual gas consumption of the United States. The Mackenzie River Delta region in the Canadian Arctic contains an estimated 40 Tcf of natural gas. The USGS's assessment of undiscovered conventional natural gas resources across the entire Arctic region concluded that over 1,600 Tcf of additional natural gas resources remain to be found, much of it under Canadian and U.S. territory. Both the United States and Canada have long recognized the potential of these natural gas resources and have pursued policies to develop them. Principal among these policies has been promoting the construction of natural gas pipelines from the Arctic to markets in the lower-48 United States. While Arctic natural gas pipeline projects have been on and off the drawing board for decades, serious interest in Arctic natural gas pipeline revived around 2000 because of accelerated growth in U.S. natural gas demand, rising natural gas prices, and increased importation of liquefied natural gas (LNG) from overseas. Moreover, many industry analysts expected a U.S. policy of carbon dioxide control could further increase natural gas demand for electric power generation and, possibly, transportation fuel. These factors led both U.S. and Canadian officials to restart the process of Arctic natural gas pipeline development. Important milestones in Arctic pipeline activity were Alaska's 2008 award to TransCanada of a license to build an Alaska natural gas transportation system from Prudhoe Bay, AK, through Canada to the lower-48 states, the concurrent announcement of a competing pipeline proposal (Denali) along a similar route, and revival of a third proposal for an all-Canada pipeline originating in the Mackenzie Delta ( Figure 5 ). Since large sections of either of the proposed Alaska natural gas pipelines would pass through Canadian territory, Canada has cooperated with the United States on their development. However, because the Mackenzie pipeline would commercialize a major new source of North American natural gas, and would draw on a limited pool of construction resources and materials available for such a project, it has been viewed by some as a direct competitor to an Alaska gas pipeline. Notwithstanding recent development progress, there have been many obstacles to Arctic natural gas pipelines--most notably natural gas prices in the lower-48 states, the primary market for Arctic natural gas. As discussed below, a rapid and largely unanticipated increase in natural gas production from U.S. shales has lowered natural gas price forecasts for the foreseeable future. Given this drop in prices, Arctic natural gas projects may not be economically viable at present. In March 2011, Canadian authorities provisionally approved the Mackenzie pipeline project, although some analysts believe it may not be constructed without new government subsidies. In May 2011 the developers of the Denali pipeline proposal discontinued the project, citing a lack of commitment to contract for pipeline capacity among potential Arctic gas producers (two of which--BP and ConocoPhillips--were Denali sponsors). TransCanada officials have stated that they remain committed to developing their Alaska pipeline project, although some industry analysts are skeptical. If either the TransCanada or Mackenzie pipeline is ultimately constructed and begins transporting natural gas to lower-48 markets, it could have a significant impact on U.S. energy prices, energy security, and emissions of carbon dioxide. Canada is the dominant foreign supplier of natural gas to the United States. Of the 3,683 billion cubic feet (bcf) of natural gas the United States imported in 2010, Canada supplied 3,222 bcf (88%), almost 20 times the next largest supplier. This level of Canadian natural gas exports to the United States comprised approximately 13% of total U.S. natural gas consumption last year. Canadian natural gas exports to the United States saw rapid growth beginning in the mid-1980s, rising more than 400% between 1984 and 2002. These imports have begun to decline, however, due to increases in U.S. imports of LNG from overseas and, more recently and importantly, due to increases in domestic natural gas production. At the same time, the United States has begun to export significant volumes of U.S.-produced natural gas to markets in eastern Canada, displacing Canadian supplies ( Figure 6 ). In 2010, the United States exported 738 billion cubic feet of natural gas to Canada, mostly via Michigan. In May, the U.S. Federal Energy Regulatory Commission approved a new pipeline from Marcellus shale gas fields in the United States to Canada, potentially increasing northward natural gas exports. The rise in U.S. domestic natural gas supplies has been driven by an unanticipated growth in natural gas production from shale, a widespread type of geologic formation that often holds large quantities of natural gas but poses technical challenges for extraction. In recent years, energy companies have overcome these challenges, making large natural gas resources in U.S. shales commercially available. For example, in its 2011 Annual Energy Outlook , the Energy Information Administration more than doubled its estimate of shale gas resources to 827 Tcf from its 2010 Annual Energy Outlook estimate of 347 Tcf--due primarily to a re-evaluation of shale gas supplies. Because U.S. shale gas reserves are located close to major natural gas markets, U.S. shale gas has an advantage over traditional supply basins in Western Canada and the U.S. Gulf Coast. Large shale gas reserves are also found in Canada, although they are several years behind the development of U.S. reserves because of limited pipeline infrastructure and because transportation costs make them less competitive than other North American supplies. The reversal of Canada-U.S. natural gas export trends is driving fundamental changes in the North American natural gas industry. For example, due to sharply declining long-haul contract volumes on its Canadian natural gas pipelines to the United States, TransCanada has had to drastically restructure its pipeline tariffs to maintain the economic viability of certain lines. Likewise, as discussed earlier, shale gas plays have hurt prospects for Arctic natural gas development in both Alaska and Arctic Canada. On the other hand, low natural gas prices benefit the production of petroleum from oil sands, which requires large volumes of natural gas for extraction and processing. It remains to be seen how the development of additional North American natural gas reserves and associated pipeline infrastructure will turn out over time as Canada seeks to develop its own resources (with the help of U.S. companies) in response to U.S. shale gas developments. At least in the near term, however, it appears that recent trends of reduced U.S. imports of Canadian natural gas will continue. Liquefied natural gas (LNG) shipments from overseas historically have played a minor role in North American energy markets. However, in reaction to rising natural gas prices in the early 2000s and a fear of impending shortages of pipeline natural gas, demand for LNG imports to the United States was expected to increase. To meet this anticipated growth in LNG demand, developers expanded existing LNG terminals and constructed or proposed numerous new LNG import terminals in both the United States and Canada. In the United States, between 2001 and 2011, 3 existing LNG import terminals were expanded, 7 new LNG terminals were constructed, and 16 were approved but not constructed. In Canada during this period, one new LNG import terminal was constructed and two more were approved. Because Canada's new LNG terminals would serve the same Northeast markets as several of the proposed U.S. terminals, there was considerable competition among the developers of these projects. In one instance, this competition even reportedly created diplomatic tension between the two countries. But the building boom in LNG terminals was premature. As North American natural gas supplies from shale plays rapidly increased, the anticipated rise in demand for LNG imports did not materialize, leaving most of the new LNG import capacity unutilized. In a somewhat ironic turn of events given the origins of the aforementioned LNG terminal building boom, some terminal owners and developers are now proposing to export North American natural gas to China, Japan, and other foreign buyers. At least two groups have proposed Canadian LNG export terminals in British Columbia, anticipating significant natural gas supplies from shales in Western Canada. Many analysts view such exports as the only way to economically develop gas reserves from these western shales, which might otherwise not be competitive with U.S. natural gas supplies. Likewise at least three U.S. developers have filed applications for LNG export facilities (modifying existing import terminals), and more such filings are anticipated. On May 20, 2011, the U.S. Department of Energy issued its first conditional authorization for LNG exports from the Sabine Pass LNG Terminal in Louisiana to non-NAFTA countries. If U.S. and Canadian LNG export projects are developed, LNG developers in the two countries could again find themselves in competition, only this time in seeking to supply overseas LNG buyers. The potential effects on North American natural gas prices are difficult to predict, but exports to foreign markets would create upward price pressures. Furthermore, a large LNG export trade might limit U.S. natural gas exports to Canada in the future. The United States and Canada, while independent countries, effectively comprise a single integrated market for petroleum and natural gas. These markets are physically linked by billions of dollars of transportation and refining infrastructure, and are economically linked by direct participation in the same regional and global energy markets. Canada is the largest foreign supplier of energy to the United States and will continue to be for the foreseeable future. The United States depends on Canada for oil and natural gas supplies that it cannot currently produce itself. As the primary supplier of U.S. imports of petroleum and natural gas, Canada is viewed as a stabilizing factor for U.S. energy supplies; although petroleum prices are set in a global market, the likelihood that Canada would cut off oil and natural gas supplies is remote. But Canada is equally dependent upon the United States to buy energy exports that might not easily find a market elsewhere due to geographical constraints. The United States is also a critical supplier to Canada of refined petroleum products. U.S.-based companies invest heavily in assets and energy resources in Canada and vice versa. Although individual companies in both countries may compete for specific energy opportunities (e.g., LNG terminals), the overall energy relationship between the United State and Canada is mutually beneficial. Traditionally, the energy trade between the United States and Canada, while intertwined, has been uncomplicated--taking the form of a steadily growing southward flow of crude oil and natural gas to markets in the U.S. Midwest and Northeast. But recent increases in oil sands and shale gas production, expansion of cross-border pipeline capacity, prospects for LNG exports, and renewed interest in Arctic natural gas have greatly complicated that energy relationship, creating new competition and interconnections. Consequently, while energy policies in one country have always inevitably affected the other, their cross-cutting effects in the future may not be widely understood and, in some cases, may be largely unanticipated. For example, policies affecting U.S. shale gas production could affect North American natural gas prices overall, and thus, the costs of producing petroleum from oil sands (which requires large volumes of natural gas for heating). Changing oil sands costs could, in turn, affect Canadian petroleum supplies to the United States, affecting north-south pipeline use and changing U.S. petroleum import requirements from overseas. Changing natural gas prices would also change the economics of Arctic natural gas, however, and influence the development of the Arctic natural gas pipelines, which could provide an alternative source of economic natural gas for oil sands production in Alberta. How such scenarios could play out in reality is open to debate, but they illustrate the tangled web policymakers in both countries must navigate as they consider future energy, environmental, and transportation decisions. As Congress debates legislative proposals affecting the petroleum and natural gas industries, it may be helpful to consider these proposals in the broadest possible North American context, recognizing that the energy sector in Canada may be moved in one direction or another based on policies in Washington, DC. For example, developers are already pursuing western Canadian routes for petroleum exports to Asia as an alternative to U.S. exports, especially if the latter should fail to grow as expected. Ultimately, the energy market effects of specific energy policies and projects must be weighed against their broader economic value, energy security implications, and environmental impacts. To date, the judgment of Congress has favored a growing U.S.-Canada energy partnership--but ensuring that this relationship continues to be as mutually beneficial as possible will likely remain a key oversight challenge for the next decades. If the balance tips the other way--either in the eyes of developers or the federal government--Congress may need to reconsider its position on key energy and related initiatives to meet the United States' long-term policy objectives.

The United States and Canada, while independent countries, effectively comprise a single integrated market for petroleum and natural gas. Canada is the single largest foreign supplier of petroleum products and natural gas to the United States--and the United States is the dominant consumer of Canada's energy exports. The value of the petroleum and natural gas trade between the two countries totaled nearly $100 billion in 2010, helping to promote general economic growth and directly support thousands of energy industry and related jobs on both sides of the border. Increased energy trade between the United States and Canada--a stable, friendly neighbor--is viewed by many as a major contributor to U.S. energy security. The U.S.-Canada energy relationship is increasingly complex, however, and is undergoing fundamental change, particularly in the petroleum and natural gas sectors. Congress has been facing important policy questions in the U.S.-Canada energy context on several fronts, including the siting of major cross-border pipelines, increasing petroleum supplies from Canadian oil sands, increasing natural gas production from North American shales, and the construction of new facilities for liquefied natural gas (LNG) exports. Legislative proposals in the 112th Congress could directly influence these developments. These proposals include H.R. 1938, which would expedite consideration of the Keystone XL pipeline proposal; H.R. 909, which would encourage petroleum and natural gas production on the outer continental shelf and in the Arctic National Wildlife Refuge; and S. 304, which would support a program to train workers involved with oil and gas infrastructure in Alaska. Other proposals in Congress affecting hydraulic fracturing operations for natural gas production, offshore drilling, or U.S. oil shale development could also affect the U.S.-Canada energy relationship. Traditionally, the energy trade between the United States and Canada, while intertwined, has been uncomplicated--taking the form of a steadily growing southward flow of crude oil and natural gas to markets in the U.S. Midwest and Northeast. But recent developments have greatly complicated that energy relationship, creating new competition and interconnections. Consequently, while energy policies in one country have always inevitably affected the other, their cross-cutting effects in the future may not be widely understood and, in some cases, may be largely unanticipated. For example, policies affecting U.S. shale gas production could affect North American natural gas prices overall, and thus, the costs of producing petroleum from oil sands (which requires large volumes of natural gas for heating). Changing oil sands costs could, in turn, affect Canadian petroleum supplies to the United States, affecting north-south pipeline use and changing U.S. petroleum import requirements from overseas. Changing natural gas prices would also change the economics of Arctic natural gas, however, and influence the development of the Arctic natural gas pipelines, which could provide an alternative source of economic natural gas for oil sands production in Alberta. How such scenarios could play out in reality is open to debate, but they illustrate the tangled web policymakers in both countries must navigate as they consider future energy, environmental, and transportation decisions. As Congress debates legislative proposals affecting the petroleum and natural gas industries, it may be helpful to consider these proposals in the broadest possible North American context, recognizing that the energy sector in Canada may be moved in one direction or another based on policies in Washington, DC. To date, the judgment of Congress has favored a growing U.S.-Canada energy partnership--but ensuring that this relationship continues to be as mutually beneficial as possible will likely remain a key oversight challenge for the next decades.

On March 12, 2002, Governor Tom Ridge--then Director of the White House Office of Homeland Security (OHS), and formerly Secretary of the Department of Homeland Security (DHS)--announced the establishment of the Homeland Security Advisory System (HSAS). The HSAS is designed to measure and evaluate terrorist threats and communicate these threats to federal, state, and local governments, the public, and the private sector in a timely manner. Although HSAS is a nationwide system, it can also be used at a smaller scale to warn of threats against a state, city, critical infrastructure, or industry. From inception to August 2004, the HSAS has been raised from "elevated" to "high" seven times, and raised to severe once. (see Table 2 ). The HSAS was developed by OHS using information collected from state and local first responders, business leaders, and the public. Following the March 12 announcement, the general public and the private sector were asked to provide comments on the system, with a deadline for comments on April 26, 2002. Within DHS, the Undersecretary for Information Assurance and Infrastructure Protection--as head of the Information Assurance and Infrastructure Protection directorate (IAIP)--is responsible for administering the HSAS. Specifically, IAIP is responsible for providing, in coordination with other agencies of the federal government, specific warning information and advice about appropriate protective measures and countermeasures to state and local government agencies and authorities, the private sector, other entities, and the public. The advisory system is based on five threat levels: low, guarded, elevated, high, and severe. Each level, with its corresponding identification color, indicates protective measures mandatory for federal departments and agencies. DHS receives threat information from the Federal Bureau of Investigation (FBI), the Central Intelligence Agency (CIA), the National Security Agency (NSA), the Drug Enforcement Agency (DEA), the Department of Defense (DOD), the Terrorist Threat Integration Center (TTIC), and other agencies. DHS uses this information to determine what terrorist threat level to set. Assigning a threat condition involves a variety of considerations, among which are the following: To what degree is the threat information credible? To what degree is the threat information corroborated? To what degree is the threat specific and imminent? How grave are the potential consequences of the threat? The DHS Secretary decides to raise or lower the threat level in consultation with the Homeland Security Council. When the decision to change the threat level is made, DHS sends an electronic notification to state homeland security centers and to federal, state, and local agencies via the National Law Enforcement Telecommunications System (NLETS). If circumstances and time permit, the DHS Secretary or his representative makes an advance conference call to alert governors, state homeland security advisors, and mayors of selected cities that the terrorism threat level has been changed and that electronic notification is about to be sent. Following the first conference call and electronic notification via NLETS, DHS makes a second conference call to as many state and local law enforcement associations as can be reached. Following the second conference call, DHS initiates a secure call using the Business Roundtable's Critical Emergency Operations Communications Link (CEO COM LINK) to notify chief executive officers of the nation's top businesses and industries. They are asked to dial into a secure conference call, and after each CEO goes through a multi-step authentication process to ensure security, DHS or other federal officials brief them on developments and threats. Following the conference call via CEO COM LINK, DHS makes a public announcement through a press conference. Finally, critical infrastructure associations and other business groups are notified. Several bills were introduced in the 109 th Congress that addressed administration of the HSAS or alert notification of federal, state, and local entities; the private sector; and the public. Some of these included H.R. 2101 , S. 1753 , and H.R. 5001 . H.R. 2101 proposed to require DHS to establish a telephone alert network to warn the public of imminent or current emergencies caused by terrorist incidents and disasters. The warning would have provided information on appropriate protective measures. S. 1753 proposed to establish a National Alert System administered by a National Alert Office. The National Alert Office would have been established within the National Oceanic and Atmospheric Administration, and the National Alert System would have provided a public alert on national, regional, and local emergencies requiring a public response. H.R. 5001 would have required the DHS Undersecretary for Information and Analysis to implement changes to HSAS. The proposed changes included the requirement for every HSAS alert to be accompanied by information on the threat and appropriate protective measures. The HSAS warning would have been limited in scope for every warning to a specific region, locality, or economic sector believed to be at risk. Finally, H.R. 5001 would have required DHS to use some means of warning the nation without the use of color designations. Since the creation of the HSAS, a number of issues have arisen, among which are: the vagueness of warnings disseminated by the system; the system's lack of protective measures recommended for state and local governments, and the public; the perceived inadequacy of disseminating threats to state and local governments, the public, and the private sector; and how best to coordinate HSAS with other existing warning systems. In the 109 th Congress, the House of Representative's Committee on Government Reform's Subcommittee on National Security, Emerging Threats, and International Relations held a hearing on the HSAS, its threat codes, and public response to it. This hearing focused on the information DHS issued the public the seven times the HSAS threat level was raised from "yellow" to "orange." These issues and pertinent oversight options available to Congress are discussed below. The HSAS threat level has been raised seven times from "yellow" to "orange" since its activation on March 12, 2002, and once to "red" on August 10, 2006. With each change, the Attorney General or DHS Secretary cited intelligence information but offered little specificity, except on August 1, 2004, when former DHS Secretary Ridge identified financial institutions in New York, Washington, DC, and New Jersey as being targeted by Al Qaeda. The only other time any specifics were given on possible terrorist attack targets was on February 7, 2003, when former DHS Secretary Ridge cited intelligence reports suggesting Al Qaeda attacks on apartment buildings, hotels, and other soft skin targets. But in this case, no region, state, or city was identified as possible locations of attacks. Moreover, DHS has never explained the sources and quality of intelligence upon which the threat levels were based. Some observers have asserted that when federal government officials announce a new warning about terrorist attacks, the threats are too vague. The vagueness that characterized the eight increases in the threat condition in the past two years has raised concerns that the public may begin to question the authenticity of the HSAS threat level. Former Secretary Ridge told reporters on June 6, 2003, that DHS is worried about the credibility of the system. He said that the system needs to be further refined. Questions about the credibility of the threat, say other observers, might cause the public to wonder how to act or whether to take any special action at all. Some observers maintain that, without specific terrorist threat information, there is no basis for formulating a clear, easily understood public announcement of what appropriate protective measures to take. Others assert that the continued lack of specific information arguably can lead to complacency. DHS officials cite the lack of specificity in intelligence as the reason for a lack of detailed information when the threat level is changed. Former Secretary Ridge has been quoted saying that the intelligence gathered so far has been generic; but he maintained that DHS, and the federal intelligence community that provides information about terrorist threats will improve. Option 1: Status Quo . Congress may view the evolution of the process, and decisions relating to it are best left to the Department. The lack of specificity may be due to the need to protect intelligence sources or a desire by DHS to issue warnings when threat information is generic, but nonetheless credible. Maintaining the status quo places the burden of responding to complaints about the vagueness of HSAS warnings and the critiques of DHS's perceived inability to give adequate terrorist attack warnings on the Department. Option 2: Provide General Warnings . Due to the reported misunderstanding of HSAS threat levels, and the system's lack of recommended protective measures for state and local agencies, the public, and private-sector entities, Congress could consider directing DHS to issue general warnings concerning the threat of terrorist attacks without using the HSAS to notify state and local governments, the public, and the private sector. General warnings via public statements, in coordination with HSAS warnings to the federal government, would ensure that notices of terrorist threats are issued to state and local governments, the public, and the private sector. DHS chose to provide general warnings on September 4, 2003, and November 21, 2003. On September 4, 2003, DHS cited recent federal interagency reviews of information that raised concerns about possible Al Qaeda plans to attack the U.S. and U.S. interests overseas. This general warning listed aviation, critical infrastructure, WMD, and soft target threats, however, no specifics were given on possible location or type of attacks. Another general warning was issued on November 21, 2003, when DHS cited a high volume of reports concerning the possible threats against U.S. interests during the Muslim holiday of Ramadan. These reports suggested Al Qaeda remained interested in using commercial aircraft as weapons against critical infrastructure; however, no location of possible attacks was specified. This approach would address the concerns of some who have asserted that the HSAS causes misunderstanding at the state and local level, but it would not address the issue raised by those who say DHS does not give enough specificity in its terrorist attack warnings. Option 3: Increase Specificity of Warnings . Were Congress to decide that the terrorist warnings issued by DHS are too vague and cause complacency in state and local agencies, the public, and the private sector, it might instruct DHS to use the HSAS to provide specific warnings to targeted federal facilities, regions, states, localities, and private sector industries to the extent that is possible. DHS has said that its goal is to have the capability to issue high alerts to designated cities, geographical regions, industry, or critical infrastructure. This approach arguably would address the concerns about the perceived vagueness of HSAS warnings. One could argue that DHS is getting better at providing specificity with the latest alert issued on August 1, 2004. The HSAS provides a set of protective measures for each threat condition, but these protective measures are identified only for federal agencies. DHS only recommends protective measures for states, localities, the public, or the private sector, however, the recommended protective measures are the same ones issued to federal agencies. These recommended protective measures provide no specificity for states, localities, the public, or the private sector. HSAS silence with regard to protective measures for the public, the private sector, and state and local governments has drawn the attention of some interested observers. Early on, William B. Berger, President of the International Association of Chiefs of Police, testified before the Senate Governmental Affairs Committee that the lack of defined response protocols for state and local governments was an area of concern among local law enforcement agencies. Citing what some contend is a lack of DHS guidance on protective measures, non-federal entities are beginning to fill the perceived void. For example, the American Red Cross recommends protective measures for individuals, families, neighborhoods, schools and businesses at each of the HSAS threat levels. Further, the State of Maryland has adopted the American Red Cross protective measures. Without federal guidance, some cities have adopted the following types of protective measures when the HSAS threat condition is raised to "orange": Surveillance cameras are activated. Law enforcement officers are not granted time off. Port security patrols are increased. Law enforcement officers are required to carry biological/chemical protective masks. First responders are placed on alert. Mass transit authorities broadcast warnings and instructions. Mass transit law enforcement officers increase patrols. Law enforcement agencies make security checks in sensitive areas, such as bridges, shopping centers, religious establishments, and courthouses. Option 1: Status Quo . The HSAS was designed for federal government use and Congress may deem the system adequate for the federal government. This approach can encourage states and localities to conduct threat and vulnerability assessments that would then assist in the development of specific protective measures geared to each state and locality's homeland security needs. On the other hand, this approach might cause confusion among states and localities in their attempts to prepare for terrorist attacks without federal guidance on protective measures. Option 2: Federal Guidelines for State and Local Protective Measures . If Congress decided that there were a need for more guidance for states, localities, the public, and the private sector, it could either encourage DHS to establish HSAS protective measure guidance for states, localities, the public, and the private sector, or it could enact legislation mandating these activities. These protective measures could match the federal government preparedness and response activities identified in the HSAS. This approach could provide federal government guidance on how to be prepared for and mitigate against a terrorist attack. A list of general protective measures for states, localities, the public, and the private sector may not, however, be as effective as state and locally devised protective measures. DHS uses a variety of communications systems to provide terrorist threat warnings to states, localities, the public, and the private sector. These systems include, for an example, conference calls, public announcements, CEO COM LINK, and NLETS, but DHS has no single communication system it uses to issue HSAS terrorist warnings. On April 30, 2003, Jeffery Horvath, chief of the Dover, Delaware police department told the Senate Governmental Affairs Committee that his department has never received any official notification of a change of HSAS threat condition and has relied on the news media for this information. Michael J. Chitwood, chief of the Portland, Maine police department reiterated this point, and specifically identified the Cable News Network (CNN) as the news medium through which he receives notifications of changes in the HSAS threat level. He added that he received official notification from state authorities eight hours later. Fire chief Edward P. Plaugher of Arlington County, Virginia, also identified CNN as the primary source for notification of changes in the HSAS threat level. When testifying before the Senate Governmental Affairs Committee, former DHS Secretary Ridge said that the process for notifying state, and local agencies and authorities of a change in the HSAS threat condition needs improvement. The public is alerted to a change in HSAS threat condition through the news media, following a public announcement from DHS or media leak of the information. There is no Emergency Alert System (EAS) type communication activated to alert the public to a change in threat condition, so the public is not informed of the change until they monitor a public news source. Private sector alerts are through systems like CEO COM LINK and conference calls. DHS uses CEO COM LINK to notify private sector entities that participate in the system, and then makes calls to other critical infrastructure and business associations. This arguably results in a de facto prioritization of alerted private sector entities, which could result in a targeted private sector entity being attacked without a timely and effective alert. Option 1: Status Quo . Congress may decide to allow DHS to deal with issues relating to HSAS advisories at this stage of HSAS development. This approach would encourage the continued utilization of the DHS terrorist threat communication systems. Since the HSAS is designed for federal government use, there may be no need for DHS to establish any other communication systems that disseminate changes in the HSAS terrorist threat levels. This would, however, not address the issues some have raised about the dissemination of HSAS advisories. Some would argue that before DHS establishes a specific system that communicates a change in HSAS terrorist threat levels, DHS needs to establish protective measures for states, localities, the public, and the private sector. This argument is based on the belief that there is little value in knowing of a change in the HSAS terrorist threat level in the absence of recommended protective measures. Option 2: Revise the HSAS Notification Process . Congress could encourage, or enact legislation instructing DHS to revise the HSAS notification process to ensure that state and local law enforcement, and emergency management agencies are informed of changes of the terrorist threat level in a more effective and timely manner. This approach could address the problem of states and localities receiving the notification via the news media without first receiving official notification from DHS. This approach, however, would not address the issue of the public, and private sectors receiving timely notification of changes in the HSAS threat level. A possible communications system DHS could use for disseminating threat level changes of the HSAS is the Homeland Security Information Network (HSIN). DHS announced an expansion of its HSIN on February 24, 2004. The HSIN is a computer-based counterterrorism communications network connecting DHS to all 50 states, five territories, and 50 major urban areas for a two-way flow of terrorist threat information. This communications system delivers real-time interactive connectivity among state and local partners with the DHS Homeland Security Operations Center (HSOC) through the Joint Regional Information Exchange System (JRIES). The community of users include State Homeland Security Advisors, State Adjutant Generals, State Emergency Operation Centers, and local emergency response providers. HSAS is not the only federal warning system; eight separate systems exist to provide timely notification about imminent and potentially catastrophic threats to health and safety. The types of hazards covered by these systems include severe weather, contamination from chemical and biological weapon stockpiles scheduled for destruction, terrorist attacks, and any other emergency or hazard the President decides is significant enough to warrant public notification. Some argue for the consolidation of the existing warning systems into one "all-hazard" system. The Partnership for Public Warning is one organization advocating this type of consolidation. Other organizations, such as the Federal Communications Commission's (FCC) Media Security and Reliability Council (MSRC) have recommended that the Emergency Alert System (EAS) should be established and implemented uniformly in all parts of the United States. This enhanced EAS would be fed information from systems such as the HSAS. Consolidation and coordination of these warning systems would present challenges to administering an "all-hazard" warning system. Some of the challenges include the administration of the warning system, interoperability of existing warning systems, and the involvement of industry. Congress has directed the President to insure that all appropriate federal agencies are prepared to issue warnings of potential disasters to state and local officials, and that federal agencies provide technical assistance to state and local governments to insure that timely and effective disaster warnings are provided. The President is authorized to utilize or make available to federal, state, and local agencies the facilities of the civil defense communications system, or any other federal communications system, for the purpose of providing warnings to governmental authorities and the civilian population in areas endangered by disasters. Federal agencies that currently administer warning systems include National Oceanic and Atmospheric Administration, Federal Communications Commission, Federal Emergency Management Agency, and Department of Defense. DHS is also responsible for coordinating and distributing warnings to the public. Existing warning systems are not interoperable. Reasons for this are: separate transmitting and receiving equipment; separate standard message protocols; separate procedures for how warnings are input into dissemination systems; and separate training, exercising, and testing of the system. Since this technology is primarily researched, developed, and operated by private industry, the federal government could establish a relationship with the corporate suppliers of these technologies, a relationship to encourage development and effectively consolidate or provide the means to make the current warning systems interoperable. Consolidating and coordinating federal warning systems, however, may cause a loss of concentration on the systems' traditional hazards. Mature warning systems have established alerting protocols and routines that, if consolidated, could become too broad, which may result in less effective warnings. Option 1: Status Quo . Without congressional intervention, federal agencies responsible for issuing warnings will likely continue to narrowly focus on traditional hazards. This approach allows mature warning systems to continue communicating alerts and protective measures to an identified audience. Also, this approach would not incur an increased need for federal funding that would be required to update, test, and ensure compatibility of the systems. On the other hand, this approach would not address issues such as overlap of hazards (terrorist threat warnings of HSAS, and any presidential declared emergency warning issued by EAS), and the potential need to reach a wide audience through the use of multiple warning systems. Option 2: Coordination and Update of Warning Systems . If Congress decided to address the issue of coordinating warning systems, it could require all federal agencies with hazard warning responsibilities, to establish, and develop a means for coordinating and updating existing warning systems. This approach could allow any warning of man-made or natural hazards to be issued on the full range of federal warning systems. This could ensure that a larger number of the state and local governments, the public, and private sector entities would receive the specific warning in an effective and timely manner. It would require a communication protocol to be developed that allowed one federal warning system to "talk" to a different system. Updating of warning systems would not only include the ability of one system to "talk" to another, but could also include the ability of such systems as EAS to be transmitted on off-the-shelf telecommunication devices such as cellular phones. Given the widespread use of wireless communications, some observers have argued for warnings to be issued on wireless devices. In the 108 th Congress, S. 564 proposes such an approach that would facilitate the deployment of wireless networks in order to extend the range and reach of EAS. It would also ensure emergency personnel priority access to communications facilities in times of emergency. Option 3: Consolidation of Warning Systems . If Congress decided that there needs to be an all-hazard warning system, it could enact legislation requiring the federal agencies that have warning responsibilities to develop and implement such a system to warn states, localities, the public, and the private sector. This approach could ensure that any warning of a hazard--man-made or natural--would be disseminated to as many entities as necessary in a timely and effective manner. In the 108 th Congress, two bills, S. 118 , and H.R. 2537 , propose such an approach to all-hazard warnings. The bills propose the establishment of a single all-hazard warning system that would ensure that states, localities, the public, and the private sector would be alerted to specific risks from man-made, and natural hazards. This approach, however, would arguably require federal funding and effort to research, test, develop, and implement an all-hazard warning system. An increase in the HSAS threat level imposes both direct and indirect costs on federal, state, and local governments, the private sector, and the public. These costs include the increased security measures undertaken by states and localities, loss to tourism, and the indirect cost on the economy during a period of heightened threat level. In FY2003, the Office for Domestic Preparedness (renamed the Office of Grant Programs in FY2007) Critical Infrastructure Protection grant program authorized state and local governments to use allocated grants to fund overtime costs associated with heightened threat levels. According to the Office of Grant Programs's State Homeland Security Grant and Urban Area Security Initiative grant programs guidance, overtime is an authorized expenditure only associated with training or exercises. Office of Grant Programs's Law Enforcement Terrorism Prevention Program, however, does allow overtime costs specifically related to homeland security efforts. Local governments incur direct costs when they put in place additional security measures to deal with a higher threat condition. An example of this is the cost of random car searches at Atlanta's Hartsfield airport, which reportedly requires $180,000 a month for labor and signage. This cost is borne by Atlanta's police department and airport administration. Because of the budget crisis that many states are experiencing, additional homeland security costs during heightened threat periods are seen as an additional fiscal burden. The costs associated with threat level changes have prompted many state and local officials to complain to DHS. The United States Conference of Mayors released a 145-city survey that reported that during periods of heightened alert homeland security costs increased to additional $70 million a week. This increase in homeland security costs during heightened threat periods also has localities arguing for direct funding from the federal government. FEMA's Assistance to Firefighters is the only assistance that provide 100% of the funding to localities. The Office of Grant Programs's Urban Area Security Initiative grants, however, first pass through the state, which causes some localities to complain about a delay in receiving funding. Authorized program expenditures are another point of contention that states and localities have with homeland security funding and costs. All homeland security grant programs list authorized equipment and activities that grant allocations can be used to fund. States and localities may argue that these authorized expenditures do not address their specific homeland security needs. These direct homeland security costs occur not only at the state and local level: when the threat level changes, federal departments and agencies have to adopt prescribed protective measures outlined in the different threat condition levels of the HSAS. An indirect cost of a heightened threat level is the negative effect on tourism in cities perceived as potential targets of terrorism . It has been observed that increased threat levels and the need for heightened security have hurt the tourism industry of such metropolitan areas as Washington, DC, New York, and Chicago. Washington's Mayor Anthony Williams urged residents to be alert for suspicious activities. He also wanted the city to remain friendly, open, and safe to minimize the affects of the terrorist threat level on tourism. D.C. Delegate Eleanor Holmes Norton agreed with the need to keep Washington open to tourism. She said that the city's tourism industry had been hurt by changes in threat condition, and that she feared some officials would overreact and shut down public buildings. An example of the impact on tourism is the decision by some schools to cancel trips to Washington because of the threat of terrorist attack. Some municipal officials have had to make a costly decision between homeland security and tourism. Philadelphia's mayor, John F. Street, for instance, chose not to close down a street around Independence Hall after he received a call from DHS Secretary Ridge, who advised its closing. Mayor Street cited traffic and tourism concerns as the reason he chose not to respond to the recommendation. Another indirect cost may be how a change in the HSAS threat condition affects the stock markets. Option 1: Status Quo . Congress may decide that the Office of Grant Programs homeland security assistance adequately meets the needs of states and localities' homeland security costs due to a heightened HSAS threat. It may be an appropriate approach for ensuring the splitting of homeland security costs among the several tiers of government. This policy approach would not however, address such issues as the needs of some state and local first responder agencies, of hiring additional personnel, the loss of revenue generated by tourism due to an increased terrorist threat level, or the cost the economy incurs when the terrorist threat level is raised. Option 2: Funding Through Established the Office of Grant Programs . Should Congress decide that more funding needs to be provided to cover costs incurred by states and localities due to an increased terrorist threat level, it could consider establishing grant programs that specifically fund such terrorist prevention, preparedness, and mitigation activities as overtime pay for first responders and the purchase of equipment and personnel for the protection of critical infrastructure. In the 108 th Congress, S. 1245 proposed such an approach by recommending that a consolidated homeland security grant program provide grant allocations for overtime expenses related to training, activities (as determined by the DHS Secretary) relating to an increase in the HSAS threat level, and emergency preparedness responses to a WMD incident. Option 3: Funding Specifically for Heightened Threat Levels . Should Congress decide to provide funding for costs incurred during heightened threat level periods, it could appropriate funds, in addition to the Office of Grant Programs homeland security assistance, specifically to states, localities, and private sector entities to compensate for costs associated with a change in the HSAS threat level. In the 108 th Congress, S. 728 proposed such an approach by compensating state and local law enforcement for costs associated with airport security.

The Homeland Security Advisory System (HSAS), established on March 12, 2002, is a color-coded terrorist threat warning system administered by the Department of Homeland Security (DHS). The system, which federal departments and agencies are required to implement and use, provides recommended protective measures for federal departments and agencies to prevent, prepare for, mitigate against, and respond to terrorist attacks. DHS disseminates HSAS terrorist threat warnings to federal departments, state and local agencies, the public, and private-sector entities. DHS, however, only provides protective measures for federal departments. This dissemination of warnings is conducted through multiple communication systems and public announcements. HSAS has five threat levels: low, guarded, elevated, high, and severe. From March 2002 to the present, the HSAS threat level has been no lower than elevated, raised to high seven times, and raised to severe once. The first time it was raised to high was on September 10, 2002, due to the fear of terrorist attacks on the anniversary of the terrorist attacks of September 11, 2001. The most recent time it was raised to high was on July 7, 2005, due to terrorist bombings of the London mass transit systems. DHS raised the threat level for mass transit systems only. The only time HSAS has been raised to severe (red) was on August 10, 2006, due to a terrorist plan to bomb flights originating in the United Kingdom. DHS raised the threat level for the aviation sector only. In the 109th Congress, the House of Representative's Committee on Government Reform's Subcommittee on National Security, Emerging Threats, and International Relations held a hearing on the HSAS, its threat codes, and public response to it. This hearing focused on the information DHS issued the public the seven times the HSAS threat level was raised from "yellow" to "orange." While the need for terrorist threat warnings seems to be widely acknowledged, there are numerous issues associated with HSAS and its effects on states, localities, the public, and the private sector. These issues include the following: vagueness of warnings; lack of specific protective measures for state and local governments, the public, and the private sector; dissemination of warnings to states, localities, the public, and the private sector; coordination of HSAS with other federal warning systems; and cost of threat level changes. This report will be updated as congressional or executive actions warrant.

This country has long debated how best to meet the needs of the poor. Some argue that income supplements that allow families to participate in the consumer market are the most effective and efficient means for the government to ensure that the basic needs of the poor are met. Others argue that poor people cannot effectively participate in the free market for a variety of reasons beyond income, and, as a result, society has a responsibility to provide them with the goods and services they need to survive. The social welfare programs run by the federal government have shifted from time to time in their relative emphasis on providing cash welfare versus subsidizing the costs of goods and services. Looking at the changes in welfare and housing programs over time helps to illustrate this tension. During and after the Great Depression, the government created a number of programs that provided both cash welfare and subsidized goods and services to the poor. The Social Security Act of 1935 offered grants to states to help fund cash aid for three groups of needy persons: children (Aid to Dependent Children), aged persons (Old-Age Assistance), and blind persons (Aid to the Blind). The Housing Act of 1937 created a federal construction program both to create jobs and to stimulate the economy, as well as to build low-cost housing for the poor. By the late 1930s and early 1940s, the federal government was providing surplus food to the poor in select cities. In 1964, the Food Stamp program was enacted both to eliminate surplus food as well as supplement the food needs of the poor. In 1965, the Medicaid program, which provided access to health care for the poor was created. By the late 1960s, the children's cash welfare program (renamed Aid to Families with Dependent Children (AFDC)) had become the target of widespread criticism. Some argued that cash welfare programs for single mothers promoted out-of-wedlock childbirth and dependency while discouraging work. At the same time, critics attacked federal housing programs, citing rising crime in publicly constructed housing developments and chronic fraud and abuse in their management. In 1969, President Nixon proposed a radical change to the federal social welfare system, a guaranteed minimum income in the form of a negative income tax. Nixon's plan was not adopted, but some reforms were made to the cash welfare program. By 1973, Nixon declared a moratorium on all federal housing construction programs. In their place, a number of programs were developed, the largest being a system of rental subsidies which families could use in the private market. Since the 1970s, federal social welfare policies have not resolved the debate between cash and services. Instead, a hybrid of both has developed and been maintained. The Earned Income Tax Credit (EITC) was created in the late 1970s and provides income supplements to working families. Market-based housing vouchers have grown to the point where more people are now served by vouchers than live in public housing. AFDC was abolished in 1996 and replaced by a state block grant called Temporary Assistance to Needy Families (TANF). This last change, from AFDC to TANF, has been one of the most dramatic. Whereas AFDC provided ongoing cash payments for poor families, TANF was designed to provide families with a temporary cash benefit while they transitioned into work. Under TANF, states have new flexibility, which, paired with a large reduction in the welfare caseload in the mid-1990s, has made it possible for them to use their TANF funds to provide a wide range of services including child care and job-search assistance. Spending on services now accounts for a larger portion of TANF spending than does spending on cash benefit payments. Given the array of federal support for both cash aid and goods and services, questions can be raised as to whether the existing programs are well-coordinated for the purposes of effectiveness and efficiency. This paper explores the overlapping areas of housing assistance and welfare, their areas of alignment and disconnect and proposals that have been made to encourage coordination between them. Enacted as a part of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) ( P.L. 104-193 ) as a replacement for the former welfare program, Aid to Families with Dependent Children (AFDC), TANF provides fixed grants to states for time-limited and work-conditioned aid for low-income families. The goals of TANF are to: Aid needy families so that children may be cared for in their homes or those of relatives; End dependence of needy parents upon government benefits by promoting job preparation, work, and marriage; Prevent and reduce out-of-wedlock pregnancies and establish goals for preventing and reducing their incidence; and Encourage the formation and maintenance of two-parent families. States have the flexibility to use their TANF grants not only for cash assistance, but for a wide range of services that seek to advance any of the goals of the program. States have used that flexibility to fund, for example, child care, transportation, job search assistance, and, in some cases, even housing assistance. States have implemented their TANF programs very differently and some states provide a wider array of services than others. In addition to greater flexibility in using funds, the conversion to TANF has brought a combination of policies to promote work, including stronger sanctions for nonparticipation in work, "Work First" policies and financial work rewards. Since TANF was enacted, the goal of moving families off of cash assistance and into employment has been largely met, as caseloads now are one-half their historic peak size. However, it is less clear whether the incomes of the families who have left the caseloads (or not entered them) provide "self-sufficiency." Studies indicate that most families who have left cash assistance still require some form of public assistance. According to studies funded by the Department of Health and Human Services (HHS), about two-thirds of families who leave welfare receive food stamps within the first year and three out of five adults leaving welfare and 60-90% of their children are enrolled in Medicaid. Funding for the TANF block grant was originally set to expire on September 30, 2002, but it has been renewed through a series of short-term legislative actions. Several bills were introduced in the 108 th Congress to reauthorize TANF through FY2008. The House passed the Personal Responsibility, Work, and Family Promotion Act of 2003 ( H.R. 4 ), on February 13, 2003. The Senate Finance Committee reported the Personal Responsibility and Individual Development for Everyone (PRIDE, H.R. 4 ) on October 3, 2003. Both bills contained proposals similar to the Administration's welfare reauthorization proposals, such as requiring states to engage more families in work, and requiring families to work more hours. Neither was enacted before the end of the 108 th Congress. The argument for some form of subsidy to offset housing costs for certain families is often justified by looking at the percentage of income that these families pay for housing. The general rule used by HUD is that housing is "affordable" if it costs no more than 30% of a low-income family's annual gross income. Many low-income families pay much more than 30% of their incomes towards housing costs. According to the 2003 State of the Nation's Housing, released by the Harvard Joint Center for Housing Studies, there were over 14 million households who were severely rent-burdened, meaning that they paid more than half of their income towards rent. Almost 75% of these 14 million severely rent-burdened households were in the bottom income quintile. The poorest are the most rent burdened, with almost half of all households in the bottom income quintile facing a severe rent burden. Many argue that "affordable" housing is simply unavailable for low-income families. The National Low Income Housing Coalition conducted research looking at wages and housing costs and found that, in most major cities, it is highly unlikely that households with earnings from the minimum wage of $5.15 per hour up to nearly $10 per hour could find an "affordable" apartment. In order to address the need for "affordable housing," a number of direct housing assistance programs have been developed. These programs are administered by the Department of Housing and Urban Development (HUD) and authorized under the Housing Act of 1937 ( P.L. 93-383 ), as amended. According to the 1937 Act: It is the policy of the United States ... that our Nation should promote the goal of providing decent and affordable housing for all citizens through the efforts and encouragement of Federal, State and local governments, and by the independent and collective actions of private citizens, organizations, and the private sector. The three major forms of direct housing assistance currently administered by HUD are: the low-rent Public Housing program, the Housing Choice Voucher program and project-based assistance programs. Public Housing is rental housing that was constructed using federal funds and is publicly owned and managed by local, quasi-governmental Public Housing Authorities (PHAs). Low-income families who live in public housing pay approximately 30% of their incomes for rent. The costs of maintaining the buildings, beyond what can be supported by tenant rents, are subsidized by the federal government. In FY2003, there were 1.2 million public housing units under management. Originally referred to as the Section 8 voucher program, the Housing Choice Voucher program provides federally funded subsidies, administered by local PHAs, to low-income families and individuals to lease housing from private landlords. Families who receive vouchers pay between 30% and 40% of their incomes towards rent and the federal government subsidizes the remainder. In FY2003, there were approximately 2.2 million authorized vouchers. Project-based rental assistance programs include privately-owned buildings for which the tenant rents, and in some cases construction costs, are subsidized by HUD. Although these programs are not generating new contracts, they were initially authorized under multi-year contracts, many of which have not yet expired. Tenants who live in these buildings pay approximately 30% of their incomes towards rent and the federal government pays the remainder to the landlord. In FY2003, there were approximately 1.6 million project-based rental assistance units under government contract. Currently, only about one quarter of eligible low-income households actually receive housing assistance, mainly due to funding limitations. Anecdotal evidence indicates that waiting lists for housing assistance, especially in major cities, are years long and many are not accepting additional names. Table 1 compares some of the key aspects of TANF and HUD's housing assistance programs. Note that the programs are administered by different levels of government (state vs. local) and that, in most cases, states have greater flexibility in administering TANF than do the PHAs and local agencies that administer housing assistance programs. States use TANF funds to provide cash assistance as well as programs and services to eligible households. While states are required to report the number of people who receive direct cash assistance from TANF, they are not required to track the number of people who participate in TANF funded services. Approximately 2.2 million families received cash assistance from TANF in FY2003. In FY2003, 24% of adults who received cash assistance from TANF were employed in paid jobs. Their average monthly earnings were $621 while on the TANF rolls. This amount is well below the poverty level and low enough that most families working and on the TANF caseload would be eligible for housing assistance. However, only approximately 20% of the caseload reported receiving some form of housing assistance. States are not required to track those who have left the TANF cash assistance caseloads. Although national data are unavailable, some researchers have tried to study this population, referred to as "welfare leavers." HHS-funded leaver studies have found that, for most leavers, year-round work paid more than welfare. However, the average monthly income for leavers from all sources, including income, generally lies near the poverty line. Many leavers come back to welfare; the leaver studies found that between one-quarter and one-third of all families who left welfare returned within one year. It was estimated that in FY2004, approximately 5 million housing units were eligible to receive some form of direct housing assistance. Because housing assistance is provided through multiple programs, data on the entire population of housing assistance recipients are not readily available. However, data are available on the characteristics of the populations of the individual programs. This program specific data can be used to make some generalizations. As Table 2 illustrates, a large percentage of the housing assistance caseload is elderly or disabled. This portion of the housing assistance caseload is much less likely to be eligible for TANF cash assistance. Families who might qualify for TANF--non-elderly, non-disabled households with children--constitute over half of the housing voucher caseload, more than one-third of the public housing caseload, and a little over a fifth of the Section 8 project-based caseload. Of the non-elderly, non-disabled portion of the housing assistance caseload, more than half reported some income from work; less than 10% reported combining welfare and work. About one-fifth of these households were receiving income from welfare but not from work. Given that the caseload is approximately 5 million households, that around half of those households are non-elderly, non-disabled (2.5 million), and that about one fourth of those households are receiving welfare, we can very roughly estimate that around half a million households are receiving both TANF assistance and housing assistance. This estimate was confirmed in conversations between the author and staff in the Policy Development and Research division of HUD. The interaction of TANF and direct housing assistance can be assessed in two ways. First, one can look at how the rules of the two types of programs either complement each other or conflict and the implications that may have for households who receive both benefits. The conflict in these rules has been discussed both by housing and welfare advocates. Second, one can look at how the provision of services under one program can help further the goals of the other program, regardless of whether a family is participating in both. Both housing research and welfare research have attempted to measure the impact of these programs on family outcomes. For families who receive benefits from both TANF and HUD housing assistance programs, the different features of the two programs can create unintended consequences. The emphasis of TANF on work, sanctions, and time limits could have implications for the cost of housing assistance programs. Additionally, the benefit structure of housing assistance programs may undermine the work incentives built into TANF. While the TANF goals do not explicitly include increasing families' incomes, the program's emphasis on work, sanctions and time limits has the potential to significantly impact the incomes of welfare recipients. When TANF was enacted, some low-income housing advocates were concerned that, since housing assistance benefit levels are based on family income, if TANF caused fluctuations in family incomes, it could have serious impacts on the federal housing budget. For example, if under TANF, more families are working and states are maintaining generous earnings disregards, it is possible that families' incomes will rise. If families' incomes rise, they require less housing assistance and the housing assistance programs could cut their costs or serve more families. If under TANF, many families are sanctioned from cash assistance or reach their time limit, it is possible that families' incomes will drop. If families' incomes drop, they require more housing assistance, and PHAs could either request additional federal funds or cut the number of people they serve. Preliminary research findings have shown that TANF, while promoting work, has not significantly increased or decreased the incomes of current or former recipients. Housing research that sought to monitor the influence of TANF on housing assistance recipients has similarly found few changes in income. As a result, welfare reform has not had a major impact on the housing budget. However, to the extent that TANF, or changes made to TANF, raise or lower the income of families in the future, the housing budget could be impacted. While one of the major goals of the TANF program is to promote work, the benefit structure of the HUD housing assistance programs may undermine TANF work policies. The amount of housing assistance a family receives fluctuates with the family's income. If a family's income falls, the family's housing assistance will typically rise to make up for that fall in income. As a result, the family may be cushioned from the full impact of sanctions and time limits and, therefore, might have fewer incentives to meet work requirements. In the other direction, if a family's income rises as a result of work, then the amount of housing assistance a family receives is typically reduced. The family may not feel the full impact of an increase in earnings, and as a result, might have fewer incentives to increase earnings under TANF. Furthermore housing assistance is targeted at extremely low-income households, putting less-poor, potentially working households at a disadvantage when it comes to receiving housing benefits. Several policies have been adopted to help improve the compatibility of TANF and housing assistance program rules. QHWRA . The Quality Housing and Work Opportunity Reconciliation Act of 1998 (QHWRA) ( P.L. 105-276 ) required PHAs to adopt several policies designed to encourage families living in public housing to work. QHWRA required PHAs to adopt flat rents as a policy to promote work. Flat rents are market equivalent rents that a family can opt to pay in lieu of an income-based rent. Under a flat rent structure, if a family's income rises to a point where 30% of its income is higher than the flat rent, it can switch to the flat rent and further income increases will not be offset by increases in rent. Second, QHWRA directed PHAs to adopt an earned income disregard. Under the earned income disregard for public housing, certain amounts of a qualifying adult's verified earned income are not counted toward rent. Specifically, income due to earnings are completely disregarded in calculating rent for 12 months, after which half of any increased earnings are excluded for an additional 12 months. A PHA can also choose to set up Individual Savings Accounts (ISAs) in addition to earned income disregards. When a PHA has set up an ISA program, a family can opt to pay increased rent rather than take the disregard, but the increased amount is deposited into a savings account on the family's behalf. Another rent policy dictated by QHWRA attempts to prevent rent changes from undermining TANF sanctions. For voucher-holders and residents of public housing, decreases in income resulting from non-compliance with TANF rules (or fraud) cannot be offset by rent reductions or increases in housing subsidies. Therefore, families are not cushioned from rent increases if their incomes fall as a result of non-compliance. However, reductions in TANF assistance resulting from time limits or failure to find a job do not count as non-compliance for this purpose. Therefore, if a family hits a time limit or loses TANF because they cannot find a job, their housing benefits will increase to reflect the family's loss of income. In addition to changes in rent determination policies, QHWRA introduced a community and self-sufficiency requirement to public housing. Under these rules, non-elderly, non-disabled adults who live in public housing are required to work or participate in community service at least 8 hours per month. This provision was suspended in FY2002, but upon passage of the FY2003 appropriations law ( P.L. 108-7 ), the community service and self-sufficiency provision was reinstated. The Family Self Sufficiency and the Resident Opportunities for Self Sufficiency Program . Under the Housing Choice Voucher program, some families are able to participate in a work incentive program entitled the Family Self Sufficiency Program (FSS). PHAs employ FSS program coordinators who link housing assistance recipients to the supportive services they need to achieve economic self-sufficiency. Families who wish to participate in the FSS program must sign an FSS contract. The contract requires that the family comply with the lease, that all family members become independent of welfare, and that the head of the family seek and maintain suitable employment within five years. An interest-bearing FSS escrow account, similar to an ISA, is established by the PHA for each family that participates in the FSS program. Any increases in rent resulting from increases in earned income are credited to the account during the term of the FSS contract. The PHA may make a portion of this escrow account available to the family during the term of the contract to enable the family to complete an interim goal such as education. If the family completes the contract and no member of the family is receiving welfare, the amount of the FSS account is paid to the family. If the PHA terminates the FSS contract, or if the family fails to complete the contract before its expiration, the family's FSS escrow funds are forfeited. The Resident Opportunities for Self Sufficiency Program (ROSS) is designed to link public housing residents with supportive services, resident empowerment activities, and assistance in becoming economically self-sufficient. ROSS grants may be made to PHAs, resident associations or non-profits operating programs that benefit public housing residents. The grant money can be used to fund a range of activities including resident self-sufficiency initiatives, resident small business development, other job training and support and service coordinators. Welfare to Work Vouchers . To address a perceived lack of housing available to families attempting to transition from welfare to self-sufficiency, in 1999 Congress authorized HUD to award approximately 50,000 additional housing choice vouchers to housing authorities throughout the country through its Welfare to Work (WtW) Voucher Program. WtW vouchers target families who have a critical need for housing in order to obtain or retain viable employment. In order to be eligible for a WtW voucher, a family must be both eligible for housing assistance and for TANF cash assistance. In order to be eligible to administer WtW vouchers, PHAs must develop plans in partnership with welfare and workforce development agencies to ensure that the housing assistance is combined with job training, child care, and other services families need to make the successful transition from welfare to economic independence. No new WtW vouchers have been authorized by Congress since 1999, although the existing WtW vouchers have been renewed. TANF Funding and Housing . States have wide flexibility under TANF to fund programs designed to better coordinate and fulfill the service needs of families transitioning from welfare to work. As of 2002, 12 states were using their TANF block grant funds to provide some form of housing assistance to families, ranging from home buyer support to rental assistance. While TANF funds can currently be used for one-time or ongoing housing-related assistance, housing aid lasting beyond four months counts as "assistance," which triggers time limits, work requirements and child support reporting requirements for recipients. Some advocates have proposed that the welfare law be changed to allow housing benefits to count as "non-assistance," thus not triggering time limits, work requirements or child support reporting requirements. While this change may prompt more states to use TANF funds for housing, states feel pressure to use TANF funds for many competing purposes, including for funding for child care. Several studies have been conducted to test whether and how the receipt of housing assistance impacts low-income families, including families who have or are receiving cash assistance. These studies have looked at the impact of housing assistance on a number of outcomes, including employment and TANF receipt. According to a study by the Brookings Institution, poor families who had left welfare but maintained housing assistance experienced higher employment rates and incomes than welfare leavers without housing assistance. Similar findings resulted from a study of Minnesota's welfare reform initiative (MFIP); the Manpower Demonstration Research Corporation (MDRC) found that residents of public and subsidized housing benefitted more from MFIP than similar families without housing assistance. Despite these positive findings on the relationship between housing assistance and income and earnings, other studies have demonstrated a lack of clear relation between housing assistance and employment and/or earnings. The Department of Housing and Urban Development conducted a study of housing assistance recipients who received welfare in two states. While no statistically significant differences were found in earnings and employment outcomes between welfare recipients with and without housing assistance, the non-experimental component of this analysis indicated a possible positive interactive effect between welfare reform and housing vouchers. Although studies have been ambiguous regarding the impact of housing assistance on employment and earnings, the relationship between neighborhood poverty rates and employment and earnings is well documented. A number of studies have found that neighborhoods with high poverty rates negatively impact families' employment, earnings and earnings growth and increase welfare recidivism and the length of a family's stay on welfare. While public housing is often located in areas of high concentrations of poverty, the portable voucher program allows families the flexibility to move to housing virtually any place in the U.S. While voucher families typically live in areas with lower concentrations of poverty than do families in public housing, families with vouchers still often live in neighborhoods with high poverty. An experiment undertaken by HUD, the Moving to Opportunity (MTO) Fair Housing Demonstration, was designed to test the impact on families of requiring them to move from areas of high concentrations of poverty to areas with low concentrations of poverty. Preliminary findings indicate that families who used vouchers to move to low poverty areas had improved health outcomes, improved educational test scores, and lower rates of juvenile crime. These preliminary findings have not yet shown any wage or employment effects. The research seems to indicate that, at the least, housing assistance does not appear to hurt the employment and earnings efforts of families leaving welfare; instead, housing assistance may actually improve their outcomes. Furthermore, housing assistance that provides for families to move to areas of lower poverty may actually improve other aspects of the families' lives including health and education outcomes. After observing the ways in which federal housing and welfare programs do and do not work together, possible changes may be considered to the programs to help improve their coordination. Several program changes have been considered in past Congresses that may be introduced again. These changes fall into two broad categories: adjusting program rules, and increasing the amount of housing assistance available. There are several areas in which existing housing and welfare program rules are in conflict and adjustments could be made to alleviate that conflict. As noted earlier, housing assistance programs, for the most part, do not have the same emphasis on work as do welfare programs. This difference in focus may lead to conflicting messages for dual program participants who eventually see benefits reduced as income increases. However, housing assistance program features which promote employment, such as the Family Self Sufficiency (FSS) program, may enhance the effectiveness of welfare-to-work programs. Currently, FSS funds, which are issued by HUD to PHAs, can be used only for families who live in public housing or receive tenant-based Section 8 housing choice vouchers; some have argued to allow PHAs to use FSS funds for families with project-based Section 8 vouchers. FSS funds can be used to provide case management and services to assist families in attaining educational and employment goals. Similarly, ROSS funds, which are also issued by HUD to PHAs, are only available to public housing residents; proposals have been made to make ROSS funds available to PHAs for use with Section 8 voucher recipients. One concern that has been raised is that by expanding the use of these funds without expanding the amount of funding available would result in greater competition for the existing funds. Housing programs and welfare programs are administered at different levels of government, which may contribute to the difficulty in coordinating these two sets of programs. As a result, some have proposed to make changes to the administration of housing programs in order to enhance compatibility with welfare programs. A "superwaiver" was proposed by the Administration, and a version of this proposal was included in the Administration-based welfare reform bills. The superwaiver would enable states to request waivers of the statutory or regulatory rules for a wide range of work support programs, including housing assistance programs. The superwaiver provision has several potential implications for housing. Advocates of the superwaiver provision assert that it will foster greater coordination among work support programs and will allow localities to better adjust programs to meet the special needs of their population. One potential use of the superwaiver, cited by The Midwest Welfare Peer Assistance Network (WELPAN), could be to override the six-month restriction on follow-up and supportive service assistance to recently housed homeless families that exists in the Supportive Housing for the Homeless Program. WELPAN asserts that a superwaiver would allow administrators to extend follow up and supportive service assistance to meet the needs of individual families beyond the current six-month cap. Those who oppose the expanded waiver authority express concern that states would have too much authority to undermine the goals of programs for the poor, as established by Congress. For example, the Center on Budget and Policy Priorities has expressed concern that superwaiver authority could allow a state to sell off a large public housing building that currently serves extremely low-income families and then use the money for housing assistance for moderate-income individuals. If housing assistance helps improve the outcomes of families transitioning from welfare to work, low-income housing advocates argue, then more housing assistance should be made available to these families. There are two ways to do this: one, increase the amount of housing assistance provided; or two, prioritize these families for existing assistance. The first is difficult because housing assistance is very expensive. The second is difficult because of the competing needs of the elderly and disabled. The following strategies have been suggested for creating additional housing assistance for welfare families. While new housing assistance money can be difficult to obtain in a tight budget year, states can use their existing TANF funds to support housing, both in the form of ongoing housing assistance as well as rehabilitation of the housing occupied by TANF recipients. As noted earlier, while TANF funds can currently be used for one-time or ongoing housing related assistance, housing aid lasting beyond four months now counts as "assistance," which triggers time limits, work requirements and child support reporting requirements. Proposals to redefine housing as non-assistance were included in the Senate Finance Committee's welfare reauthorization bill from the 107 th Congress, which was not enacted. It is thought that such changes to the law would entice more states to use TANF funds to provide housing assistance. Local communities can set local preferences for distributing housing assistance. If preference is given to families leaving TANF, more assistance may be available to this population. However, PHAs face a tension between prioritizing working families moving off of welfare and prioritizing the elderly and/or disabled. One way to avoid this tension is to create and fund vouchers specifically for families moving from welfare to work. Fifty-thousand Welfare-to-Work (WtW) housing vouchers were authorized and funded in the 1999 Veterans Administration-Department of Housing and Urban Development and Other Independent Agencies (VA-HUD) appropriations legislation ( P.L. 105-276 ). None has been funded since then, and the program has never been authorized. The WtW voucher program targets families who have a critical need for housing in order to obtain or retain viable employment. In order to participate in the WtW program that was appropriated in 1999, housing authorities were required to develop Welfare-to-Work Voucher plans that demonstrated how housing assistance is combined with job training, child care, and other services families need to transition from welfare to work. Some low-income housing advocates have argued on behalf of authorizing the WtW housing voucher program. However, it is expensive to create new vouchers. Congress has not created any new vouchers since 2002. In fact, in the face of recent budget constraints, Congress has placed funding restrictions on the voucher program in both FY2004 and FY2005 that have led to reductions in the number of available vouchers in some parts of the country. For more information on current issues in the voucher program, see CRS Report RL31930, Section 8 Housing Choice Vouchers: Funding and Related Issues . Because the populations that are served by HUD housing assistance and welfare programs overlap, the pressure to ensure that the programs are well-coordinated will likely continue to face Congress. While several changes have been made in recent years to improve this coordination, the differences inherent in the two sets of programs, such as the high proportion of elderly and disabled households served by housing programs, the different levels of government that administer housing and welfare programs, and the costs associated with providing additional services, may make further changes difficult to enact.

The 1995-1996 debate over creation of a block grant to states for cash aid to needy families with children (Temporary Assistance for Needy Families--TANF) focused on reducing welfare rolls by promoting work. Except for child care costs, it gave scant attention to other living expenses of low-income parents. The issues of housing cost and affordability were essentially absent from the debate, although rent is the largest expense for many low-income families. The important role housing plays in families' lives has been recognized through a system of programs, administered by the Department of Housing and Urban Development (HUD), that subsidize the housing costs of low-income families. The three major direct housing assistance programs are the low-rent public housing program, the Housing Choice Voucher program (also known as Section 8 vouchers) and project-based rental assistance. Both housing programs and TANF are designed to serve the needs of low-income households. As a result, many low-income families who receive TANF cash assistance or services, or have in the past, also qualify for housing assistance. It is estimated by CRS that possibly half a million households were receiving both cash welfare assistance and housing assistance in 2001. Although the two programs, in many cases, serve the same populations, the structures and rules of the two programs are often in conflict. This inconsistency in program rules can lead to inefficiencies for dual program participants. Some changes have been made to enhance the compatibility of housing and welfare programs. Further changes to one or both of the programs to enhance coordination have been considered as a part of the debate surrounding both welfare reauthorization and proposed housing reform measures. This paper will introduce the reader to federal housing assistance and welfare programs, the people they serve, how the programs interact and current issues. It will be updated to track relevant legislation.

For some 45 years, the primary international organization for coordinating restrictions on dual-use exports was COCOM, the Coordinating Committee For Multilateral Export Controls. COCOM was formed in 1949 to limit military-related transfers to Communist countries. At the time of its termination at the end of March 1994, it consisted of 17 industrial countries, including all members of NATO--except Iceland--and Japan and Australia. COCOM operated on the basis of "consensus," and functioned without the existence of a treaty or specific international legal authorization. In reality, COCOM "consensus" gave any member--and that member was most likely to be the United States--a veto over the export by any other member of a controlled good or technology. The day-to-day operations of COCOM involved meetings of a Secretariat in Paris at which the members agreed upon the technical specifications of the dual-use items that were being considered for export to Eastern Europe, the former Soviet Union, and the People's Republic of China. The Secretariat also decided whether to allow exceptions to agreed-upon restrictions. Irregular COCOM "High Level" meetings set or enunciated overall policy for the members. To provide guidance, COCOM created three lists of controlled items: an International Industrial List, an International Atomic Energy List, and an International Munitions List. The export control organizations of the member countries then incorporated some variant of the listed items. In the United States, the Export Administration Regulations contained the U.S. version of the items on the COCOM lists. Since COCOM had no independent legal existence, implementation of COCOM decisions depended upon the effectiveness of the export control laws and bureaucracies of each of the individual members. It was the responsibility of COCOM member countries to pass and enforce adequate laws and regulations to control exports. The comprehensiveness of the member countries' export control regimes, the degree of high level attention given to export controls, and the effectiveness of the export control bureaucracies varied considerably. In almost every instance, the United States was the most active in pursuing COCOM limitations on exports, while its major trading partners--especially France, the United Kingdom, and West Germany--often seemed more concerned about facilitating exports. After the dissolution of the Soviet Union, COCOM members agreed, in November 1993, to disband COCOM, replace it with a new entity, and to move to "national discretion" in export licensing decisions as of January 1994. National discretion meant that each country, not COCOM as an entity, would determine what should be exported, and no country could veto the export decisions of another. Beginning in November 1993, Clinton Administration representatives undertook a major effort to create a "broadly based" replacement accord for COCOM which, as initially conceived would include the formerly COCOM-proscribed countries. It was initially hoped that this successor accord would be in place by the time that COCOM was disbanded on March 31, 1994. That deadline was not met. This effort resulted in the establishment of initial elements of the Wassenaar Arrangement, by 28 nations at the Hague on December 19, 1995, subject to the approval of their governments. After meetings in early April and mid-July 1996, the Secretariat of the Arrangement was established in Vienna in 1996. Initially called the "New Forum", the Wassenaar Arrangement has as its primary focus two basic areas: (1) conventional weapons exports and, (2) sensitive dual-use items and technologies with military end uses. The Clinton Administration viewed the new accord as the "centerpiece" of its efforts to promote "multilateral restraint" in conventional arms sales and transfers of sensitive military technologies. The Clinton Conventional Arms Transfer Policy, set out in February 1995, was a restatement of a policy approach that has guided U.S. arms transfers since the Reagan Administration. The Wassenaar Arrangement (formally titled the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies) does not appear to break any new ground in the multilateral conventional arms control area. Previous attempts to achieve regional conventional arms sales agreements--most notably the effort in 1991-1992 by the George H.W. Bush Administration aimed at securing restraint on Middle East arms sales by the five permanent members of the U.N. Security Council--failed due to the lack of consensus among the parties regarding which weapons could be sold and to whom. Elements of the Wassenaar Arrangement dealing with conventional weapons transfers depend for their success on securing the agreement of other weapons suppliers to forego activities that might otherwise be to their political or financial benefit. There are four major areas of policy concern within the Wassenaar Arrangement. These areas are membership, target countries, materials to be controlled, and organization/operational procedures. The initial negotiations on the successor accord among the 17 COCOM members were expanded to include, in addition to the original members, several new European countries and New Zealand as participants. Then at the January 1994 Moscow summit, Secretary of State Christopher and Russian Foreign Minister Kozyrev issued a joint statement welcoming the decision to establish a new multilateral regime and indicating Russia's wish to join. In the spring of 1994, State Department officials stated that they would oppose the accession of Russia to the new regime as long as it continued weapons sales to Iran. The Russian decision to sell nuclear power reactors to Iran further complicated matters. By early 1995, the United States still was unwilling to agree to Russian participation in the formation of the new regime, while other members of COCOM were unwilling to start the new regime without the Russians. The matter was resolved in June 1995 at a Gore-Chernomyrdin meeting when the Russians agreed not to make any new weapons contracts with Iran or to sell nuclear reprocessing equipment. The "agreed membership criteria" under the Wassenaar Arrangement are that participants have adequate export controls, adhere to the major existing nonproliferation regimes--the Missile Technology Control Regime, Australia Group, and Nuclear Suppliers Group--and have "responsible" export control policies toward the so-called pariah countries: Iran, Iraq, Libya, and North Korea. According to Clinton Administration officials, China has not been invited to join the new regime because of concerns by the United States and its allies regarding Chinese weapons exports to Iran, Pakistan, and other shortcomings in meeting membership criteria. Closely related to the question of Russian participation, has been the participation of the other members of the former Soviet Union. The export control system that existed in the Soviet Union was centralized in Moscow. The countries that had been part of the Soviet Union had few responsibilities for controlling exports. Since 1991, the amount of attention paid by these newly independent countries to developing adequate export controls has varied greatly. Even now, a high level of uncertainty continues to exist as to the export control capabilities and the willingness of leaders of these countries to support export controls generally, and an association such as the Wassenaar Arrangement specifically. A second major area of policy concern relates to countries against which the new Arrangement is to be targeted. From the outset, the United States has wanted to target "countries of concern," specifically identified as Iran, Iraq, Libya, and North Korea. However, most of the countries participating in the negotiations have preferred setting a general objective of promoting security and stability and then letting each member country determine its export control policies and target countries. As currently constructed, Wassenaar "will not, however, be directed against any state or group of states; impede bona fide civil transactions; nor interfere with the rights of states to acquire legitimate means with which to defend themselves." France, Germany, and Russia, in particular, are opposed to a U.S. proposal to require advance notification of arms sales to regions of concern. However, former Under Secretary of State Lynn Davis noted that participants in the Wassenaar Arrangement have national policies banning arms and related exports to Iran, Libya, Iraq, and North Korea. Secretary Davis also noted the U.S. will continue to insist that prospective new members adhere to such policies. Based on discussions at the December 1996 plenary session, Secretary Davis said that no participating country was currently transferring arms or ammunition to Afghanistan in keeping with a recent U.N. Security Council resolution. Under the Wassenaar Arrangement, member states have agreed to control exports or retransfers of items and technologies contained on an agreed basic list of Dual-Use Goods and Technologies, and a separate Munitions List. Information on transfers of more than 100 sensitive dual-use goods and technologies on the agreed list are to be shared by members of the Arrangement. Arms transfer reporting is currently confined to the categories of major weapons systems used for the CFE (Conventional Forces, Europe) Treaty and the United Nations Arms Register. Related to the questions concerning which items should be controlled is the issue of regime organization and operations. None of the participants in the process appears to favor the types of strong controls--and U.S. dominance--that existed under COCOM. National discretion with coordination is the most rigorous procedural option that emerged from the negotiations. Indeed, American officials have publicly acknowledged that only the United States favors prior notification of transfers, and this procedure is not part of the new regime. During plenary sessions and working group discussions, under Wassenaar, member governments are to share information on potential threats to peace and stability. They are to examine closely dubious weapons or technology acquisition trends. Specific information regarding global transfers to non-participating countries of arms in the seven categories, including model and type, (and technology) is to be made available in this manner, as are notices of denials of transfers of specific items on the lists established by the Wassenaar Arrangement. Members will regularly review the dual-use and Munitions List to reflect technological advancements and experience gained. The Arrangement envisions "more intensive consultations and more intrusive information sharing" among 6 major weapons suppliers: the United Kingdom, the U.S., France, Russia, Germany, and Italy. Through transparency of national activities involving weapons and technology transfers, it is hoped that dangerous acquisition patterns can be detected and halted before they become problematic. At the July 11-12, 1996 meeting in Vienna, the 33 Wassenaar states approved the "Initial Elements" to govern the Arrangement, and set November 1, 1996, as the date to launch both the control aspects of the agreement and the information exchange. Under the Arrangement, twice a year Participating States report all transfers or licenses issued for sensitive dual-use goods or technology (items in Annex 1 which is a subset of the Dual-Use list)--currently for transfers in the seven U.N. categories. In the case of conventional arms transfers, a biannual data exchange among participants gives details of arms deliveries . Twice a year, Participating States also report denials of licenses to transfer items on the Dual-Use list to non-member states. When a Participating State denies an export license for sensitive dual-use items, it is to notify other participants on an early and timely basis (preferably within 30 days, but definitely within 60 days). The Arrangement does not prohibit a participating country from making an export to a particular destination that has been denied by another participant (this practice is called "undercutting"). But participants are required to notify other participants within 60 days, and preferably within 30 days, after they approve a license for an export of sensitive dual-use goods that are essentially identical to those that have been denied by another participant during the previous three years. At the December 1999 plenary session of Wassenaar Arrangement members, the U.S. team proposed reporting on specific exports rather than aggregated reporting, reporting on exports of all listed items (not just the sensitive and very sensitive items), extensive pre-export reporting, and a "no undercut rule" which would ban exports by a Wassenaar partner of goods already denied by another partner. Russian and Ukrainian delegates reportedly blocked these reforms and the primary accomplishment was a joint statement of the importance of strong enforcement based on national laws. Beginning with the December 2000 plenary meeting, member states continued to reaffirm their concern regarding the threats posed by the illicit possession and use of Man Portable Air-Defence Systems (MANPADS) and agreed on elements of export controls on such weapons. In subsequent December plenary meetings of the Wassenaar Arrangement, through 2005, member states have also reaffirmed their commitment to prevent the acquisition of conventional arms and dual-use goods and technologies by terrorist groups and organizations and by individual terrorists, agreed to a document setting out detailed "best practice" guidelines and criteria for small arms and light weapons (SALW) exports, and agreed to impose strict controls on the activities of those who engage in the brokering of conventional arms by introducing and implementing adequate laws and regulations based on agreed Elements for Effective Legislation on Arms Brokering. The agreed membership criteria of the Wassenaar Arrangement basically rely upon statements by members that they will abide by fairly general standards. Since the Russian export control system and those of other NIS countries lack substantial transparency, what steps can be taken to ensure that the membership criteria will be complied with by these states and others with traditions of weak export control systems? Is there an effective means by which the United States can induce acceptance of higher standards for evaluating sensitive technology transfers by other participating states? Is legislation sanctioning nations that continue to transfer weapons and technology to aggressive nations in regions of tension such a mechanism? Would a greater emphasis on use of oversight mechanisms in U.S. law, such as the Arms Export Control Act, or the reauthorization of the Export Administration Act provide the United States with a more effective means of achieving some of the fundamental goals it has been pursuing through the Wassenaar Arrangement?

This report provides background on the Wassenaar Arrangement, which was formally established in July 1996 as a multilateral arrangement aimed at controlling exports of conventional weapons and related dual-use goods and military technology. It is the successor to the expired Coordinating Committee for Multilateral Export Controls (COCOM). This report focuses on the current status, features, and issues raised by the establishment and functioning of the Wassenaar Arrangement. It will be updated only if warranted by notable events related to the Arrangement.

Casework , in a congressional office, refers to the response or services that Members of Congress provide to constituents who request assistance. As part of the process of determining how to carry out their congressional duties, Members of Congress largely determine the scope of casework and their other constituent service activities. Typically with casework, Members and their staffs help individual constituents deal with federal administrative agencies by acting as facilitators, ombudsmen, and, in some cases, advocates. Some congressional offices may consider their liaison activities between the federal government and local governments or businesses concerned with the effects of federal legislation or regulation to be casework. Other offices may include interactions with communities and nonprofit organizations seeking federal grants or other assistance as casework. Common congressional casework requests include tracking a misdirected benefits payment; helping to fill out a government form; applying for Social Security, veterans', education, and other federal benefits; explaining government activities or decisions; applying to a military service academy; seeking relief from a federal administrative decision; and immigrating to the United States or applying for U.S. citizenship. Contrary to the widely held public perception that Members of Congress can initiate a broad array of actions resulting in a speedy, favorable outcome, there are significant limitations on the degree of permissible intervention from a Member office. More of these restrictions are described later in this report: see " 3. What rules govern casework? ". Casework is not required of Members of Congress, but it is commonly expected by constituents. Some constituents may view a Member's office as the best point of a contact for assistance with the federal government. It appears that each Member office today provides some type of casework, reflecting a broadly held understanding among Members and their staff that casework is integral to the representational duties of a Member of Congress. Some also believe that casework activities can be part of an outreach strategy to build political support among constituents. Casework may also be viewed as an evaluative stage of the legislative process. Some observers suggest that casework inquiries afford Members the opportunity to evaluate whether a program is functioning as Congress intended. Constituent inquiries about specific policies, programs, or benefits may also suggest areas in which programs or policies require additional oversight, or further legislative consideration. Federal statute prohibits Members of Congress, chamber officers, and congressional staff from representing anyone before the federal government, except in the performance of their official duties. House and Senate rules and federal law also prohibit ex parte , or off-the-record, communications with agency employees reasonably expected to be involved in case adjudication. Generally, a Member of Congress may do the following on behalf of eligible individuals seeking their assistance, under House and Senate guidelines: request information or a status report; urge prompt consideration; arrange for interviews or appointments; express judgments; call for reconsideration of an administrative response that the Member believes is not reasonably supported by statutes, regulations, or considerations of equity or public policy; or perform any other service of a similar nature consistent with the provisions of the rules of the House or Senate. Under the Privacy Act of 1974, executive branch agencies cannot share records containing an individual's personally identifiable information with any outside entity unless that individual has authorized the release of that information. Agencies may request a particular format or types of information on a Privacy Act release. Requests involving medical information might require an additional waiver, pursuant to rules promulgated under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). House rules regarding casework services are discussed in the House Ethics Manual . Guidelines in the House Ethics Manual say that when contacting a federal agency on behalf of a constituent, a Member, officer, or employee of the House should not make prohibited, off-the-record comments, receive things of value for providing casework assistance, or improperly pressure agency officials. Casework requests typically do not involve the courts, but guidelines in the House Ethics Manual provide a range of options to Members who might choose to participate in judicial proceedings. Senate Rule XLIII and the Senate Ethics Manual establish parameters for casework services in that chamber. Senate Rule XLIII (3) prohibits the provision of casework assistance on the basis of contributions or services to organizations in which the Senator has a political, personal, or financial interest. The Senate Ethics Manual describes constituent service as something that occurs with respect to the executive branch and is silent on service before the courts. Because casework is often viewed as a representational activity, the primary recipients of an office's casework services are usually considered to be individual constituents residing within a House Member's district, or a Senator's state. Yet there are reasons why other persons or entities might seek assistance from a Member's office. For example, foreign-born individuals seeking to immigrate to the United States may contact a Member of Congress for assistance. A family member or other concerned party outside of a Member's district may contact an office on behalf of a resident constituent. Strict definitions of who is eligible for casework assistance are not provided by the House or Senate; however, other guidelines may imply certain parameters. Senate Rule XLIII recognizes that not everyone who seeks assistance from a Senator will be a constituent of the state the Senator represents, and uses the term "petitioner" to refer to the casework requester. No such distinction is drawn in the House Ethics Manual , which uses the term "constituents" to refer to the recipients of Members' casework services. In the House, guidance issued by the Committee on Ethics suggests that "particular care should be exercised when providing assistance to individuals who are not from the Member's congressional district." The guidance also indicates that a Member should not use official resources to provide casework for individuals who live outside the district the Member represents. When a Member of the House is unable to assist a non-constituent, the Member may refer the person to his or her own House Member or Senators. Matters regarding the management of casework activities are at the discretion of individual congressional offices, subject to the rules of their respective chambers, relevant law, and the priorities of that office. The number and type of constituent requests, how an office defines casework, Member priorities, and the distribution of responsibilities among office locations and staff are some of the factors that can affect a congressional office's casework policies and procedures. Most casework is conducted by staff in state or district offices, and staff are commonly hired in these locations to work on casework or other constituent services. Offices often establish and document procedures for how they handle casework; this is not required, but some offices find it useful to specify casework goals, management procedures, or expectations of staff. This can help ensure that all cases are addressed in a similar manner, and that all appropriate staff can process new casework requests and access casework records if needed. Offices sometimes create their own forms to serve as Privacy Act waivers or to gather necessary case-related information from constituents. Most constituents expect that offices will handle their personal information carefully and discreetly. Casework and other records created in a congressional office are considered to be the personal property of the Member; the House and Senate provide guidance for managing these materials. Many state or district offices have enough constituent requests to assign at least one staff member to work specifically on casework. Congressional staff serving as caseworkers typically act as liaisons between constituents and federal agencies. The decision to hire a caseworker, the specific qualifications for that role, and job responsibilities, however, are left to each Member office to determine. In some offices, certain caseworkers work with particular agencies or on certain types of cases; in other offices, all caseworkers work on all types of cases. For some staff, casework is their primary job responsibility; others perform casework alongside another role in the office. Caseworkers generally first obtain information about the constituent's situation from the person requesting assistance. This often involves understanding the problem presented by, or on behalf of, the constituent. Caseworkers may need to establish what services or benefits the constituent may be eligible for. They may also need to request documentation, like copies of birth certificates or military service or other records, to provide to the agency in support of a case. Caseworkers also identify the appropriate way to address the constituent's concerns. Often, this involves contacting a federal agency's congressional liaison. To receive any information from federal agencies about a constituent, caseworkers must provide a Privacy Act waiver, signed by the constituent, which allows the agency to share the constituent's personal information with a Member. Throughout the process, caseworkers try to communicate with the constituent about realistic expectations. While many congressional offices focus on national agencies, some issues presented by constituents may lead caseworkers to contact state or local governments, or nonprofit or community organizations; in some instances, these entities may be able to provide intermediary or alternative assistance to constituents. Caseworkers also determine when a case may require additional support from a Member of Congress, other officials, or other staff. Additional information for caseworkers on working with constituents is available on the CRS casework resources website ( http://www.crs.gov/resources/casework ) or by contacting CRS. Often, federal agencies have designated legislative affairs or congressional relations staff assigned as general points of contact for congressional caseworkers. Many of these contacts are listed in CRS Report 98-446, Congressional Liaison Offices of Selected Federal Agencies . Congressional liaisons generally are not agency decisionmakers, and essentially serve as a resource available to assist Members and congressional staff on legislative and constituent service matters. Individuals serving in this capacity commonly work in an agency's legislative or intergovernmental affairs office. Although most of these congressional liaisons are located in Washington, DC, agency locations, they can refer caseworkers to the appropriate local or regional office staff members, if needed, for further assistance. Caseworkers may also need to identify other sources of assistance for constituents. Frequently, caseworkers can utilize contacts known to their offices. This can include local leaders or community organizations that may be able to provide alternative means of assistance for constituents. Caseworkers may also learn about helpful points of contact through other caseworkers who have worked on similar issues in another congressional office. In addition to developing a broad network of contacts, caseworkers often develop expertise through their interactions with agencies and insights into what agency acronyms or terminology mean in practical terms for the constituent. This sometimes enables caseworkers to provide information to constituents that the constituents may not have otherwise gleaned from the agency's formal response. Although Members and caseworkers are limited in how much they can directly intervene in an agency's decisionmaking process on behalf of a particular case, there are several reasons why agencies typically are responsive to congressional concern. Congress, broadly, is responsible for creating federal agencies and programs, determining their scope, providing their funding, and overseeing their activities. Because some constituents seek congressional assistance only after other means of working with an agency have failed, agencies may view congressional casework inquiries as micro-level exercises of oversight and respond to them accordingly. Response times, whether for an acknowledgment that a case inquiry has been received, or for a response the agency considers final, can vary considerably from agency to agency. Waiting periods may be determined in part by the priority agencies place on constituent service, the type or complexity of an individual case, or the volume of cases to which an agency responds. In some instances, agency response practices might result in slower response than constituents and some congressional offices expect or would prefer. Federal agencies might have different protocols that apply for emergency or time-sensitive situations, and congressional liaisons can share these methods with caseworkers. There are, however, limits on what caseworkers and agency officials can do to expedite requests. As constituents wait for an agency response, caseworkers might try to provide information about how long the process could take, based on information from or past work with the agency. Caseworkers may choose to provide regular updates to constituents at defined intervals to help assure constituents that their case is still being considered by the agency. Federal agencies are required to comply with statutes and regulations governing their activities, including decisions regarding services and benefits provided to constituents. As a consequence, an agency might sometimes be unable to provide a response that is satisfactory to the constituent. If there is reason to believe that incomplete information was available to the agency, or that an agency decision was not in keeping with its statutory or regulatory requirements, a Member office may, pursuant to House or Senate rules, request reconsideration of a constituent's concerns. Caseworkers can sometimes refer constituents to state, local, or community resources that might address some of the challenges a constituent is experiencing. Nonfederal entities that provide services to veterans, the elderly, or others with specific needs might offer services while a constituent awaits an agency decision or fashion a remedy if no agency resolution is available. CRS has a number of casework resources for congressional offices, accessible online through http://www.crs.gov/resources/CASEWORK . These resources include an introductory video on casework (CRS Video WVB00093, Introduction to Congressional Casework ); a longer report on casework practices (CRS Report RL33209, Casework in a Congressional Office: Background, Rules, Laws, and Resources ); a report on U.S. service academy nominations (CRS Report RL33213, Congressional Nominations to U.S. Service Academies: An Overview and Resources for Outreach and Management ); and a list of frequently updated congressional liaison contacts (CRS Report 98-446, Congressional Liaison Offices of Selected Federal Agencies ). CRS periodically hosts seminars for district and state staff that can provide additional information; upcoming programs are listed at http://www.crs.gov/events . Congressional offices may also contact CRS analysts directly to address more specific questions or concerns related to casework. Further case support may be obtained by contacting local or state officials, professional associations, or community groups that help individuals facing similar situations; these entities may have access to additional resources that can help resolve or alleviate a constituent's problem. Caseworkers working in district offices may find it useful to contact staff in the Member's Washington, DC, office for additional information about policies or programs that affect casework. Similarly, information from fellow caseworkers in neighboring states or districts where constituent and agency experiences may be similar can be useful in providing caseworkers with contacts, resources, or advice.

Constituents often contact a congressional office looking for assistance; the work congressional offices do in response to these requests is generally referred to as casework . Members of Congress determine the scope of their constituent service activities, including casework. Many requests for casework come from constituents seeking assistance from federal agencies, but offices may also receive requests from non-constituents. Congressional offices can have different conceptualizations of casework based on Member preferences, district needs, and constituent expectations. This report addresses frequently asked questions (FAQs) about congressional casework. It is intended to provide resources for congressional offices and individual caseworkers. This includes the casework rules and guidelines established by the House and Senate, as well as some observations about how congressional offices generally approach casework and work with federal agencies on behalf of constituents. Casework practices are largely left to each Member office to determine, like many other aspects of congressional operations. Each constituent's situation is unique, and federal agencies vary in their casework practices, which makes it difficult for either chamber to issue prescriptive guidelines regarding casework. The degree of flexibility afforded to offices can help caseworkers tailor their assistance to best meet constituents' needs. The relative autonomy afforded to congressional offices regarding casework also means that many of the answers provided here are necessarily broad-based. Further resources are available from CRS that can provide more specific, context-specific information. Several of these CRS resources are discussed throughout this report, including the following: CRS Video WVB00093, Introduction to Congressional Casework , by [author name scrubbed] CRS Report RL33209, Casework in a Congressional Office: Background, Rules, Laws, and Resources , by [author name scrubbed] CRS Report RL33213, Congressional Nominations to U.S. Service Academies: An Overview and Resources for Outreach and Management , by [author name scrubbed] and [author name scrubbed] CRS Report 98-446, Congressional Liaison Offices of Selected Federal Agencies , by [author name scrubbed] the CRS resources website, "Constituent Services: Casework," by [author name scrubbed], available at http://crs.gov/resources/casework

On April 20, 2008, a former Roman Catholic bishop, Fernando Lugo, was elected President of Paraguay, a land-locked South American nation critically wedged between Brazil, Argentina, and Bolivia. The Lugo victory was hailed as a step toward strengthening Paraguay's fragile democracy, ending six decades of one-party rule. In many ways, the election of President Lugo raised hopes for a historic break with Paraguay's past and its tradition of authoritarian leadership, political isolation, and widespread corruption. The current political environment in Paraguay has been shaped by the country's turbulent political history. Paraguay was defeated in the War of the Triple Alliance (1864-1870) against Argentina, Brazil and Uruguay and lost 25% of its territory and over half of its population. This defeat led to an extensive period of political instability, with three civil wars in the first half of the 20 th century. In the late 19 th century, a two-party political system emerged with the formation of the Colorado Party and the Liberal Party, but the Colorado Party soon became the dominant political force, ruling between 1887 and 1904. The Liberal Party captured control of the government and ruled from 1904 until 1940. A war with neighboring Bolivia between 1932-1935, the Chaco War, further weakened political institutions and hindered economic development until the military assumed control in 1940 and governed through a succession of authoritarian leaders. The Colorado Party returned to power in 1946, consolidating its control through the military, dominant economic groups, and the state bureaucracy. In the late 1940s, the party assumed greater control over state institutions to the point where party membership was a prerequisite for civil service positions and promotion in the military. General Alfredo Stroessner, a member of the Colorado party, staged a coup in 1954, and consolidated power in a repressive military dictatorship. Stroessner, who engineered his "election" to complete the unexpired term of his predecessor, was subsequently re-elected seven times, ruling almost continuously under the state of siege provision of the constitution, with support from the military and Colorado Party. Nominally governed by a constitution approved in 1967, Stroessner's rule increased the isolation of Paraguay from the world community. During Stroessner's 35-year rule, (known as the Stronato), political opponents were systematically harassed and persecuted, accused of communist sympathies or posing a threat to state security. The demise of the Stroessner military dictatorship in 1989 initiated a challenging political transition over the next 20 years. Due in large part to the country's authoritarian past, Paraguay's state institutions had remained weak while corruption continued to undercut democratic consolidation and economic development. In 1992, a new constitution was adopted, and in 1993, Paraguay elected its first civilian president in almost 40 years. For the next 15 years, however, Paraguay's democracy alternated between periods of greater and lesser instability, including an attempted military coup, the assassination of a Vice President, and the resignation of a President. Observers maintain that corruption is a major impediment to consolidating democratic institutions. President Nicanor Duarte Frutos (2003-2008) took important measures to combat corruption that included increased penalties for tax evasion, other measures to increase tax revenue, greater oversight of government spending, and a crackdown on the trade in contraband and counterfeit goods. He removed members of the Supreme Court after corruption allegations surfaced against them. These measures were partially successful, as suggested by Transparency International's 2006 corruption perceptions index in which Paraguay moved up to 111 out of 163 countries after Paraguay was ranked among the six most corrupt countries in the world in 2004. In both the 2007 and 2008 index, however, Paraguay dropped to 138 out of 180 countries, and in the 2009 index Paraguay ranked 154--ahead of only Venezuela and Haiti in the hemisphere. In April 2008, Paraguay took another historic step with the election of former bishop Fernando Lugo to the presidency. For some observers, Lugo's victory is seen as a chance for Paraguay to strengthen its democratic transition. One of President Lugo's central challenges is to establish presidential control over the entrenched government bureaucracy that is still essentially controlled by the Colorado Party. There were three major candidates in the presidential election of April 20, 2008. They were the former minister of education Blanca Ovelar of the long-ruling Colorado Party; Fernando Lugo, then known in Paraguay as the "bishop of the poor," backed by the Patriotic Alliance for Change; and former military commander Lino Oviedo, the leader of a failed 1996 coup who was released from prison in early September 2007, running as a candidate of the party that he founded, the National Union of Ethical Citizens (UNACE). In the campaign, Lugo emphasized empowering the poor, agrarian reform, health reform, and ending endemic corruption, which he viewed as the legacy of decades of Colorado Party dominance. Lugo said that he was open to private capital and a consensus-based development model. As a cornerstone of his candidacy, he pushed for renegotiating the Itaipu and Yacyreta hydroelectric power supply treaties with Brazil and Argentina and sought to raise the price of Paraguay's supply of hydro-energy to these countries. Lugo's coalition of opposition parties--the Patriotic Alliance for Change (APC--see text box for the coalition's various parties) won the election with 40.8% of the vote according to the National Election Tribunal, followed by Colorado's Blanca Ovelar with 30.6% and UNACE's Oviedo with 21.9% of the vote. International observation teams from the Organization of American States (OAS) and the U.S.-based International Foundation for Electoral Systems (IFES) praised the successful conduct of the elections. Both groups characterized the election as historic, with the OAS maintaining that "in spite of differences, political parties and movements achieved a fundamental consensus on the rules of the game, which as in the rest of Latin America, constitutes the essential minimum for the construction of democracy." Lugo took office on August 15, 2008, for a five-year term. He declared his top priorities as fighting widespread corruption and reducing economic inequality. Lugo's election greatly raised expectations among Paraguay's poor majority. The APC coalition that brought Lugo to office, however, fractured in late June 2009 following the congressional leadership elections. The APC lost the support of the influential PLRA (a wing of the Liberal Party and the second-largest party in Congress) when a faction of the PLRA chose to leave the coalition. In July 2009, the entire PLRA split from the electoral alliance and joined the opposition in criticizing Lugo. This defection included his Vice President, Frederico Franco, who accused the President of treason for his inability to make good on electoral promises in a December 2009 news article. In response to political challenges and conflict, President Lugo has reportedly retreated from leadership and has left the problems facing his reform agenda in the hands of his ministers. His inability to manage the growing opposition in Congress has raised questions about his capacity to effectively influence policy, and even the possibility of impeachment. Adding to his perceived weakness, a scandal erupted in April 2009 when the President was accused of fathering children during his years as a priest with three different women. (He has admitted to fathering one boy.) This scandal has further undermined his credibility in some quarters; however, others have argued that the political fallout from the paternity claims may not be so great in a culture where virility is highly valued. In late November 2009, Lugo held a press conference to accuse his detractors of being part of an "orchestrated campaign" led by the country's "powerful mafia groups." In December, however, he took steps to address the controversy by agreeing to a DNA test in response to the third paternity suit. In his first year in office, President Lugo had very limited success in working with an opposition congress. Lugo's reform agenda is stymied by a number of challenges: his electoral coalition has splintered; he is a political novice and has not acquired the political skills to build bridges with a constitutionally mandated strong Congress; and he faces a political and administrative culture reportedly riddled with corruption, clientelism, and a sympathy for and habituation to authoritarianism. Lugo's popular support has dwindled. A December 2009 poll showed less than 18% of respondents thought he was doing a "good" or "very good" job, down from 38% at the end of 2008. As Lugo entered his second year in office, calls for impeachment became more frequent. Impeachment is allowed by the Paraguayan Constitution and has been used recently (in 1999 and an almost successful attempt in 2003). Although factions within various parties support impeachment and in early December a Colorado Party Congress of 600 delegates voted to consider impeachment, the opposition in Congress does not appear to have the two-thirds majority needed to impeach Lugo. In November 2009, President Lugo shuffled the military leadership for the fourth time since he took office. Although he complained about pro-coup sentiment in the military when he made the announcement, he later released a statement that denied a coup plot had been discovered. The President had been under pressure to improve security since the October 2009 kidnapping of wealthy businessman Fidel Zavala by the Army of the Paraguayan People, (EPP), a small guerrilla group with reported links to some of Paraguay's peasant organizations. In January 2010, his Vice President, Frederico Franco, now in opposition to President Lugo, called for increased security measures in the north of the country, where the kidnapping occurred, and more aggressive action against the EPP. Fortunately for Lugo, Zavala was released unharmed on January 17, 2010, after more than three months of captivity following the reported payment of a ransom by his family. Lugo has pledged to bring the kidnappers to justice and increase security in the area where the EPP operates. Despite congressional gridlock and vocal opposition, President Lugo has had some political successes. His focus on increasing social and health expenditures to reduce inequality has resulted in modest reforms of education and healthcare. Progress to reduce poverty included an expansion of the conditional cash transfer program. He enacted policies to provide more poor families with conditional benefits (about $40 per month while their children remain in school) from 50,000 to 70,000 families. In a meeting with the President of Brazil on July 25, 2009, President Lugo obtained an agreement to sharply increase the payments received from Brazil for hydro-electric power from the Itaipu Dam, one of his campaign promises. The dam, constructed on the Parana River jointly by the Brazilian and Paraguayan governments, is the second-largest hydropower producer in the world. Sale of the power is regulated by a treaty that gives each country the right to 50% of the 14 gigawats of electricity generated by the dam. Paraguay now uses only about 5% of the power from the project. Until 2023, when the treaty expires, the unused electricity generated for Paraguay must be sold to Brazil's state-owned power utility Electrobas at a fixed price. In the July 2009 accord, Brazil agreed to triple the price it paid Paraguay for the energy, and included financing for high-capacity transmission lines to be constructed from the dam to the Paraguayan capital, Asuncion. Some analysts see the new agreement as an effort by Brazilian President Lula da Silva to offer President Lugo a hand as his electoral coalition was fracturing. Lugo had pledged during the campaign to use the power sale proceeds to finance poverty relief, health care, school nutrition programs, and ultimately, far-reaching land reform. The Paraguayan Congress quickly approved the new agreement, but it has moved slowly through the Brazilian Congress, where it must also be ratified. The new agreement would boost Paraguay's income from the dam to $360 million and is expected to be approved by the Brazilian Congress in the first half of 2010. In terms of foreign policy, Lugo has resisted ideological labels. During the electoral campaign, Lugo refrained from criticizing the United States, and also was careful not to criticize or praise Venezuelan President Hugo Chavez. Lugo has declared his intention to maintain good bilateral relations with the United States. When Lugo visited the White House on October 27, 2008, President George W. Bush said he "stood with" Lugo in pursuing a "social justice agenda" and supported his efforts to fight corruption. Following the 2008 visit, Paraguay received a one-time increase in health and economic growth assistance from the United States of $10 million. The United States has supported anti-corruption and democratization programs in Paraguay including providing more than $60 million in funding from the Millennium Challenge Corporation (see " U.S. Assistance "). The two countries collaborate extensively on anti-narcotics and anti-smuggling efforts. Some of Lugo's opponents accuse him of maintaining close ties to President Chavez, a charge that Lugo denies. He has maintained friendly relations with President Chavez but has not shown an inclination to join the Bolivarian Alternative for the Americas (ALBA), the leftist political alliance organized by Venezuela's President, which includes Cuba, Bolivia, Ecuador, and Nicaragua. Paraguay is a member of the Common Market of the South (Mercosur) along with Brazil, Argentina and Uruguay, and has been aligned with the trade group despite being Mercosur's poorest member. In August 2009, Lugo was forced to withdraw his support of legislation allowing Venezuela's membership in Mercosur because he lacked a majority in his Congress. As a full voting member of Mercosur, Paraguay has opposed the elevation of Venezuela to full membership in the customs union because of strong animosity toward Chavez in the Paraguayan Congress. Paraguay, approximately the size of California, has a population of about 6.9 million people who are concentrated in and around the capital city of Asuncion. The majority of the population is of mixed Spanish and Guarani Indian descent. Both Spanish and Guarani are the official languages, with over 90% of the population fluent in Guarani. In 2008, Paraguay's gross national income (GNI) was $16.3 billion, with a per capita GNI of $2,180, up from $1,670 in 2007. Paraguay's small, primarily agricultural economy grew by a robust 6.8% in 2007. It is one of the poorest countries in Latin America, however, and has suffered significantly from a recent drought and the global economic downturn. The Paraguayan economy is particularly dependent on its two larger neighbors, Brazil and Argentina, for its export markets. While GDP growth slowed to an estimated 5.8% in 2008, it has contracted sharply in 2009. Economic growth is estimated to have contracted by 3.8% in 2009, with a projected return to growth of 4.2% in 2010. Paraguay experienced an economic recession for several years in the aftermath of a series of bank failures from 1996-1998 that wiped out half of Paraguay's locally owned banks. When inaugurated in 2003, former President Duarte inherited a government that had defaulted on $138 million in debt, primarily as a result of low tax revenue. Under President Duarte, the economy rebounded, due in part to the implementation of reforms that included anti-corruption initiatives, which increased revenue, strengthened institutions, and created a more favorable environment for foreign investment. The Paraguayan economy remains heavily dependent on its traditional agricultural exports of soybeans, cotton and meat. Approximately 20% of GDP is derived from agriculture, and agricultural activities employ approximately one-quarter of the country's workforce. Other agricultural products include wheat, corn, sugarcane, sesame and other fruits and vegetables. Paraguay's industrial sector is still largely underdeveloped, with much of the population still employed in subsistence agriculture. Economic growth tends to be limited by Paraguay's dependence on imports of manufactured goods, as well as capital goods that are necessary to supply the industrial and investment requirements of the economy. The small manufacturing sector includes agricultural goods, leather, textile, automatic data processing (ADP) machine parts, and tobacco products. The service sector is dominated by communications, which has benefitted from strong foreign direct investment (FDI) and electricity production from the Itaipu hydropower plant co-owned with Brazil and the Yacyreta plant co-owned with Argentina. Paraguay's informal sector is very large and may be twice the size of the formal sector. Consequently, while the official unemployment rate is relatively low (5.4% estimated for 2008), the actual unemployment and underemployment rates are estimated to be much higher. Poverty rates have dropped slightly from 61% of the population in 2001 to 58.2% in 2008. Remittances from Paraguayans living abroad have significantly contributed to economic growth, increasing from approximately $200 million in 2000 to $800 million in 2008. A significant but declining part of the country's commercial sector consists of importing goods from the United States and Asia for re-export into neighboring countries. Most of these imported goods are not declared at customs, preventing the government from obtaining substantial tax revenue. Counterfeit trade and smuggling are prevalent in the country's border regions. Increased government enforcement of taxes and custom laws is having an impact on the underground economy as a whole, although much remains to be done. Overriding a presidential veto, Paraguay's Congress voted to delay implementation of a personal income tax for a third successive time in June 2009. This was a blow to the Lugo Administration's plans to raise social expenditures and implement a land reform program. The Colorado/UNACE majority in Congress also increased the fiscal deficit by raising the state pension for low income earners and other public sector wages. Members of Lugo's inner circle accused the Congress of sabotaging the President's land and fiscal reform policies. The personal income tax was again due to take effect in early 2010, but opposition in Congress has continued to prevent implementation. While promising to address income inequality and land reform, President Lugo has continued the orthodox macroeconomic policies adopted by the predecessor Duarte Administration in 2003. Those policies contributed to a slow and steady economic recovery after a period of recessions and weak recoveries and led to the achievement of positive economic growth. Lugo's appointment of Dionisio Borda as finance minister, and of other centrist politicians to his cabinet, are seen by many observers as an indication of his intent to consolidate macroeconomic stability. Borda is an independent economist, known for implementing fiscal reform. Stricter fiscal controls begun under the prior administration, which Borda also served, continue to increase the number of registered taxpayers and the amount of revenue generated by the business income tax. Paraguay and the United States have good relations, cooperating extensively on counternarcotics and counterterrorism efforts. The United States strongly supports the consolidation of Paraguay's democracy and continued economic reforms. Following the April 2008 election, then-U.S. Ambassador to Paraguay James Cason congratulated Lugo and the APC on their victory and expressed a commitment to work with them to strengthen bilateral relations. U.S. imports from Paraguay totaled $78.4 million in 2008 while the value of U.S. exports to Paraguay was over $1.6 billion. Machinery and electrical machinery account for the lion's share of U.S. exports to Paraguay. The protection of intellectual property rights (IPR, e.g., fighting piracy, counterfeiting, and contraband) has been a U.S. concern. The Duarte government made significant efforts to improve IPR protection, but the United States Trade Representative maintains that the country continues to have problems due to its porous border and ineffective prosecutions. In 2003, U.S. and Paraguayan officials signed a Memorandum of Understanding (MOU) to strengthen legal protection and enforcement of intellectual property rights in Paraguay. In December 2007, the MOU was revised and extended through 2009, and in November 2009 the agreement was extended again through 2011. The United States provided about $13.1 million in foreign assistance to Paraguay in FY2008 and an estimated $26.1 million in FY2009. The increase in FY2009 was due to a one-time addition of $10 million for health and economic growth assistance resulting from the October 2008 meeting between President Lugo and former President Bush. Under the Obama Administration's FY2010 request, Paraguay would receive $13.9 million in assistance, with $2.1 million to support Global Health and Child Survival, $5.8 million in Development Assistance, $425,000 in International Military Education and Training, $750,000 for Foreign Military Financing, $500,000 in International Narcotics Control and Law Enforcement assistance, and $4.3 million for the continuation of a Peace Corps program in the country, with approximately 200 volunteers. In 2009, the Department of Defense also provided Paraguay one-time security and stabilization assistance authorized under Section 1207 of the National Defense Authorization Act (NDAA). In FY2009, Paraguay received a total of $6.69 million in "Section 1207" funding divided between counternarcotics and development accounts to support democratic consolidation and reduce violence in eastern Paraguay during the country's transition from one-party rule to multi-party democracy. In addition to regular foreign assistance funding, Paraguay signed a $34.65 million Threshold Program agreement with the Millennium Challenge Corporation (MCC) in May 2006. Those funds, which are administered by the U.S. Agency for International Development (USAID), are targeted to strengthen the rule of law and build a transparent business environment. The program has been credited with reducing the time it takes to start a business in Paraguay by half, among other accomplishments. In May 2009, the USAID-administered program was renewed with the signing of a second two-year MCC Threshold program for $30.3 million. The program supports anti-corruption efforts by Paraguay's government in law enforcement, customs, health care, and judicial sectors. The MCC program also aims to increase public support for anti-corruption efforts. Paraguay also signed an agreement with the United States in 2006 under the Tropical Forest Conservation Act that provided Paraguay with $7.4 million in debt relief in exchange for the Paraguayan government's commitment to conserve and restore tropical forests in the southeastern region. Paraguay is a major transit country for illegal drugs destined primarily for neighboring South American states and Europe. It produces over half of the marijuana grown in South America. The Chaco region in the northwestern part of the country adjacent to Bolivia is a major transshipment point for illegal drugs, along with the tri-border area (TBA) with neighboring Argentina and Brazil. A 1987 U.S.-Paraguay bilateral counternarcotics agreement was extended in 2006. U.S. counternarcotics efforts in Paraguay have focused on providing training, equipment and technical assistance to strengthen the country's National Anti-Drug Secretariat (SENAD), and to combat money laundering and corruption. The United States assisted in the completion of a helicopter pad and support facilities for SENAD. According to the State Department's February 2009 International Narcotics Control Strategy Report, SENAD continued to make progress against illegal narcotics trafficking in 2008 with record seizures of marijuana, although cocaine seizures were markedly down. The report notes that President Lugo has said he wants to reverse Paraguay's status as a "major drug transit country." Currently, SENAD agents are civil servants and they are not issued weapons. The Paraguayan Senate rejected a bill that would have made the SENAD an autonomous institution with the power to regulate its agents as law enforcement agents who can carry and use weapons. The bill had passed the Chamber of Deputies. This defeat is considered by some to be a major setback. Finally, INCSR notes that SENAD's work is limited by budget constraints, weak laws and pervasive corruption. After President Evo Morales of Bolivia kicked out the U.S. Drug Enforcement Administration (DEA) in late 2008, 10 of the 56 agents working in that country were redeployed to Paraguay in early 2009. In April 2009, bills entitled the "U.S.-Paraguay Partnership Act of 2009" were introduced in the House ( H.R. 1837 ) and Senate ( S. 780 ). On September 14, 2009, the ATPDEA Expansion and Extension Act of 2009 ( S. 1665 ) was introduced in the Senate. Each of these bills would amend the Andean Trade Promotion and Drug Eradication Act (Title XXXI of the Trade Act of 2002, P.L. 107-210 ) to extend trade preferences to Paraguay. Currently, Colombia, Ecuador, and Peru benefit from the ATPDEA in exchange for cooperation under anti-narcotics agreements. Bolivia lost its eligibility for the program in 2008 when the Bush Administration determined that Bolivia no longer met the anti-narcotics cooperation requirements. The United States is particularly concerned about illicit activities in the tri-border area (TBA) of Paraguay, Argentina, and Brazil, where money laundering, drug trafficking, arms smuggling, and trade in counterfeit and contraband goods are prevalent. The tri-border region is loosely controlled due to porous borders, a lack of surveillance, weak law enforcement and pervasive local corruption, especially in the Paraguayan border city of Ciudad del Este. The United States has worked closely with the governments of the TBA countries on counterterrorism issues through the "3+1" regional cooperation mechanism, which serves as a forum for discussions, and the United States has provided anti-terrorism and anti-money-laundering support to Paraguay. U.S. Immigration and Customs Enforcement (ICE) sent a team of specialists to the tri-border region to investigate trade-based money laundering in 2006, and has assisted the Paraguayan government in developing a Trade Transparency Unit to examine discrepancies in trade data in order to detect customs fraud, trade-based money laundering or the financing of terrorism. U.S. Treasury officials have held workshops in the region to encourage more banking sector involvement in efforts against money laundering. The U.S. embassy's legal adviser in Asuncion held training courses for local investigators and prosecutors to combat possible terrorism links. The United States has been concerned for a number of years that the radical Lebanon-based Hezbollah and the Sunni Muslim Palestinian group Hamas have used the TBA to raise funds from the region's sizable Muslim communities by participating in illicit activities and soliciting donations. Nevertheless, according to the State Department's annual terrorism report for 2008 (issued in April 2009), there is no corroborated information that these or other Islamic extremist groups have an operational presence in the TBA. The State Department's 2008 terrorism report stated although Paraguay was generally cooperative on counterterrorism efforts, its judicial system is weak and politicized, the police force is widely viewed as ineffective and corrupt, and the country lacks strong anti-money laundering and terrorist financing legislation. In June 2008, Paraguay's Congress improved money laundering legislation as part of a major overhaul of the penal code. However, according to the terrorism report, a bill to enact important criminal procedure reform to prosecute money laundering and terrorism was delayed for a year by the Congress's Legal Reform Commission. Effective terrorist financing legislation will be critical to keep Paraguay current with its international obligations. The terrorism report also maintained that Paraguay did not exercise effective immigration or customs control on its borders. Efforts to address illicit activity in the TBA were uneven because of a lack of resources, and corruption within customs, police, and the judiciary. With U.S. support, the government's Secretariat for the Prevention of Money Laundering reportedly made progress against money laundering, including December 2008 raids on illegal exchange houses. Under the MCC Threshold Program, the United States provided assistance with the training of judges, prosecutors and police in investigation techniques critical to money laundering and terrorist cases. Paraguay made some progress on counterterrorism legislation in 2009. The Paraguayan Congress passed a measure in July 2009 that modifies the anti-money laundering law. The passed bill empowers the Secretariat for the Prevention of Money Laundering (SEPRELAD) in several ways. It elevates the agency to the level of a ministry that reports directly to the President, it broadens its capacity to require Suspicious Transaction Reports from a wider group of financial institutions, and it increases SEPRELAD's power to audit financial institutions to ensure their procedures are adequate to prevent money laundering. In addition, the Executive has initiated legislation that would criminalize the offences of terrorism, terrorist association and terrorist financing. Attempts to gain the approval of Congress on such legislation were made in 2007, November 2009, and December 2009. In December 2009, President Lugo withdrew the counterterrorism legislation that would modify some aspects of the criminal code over objections raised by human rights organizations who argued that the new legislation threatened the international protection of human rights and may undermine freedom of assembly and freedom of speech. Paraguayan authorities, however, remain optimistic that a modified initiative may pass later in 2010.

Paraguay, a landlocked nation in the center of South America, has friendly relations with the United States and has been a traditional ally. Paraguay's turbulent political history and tradition of political authoritarianism have resulted in international isolation that the country is seeking to overcome. The population of 6.9 million people is one the most homogenous mestizo populations in the hemisphere. Paraguay's largely agrarian economy has grown well in recent years on the strength of global commodity prices. However, in 2009, a severe drought and the impact of the global economic recession sharply reduced growth, but a recovery is anticipated in 2010. The April 2008 election of Fernando Lugo, a former Roman Catholic bishop and leader of the Patriotic Alliance for Change, as President ended 61 years of one-party rule by the still-dominant Colorado Party. The United States has encouraged the strengthening of democracy in Paraguay, and hailed the peaceful transition of power. Known as the "bishop of the poor" after a decade of work in an impoverished rural diocese, Lugo pledged to introduce land and agrarian reform, improve education and health services to better serve Paraguay's poor majority, and combat widespread corruption. Yet, as he entered his second year in office, there were more frequent calls for his impeachment. His loose electoral alliance had splintered, and he faced broad opposition in the opposition-dominated Paraguayan Congress that had stymied his center-left agenda at nearly every turn. At the end of 2009, polls indicated that Lugo had one of the lowest popularity ratings of any leader in the region. The United States and Paraguay cooperate in a number of areas but especially in the fight against corruption, and on anti-drug, counterterrorism and anti-smuggling initiatives. In 2006 and 2009, the United States and Paraguay signed two Millennium Challenge Corporation threshold agreements totaling more than $60 million dollars to combat corruption and strengthen the rule of law. Paraguay is a major transit country for cocaine and produces the largest crop of marijuana in South America. The United States remains concerned about illegal activities in the loosely controlled tri-border region with neighboring Brazil and Argentina, such as money-laundering, drugs and arms trafficking, and trade in counterfeit and contraband goods. The 111th Congress has expressed growing interest in Paraguay. In April 2009, two bills were introduced entitled the "U.S.-Paraguay Partnership Act of 2009" (H.R. 1837 and S. 780). On September 14, 2009, the ATPDEA Expansion and Extension Act of 2009 (S. 1665) was introduced in the Senate. Each of these bills would amend the Andean Trade Promotion and Drug Eradication Act (Title XXXI of the Trade Act of 2002, P.L. 107-210) to extend unilateral trade preferences to Paraguay. Indicating additional interest in Paraguay, the House Democratic Partnership (formerly the House Democratic Assistance Commission) made a study trip to Paraguay in August 2009. Members of the eight-member delegation had discussions with the bicameral Congress and the executive about the need to work together to support democracy in Paraguay. This report examines recent political and economic developments in Paraguay and issues in U.S.-Paraguayan relations.

The Davis-Bacon Act (DBA) requires employers to pay workers on federal construction projects at least locally prevailing wages and fringe benefits. These wages and benefits, which are determined by the U.S. Department of Labor (DOL), are the minimum hourly wages and benefits that employers must pay workers. In order to hire and retain workers, employers may pay more than locally prevailing wages or benefits. Supporters of the Davis-Bacon Act maintain that it creates stability in local construction and labor markets and ensures that projects are built by the most skilled and experienced workers. Critics of the act argue that it impedes competition, raises construction costs, and imposes additional administrative requirements on projects that receive financial assistance from the federal government. The Federal Water Pollution Control Act, commonly called the Clean Water Act (CWA), authorizes appropriations to states to operate state revolving loan funds (SRFs) that finance the construction of wastewater treatment plants. The Safe Drinking Water Act (SDWA) similarly authorizes appropriations for SRFs to finance the construction of public drinking water systems. In addition to the Davis-Bacon Act itself, Congress has added Davis-Bacon prevailing wage requirements to several statutes. The SDWA has a Davis-Bacon provision, but the provision predates the state revolving loan program. The CWA states that Davis-Bacon prevailing wages will apply to projects "constructed in whole or in part before fiscal year 1995." Authorization for appropriations expired at the end of FY1994 for the CWA and the end of FY2003 for the SDWA. Nevertheless, Congress has continued to appropriate funds for the SRFs under both statutes. After the authorization of appropriations for the SRFs under the CWA expired at the end of FY1994, Davis-Bacon coverage was the subject of considerable debate. An issue for Congress is whether to apply Davis-Bacon prevailing wages to projects financed by the state revolving loan programs under the CWA or SDWA. The American Recovery and Reinvestment Act (ARRA) provided FY2009 supplemental appropriations to both revolving loan programs, and required Davis-Bacon prevailing wages on projects funded in whole or in part by the act. As interpreted by the Environmental Protection Agency (EPA), regular appropriations for the EPA for FY2010 required Davis-Bacon prevailing wages on any project funded with FY2010 appropriations or any agreement signed in FY2010, even if the funds were appropriated in a prior year. EPA appropriations for FY2012 requires Davis-Bacon prevailing wages for projects funded under both revolving loan programs for FY2012 and future fiscal years. This report reviews the prevailing wage requirements of the DBA and discusses whether prevailing wages must be paid to workers on construction projects funded by the revolving loan programs established by the CWA and SDWA. The report also summarizes legislation that requires the payment of Davis-Bacon wages on projects funded by the two revolving loan programs. The DBA of 1931, as amended, requires employers to pay at least locally prevailing wages and fringe benefits to workers employed on contracts in excess of $2,000 to which the federal government is a party. The act applies to the construction, alteration, or repair of public buildings and public works. The purpose of the act is to stabilize local construction and labor markets by ensuring that contractors pay wages and fringe benefits that are consistent with local labor markets. Congress has added Davis-Bacon prevailing wage requirements to other statutes, including the CWA and SDWA. Under these so-called "related acts," Davis-Bacon wages apply to federal construction projects that are funded through grants, loans, loan guarantees, or other forms of financing. These related acts cover construction in such areas as transportation, housing, and water pollution control. Each contractor subject to the Davis-Bacon prevailing wage requirements must furnish a weekly payroll statement to the contracting agency. The statement must include the name of each covered worker and the worker's job classification, hourly rate of pay, and number of hours worked. DOL publishes locally prevailing wages and fringe benefits for four types of construction: residential, building, highway, and heavy construction. Davis-Bacon prevailing wages and fringe benefits are based on DOL surveys of construction contractors, subcontractors, and building trades unions. The surveys collect information on wages and fringe benefits paid to workers on active construction projects. Congress enacted the CWA in 1948 to improve water quality in the United States. While the CWA sought initially to provide states with technical assistance, it has been amended several times to accomplish other goals. In 1956, Congress adopted legislation (P.L. 84-660) that created the Construction Grants Program, which provided grants directly to local governments for the construction of municipal wastewater treatment plants. Subsequent amendments expanded the grants program in order to aid communities in meeting the goals and performance requirements of the act. In addition, amendments adopted in 1972 require construction contractors to pay at least locally prevailing wages on projects "for which grants are made" under the CWA. This requirement is included in Section 513 of the CWA. In 1987, Congress again amended the CWA ( P.L. 100-4 ) to phase out the Construction Grants Program and establish the State Water Pollution Control Revolving Fund Program. Under the loan program, Congress appropriates funds to states for capitalization grants. The Environmental Protection Agency (EPA) allocates the funds to the states based on a formula included in the CWA. States provide a matching amount equal to 20% of the capitalization grants they receive from the program. The states then make loans or provide other financial assistance to local governments for the construction of wastewater treatment facilities. As local governments repay the loans to states, the states loan the money to other local governments--hence, the revolving nature of the program. The 1987 amendments also added Section 602(b)(6) to the CWA. Section 602(b)(6) states that Section 513 applies to projects "constructed in whole or in part before fiscal year 1995 with funds directly made available by capitalization grants." Under the 1987 amendments, federal grants to capitalize the SRFs were expected to end with FY1994, the last year identified in the authorization of appropriations. Although Congress has not updated the section of the CWA that authorizes appropriations for the SRFs, it has appropriated funds for capitalization grants each fiscal year since 1994. After FY1994, questions arose over whether the Davis-Bacon prevailing wage requirements also expired. In 1995, EPA issued a memorandum in which it said that projects that began construction after the end of FY1994 did not have to comply with the requirements of Section 602(b)(6). The Building and Construction Trades Department (BCTD) of the AFL-CIO disagreed with EPA's interpretation of the law. The BCTD argued that Davis-Bacon coverage applied to projects funded by the SRFs as long as Congress continued to appropriate funds for the program. The BCTD asked DOL to rule that Davis-Bacon requirements continued to apply to projects that began after FY1994 and were funded with assistance from the SRFs. In June 2000, EPA and the BCTD proposed a settlement agreement that would require states to ensure that prevailing wages were paid for work performed on projects funded through the SRF program "for as long as grants are awarded to the states." EPA indicated that it was "persuaded of the appropriateness of the view that CWA section 513 imposes a continuing, independent obligation on the Agency to ensure that Davis-Bacon Act requirements apply to the grants made under the CWA for treatment works, including capitalization grants." Under the agreement, the BCTD would also agree to avoid further legal action before DOL or any other federal agency. The final settlement agreement between EPA and the BCTD appeared in the Federal Register in January 2001. The agreement was to take effect in July 2001. But, on June 19, 2001, EPA indicated that it would not implement the terms of the settlement agreement because it believed that Section 513 of the CWA was precluded by Section 602(b)(6), which addresses projects "constructed in whole or in part before fiscal year 1995." Although EPA stated that it would publish a formal notice of its changed position in the Federal Register , it does not appear to have done so. It was reported in September 2001 that EPA was delaying implementation of the settlement agreement until October 1, 2001. It does not appear that the settlement agreement was ever implemented. As discussed below, in recent legislation Congress has imposed Davis-Bacon prevailing wage requirements on projects that receive financial assistance from SRFs under the CWA. Congress approved the SDWA in 1974 to protect the quality of public drinking water supplies in the United States. EPA may regulate drinking water contaminants pursuant to the SDWA. In 1996, Congress amended the SDWA ( P.L. 104-182 ) to create a state revolving loan program modeled after the loan program in the CWA. The purpose of the revolving loan program is to help public water systems finance improvements needed to comply with federal drinking water regulations. The 1996 amendments authorized the EPA to make grants to states to capitalize Safe Drinking Water SRFs. States must provide a match equal to 20% of their annual grant. Funding authority for the Safe Drinking Water SRFs expired at the end of FY2003. Nevertheless, Congress has appropriated funds for capitalization grants each year since. The SDWA contains a Davis-Bacon provision, but the provision predates the state revolving loan program. Section 1450(e) of the SDWA states that the EPA Administrator "shall take such actions as may be necessary to assure compliance with provisions of [the Davis-Bacon Act]." In 2004, as the Senate considered legislation that would have amended the SDWA to require the payment of prevailing wages for projects financed with assistance provided from a Safe Drinking Water SRF. The Senate Committee on Environment and Public Works observed: "As enacted, Davis Bacon applies only to those contracts to which the Administrator or Federal Government is a contractee. In the case of the SRF, the contracts are between the State and the municipality and therefore, Davis Bacon does not apply to the SRF." In recent Congresses, legislation has been enacted that requires Davis-Bacon prevailing wages on projects that receive financial assistance from SRFs under both the CWA and SDWA. Other legislation has been considered that would have applied Davis-Bacon wages to projects funded by both programs. Appropriations acts for EPA for FY2010 and FY2012 included provisions that applied Davis-Bacon prevailing wages to projects financed by the state revolving loan programs under both the CWA and SDWA. The Consolidated Appropriations Act, 2012 ( P.L. 112-74 ) provided capitalization grants to the Clean Water SRFs and Safe Drinking Water SRFs for FY2012. The act applies Davis-Bacon prevailing wages to projects funded under both revolving loan programs for FY2012 and future fiscal years. Specifically, P.L. 112-74 stated: For fiscal year 2012 and each fiscal year thereafter, the requirements of section 513 of the Federal Water Pollution Control Act (33 U.S.C. 1372) shall apply to the construction of treatment works carried out in whole or in part with assistance made available by a State water pollution control revolving fund as authorized by title VI of that Act (33 U.S.C. 1381 et seq.), or with assistance made available under section 205(m) of that Act (33 U.S.C. 1285(m)), or both. For fiscal year 2012 and each fiscal year thereafter, the requirements of section 1450(e) of the Safe Drinking Water Act (42 U.S.C. 300j-9(e)) shall apply to any construction project carried out in whole or in part with assistance made available by a drinking water treatment revolving loan fund as authorized by section 1452 of that Act (42 U.S.C. 300j-12). The Department of the Interior, Environment, and Related Agencies Appropriations Act, 2010 ( P.L. 111-88 ) provided capitalization grants to the Clean Water SRFs and Safe Drinking Water SRFs for FY2010. The legislation stated that prevailing wages would be required for work performed on construction projects carried out in whole or in part with funds from the two SRFs: For fiscal year 2010 the requirements of section 513 of the Federal Water Pollution Control Act (33 U.S.C. 1372) shall apply to the construction of treatment works carried out in whole or in part with assistance made available by a State water pollution control revolving fund as authorized by title VI of that Act (33 U.S.C. 1381 et seq.), or with assistance made available under section 205(m) of that Act (33 U.S.C. 1285(m)), or both. For fiscal year 2010 the requirements of section 1450(e) of the Safe Drinking Water Act (42 U.S.C. 300j-9(e)) shall apply to any construction project carried out in whole or in part with assistance made available by a drinking water treatment revolving loan fund as authorized by section 1452 of that Act (42 U.S.C. 300j-12). In November 2009, EPA provided guidance on the FY2010 appropriations and the payment of prevailing wages. In a memorandum to water management division directors, EPA announced that Davis-Bacon coverage would extend to any "assistance agreement" funded with FY2010 appropriations. EPA also stated that Davis-Bacon coverage would extend to any agreement executed during FY2010, even if the source of the funds was a prior year's appropriations. EPA noted the following: States must include in all assistance agreements, whether in the form of a loan, bond purchase, grant, or any other vehicle to provide financing for a project, executed on or after October 30, 2009 (date of enactment of P.L. 111-88 ), and prior to October 1, 2010, for the construction of treatment works under the CWSRF or for any construction under the DWSRF, a provision requiring the application of Davis-Bacon Act requirements for the entirety of the construction activities financed by the assistance agreement through completion of construction, no matter when construction commences. Application of the Davis-Bacon Act requirements extends not only to assistance agreements funded with Fiscal Year 2010 appropriations, but to all assistance agreements executed on or after October 30, 2009 and prior to October 1, 2010, whether the source of the funding is prior year's appropriations, state match, bond proceeds, interest earnings, principal repayments, or any other source of funding so long as the project is financed by an SRF assistance agreement. If a project began construction prior to October 30, 2009, but is financed or refinanced through an assistance agreement executed on or after October 30, 2009 and prior to October 1, 2010, Davis-Bacon Act requirements will apply to all construction that occurs on or after October 30, 2009, through completion of construction. Although some questioned the breadth of the November 2009 guidance, it appears possible to interpret the SRF funding provisions in the FY2010 appropriations measure to allow Davis-Bacon coverage to extend to projects that were financed with funds appropriated in prior years. P.L. 111-88 stated that prevailing wages were required for projects "carried out in whole or in part with assistance" from the SRFs. Thus, the measure did not seem to limit the application of the Davis-Bacon requirements to projects funded only with appropriations for FY2010. Concerns were raised about the effect of imposing Davis-Bacon prevailing wage and reporting requirements on all projects that received assistance from the SRFs in FY2010. Some argued that the requirements could affect projects that were already planned. For example, the requirements could affect cost estimates, contract preparation, and administrative costs. It was also argued that the requirements could cause some projects to be delayed. The American Recovery and Reinvestment Act ( P.L. 111-5 , ARRA) provided supplemental appropriations for FY2009 to the state revolving loan programs. Section 1606 of ARRA required the payment of prevailing wages for work performed on projects "funded directly by or assisted in whole or in part by and through the Federal Government" pursuant to the act. Thus, while Davis-Bacon prevailing wage requirements already applied to much of the construction funded by ARRA, Congress imposed Davis-Bacon requirements on all construction projects funded by the act. In several recent Congresses, legislation has been reported, but not enacted, that would have reauthorized appropriations for the CWA and SDWA state revolving fund loan programs and would have extended Davis-Bacon prevailing wage requirements to those programs. In the 111 th Congress, the Senate Environment and Public Works Committee reported S. 1005 , the Water Infrastructure Financing Act. In addition to authorizing additional funding for the SRFs under both the CWA and SDWA, the legislation required Davis-Bacon prevailing wages on all projects financed in whole or in part by a state revolving loan fund. The bill applied Davis-Bacon both to the initial loans made by an SRF with funds from a new congressional appropriation and, as communities paid back the loans, to loans made using these repayments. In the 111 th Congress, the House passed H.R. 1262 , the Water Quality Investment Act of 2009. The legislation reauthorized the CWA SRF program for five years and applied Davis-Bacon prevailing wages to all projects financed in whole or in part through an SRF. Also in the 111 th Congress, the House Energy and Commerce Committee reported H.R. 5320 , the Assistance, Quality, and Affordability Act of 2010. As approved by the full committee, H.R. 5320 applied Davis-Bacon prevailing wages to projects financed through a SDWA revolving loan fund.

The Davis-Bacon Act requires employers to pay workers on federal construction projects at least locally prevailing wages and fringe benefits. These wages and benefits are the minimum hourly wages and benefits that employers must pay workers. In order to hire and retain workers, employers may pay more than locally prevailing wages or benefits. Supporters of the Davis-Bacon Act maintain that it creates stability in local construction and labor markets and ensures that projects are built by the most skilled and experienced workers. Critics of the act argue that it impedes competition, raises construction costs, and imposes additional administrative requirements on contractors. The Federal Water Pollution Control Act, commonly called the Clean Water Act (CWA), authorizes appropriations to states to operate state revolving loan funds (SRFs) that finance the construction of wastewater treatment plants. The Safe Drinking Water Act (SDWA) authorizes appropriations for SRFs to finance the construction of public drinking water systems. An issue for Congress is whether to apply Davis-Bacon prevailing wages to projects financed by the state revolving loan programs under the CWA and SDWA. The SDWA has a Davis-Bacon provision, but the provision predates, and does not apply to, the state revolving loan program. The CWA states that Davis-Bacon prevailing wages apply to projects that are "constructed in whole or in part before fiscal year 1995" with funds from the revolving loan program. Authorization for appropriations expired at the end of FY1994 for the CWA and the end of FY2003 for the SDWA. Nevertheless, Congress has continued to appropriate funds for the SRFs under both statutes. After the authorization of appropriations for the SRFs under the CWA expired at the end of FY1994, Davis-Bacon coverage was the subject of considerable debate. In 1995, the Environmental Protection Agency (EPA) issued a memorandum stating that projects that began construction after the end of FY1994 did not have to comply with the Davis-Bacon requirements. However, the Building and Construction Trades Department (BCTD) of the AFL-CIO disagreed with EPA's interpretation of the law. The BCTD argued that Davis-Bacon coverage applied to projects funded by the SRFs as long as Congress continued to appropriate funds for the program. In June 2000, EPA and the BCTD proposed a settlement agreement that would require states to ensure that prevailing wages are paid for work performed on projects funded through the SRF program "for as long as grants are awarded to the states." The agreement was to take effect in July 2001. Later, the implementation date was moved to September 2001, and then to October 2001. It does not appear that the settlement agreement was ever implemented. The American Recovery and Reinvestment Act (ARRA) provided FY2009 supplemental appropriations funds to the CWA and SDWA SRFs, and required Davis-Bacon prevailing wages on projects funded in whole or in part by the act. Regular appropriations for EPA for FY2010 and FY2012 included provisions that applied Davis-Bacon prevailing wages to projects financed by the state revolving loan programs under both the CWA and SDWA. As interpreted by the EPA, regular appropriations for the EPA for FY2010 required Davis-Bacon prevailing wages on any project funded with FY2010 appropriations or any agreement executed in FY2010, even if the funds were appropriated in a prior year. Appropriations for FY2012 required Davis-Bacon prevailing wages for projects funded under both revolving loan programs for FY2012 and future fiscal years.

Concern about shareholder value, corporate governance, and the economic and social impact of escalating pay for corporate executives has led to a controversy regarding the practices of paying these executives. In a stated attempt "to provide investors with a clearer and more complete picture of compensation to principal executive officers, principal financial officers [and] the other highest paid executive officers and directors," the Securities and Exchange Commission (SEC or Commission) issued rules in 2006 concerning the disclosure of executive compensation. The rules, however, have created a controversy of their own. Separate from the SEC, Congress has also examined ways to address concerns relating to executive compensation. On July 26, 2006, the SEC voted to adopt revisions to its rules concerning disclosure of executive compensation. These compensation disclosure rules were particularly focused upon companies' providing investors with details about executives' stock-option grants and corporate stock-option programs. The rules required companies to prepare a principles-based Compensation Discussion and Analysis section in their proxy statements, annual reports, and registration statements. In these July 26 rules, the Commission required companies "to make tabular and narrative disclosure about all aspects of stock option grants and ... provid[e] additional guidance about the disclosure of company stock-option practices." The tables would have to contain such information as the grant date fair value, the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards Rule No. 123 (FAS 123R) grant date, the closing market price on the grant date if the closing market price is greater than the exercise price of the award, and the date on which the board of directors or the compensation committee took action to grant the award if the action date is different from the grant date. On December 22, 2006, the Commission announced that it had adopted changes in its July 26 executive and director compensation disclosure rules "to more closely conform the reporting of stock and option awards to Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (revised 2004) Share-Based Payment (FAS 123R)." The amendment was made in the form of interim final rules that would become effective upon publication in the Federal Register. The Commission went on to state that FAS 123R requires recognition of the costs of equity awards over the period in which an employee is required to provide service in exchange for the award. Using this same approach in the executive compensation disclosure will give investors a better idea of the compensation earned by an executive or director during a particular reporting period, consistent with the principles underlying the financial disclosure statement. The SEC briefly summarized some of the important provisions of the amendment as follows: The dollar values required to be reported in the Stock Awards and Option Awards columns of the Summary Compensation Table and the Director Compensation Table are revised to disclose the compensation cost of those awards, before reflecting forfeitures, over the requisite service period, as described in FAS 123R. Forfeitures are required to be described in accompanying footnotes. The Grants of Plan-Based Awards Table is revised to require disclosure of the grant date fair value of each individual equity award, computed in accordance with FAS 123R, and the Director Compensation Table required under Item 402 of Regulation S-K is revised to require footnote disclosure of the same information. The Grants of Plan-Based Awards Table is revised to require disclosure of any option or stock appreciation right that was re-priced or otherwise materially modified during the last completed fiscal year, including the incremental fair value, computed as of the re-pricing or modification date in accordance with FAS 123R, and the Director Compensation Table required under Item 402 of Regulation S-K is revised to require footnote disclosure of the same incremental fair value information. These December 22 amendments have resulted in criticism by some investor groups. Investor groups' criticism has focused on what they believe to be the obfuscation of executive pay packages. An example given is the following: Say the Chief executive of American Widget gets a $24 million option grant on December 1 of this year, with the options vesting--meaning they may be exercised--over four years. He is not eligible for retirement, perhaps because he joined the company only a few years ago, or perhaps because he has not reached the company's minimum retirement age of 60. In the summary table, the value of that option will be shown as $500,000. That is because he has worked just one month of the 48 months needed for the option to become fully exercisable. Over at National Widget, American's main competitor, the chief executive gets an inferior options package on the same day. It is worth $5 million, with the same four-year schedule. But that executive is eligible to retire, although he has no intention of doing so. The compensation summary will show he got a $5 million option. The reality is that one man received options worth nearly five times what the other one was awarded. The appearance is very different. On the other hand, some business groups claimed that the executive compensation disclosure requirements as originally proposed by the SEC needed to be revised because they did not provide a completely accurate picture of actual annual executive compensation. On December 16, 2009, the SEC adopted rule changes titled "Proxy Disclosure Enhancements." The provisions addressing disclosures of executive compensation require a discussion of overall employee compensation policies and practices if risks arise that are reasonably likely to have a material adverse effect upon the company. Congressional proposals concerning executive compensation may be classified into two broad categories: additional disclosure of executive compensation to shareholders and limiting for tax purposes the amounts deferred under a nonqualified deferred compensation plan. An example of additional disclosure is H.R. 4291 , 109 th Congress. This bill would have amended Section 16 of the Securities Exchange Act of 1934 to require that each reporting issuer must include in the annual report and in any proxy solicitation a comprehensive statement of the issuer's compensation plan for the principal executive officers, including any type of compensation, the short- and long-term performance measures that the issuer uses for determining compensation, and the policy of the issuer concerning other specified measures of compensation. The proxy solicitation materials would have been required to have a separate shareholder vote to approve the compensation plan. The bill would also have required the disclosure of golden parachute compensation in any proxy solicitation material concerning an acquisition, merger, consolidation, or proposed sale. In the 110 th Congress, H.R. 1257 , the Shareholder Vote on Executive Compensation Act, referred to the House Committee on Financial Services, would have amended Section 14 of the Securities Exchange Act of 1934 to add a new subsection which would have required a separate, nonbinding shareholder vote in any proxy or consent or authorization for an annual meeting to approve the compensation of executives as disclosed in accordance with the SEC's compensation disclosure rules. Also in the 110 th Congress there was a proposal which would have affected the tax consequences of executive compensation. Section 206 of S. 349 would have added an additional requirement to rules governing income inclusion of amounts deferred under a nonqualified deferred compensation plan. Also in the 110 th Congress, S. 2866 would have amended the Internal Revenue Code to place an annual limitation on aggregate amounts that could be deferred under nonqualified deferred compensation arrangements. It would have amended Section 304 of the Sarbanes-Oxley Act of 2002 to provide for a longer look-back period for reimbursement of compensation for misconduct by an executive to the issuer. It would have amended the Securities Exchange Act of 1934 to provide during an annual meeting for a nonbinding shareholder vote on executive compensation. It would have also amended the Federal Property and Administrative Services Act of 1949 to require federal contractors to disclose their executive compensation structures. In the 110 th Congress, two laws containing executive compensation provisions applicable to executives of specific types of businesses were enacted: P.L. 110-289 , the Housing and Economic Recovery Act of 2008, and P.L. 110-343 , the Emergency Economic Stabilization Act of 2008. Sections of P.L. 110-289 concern restrictions on compensation for executives of federal home loan banks, Fannie Mae, and Freddie Mac. Section 1117 allows the Secretary of the Treasury, in exercising temporary authority to purchase obligations issued by any federal home loan bank, Fannie Mae, and Freddie Mac, to consider limitations on the payment of executive compensation. Sections 1113 and 1114 allow the Director of the Federal Housing Finance Agency to prohibit and withhold executive compensation from executives of federal home loan banks, Fannie Mae, and Freddie Mac if wrongdoing has occurred. There is also authority for limiting golden parachute payments to these executives. Section 302 of P.L. 110-343 prohibits the tax deduction of excessive employee remuneration. Section 111 of P.L. 110-343 allowed the Secretary of the Treasury to require that financial institutions whose troubled assets are purchased met appropriate standards for executive compensation. These standards were required to include limits on incentive-based compensation for unnecessary and excessive risks, recovery of bonuses and incentive compensation based on criteria later proven to be materially inaccurate, and a prohibition on golden parachutes. Bills concerning executive compensation limits have been introduced in the 111 th Congress. Among these bills are H.R. 851 , which would require any institution provided with assistance under the Emergency Economic Stabilization Act of 2008 to meet standards for executive compensation and corporate governance, and H.R. 857 and S. 360 , which would prohibit any officer or employee of an entity receiving funds under TARP from being compensated more than the President of the United States. In the 111 th Congress, Title VII of P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA), amended Section 111 of P.L. 110-343 to set forth somewhat different and more detailed restrictions on the compensation of executives of companies during the period in which any obligation arising from financial assistance provided under the Troubled Assets Relief Program (TARP) remains outstanding. The Secretary of the Treasury is required to develop appropriate standards for executive compensation. The standards must include the following: Limits on compensation that exclude incentives for the five highest paid executives of the TARP recipient to take unnecessary and excessive risks. A provision for the recovery by the TARP recipient of any bonus, retention award, or incentive compensation paid to the five highest paid executives and the next 20 most highly compensated employees of the TARP recipient, based upon criteria that are later found to be materially inaccurate. A prohibition on the TARP recipient's making any golden parachute payment to the five highest paid executives or any of the next five highest paid employees of the TARP recipient. A prohibition on a TARP recipient's paying a bonus, retention award, or incentive compensation, except that the prohibition shall not apply to paying long-term restricted stock, so long as this stock does not fully vest during the period in which the TARP recipient has outstanding financial assistance, has a value not greater than one-third of the total amount of the annual compensation of the employee receiving the stock, and is subject to other conditions that the Secretary of the Treasury may determine to be in the public interest. The prohibition is not to be construed to apply to a bonus payment required to be paid according to a written employment contract executed on or before February 11, 2009. The prohibition applies to the highest paid person of a financial institution receiving $25 million or less in financial assistance, to at least the five highest paid employees of a financial institution receiving between $25 million and $250 million in financial assistance, to the five highest paid executive officers and at least the next 10 highest paid employees of a financial institution receiving between $250 million and $500 million, and for a financial institution receiving financial assistance of $500 million or more to the five highest paid officers and at least the next 20 highest paid employees. A prohibition on any compensation plan encouraging manipulation of the reported earnings of a TARP recipient to enhance the compensation of any of its employees. A requirement for the establishment of a Board Compensation Committee. The chief executive officer and the chief financial officer of each TARP recipient must certify that the TARP recipient has complied with the standards issued by the Secretary of the Treasury and file the certification with the SEC if the company's securities are publicly traded or with the Secretary of the Treasury if the company's securities are not publicly traded. The Board Compensation Committee which each TARP recipient is required to establish must be made up of independent directors and must review employee compensation plans. The Board must meet at least semiannually to discuss and evaluate employee compensation plans. If the TARP recipient's stock is not registered with the SEC and it has received $25 million or less of TARP assistance, the Board Compensation Committee's duties shall be performed by the recipient's board of directors. The board of directors of each TARP recipient must have a policy concerning excessive or luxury expenses, including entertainment, office renovations, transportation services, and other unreasonable expenditures. Any annual or other meeting of the shareholders of a TARP recipient must permit a separate shareholder vote to approve the compensation of executives. The vote shall be nonbinding and cannot be construed to overrule a decision by the board of directors. The Secretary of the Treasury is required to review bonuses, retention awards, and other compensation paid to the five highest paid executives and the next 20 highest paid employees of each company that received TARP assistance before February 17, 2009 (the act's date of enactment), to determine whether any payments were inconsistent with the purposes of TARP or contrary to the public interest. Payments determined to be excessive shall be reimbursed to the federal government. In consultation with the appropriate federal banking agency, the Secretary of the Treasury shall permit a TARP recipient to repay any assistance provided to the financial institution, without regard to whether the financial institution has replaced the funds from any other source or to any waiting period. When the assistance is repaid, the Secretary of the Treasury shall liquidate warrants associated with the assistance at the current market price. On June 10, 2009, the Treasury Department issued a rule concerning executive compensation for firms that have received assistance under TARP. Bonuses and golden parachute payments are limited to executives of all entities which have received bailout funds, not just to financial firms. Along with the rule, Treasury has appointed a special master responsible for reviewing any compensation paid to top executives and highly paid employees of companies which have received exceptional assistance from the federal government. On June 9, 2009, Treasury and the SEC issued two broad proposals that would provide the SEC with more authority over executive compensation at all publicly traded companies. These proposals would give to the SEC the authority to require nonbinding shareholder votes on executive compensation and authority to ensure that corporate compensation committees are more independent. With the acknowledgment by AIG of the payment of bonuses to a number of its employees, bills have been introduced to recover at least some of the bonuses paid. These bills would use different ways in recovering the bonuses. For example, H.R. 1575 would authorize the Attorney General to recover excessive compensation paid by entities which have received federal financial assistance on or after September 1, 2008. Other bills would impose a high rate of taxation upon the bonuses paid. For example, H.R. 1586 , passed by the House, would impose a 90% tax on many bonuses paid by businesses receiving TARP assistance. S. 651 would impose an excise tax on some bonuses paid by companies receiving federal emergency economic assistance and would limit nonqualified deferred compensation that employees of companies receiving federal emergency economic assistance may defer from taxation. H.R. 1664 , passed by the House, would amend the Emergency Economic Stabilization Act of 2008 to prohibit unreasonable and excessive compensation and compensation not based on performance standards paid by companies receiving direct capital investments of taxpayer money. Bills introduced in the 111 th Congress more generally on executive compensation include S. 1074 , which would apply a say-on-pay rule to all publicly traded companies, and S. 1006 , which would require 60% of shareholders to give their approval to pay packages larger than 100 times the average annual compensation of a company's employees. The House Committee on Financial Services circulated a discussion draft of H.R. 3269 , the Corporate and Financial Institution Compensation Fairness Act of 2009. The draft had four major parts: Say-on-Pay, Independent Compensation Committee, Incentive Based Compensation Disclosure, and Compensation Standards for Financial Institutions. On July 31, 2009, the House passed an amended version of the bill. The bill is included as Title II of H.R. 4173 , passed by the House on December 11, 2009. Section 2002 of the House-passed bill, concerning shareholder votes on executive compensation disclosures, would amend Section 14 of the Securities Exchange Act by adding subsection (i), which would require every annual shareholder meeting to have a separate shareholder vote to approve the compensation of executives. The shareholder vote would not be binding and could not be construed as overruling a decision made by the board of directors. In addition, any proxy or consent solicitation material in which shareholders are asked to approve an acquisition, merger, consolidation, or proposed sale of an issuer would have to disclose any agreements or understandings that executive officers have concerning compensation based upon the acquisition, merger, consolidation, or sale of the issuer, so-called golden parachute agreements. There would have to be a nonbinding shareholder vote on this compensation. Every institutional investment manager would be required to disclose how it voted on executive compensation and golden parachutes. The SEC could exempt certain categories of issuers from the shareholder vote requirements and, in determining these exemptions, would need to take into account the potential impact upon smaller companies. Section 2003 of the House-passed bill would require that every national securities exchange or association prohibit the listing of equity securities of an issuer not having a compensation committee of the board of directors. Every member of the compensation committee would have to be independent, meaning that he or she could not accept any consulting, advisory, or other compensatory fee from the issuer. A compensation committee would have the authority to retain a compensation consultant and independent counsel. A compensation consultant or other adviser to an issuer's compensation committee would have to meet the independence standards established by the SEC by regulation. Section 2004 of the House-passed bill would require federal regulators to issue regulations requiring covered financial institutions to disclose the structures of all incentive-based compensation arrangements offered by the institutions so as to determine whether the structures are aligned with sound risk management, structured to consider risks over time, and meet other criteria to reduce unreasonable incentives offered to employees to take excessive risks that could threaten the safety and soundness of financial institutions or could have adverse effects upon economic conditions or financial stability. The federal regulators covered are the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Board of Directors of the Federal Deposit Insurance Corporation, the Director of the Office of Thrift Supervision, the National Credit Union Administration Board, the Securities and Exchange Commission, and the Federal Housing Finance Agency. Covered financial institutions are a depository institution or depository institution holding company, a broker-dealer, a credit union, an investment adviser, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and any other financial institution that the federal regulators determine should be treated as a covered financial institution. The Comptroller General would be required to carry out a study to determine whether there is a connection between compensation structures and excessive risk taking. Subtitle E of Title IX of the Chairman's Mark on financial regulatory reform of the Senate Committee on Banking, Housing, and Urban Affairs concerns executive compensation. The proposal requires that, in a proxy for a shareholder meeting, there be a separate resolution to approve executive compensation. The vote shall not be binding and may not be construed as overruling a decision by the board of directors. The proposal requires that the SEC prohibit the listing of any security of an issuer that does not comply with the rules of the SEC concerning an issuer's compensation committee. The proposal's provision on executive compensation disclosures mandates the SEC to require by rule that each issuer disclose in the annual proxy statement a clear description of disclosed compensation, including information showing the relationship between executive compensation and the financial performance of the issuer. In the event of an accounting restatement due to material noncompliance of the issuer with financial reporting requirements, the issuer will recover incentive-based compensation. The proposal requires each issuer to disclose in the annual proxy statement whether employees are allowed to purchase hedging instruments related to equity securities granted to employees as part of employee compensation. With respect to compensation standards for holding companies of depository institutions, there are prohibitions on excessive compensation and compensation that could lead to material financial loss. As part of their financial regulatory reform legislation, both the House and the Senate passed bills with provisions applying to executive compensation. The House- and Senate-passed executive compensation provisions differed, in some cases significantly. The House and Senate conferees on Wall Street reform passed an executive compensation subtitle. On June 30, 2010, the House agreed to the conference report for H.R. 4173 , now referred to as the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). The Senate agreed to the conference report on July 15, 2010. The President signed the bill into law as P.L. 111-203 on July 21, 2010. In the 112 th Congress, H.R. 3606 , eventually a combination of several House bills, passed both the House and the Senate and is titled the Jumpstart Our Business Startups Act (JOBS Act). The bill's Section 102(a) exempts for up to five years certain companies with annual gross revenues of less than $1 billion, called emerging growth companies, from complying with the requirement of Dodd-Frank concerning the nonbinding shareholder vote on the approval of executive compensation. The President signed the bill on April 5, 2012. On March 3, 2009, the United States Supreme Court granted certiorari in Jones v. Harris Associates . In this case shareholders in a mutual fund brought suit against a fund's investment advisers for charging excessive fees in violation of Section 36(b) of the Investment Company Act of 1940. This provision in part states that an investment adviser of a registered investment company has a fiduciary relationship concerning compensation for services and that fund shareholders can bring a claim for breach of that fiduciary duty. The lower court decision stated that "[s]ection 36(b) does not say that fees must be 'reasonable' in relation to a judicially created standard. It says instead that the adviser has a fiduciary duty." The lower court held that the fees in this instance were not excessive because they were roughly in line with fees that other funds of similar size and investment goals paid their advisers and because the shareholders could not show that the adviser misled the fund's directors. The question before the Supreme Court is whether the lower court erred in holding that a shareholder's claim of excessive fees under Section 36(b) cannot be recognized unless the shareholder can show that the adviser misled the fund's directors. Interest in this case from the executive compensation angle centers on the possibility that the decision may provide a hint as to what the Court could consider excessive executive compensation if it has before it a case concerning, for example, government actions limiting executive compensation. On November 2, 2009, the Court heard oral argument in this case. On March 30, 2010, the Court held that, in order to be successful in holding that an adviser misled the fund's directors and thereby violated his fiduciary duty, investors must show that an investment adviser has charged a "fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm's length bargaining."

Concern about shareholder value, corporate governance, and the economic and social impact of escalating pay for corporate executives has led to a controversy regarding the practices of paying these executives. Proposals have been made in the current and recent Congresses to limit executive compensation and the amount of deferred compensation for tax purposes. In the 110th Congress, two laws containing executive compensation provisions were enacted: P.L. 110-289, the Housing and Economic Recovery Act of 2008, and P.L. 110-343, the Emergency Economic Stabilization Act of 2008. Bills have also been introduced in the 111th Congress concerning limiting executive compensation. In the 111th Congress, Title VII of P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA), sets forth restrictions on the compensation of executives of companies during the period in which any obligation arising from financial assistance provided under the Troubled Assets Relief Program (TARP) remains outstanding. In July 2009 the House Committee on Financial Services circulated a discussion draft of H.R. 3269, the Corporate and Financial Institution Compensation Fairness Act of 2009. On July 31, 2009, the House passed an amended version of H.R. 3269, which is included as Title II of H.R. 4173, passed by the House on December 11, 2009. The Senate considered a proposal of a financial regulatory reform bill, of which Subtitle E of Title IX concerned executive compensation. Both the House and the Senate passed bills with provisions applying to executive compensation. The House- and Senate-passed executive compensation provisions differed, in some cases significantly. The House and Senate conferees on Wall Street reform passed an executive compensation subtitle. On June 30, 2010, the House agreed to the conference report for H.R. 4173, now referred to as the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). The Senate agreed to the conference report on July 15, 2010. The President signed the bill into law as P.L. 111-203 on July 21, 2010. In the 112th Congress, H.R. 3606, eventually a combination of several House bills, passed both the House and the Senate and is titled the Jumpstart Our Business Startups Act (JOBS Act). The bill has a provision which would exempt certain companies with annual gross revenues of less than $1 billion from complying with many of the executive compensation provisions of Dodd-Frank for up to five years. The President signed the bill on April 5, 2012. On March 3, 2009, the United States Supreme Court granted certiorari in Jones v. Harris Associates, a case which challenged the fees charged by a mutual fund's investment advisers as excessive and a breach of fiduciary duty. Interest in this case from the executive compensation angle centered on the possibility that the decision might provide a hint as to what the Court could consider excessive executive compensation. On November 2, 2009, the Court heard oral argument in this case. On March 30, 2010, the Court held that, in order to be successful in holding that an adviser misled the fund's directors and thereby violated his fiduciary duty, investors must show that an investment adviser has charged a "fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm's length bargaining."

Electric utility generating facilities are a major source of air pollution. The combustion of fossil fuels (petroleum, natural gas, and coal), which accounts for about two-thirds of U.S. electricity generation, results in the emission of a stream of gases. These gases include several pollutants that directly pose risks to human health and welfare, including particulate matter (PM), sulfur dioxide (SO 2 ), nitrogen oxides (NOx), and mercury (Hg). Particulate matter, SO 2 , and NOx are currently regulated under the Clean Air Act (CAA), and the Environmental Protection Agency (EPA) has promulgated rules to regulate mercury beginning in 2010. Other gases may pose indirect risks, notably carbon dioxide (CO 2 ), which contributes to global warming. Table 1 provides estimates of SO 2 , NOx, and CO 2 emissions from electric generating facilities. Annual emissions of Hg from utility facilities are more uncertain; current estimates indicate about 48 tons. Utilities are subject to an array of environmental regulations, which affect in different ways both the cost of operating existing generating facilities and the cost of constructing new ones. The evolution of air pollution controls over time and as a result of growing scientific understanding of health and environmental impacts has led to a multilayered and interlocking patchwork of controls. Moreover, additional controls are in the process of development, particularly with respect to NOx as a precursor to ozone, to both NOx and SO 2 as contributors to PM 2.5 , and to Hg as a toxic air pollutant. Also, under the United Nations Framework Convention on Climate Change (UNFCCC), the United States agreed to voluntary limits on CO 2 emissions. The current Bush Administration has rejected the Kyoto Protocol, which would impose mandatory limits, in favor of a voluntary reduction program. In contrast to the Administration's position, in June 2005, the Senate passed a Sense of the Senate calling for mandatory controls on greenhouse gases that would be designed not to impose significant harm on the economy. For many years, the complexity of the air quality control regime has caused some observers to call for a simplified approach. Now, with the potential both for additional control programs on SO 2 and NOx and for new controls directed at Hg and CO 2 intersecting with the technological and policy changes affecting the electric utility industry, such calls for simplification have become more numerous and insistent. One focus of this effort is the "multi-pollutant" or "four-pollutant" approach. This approach involves a mix of regulatory and economic mechanisms that would apply to utility emissions of up to four pollutants in various proposals--SO 2 , NOx, Hg, and CO 2 . The objective would be to balance the environmental goal of effective controls across the pollutants covered with the industry goal of a stable regulatory regime for a period of years. In February 2002, the Bush Administration announced two air quality proposals to address the control of emissions of SO 2 , NOx, Hg, and CO 2 . The first proposal, called "Clear Skies," would amend the Clean Air Act to place emission caps on electric utility emissions of SO 2 , NOx, and Hg. Implemented through a tradeable allowance program, the emissions caps would be imposed in two phases: 2010 (2008 in the case of NOx) and 2018. As part of a complete rewrite of Title IV of the Clean Air Act, the Administration's proposal was introduced in the 108 th Congress as H.R. 999 and S. 485 . Revised versions of Clear Skies legislation were introduced in the 109 th Congress as H.R. 227 and S. 131 . The proposal has not been reintroduced in the 110 th Congress. The second Administration proposal initiates a new voluntary greenhouse gas reduction program, similar to ones introduced by the earlier George H. W. Bush and Clinton Administrations. Developed in response to the U.S. ratification of the 1992 UNFCCC, these previous plans projected U.S. compliance, or near compliance, with the UNFCCC goal of stabilizing greenhouse gas emissions at their 1990 levels by the year 2000 through voluntary measures. The Bush Administration proposal does not make that claim, projecting only a 100 million metric ton reduction in emissions from what would occur otherwise in the year 2012. Total emissions would continue to rise. Instead, the plan focuses on improving the carbon efficiency of the economy, reducing 2002 emissions of 183 metric tons per million dollars of GDP to 151 metric tons per million dollars of GDP in 2012. It proposes several voluntary initiatives, along with increased spending and tax incentives, to achieve this goal. The Administration notes that the new initiatives would achieve about one-quarter of the objective, while three-quarters of the projected reduction is seen as occurring through existing efforts. In the 110 th Congress, five bills have been introduced that would impose multi-pollutant controls on utilities. They are all four-pollutant proposals that include carbon dioxide. S. 1168 , introduced by Senator Alexander, and S. 1177 , introduced by Senator Carper, are revised versions of S. 2724 , introduced in the 109 th Congress. S. 1201 , introduced by Senator Sanders, and S. 1554 , introduced by Senator Collins, are similar but revised versions of S. 150 , introduced in the 109 th Congress. In contrast, H.R. 3989 , introduced by Representative McHugh, represents a new proposal. All of these bills involve some form of emission caps, beginning in 2009-2012 time frame. S. 1168 , S. 1177 , and S. 1201 include a second phase beginning in 2013-2015; H.R. 3989 includes a multi-phase program for CO 2 only. They would employ a tradeable credit program to implement the SO 2 , NOx, and CO 2 caps while all but H.R. 3989 permit plant-wide averaging in complying with the Hg requirements. The provisions concerning SO 2 , NOx, and Hg in the five bills are generally more stringent than the comparable provisions of S. 131 of the 109 th Congress. It is difficult to compare the CO 2 caps contained in these bills with the Administration's proposal concerning CO 2 --both because the Administration's proposal is voluntary rather than mandatory and because it is broader (covering all greenhouse gas emissions rather than just utility CO 2 emissions). The five bills are summarized in the Appendix . Each of these bills generally builds on the SO 2 allowance trading scheme contained in Title IV of the 1990 Clean Air Act Amendments (CAAA). Under this program, utilities are given a specific allocation of permitted emissions (allowances) and may choose to use those allowances at their own facilities, or, if they do not use their full quota, to bank them for future use or to sell them to other utilities needing additional allowances. All five bills introduced in the 110 th Congress provide for a tradeable allowance scheme to implement their emission caps on SO 2 , NOx, and CO 2 . However, allowance allocation schemes in the bills differ, with S. 1201 and S. 1554 containing detailed provisions for allocating SO 2 , NOx, and CO 2 allowances to various economic sectors and interests. In most cases, these interests (or their trustees in the case of households and dislocated workers and communities) would auction off (or otherwise sell) their allowances to the affected utilities and use the collected funds for their own purposes. In addition, S. 1201 requires the increasing use of auctions, mandating 100% of the annual allowance allocation be auctioned within 15 years of enactment. In contrast, S. 1168 bases its allowance formulas on fuel usage adjusted by factors specified in the bill, along with a requirement that 25% of the allowances be auctioned. S. 1177 specifies CO 2 and NOx limitations based on electricity output, and SO 2 limitations based on the current Title IV program. The bill sets a schedule for increasing the percentage of the annual allowance allocation that is to be auctioned with 100% required in 2036 and thereafter. Finally, H.R. 3989 auctions 100% of its CO 2 allowances while providing discretion to EPA to allocate SO 2 and NOx allowances. On mercury, all five bills focus on achieving a 90% reduction by 2011 ( S. 1554 and H.R. 3989 ), 2013 ( S. 1201 ) or 2015 ( S. 1168 and S. 1177 ). In contrast, the emissions goal of S. 131 of the 109 th Congress would have allowed about three times more emissions and three to five more years for compliance. In addition, all but H.R. 3989 restrict Hg credit trading to plant-wide averaging of emissions, in contrast with the cap-and-trade program of S. 131 . H.R. 3989 is even more stringent, imposing the emissions rate limitation on a unit-by-unit basis. The bills currently introduced in the 110 th Congress specify CO 2 reductions. In contrast, the Administration's CO 2 proposal relies on various voluntary programs and incentives to encourage reductions in greenhouse gases from diverse sources, including CO 2 emissions from electric generation. These voluntary reductions should not be taken as a given, as neither the George H. W. Bush Administration's nor the Clinton Administration's voluntary programs achieved their stated goals. Thus, in one sense, comparing a mandatory reduction program such as that proposed by S. 1168 , S. 1177 , S. 1201 , and S. 1554 with the Administration's voluntary program is comparing apples to oranges. The first is legally binding, the second has been criticized as merely an exhortation. The CO 2 reduction requirements of S. 1168 , S. 1201 , and S. 1554 are similar, except that S. 1201 and S. 1554 requires affected sources also offset CO 2 emissions from small electric generating units. In contrast, S. 1177 imposes a cap that starts out slightly higher than the other two bills and declines on a slower schedule. Finally, H.R. 3989 has the most detailed reduction scheme with substantial reductions from coal-fired facilities scheduled through 2050. All but H.R. 3989 have provisions to create offsets and facilitate sequestration efforts. Among its titles, S. 1168 has extensive provisions providing for greenhouse gas offsets from landfill methane (CH 4 ), sulfur hexafluoride (SF 6 ) projects, afforestation or reforestation, energy efficiency, agricultural practices (manure management), and biomass. The provisions in S. 1177 include allowance allocations for incremental nuclear capacity, clean coal technology, and renewable energy, along with programs to encourage sequestration. Likewise, S. 1554 includes allowance allocations to encourage renewable energy, energy efficiency, and sequestration. Finally, S. 1201 requires the EPA to develop standards for providing allowances for geologic and biological sequestration. In addition to emissions caps, S. 131 of the 109 th Congress would have substantially modified or eliminated several provisions in the Clean Air Act with respect to electric generating facilities. The bill would have eliminated New Source Performance Standards (NSPS) (Section 111) and replaced them with statutory standards for SO 2 , NOx, particulate matter, and Hg for new sources. Modified sources could have also opted to comply with these new statutory standards and be exempted from the applicable Best Available Control Technology (BACT) determinations under Prevention of Significant Deterioration (PSD) provisions (CAA, Part C) or Lowest Achievable Emissions Rate (LAER) determinations under non-attainment provisions (CAA, Part D). Compliance with these provisions would have exempted such facilities from New Source Review (NSR), PSD-BACT requirements, visibility Best Available Retrofit Technology (BART) requirements, Maximum Achievable Control Technology (MACT) requirements for Hg, and non-attainment LAER and offset requirements. The exemption would not have applied to PSD-BACT requirements if facilities were within 50 km of a PSD Class 1 area. Existing sources could have also received these exemptions if they agreed to meet a particulate matter standard specified in the bill along with good combustion practices to minimize carbon monoxide emissions within three years of enactment. In addition, S. 131 would have provided these exemptions for industrial sources that choose to opt into the Clear Skies program. S. 131 also would have included an exemption for steam electric generating facilities from Hg regulation under Section 112 of the CAA (including the residual risk provisions), and relief from enforcement of any Section 126 petition (with respect to reducing interstate transportation of pollution) before December 31, 2014. The five bills in the 110 th Congress generally omit the regulatory changes of S. 131 , while introducing new provisions. All five bills would revise the current New Source Review (NSR) program to require affected electric generating units 40 years or older (30 years old in the case of H.R. 3989 ) to meet more stringent SO 2 and NOx performance standard by either 2015 ( S. 1201 ), 2016 ( S. 1554 ), 2020 ( S. 1168 and S. 1177 ), or five years after enactment ( H.R. 3989 ). All except S. 1554 and H.R. 3989 contain provisions establishing a new performance standard for CO 2 . S. 1168 and S. 1177 would also eliminate the annual NOx and SO 2 caps contained in the recently promulgated Clean Air Interstate Rule (CAIR). In addition to the above, S. 1201 and S. 1554 would create several new regulatory programs and standards, including an Efficiency Performance Standard, and a Renewable Portfolio Standard. These programs would be implemented through a credit trading program.

With the prospect of new layers of complexity being added to air pollution controls, and with electricity restructuring putting a premium on economic efficiency, interest is being expressed in finding mechanisms to achieve health and environmental goals in simpler, more cost-effective ways. The electric utility industry is a major source of air pollution, particularly sulfur dioxide (SO2), nitrogen oxides (NOx), and mercury (Hg), as well as unregulated greenhouse gases, particularly carbon dioxide (CO2). At issue is whether a new approach to environmental protection could achieve the nation's air quality goals more cost-effectively than the current system. One approach being proposed is a "multi-pollutant" strategy--a framework based on a consistent set of emissions caps, implemented through emissions trading. Just how the proposed approach would fit with the current (and proposed) diverse regulatory regimes remains to be worked out; they might be replaced to the greatest extent feasible, or they might be overlaid by the framework of emissions caps. In February 2002, the Bush Administration announced two air quality initiatives. The first, "Clear Skies," would amend the Clean Air Act to place emission caps on electric utility emissions of SO2, NOx, and Hg. Implemented through a tradeable allowance program, the emissions caps would generally be imposed in two phases: 2008 and 2018. "Clear Skies" was re-introduced in the 109th Congress as S. 131. The second initiative begins a voluntary greenhouse gas reduction program. This plan, rather than capping CO2 emissions, focuses on improving the carbon efficiency of the economy, reducing 2002 emissions of 183 metric tons per million dollars of GDP to 151 metric tons per million dollars of GDP in 2012. In the 110th Congress, five bills have been introduced that would impose multi-pollutant controls on utilities. They are all four-pollutant proposals that include carbon dioxide. S. 1168 and S. 1177 are revised versions of S. 2724, introduced in the 109th Congress. S. 1201 and S. 1554 are expanded and revised versions of S. 150, introduced in the 109th Congress, while H.R. 3989 is a new proposal. All of these bills involve some form of emission caps, beginning in the 2009-2012 time frame, with all but S. 1554 including a second phase in 2013-2015 (CO2 only for H.R. 3989). They would employ a tradeable credit program to implement the SO2, NOx, and CO2 caps; all but H.R. 3989 permit plant-wide averaging in complying with the Hg requirements. The provisions concerning SO2, NOx, and Hg in the 110th Congress bills are generally more stringent than the comparable provisions of S. 131 of the 109th Congress. It is difficult to compare the CO2 caps contained in these bills with the Administration's proposal concerning CO2--both because the Administration's proposal is voluntary rather than mandatory and because it is broader (covering all greenhouse gas emissions rather than just utility CO2 emissions).

On June 4, 2015, the U.S. Office of Personnel Management (OPM) revealed that a cyber intrusion into its information technology systems and data "may have compromised the personal information of [approximately 4.2 million] current and former Federal employees." Later in June, OPM reported a separate cyber incident, which it said had compromised its databases housing background investigation records and resulted in the theft of sensitive information of 21.5 million individuals. The OPM breach, one of the largest reported on federal government systems, was detected partly through the use of the Department of Homeland Security's (DHS's) Einstein system--an intrusion detection system that "screens federal Internet traffic to identify potential cyber threats." Reportedly, the hackers used compromised security credentials--those assigned to a KeyPoint Government Solutions employee, a federal background check contractor working on OPM systems--to exploit OPM's systems and gain access. Officials do not believe that the intruders are still in the system. In the aftermath of the intrusions, Katherine Archuleta has stepped down as the director of OPM amid criticisms of how the agency managed its response to the intrusions and secured its information systems. Beth Cobert has taken on the role of acting director. In addition, OPM's Electronic Questionnaires for Investigations Processing (e-QIP) application, the "web-based automated system that was designed to facilitate the processing of standard investigative forms used when conducting background investigations," has been taken offline for "security enhancements." Notably, as is common with data breaches, a vailable information on the recent OPM breach developments remains incomplete. Assumptions about the nature, origins, extent, and implications of the data breach may change, and some media reporting may conflict with official statements. Policymakers have received official briefings on the breach developments, and Congress has held a number of hearings on the issue. This report provides an overview of the current understanding of the recent OPM breaches, as well as issues and questions raised about the source of the breaches, possible uses of the information exfiltrated, potential national security ramifications, and implications for the cybersecurity of federal information systems. Information released in June 2015 regarding the first OPM breach indicates that hackers gained access to personal information including "employees' Social Security numbers, job assignments, performance ratings and training information." The second reported breach involved the theft of data on 19.7 million current, former, and prospective employees and contractors who applied for a background investigation in 2000 or after using certain OPM forms. This second breach also impacted personal information of 1.8 million non-applicants; OPM notes that these non-applicants are primarily individuals married to or otherwise cohabitating with background investigation applicants. OPM confirmed that "the usernames and passwords that background investigation applicants used to fill out their background investigation forms were also stolen." About 1.1 million stolen records also include fingerprints. Notably, the two breaches revealed in June 2015 are not the first incidents targeting OPM databases containing such sensitive information. In a previous 2014 breach of OPM, hackers purportedly targeted "files on tens of thousands of employees who [had] applied for top-secret security clearances." Determining an actor (and actor's motivation) involved in a cyber incident can help guide how the United States responds. If a perpetrator is believed to be motivated by profit or economic advantage, the investigation and response may be led by law enforcement using the tools of the criminal justice system. If the perpetrator is deemed to be a state-sponsored actor with a different motivation, the United States may utilize diplomatic or military tools in its response. Speaking at an intelligence conference on June 24, 2015, Admiral Michael Rogers, director of the National Security Agency and head of U.S. Cyber Command, declined to discuss who might be responsible for the attacks, stating "I'm not [going to] get into the specifics of attribution.... That's a process that we're working through on the policy side. There's a wide range of people, groups and nation states out there aggressively attempting to gain access to that data." Speaking at the same conference a day later, however, Director of National Intelligence James Clapper identified China as the "leading suspect" in the attacks. Mr. Clapper expressed grudging admiration for the alleged hackers, noting "[y]ou have to kind of salute the Chinese for what they did.... You know, if we had an opportunity to do that, I don't think we'd hesitate for a moment." Without explicitly denying involvement, China has called speculation about its role in the OPM breaches neither "responsible nor scientific." In late June 2015, top officials from the United States and China met in Washington, DC, for the annual session of the U.S.-China Strategic & Economic Dialogue--the two countries' most high-level dialogue. The dialogue included discussion of cyber issues, but progress on these issues was not mentioned among the dialogue's official "outcomes." China said in early July that it was "imperative to stop groundless accusations, step up consultations to formulate an international code of conduct in cyberspace and jointly safeguard peace, security, openness and cooperation of the cyber space through enhanced dialogue and cooperation in the spirit of mutual respect." Of note, the United States in May 2014 filed criminal charges over a set of computer intrusions allegedly from China. The U.S. Department of Justice indicted five members of China's People's Liberation Army (PLA) for commercial cyber espionage that allegedly targeted five U.S. firms and a labor union. It was the first, and so far only, time the United States has filed criminal charges against known state actors for cyber economic espionage. Criminal charges appear to be unlikely in the case of the OPM breach. As a matter of policy, the United States has sought to distinguish between cyber intrusions to collect data for national security purposes--to which the United States deems counterintelligence to be an appropriate response--and cyber intrusions to steal data for commercial purposes--to which the United States deems a criminal justice response to be appropriate. Describing discussions with Chinese officials at the July 2013 session of the annual U.S.-China Strategic & Economic Dialogue, a month after Edward Snowden made public documents related to U.S. signals intelligence, a senior Obama Administration stated, "[W]e were exceptionally clear, as the President has been, that there is a vast distinction between intelligence-gathering activities that all countries do and the theft of intellectual property for the benefit of businesses in the country, which we don't do and we don't think any country should do." The OPM breach so far appears to be seen in the category of intelligence-gathering, rather than commercial espionage. If the United States chooses to respond in other ways to intrusions from China, experts have suggested that China has multiple vulnerabilities that the United States could exploit. "China's uneven industrial development, fragmented cyber defenses, uneven cyber operator tradecraft, and the market dominance of Western information technology firms provide an environment conducive to Western CNE [computer network exploitation] against China," notes one scholar of Chinese cyber issues. It remains unclear how data from the OPM breaches might be used if they are indeed now in Chinese government hands. Experts in and out of government suspect that "China may be trying to build a giant database of federal employees" that could help identify U.S. officials and their roles. Writing in Wired magazine, Senator Ben Sasse observed, "China may now have the largest spy-recruiting database in history." There have been suggestions that information exposed in the breaches "could be useful in crafting 'spear-phishing' e-mails, which are designed to fool recipients into opening a link or an attachment so that the hacker can gain access to computer systems." In addition to being used by nation states, a trove of data from breaches such as those at OPM can provide a number of avenues for criminals to exploit. For instance, compromised Social Security numbers and other personally identifiable information (PII) may be used for identity theft and financially motivated cybercrime, such as credit card fraud. However, experts have been skeptical as to whether compromised information from the OPM breaches will even appear for sale in the online black market. When cybercriminals have tried in the underground markets to pass off other stolen data as that coming from the OPM breaches, this has been debunked, and the stolen data were shown to have come from other sources. The lack of stolen OPM data appearing in the criminal underworld has led some to speculate the breaches were more likely conducted for espionage rather than criminal purposes. Nonetheless, even if data were stolen for non-criminal purposes, they could still fall into criminal hands. While discussion about the stolen fingerprint information has been limited, analysts have begun to question how this data could be used. Some have speculated that if the fingerprints are of high enough quality, there may be "acutely negative long-term consequences for individuals affected and their future use of fingerprints to verify their identities." Depending on whose hands the fingerprints come into, they could be used for criminal or counterintelligence purposes. For instance, they could be trafficked on the black market for profit or used to reveal the true identities of undercover officials. Also a concern is that biometric data such as fingerprints cannot be reissued--unlike other identifying information such as Social Security numbers. This could make recovery from the breach more challenging for some. Reports have emerged indicating that OPM had attempted to take over the administration of Scattered Castles--the intelligence community's (IC's) database of sensitive clearance holders--and create a single clearance system for government employees. Although the IC refused out of concerns of increased vulnerability to hacking, news reports allege that some sharing of information between systems was underway by 2014. U.S. officials have denied that Scattered Castles was affected by the OPM hack, but they have neither confirmed nor denied that the databases were linked. If the IC's database were linked with OPM's, this could potentially help the hackers gain access to intelligence agency personnel and identify clandestine and covert officers. Even if data on intelligence agency personnel were not compromised, the hackers might be able to use the sensitive personnel information to "neutralize" U.S. officials by exploiting their personal weaknesses and/or targeting their relatives abroad. Access to the IC's database could also reveal the process and criteria for gaining clearances and special access, allowing foreign agents to more easily infiltrate the U.S. government. Some in the national security community have compared the potential damage of the OPM breaches to U.S. interests to that caused by Edward Snowden's leaks of classified information from the National Security Agency. Yet the potential exists for damage beyond mere theft of classified information, including data manipulation or misinformation. While there is no evidence to suggest that this has happened, hackers would have had the ability, some say, while in U.S. systems to alter personnel files and create fictitious ones that would have gone undetected as far back as 2012. Another concern is the possibility for data publication, as was done with the Snowden records. Dissemination of sensitive personnel files could damage the ability of clearance holders to operate with cover, and could open them up to potential exploitation from foreign intelligence agents. The cybersecurity of most federal information systems is governed by the Federal Information Security Management Act (FISMA, 44 U.S.C. SS3551 et seq.), which was updated at the end of the 113 th Congress ( P.L. 113-283 ). The update gave explicit operational authority to DHS for implementation, including the authority to issue binding operational directives, and it set requirements for breach notification for federal agencies. In addition, 40 U.S.C. SS11319, as added by P.L. 113-291 , provided agency chief information officers (CIOs) with additional budgeting and program authorities. A potential question for Congress is whether those and other provisions of law give agencies the legislative authority and resources they need to adequately address the risks of future intrusions. Among the specific questions Congress might consider are the following: Are the current authorities and requirements under FISMA sufficient, if fully implemented, to protect federal systems from future intrusions such as the most recent OPM intrusions? If not, what changes are needed to sufficiently reduce the level of risk? For example, should the priority level for cybersecurity be elevated with respect to other aspects of mission fulfillment; should the federal government adopt the explicit goal of being assessed by independent experts as having world-class cybersecurity? What are the barriers to improving federal cybersecurity to a level that would sufficiently reduce the risks of incidents such as the breaches at OPM, and what legislative actions are needed to remove them? For example, do agency heads, responsible for cybersecurity under FISMA, have sufficient understanding of cybersecurity to execute those responsibilities effectively--a broadly held concern with respect to private-sector chief executive officers that the National Institute of Standards and Technology (NIST) Cybersecurity Framework was designed in part to help address? Are the recent amendments to CIO authorities sufficient for them to implement their cybersecurity responsibilities under FISMA? Does DHS have sufficient authorities to protect federal civilian systems under its statutory responsibilities? For example, should it have greater legislative authority to deploy countermeasures on federal systems, as some legislative proposals would provide? Are the specific actions taken and proposed by the Obama Administration in the wake of the OPM breaches, such as the "cybersecurity sprint" and the proposed strategy and acquisition guidance initiatives, sufficient to provide the required improvements in cybersecurity at federal agencies? Congress is currently considering legislation to reduce perceived barriers to information sharing among private-sector entities and between them and federal agencies. An additional potential question for Congress is whether the protections outlined in the proposed bills against inadvertent disclosure by federal agencies will be sufficient in the wake of breaches such as those involving OPM.

On June 4, 2015, the U.S. Office of Personnel Management (OPM) revealed that a cyber intrusion had impacted its information technology systems and data, potentially compromising the personal information of about 4.2 million former and current federal employees. Later that month, OPM reported a separate cyber incident targeting OPM's databases housing background investigation records. This breach is estimated to have compromised sensitive information of 21.5 million individuals. Amid criticisms of how the agency managed its response to the intrusions and secured its information systems, Katherine Archuleta has stepped down as the director of OPM, and Beth Cobert has taken on the role of acting director. In addition, OPM's Electronic Questionnaires for Investigations Processing (e-QIP) application, the system designed to help process forms used in conducting background investigations, has been taken offline for security improvements. Officials are still investigating the actors behind the breaches and what the motivations might have been. Theft of personally identifiable information (PII) may be used for identity theft and financially motivated cybercrime, such as credit card fraud. Many have speculated that the OPM data were taken for espionage rather than for criminal purposes, however, and some have cited China as the source of the breaches. It remains unclear how the data from the OPM breaches might be used if they are indeed now in the hands of the Chinese government. Some suspect that the Chinese government may build a database of U.S. government employees that could help identify U.S. officials and their roles or that could help target individuals to gain access to additional systems or information. National security concerns include whether hackers could have obtained information that could help them identify clandestine and covert officers and operations. The cybersecurity of most federal information systems is governed by the Federal Information Security Management Act (FISMA, 44 U.S.C. SS3551 et seq.). Questions for policymakers include whether existing provisions of law give agencies the legislative authority and resources they need to adequately address the risks of future intrusions. In addition, effective sharing of cybersecurity information has been considered an important tool for protecting information systems from unauthorized intrusions and exfiltration of data. The 114 th Congress is considering legislation to reduce perceived barriers to information sharing among private-sector entities and between them and federal agencies.

The U.S. Census Bureau periodically collects national survey information on child support. By interviewing a random sample of single-parent families, the Census Bureau is able to generate an array of data that is useful in assessing the performance of noncustodial parents in paying their child support. Although the Ce nsus Bureau has been collecting child support information in a special Child Support Supplement to the April Current Population Survey (CPS) biennially since 1978, the supplement survey has changed significantly over the years. According to the Census Bureau, the most recent data, from 2013, are comparable only back to 1993. During the early years of the survey, information was collected only from custodial mothers. Beginning with the 1991 data, information was also collected from custodial fathers. This report presents unsegmented data with respect to custodial mothers and fathers (i.e., custodial parents' data). The survey population includes all persons who have their own children under the age of 21 living with them, while the other parent lives outside the household. The Child Support Enforcement (CSE) program was enacted in 1975 as part of P.L. 93-647 (Title IV-D of the Social Security Act). It is a federal-state program whose purpose is to help strengthen families by securing financial support for children from their noncustodial parent on a consistent and continuing basis, and by helping some families to remain self-sufficient and off public assistance by providing the requisite CSE services. The CSE program is administered by the Office of Child Support Enforcement (OCSE) in the Department of Health and Human Services (HHS), and funded by general revenues. All 50 states, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands operate CSE programs and are entitled to federal matching funds. The CSE program provides seven major services on behalf of children: (1) parent location, (2) paternity establishment, (3) establishment of child support orders, (4) review and modification of child support orders, (5) collection of child support payments, (6) distribution of child support payments, and (7) establishment and enforcement of medical child support. The CSE program is estimated to handle at least 50% of all child support cases; the remaining cases are handled by private attorneys, collection agencies, or through mutual agreements between the parents. In FY2013, the CSE program collected $28.0 billion in child support payments (from noncustodial parents) and served 15.6 million child support cases. The national Census Bureau data show that the aggregate amount of child support received in 2013 was $22.5 billion, and that 13.4 million parents had custody of children under the age of 21 while the other parent lived elsewhere. In 2013, almost 83% of custodial parents were mothers. Of all custodial parents, 48% were white (non-Hispanic), 25% were black, 23% were Hispanic, 16% were married, 33% were divorced, 38% were never married, 13% did not have a high school diploma, almost 20% had at least a bachelor's degree, 50% worked full-time year-round, 29% had family income below poverty, and nearly 43% received some type of public assistance (i.e., Medicaid, food stamps, public housing or rent subsidy, TANF, or general assistance). Table 1 summarizes several child support indicators from biennial survey data for selected years from 1993 through 2013. The table shows that the likelihood of having a child support award, being legally entitled to a child support payment, and actually receiving at least one child support payment decreased over the 21-year period from 1993 through 2013. In contrast, the percentage of custodial parents (owed child support) who received the full amount of the child support that they were owed increased by almost 24%, from 37% in 1993 to 46% in 2013. In 2013, about 49% of the 13.4 million custodial parents (with children under the age of 21) were awarded child support. Of those who were actually due child support payments (5.7 million), about 74% of them received at least one payment and almost 46% received all that they were owed. In 2013, only 2.6 million (19%) of the 13.4 million custodial parents eligible for child support actually received the full amount of child support that was owed to them. In 2013, the average child support payment received by custodial parents amounted to $3,953, 6.5% higher than the average child support payment in 1993 ($3,712). In 2013, 68% of the $32.9 billion in aggregate child support due was actually paid. In 1993, 65% of the $38 billion (adjusted for inflation, in 2013 dollars) in child support due was paid. During the 21-year period 1993 through 2013, after adjusting for inflation, aggregate child support due started at $38.0 billion in 1993, fluctuated to a high of $46.9 billion in 2003, and dropped to a low of $32.9 billion in 2013. Over the entire period, aggregate child support due decreased by 13%, total child support received decreased 9%, and the amount left unpaid decreased 21% (see Table 1 ). While sex, race, marital status, and education are significant factors in predicting whether a custodial parent will be issued a child support order, award rates tend to be significantly lower than receipt rates. For example, although female custodial parents were almost 1.7 times more likely to be awarded child support in 2013 as their male counterparts, among parents who were owed/due child support, both had at least a 73% chance of actually receiving child support payments. (See Table 2 .) Moreover, in 2013, 37% of black custodial parents were awarded child support compared to 56% of white custodial parents. Even so, nearly 65% of black custodial parents who were owed/due child support actually received child support payments and 79% of white custodial parents who were owed child support actually received child support payments in 2013. Similarly, while 42% of never-married parents were awarded child support in 2013, almost 68% of never-married parents who were owed child support actually received child support payments in 2013. Also, 38% of custodial parents without a high school diploma were awarded child support, while almost 62% of custodial parents without a high school diploma who were owed child support actually received child support. The pattern of receipt rates being higher than award rates also held for the economic factors listed in Table 2 --in that once a child support obligation was awarded, the probability of actually receiving payments rose significantly for all categories of custodial parents. In 2013, 45% of custodial parents with incomes below the poverty level were awarded child support, and nearly 66% of those owed/due payments actually received child support payments. Table 2 also shows that 49% of custodial parents who worked full-time year-round were awarded child support, while almost 77% of those owed received child support payments. Similarly, 47% of custodial parents who received public assistance were awarded child support, while nearly 67% of those who were owed child support payments actually received child support payments. Of the categories of custodial parents presented in Table 2 , custodial parents who were divorced followed by custodial parents who were white (non-Hispanic) were the categories of parents most likely to be awarded child support. In 2013, 57.7% of custodial parents who were divorced and 56.4% of white (non-Hispanic) custodial parents were awarded child support. The table also shows that custodial parents with an associate's degree who were owed/due child support was the category of parents most likely to receive child support payments in 2013. In 2013, 83.1% of custodial parents with an associate's degree who were owed payments actually received child support payments. In 2013, the average yearly child support payment received by custodial parents with payments was $5,333; $5,181 for mothers and $6,526 for fathers. These full or partial payments represented (on average) 14% of the custodial parent's yearly income, 16% of the custodial mothers' total yearly income, and 9% of the custodial fathers'. In 2013, for custodial parents with income below the poverty level, child support payments for those who received them made up, on average, 49% of their yearly income. In 2013, child support payments made up 13% of the yearly income of custodial parents without a high school diploma who were owed child support and who actually received full or partial payments. In 2013, child support represented about 18% of the income of the 2.6 million custodial parents who received all of the child support that they were owed. The Census Bureau data also include information on health insurance. In 2013, 54% of the 6.5 million custodial parents with child support awards had awards that included health insurance. The noncustodial parent provided the health insurance coverage in 51.1% of the awards with health insurance provisos and in 10.4% of the awards without health insurance stipulations. Moreover, the noncustodial parent provided health insurance coverage for 19.4% of the nearly 6.9 million custodial parents who did not have a child support award. Overall, 3.5 million noncustodial parents provided health care for their children in 2013. This represented 26.1% of the 13.4 million children under the age of 21 who were living with a custodial parent while their other parent lived elsewhere.

The national Census Bureau data show that in 2013, 13.4 million parents had custody of children under the age of 21 while the other parent lived elsewhere, and the aggregate amount of child support received was $22.5 billion. In 2013, almost 83% of custodial parents were mothers. Of all custodial parents, 48% were white (non-Hispanic), 25% were black, 23% were Hispanic, 16% were married, 33% were divorced, 38% were never married, 13% did not have a high school diploma, almost 20% had at least a bachelor's degree, 50% worked full-time year-round, 29% had family income below poverty, and nearly 43% received some type of public assistance. In 2013, 2.6 million (40%) of the 6.5 million custodial parents with child support orders actually received the full amount of child support that was owed to them. The average yearly child support payment received by custodial parents with payments was $5,181 for mothers and $6,526 for fathers. These full or partial payments represented about 16% of the custodial mothers' total yearly income and 9% of the custodial fathers' yearly income. Compared to 1993 Census data, less child support was received by custodial parents in 2013 ($24.8 billion in 1993 versus $22.5 billion in 2013; in 2013 dollars). However, a higher percentage of those owed child support actually received all that they were due (36.9% in 1993 versus 45.6% in 2013).

Rules of origin (ROO), the methodology used to prove country of origin, are central components of U.S. trade policy. Such rules can be very straightforward when all of the parts of a product are manufactured and assembled primarily in one country. However, when component parts of a finished product originate in many countries--as is often the case in global industries such as autos and electronics--determining origin can be a complex, sometimes subjective, and time-consuming process. Determining a product's country of origin can have significant implications for an imported product's treatment with respect to U.S. trade programs and other government policies. For example, the United States restricts imports from certain countries, including Cuba, Iran, and North Korea, as part of larger foreign policy considerations. U.S. trade policy also seeks to promote economic growth in developing countries by offering trade preference programs, including the Generalized System of Preferences (GSP), and the African Growth and Opportunity Act (AGOA). Such policies require that officials make accurate country of origin determinations so that the benefits of the preferential tariff treatment are received and program goals are met. Certain key characteristics of contemporary globalized manufacturing may also prove challenging to the ROO process and implementation. These characteristics include the growing complexity of global value chains and, consequently, the increasing demand for fast and efficient movement of intermediate goods across borders to assure competitive prices and profitability. Some observers assert the combined effects of these characteristics have created a globalized manufacturing environment that is sufficiently intricate and flexible to make the application of ROO more complex and, at times, potentially misleading. This report first provides a general overview of the implementation of the U.S. ROO system. It then discusses the advantages and disadvantages of U.S.-implemented ROO schemes. The report concludes with some policy options for Congress that proponents assert could improve the ROO process. The country of origin of an imported product is defined in U.S. trade laws and customs regulations as the country of manufacture, production, or growth of any article of foreign origin entering the customs territory of the United States. There are two types of rules of origin (ROO): Non-preferential ROO are used to determine the origin of goods imported from countries with which the United States has most-favored-nation (MFN) status, and are the principal regulatory tools for accurate assessment of tariffs on imports, addressing country of origin labeling issues, qualifying goods for government procurement, and enforcing trade remedy actions and trade sanctions. Preferential ROO are used to determine the eligibility of imported goods from U.S. free trade agreement (FTA) partners and certain developing countries to receive duty-free benefits under U.S. trade preference programs (e.g., the Generalized System of Preferences and the African Growth and Opportunity Act), and other special import programs (e.g., goods entering from U.S. territories). Preferential ROO schemes vary from agreement to agreement and preference to preference. U.S. laws and regulations on rules of origin conform to the World Trade Organization (WTO) Agreement on Rules of Origin, in which WTO members agreed not to use ROO to pursue trade policy objectives in a manner that would disrupt trade, and to apply them in a consistent, uniform, impartial, and reasonable manner. No specific U.S. trade law provides an overall definition of "rules of origin" or "country of origin." Instead, U.S. Customs and Border Protection (CBP)--the agency primarily responsible for determining country of origin (as it is for enforcing tariffs and other laws that apply to imported products)--relies on a body of court decisions, CBP regulations, and agency interpretations to confer origin on an imported product if the matter is in doubt. Although CBP is the primary enforcement agency for U.S. trade laws, the Customs Modernization Act (Title VI of P.L. 103-182 ) actually shifted much of the responsibility for complying with customs laws and regulations from CBP to the importer of record. This means that the importer must understand customs procedures (including, for example, the applicability of a preferential ROO scheme to his or her product and country of origin), and apply "reasonable care" to enter, properly classify, and determine the value of merchandise so CBP can properly assess duties, collect accurate statistics, and determine whether all other applicable legal requirements have been met. In cases where the country of origin is unclear, importers may seek advance ROO rulings from CBP in an effort to accelerate the import process. As a member of the World Trade Organization (WTO), the United States must grant most-favored-nation (MFN) treatment to the products of other WTO member countries with respect to tariffs and other trade-related measures. Non-preferential ROO ensure that imports from U.S. MFN trading partners receive the proper tariff treatment. Non-preferential ROO are also important for country of origin labeling, government procurement, enforcement of trade remedy actions, compilation of trade statistics, supply-chain security issues, and other laws. Under non-preferential rules of origin, two major criteria apply. First, goods that are wholly the growth, product, or manufacture of one particular country are attributed to that country. This is known as the wholly obtained principle. Second, if an imported product consists of components from more than one country, a principle known as substantial transformation is used to determine origin. In most cases, the origin of the good is determined to be the last place in which it was substantially transformed into a new and distinct article of commerce based on a change in name, character, or use. Making the determination about what constitutes a change sufficient for a product to be considered substantially transformed is when an origin ruling can prove to be quite complex. When determining origin, CBP takes into account one or more of the following factors: the character, name, or use of the article; the nature of the article's manufacturing process, as compared to the processes used to make the imported parts, components, or other materials used to make the product; the value added by the manufacturing process, including the cost of production, the amount of capital investment, or labor required, compared to the value imparted by other component parts; and, the essential character is established by the manufacturing process or by the essential character of the imported parts or materials. Origin determinations are fact-specific, but CBP acknowledges that there can be considerable uncertainty about what is deemed to be substantial transformation due to the "inherently subjective nature" which may be involved in CBP interpretations of these facts. Participating countries in the Uruguay Round of multilateral trade talks (that also established the WTO in 1995) recognized the need for rules of origin to be objective, understandable, predictable, and transparent. In the WTO Agreement on Rules of Origin, members agreed not to use rules of origin to pursue trade policy objectives in a manner that would disrupt trade, and to apply them in a consistent, uniform, impartial, and reasonable manner. However, the agreement also allows each WTO member to determine its own ROO regime. All WTO members also agreed to notify other members about preferential ROO, including a listing of the preferential arrangements which they implement, along with all applicable administrative decisions and rulings. The WTO Agreement on Rules of Origin established a Harmonization Work Program (HWP) in an effort to develop uniform, cooperative, and coherent non-preferential rules of origin to be used by all WTO members. The ongoing HWP issued a first draft of a consolidated negotiating text in 1998, and a technical review completed in 1999. These efforts secured a general agreement on an overall design for harmonized rules of origin, including definitions, general rules, and two appendices (one on definitions of wholly obtained goods and one on product-specific rules of origin). Continuing negotiations are being carried out in the WTO Committee on Rules of Origin (CRO) under the WTO Council for Trade in Goods, and the World Customs Organization (WCO) Technical Committee on Rules of Origin (TCRO). In the Trade Act of 2002 ( P.L. 107-210 ), one of the principal U.S. trade negotiating objectives was the conclusion of a WTO agreement on harmonized rules of origin. According to the United States Trade Representative (USTR), reaching agreements on the technical aspects of the HWP have turned out to be more complex than initially envisioned, and negotiations continue in 2015. CBP (formerly known as the U.S. Customs Service) has made several proposals since 1991 to simplify and standardize non-preferential ROO, generally by expanding the application of regulations set forth in 19 C.F.R. Part 102 (the "NAFTA Marking Rules") to entries of goods under non-preferential rules of origin and for "free trade agreements already negotiated that use the substantial transformation test to determine whether products qualify for reduced tariffs." CBP mentioned that the NAFTA marking rules had already been implemented for all imports from Canada and Mexico, and for nearly all textile and apparel products since 1996 and, consequently, that the importing community and CBP have had extensive experience in applying these rules. CBP noted that its experience in implementing NAFTA marking rules had shown that "by virtue of their greater specificity and transparency, codified rules result in determinations that are more objective and predictable than under the case-by-case adjudication method." In addition, CBP stated its belief that "the proposed extension of the Part 102 rules to all trade will result in more objective, transparent, and predictable determinations, and will, therefore, facilitate the exercise of reasonable care by importers with respect to their obligations regarding identification of the proper country of origin of imported merchandise." A public comment period on the proposed rule ended on September 23, 2008. The comment period was extended twice--first, until October 23, 2008 (73 F.R. 51963), and again (due to technical corrections in the underlying Code of Federal Regulations sections) on October 30, 2008 (73 F.R. 64575) until December 1, 2008. Much of the public response opposed the 2008 CBP proposal. Many associations and businesses voiced general opposition to the proposed rule because they said the proposal could substantially increase costs of entry, place undue burdens on members of the trading community (especially on small businesses), and increase the complexity of the importing process. Others commented on the difficulty of applying these NAFTA marking rules to particular products such as computer software or pharmaceuticals. Some industry organizations, including the National Association of Manufacturers, questioned the CBP assumption that implementing a tariff shift method could increase predictability and transparency. Other associations commented that, if implemented, the regulation could cause an unintended major reversal of existing law that could harm some importers who have relied on the existing law for years. In September 2011, CBP issued a final rule making the NAFTA marking rules applicable to some products subject to non-preferential ROO, namely pipe fittings and flanges, greeting cards, glass optical fiber, rice preparations, and some textile and apparel products. However CBP officials also announced that they did not adopt as a final rule the "portion of the notice that proposed amendments to the CBP regulations to establish uniform rules governing CBP determinations of the country of origin of imported merchandise. Preferential rules of origin are used to verify that products are eligible for duty-free status under U.S. trade preference programs, such as the Generalized System of Preferences (GSP), the African Growth and Opportunity Act (AGOA), or free trade agreements (FTAs), such as the North American Free Trade Agreement (NAFTA) and the U.S- South Korea Free Trade Agreement (KORUS FTA). As with non-preferential ROO, if goods are "wholly the product" of a beneficiary of preference program or free trade agreement, establishing origin is usually fairly straightforward. However, if a good was not entirely grown or manufactured in the targeted country or region, rules of origin specific to the trade preference or FTA apply. Preferential ROO vary from agreement to agreement and preference to preference. Most U.S. FTAs use three methods, or a combination thereof, to determine what products "originate" and thus actually qualify for the benefits of the agreement. In some agreements, a tariff shift method, or change in the Harmonized Tariff Schedule (HTS) tariff classification (as a result of production occurring entirely in one or more of the parties), may be used to determine whether or not the product qualifies for these benefits. The NAFTA is one example in which this methodology is used. This methodology is favored by U.S. customs officials because they say that it provides an objective method for describing exactly the kind of substantial transformation that must occur to determine the origin of a product. For example, the "yarn forward" principle, related to preferential ROO for certain textile and apparel products, is a type of tariff shift test that requires textile and apparel products to originate in an FTA country from the yarn stage forward (fibers may come from anywhere). Notably, the specific term, "yarn forward" never actually appears in an FTA. Instead, the tariff shift presented in the ROO indicates the amount of processing required (substantial transformation) in an FTA country in order to confer originating status. Specific ROO for certain products, including textiles and apparel, generally appear in an annex to the FTA, and list various categories of goods by reference to their Harmonized Tariff Schedule (HTS) tariff lines. With certain products, a technical test may be used that requires specific processing operations occur in the originating country. Sometimes known as a critical process criterion, this test mandates that certain production or sourcing processes be performed that may (positive test) or may not (negative test) confer originating status. For example, in the U.S.-South Korea Free Trade Agreement (KORUS), certain chemicals require that manufacturing processes such as purification, chemical reaction, controlled mixing and blending, changes in particle size, or other technical tests such as these, must take place in one or both FTA parties in order to confer origin. A local content or regional value content (RVC) test is required of many products imported into the United States under FTAs or preference programs. A local content test stipulates a product must contain a minimum percentage of domestic value-added determined by the origin of physical components or parts and labor and manufacturing processes that originated in the FTA partner or beneficiary developing country to receive the tariff benefit. The amount of local content required may vary among U.S. free trade agreements and preferences, and differ among product categories within an arrangement. In some cases, the local content requirement may be fulfilled on a regional basis. For example, in order for a product to qualify for duty-free treatment under the Generalized System of Preferences (GSP), the cost or value of the materials produced in that developing country (or produced in one or more members of an association of countries treated as one country under GSP), and the direct cost of the processing operations performed in that beneficiary country (or association of countries as described above), must be at least 35% of the appraised value of the product . The previous example illustrates "cumulation," or the way that ROO may allow for combining value-added inputs from a region or group of countries into a manufactured product that qualifies as an import under the terms of a regional FTAs or regionally-targeted preference program. Cumulation may help accomplish another major policy objective of regional trade programs: the stimulation of regional integration through deepened intra-regional trade. In some preferential arrangements, a certain percentage of U.S. content may count toward meeting the regional content test. In U.S. FTAs, three alternative methods are often used to calculate regional value content (RVC), which is often used to determine the origin of assembled products such as autos and auto parts. Manufacturers and importers are sometimes given more than one ROO option to calculate the RVC because one method of calculation may be more beneficial than the other for particular companies or industries. Three common types of RVC calculations are: Build-down m etho d: calculates the RVC by subtracting the value of the non-originating merchandise (VNM) from the adjusted value (AV) of the finished product. The adjusted value includes all costs, profit, general expenses, parts and materials, labor, shipping, marketing, and packing. If the RVC (expressed as a percentage) of the product value is equal to or greater than the minimum percentage specified in the ROO, the product qualifies. Build-up m ethod: calculates RVC by adding together the value of all of the regional inputs (e.g., costs, general expenses, parts, materials, labor, shipping, marketing, and packing). If the RVC (expressed as a percentage) of the product is equal to or greater than the minimum percentage specified in the ROO, the product qualifies. Net c ost m ethod : captures only the costs involved in manufacturing, including factory labor, materials, and direct overhead. Other costs, such as sales promotion, marketing, royalties, and profit, are excluded from the calculation. The use of a small, easily identifiable set of input costs is thought to make the net cost method easier to use in calculating RVC. Due to their obscure and technical nature, rules of origin frameworks are generally not in the forefront of the continuing debates on trade liberalization or globalization. Nevertheless, the role of ROOs (both preferential and non-preferential) is central to the international trading system and trade negotiations. Preferential rules of origin are arguably essential to ensure that the benefits of an FTA are provided to those countries that have negotiated and entered into the agreement. Without preferential ROO, it would be possible for imports from non-FTA countries to enter the FTA partner with the lowest external tariff, and then sell the good throughout the region under the FTA rate. This could force a convergence of external tariffs and possibly a competitive devaluation of external tariffs in the region. For similar reasons, ROO are also important when providing unilateral trade preferences to ensure that only goods from eligible countries receive the benefits. Some policy observers, however, assert that the worldwide proliferation of trade agreements creates inefficiencies in the trading system because there are so many complex ROO frameworks. Others express concern that current U.S. systems for determining country of origin may run counter to overall U.S. trade policy. Still other observers say that negotiation of specific ROO allows countries to shield import-sensitive segments of industries by instituting ROO that either do not include a particular product, or make the ROO so difficult that the product does not qualify. Some observers assert that ROO interpretation is complex and subjective. Other experts maintain that, in a global manufacturing environment, there should be other means of determining country of origin. Finally, some experts wonder if ROO definitions could produce results that could be counter to certain policy objectives. Some economists argue that the proliferation of bilateral and regional trade agreements--each with their own preferential ROO scheme--adds new complexities for importers and manufacturers; thus potentially inserting economic inefficiencies into the international trading system. Since preferential rules of origin are specific to each free trade agreement or preference program, assembling the proper documentation can be a complex and costly process. Some in the business community mention that the administrative costs associated with navigating the increasingly complex patchwork of regulations involved in establishing origin can outweigh the benefits of FTAs. Some economists also assert that the worldwide proliferation of FTAs have led to an inefficient "spaghetti bowl" approach to trade policy with individual ROO requirements. The lack of transparency of preferential ROO (and their apparent use as instruments of protectionism) is also a matter of concern for some critics. An often-repeated example of this is the "triple-transformation rule" for apparel products within the North American Free Trade Agreement (NAFTA). This rule requires that the raw materials (fiber), the cloth, and the garment itself all be processed within the FTA region to be NAFTA-eligible. Other observers say FTAs provide importers with greater flexibility in sourcing goods, and provide exporters with greater access to foreign markets where the same FTA ROO requirements would apply on entry into the FTA partner's market. Importers always have the option of entering products under MFN status (in which case non-preferential rules of origin would apply) if they determine this is the most cost-effective method of entry. Therefore, FTAs could be seen as providing importers with additional options in choosing suppliers, as well as modes of entry (i.e., under preferential or non-preferential ROO). Importers can weigh the costs of compliance (combined with the more favorable FTA tariff rate) against importing goods from suppliers outside the FTA. For example, a study of trade flows under NAFTA ROO illustrated that when the MFN tariff on a product is equal or more favorable than the NAFTA tariff, importers will typically choose to import under the MFN rate to avoid the additional compliance costs. However, when importers determine that the NAFTA rate (plus additional transaction costs) is more favorable, they choose to import goods under NAFTA. Importers may, in some cases, decide not to enter goods under an FTA, but the availability of such preferences gives them greater flexibility to purchase and import products in the most cost-effective manner available. The fact remains, however, that the utilization of trade preferences under preferential rules of origin is sometimes costly, and may also inhibit the use of preferences. The key challenges of constructing ROO in preferential trading relationships are twofold: finding the balance between the effectiveness and the efficiency of ROO, and simplifying and making ROO more transparent. Because some preferential ROO in FTAs are negotiated product by product and industry by industry, some critics allege that there is "enormous scope for well-organized industries to essentially insulate themselves from the effects of the FTA by devising suitable ROO," thus diminishing the FTA's trade liberalizing effects overall. Thus, more restrictive (and often more complex) ROO may be crafted to compensate domestic manufacturers that stand to lose protection as a result of an FTA or preference. Others contend that such measures are often successful in softening the opposition from import-competing groups, thus enhancing the political feasibility of subsequent FTA implementation (after congressional approval). Some studies indicate that more restrictive rules of origin, such as higher local content requirements, may encourage producers of finished goods in an FTA region to shift from lower-cost suppliers of intermediate goods outside an FTA to higher-cost suppliers within an FTA region (often U.S. suppliers) to qualify for more favorable FTA tariff benefits. Thus, more restrictive ROO can be used to provide "protection" to these regional suppliers and maintain existing protection against outsiders, to the extent that they provide sufficient incentive for FTA producers to buy more inputs inside the region. Therefore, more restrictive local or regional content requirements can spread the benefits of an FTA to manufacturers of intermediate products in the region. The following example illustrates the interest the U.S. automobile sector demonstrated in influencing ROO during negotiations on the NAFTA: All three [U.S.] automakers had an interest in a reasonably high rule of origin to make it more difficult for European and Japanese competitors to locate assembly plants in Canada or Mexico and thereby ship finished automobiles to the United States duty-free. But GM differed from Chrysler.... Because of [its] joint venture with Isuzu in Canada, GM favored a lower rule of origin, around 60 percent [regional content requirement]. For reasons that reflected their own patterns of production and competitive position, Ford and Chrysler preferred a higher rule, approximately 70 percent. Auto parts makers had every incentive to push for as high as a percentage as possible, since high percentages protected them from foreign competitors. Country of origin rulings can be complex, especially when questions on what processes or procedures are sufficient for a product to be "substantially transformed" come into play. A major reason for this complexity is that, especially in situations involving non-preferential (MFN) origin rules, officials must often make these determinations on a "case-by-case" basis. Some importers have criticized CBP because they assert that some of these determinations are subjective and inconsistent. U.S. exporters sometimes argue that ROO determinations by officials in other countries are arbitrary and lack transparency. In the United States, importers may request a binding ruling in advance of importing the good from the CBP Office of Regulations and Rulings. CBP also provides a Customs Rulings Online Search System (CROSS) that importers can search for a ruling on a product similar to theirs for additional guidance. In December 2014, WTO members concluded the WTO Agreement on Trade Facilitation, in which they agreed to issue advance rulings on ROO and other trade matters "in a reasonable time-bound manner," and to "promptly publish ... laws, regulations, and administrative rulings" of general application relating to rules of origin. It is believed that increased transparency of ROO interpretation worldwide will provide greater assurance for exporters from the United States and other countries that the origin of their products will be handled in a consistent manner. In an international trading environment in which components of goods originate in many countries and assembly can occur anywhere in the world, some observers suggest that single-country origin determinations are misleading. Rapid advancements in science and technology since World War II have contributed to a major transformation of modern manufacturing. New manufacturing techniques have made it possible for lesser-skilled workers to manufacture higher quality products with little waste or loss. In addition, the development of faster and more efficient communications and transportation technology has made it possible to reliably construct and ship components, parts and materials from multiple locations to the site of final assembly, making the manufacturing process more complex and intricate. As a result, an increasing variety of a product's parts and components come from many different nations, and, especially with more complex merchandise, manufacture and assembly may also be conducted in several different countries. World trade and production are increasingly structured around "global value chains" (GVCs), defined as "the full range of activities that firms and workers do to bring a product from its conception to its end use and beyond." A value chain typically includes design, production, marketing, distribution, support, and delivery to the final consumer. Beyond increased competition among manufacturers, there has also been a restructuring of the overall manufacturing process toward subcontracting or "outsourcing" production to globally-integrated contract manufacturers. "Full-package" production companies in China and other countries have the capacity to link multiple specialized producers in many countries into specialized networks that manufacture all components and assemble final products. These producers are sufficiently integrated to control all manufacturing, logistics, and final delivery of the end-use products. These characteristics of modern manufacturing have significant implications for international trade, including the following: The "nationality" of the retailer or brand, the "nationalities" of the specialized producers, and "nationalities" of the ultimate manufacturers or assemblers of a product are often different. Most goods (and increasingly services) are "made in the world." Countries increasingly specialize in tasks and business functions rather than in manufacture of specific products, and countries compete on economic roles within the value chain rather than in the production of end-use goods. Although major U.S. manufacturing firms are actively involved in the overall management of their GVCs, some industries, such as retailers, may know less about where or how a product was made; Frequently, a relatively small percentage of the product's total value was created in the attributed country of origin; and, GVCs exist across many industry sectors, including electronics, motor vehicles, chemical products, agriculture and food products, fashion, and business and financial services. A 2011 analysis of the manufacture of an Apple iPhone 4 provides a very clear case study of how electronics and other products are produced in the global manufacturing environment. Most of Apple's iPhones are assembled in China by Foxconn, a Taiwanese contract manufacturer that handles all sourcing and logistics. The gross export value of the product (factory gate price) of the product was $194.04. Value-added (e.g., parts, electrical components, design, assembly, software development) came from the following countries: $80.05 of the value-added inputs originated in Korea; $24.63 originated in the United States; $16.08 came from Germany; $3.25 came from France; $0.70 came from Japan; $6.54 of the total value-added was contributed by China; and, $62.19 was undetermined (rest of world, ROW). Even though China's contribution to the iPhone's value was relatively small, the product is considered a product of China according to CBP regulations, because the product was last "substantially transformed" in China. As described above, in the increasingly global manufacturing environment, the assembly point of the manufactured product and of its individual components may differ. These rapidly accelerating changes in the manufacturing process can lead to additional complexities in ROO determinations because officials must ascribe origin to a single country for import purposes. In turn, these complexities may lead to apparent inconsistencies. For example, in some cases, CBP officials may decide that the assembly process (including the value-added by labor costs) is sufficient to confer origin, as it is the "last place of substantial transformation." In other cases, officials have determined that the final assembly process and labor costs incurred are actually not sufficient to confer this essential character. However, since CBP has the legal flexibility to be able to consider "the totality of the circumstances and makes such decisions on a case-by-case basis," the agency is able to fully consider the extent and technical nature of the processing that occurs in each country, thus taking into account the "resources expended on product design and development, extent and nature of post-assembly inspection procedures, and worker skill required during the actual manufacturing process" when making country of origin determinations. Therefore, the flexibility to analyze individual components and manufacturing processes could lead to more precise country of origin determinations, despite the complex nature of global manufacturing. Rules of origin are central components of trade policy. Preferential rules of origin are especially important for ensuring that only goods qualified to receive benefits under an FTA or preference receive those benefits. ROO may also be constructed to ensure that import-competing U.S. producers are not adversely affected by an FTA, thus possibly assuring a degree of public support for the measure. Non-preferential rules are essential for making sure that goods coming from countries that enjoy MFN status with the United States are assessed the proper tariffs, and are also key to supporting other U.S. trade laws, such as country of origin labeling. At present, CBP makes non-preferential country of origin determinations primarily based on an established body of regulatory and legal precedents. For many imports, determining origin is relatively straightforward. However, if the matter is in doubt, the origin question is decided on a case-by-case basis with input, records, and samples provided by the importer of record. Although origin rulings are fact-specific, there is sometimes uncertainty over what will be deemed as substantial transformation. Businesses sometimes criticize CBP and the current process as lacking clarity, consistency, and predictability. Additionally, given the expanding use of preferential ROO as the United States potentially enters into additional FTAs, determining country of origin (or waiting for rulings from CBP) may prove to be a significant burden on importers, especially on smaller firms. With regard to non-preferential rules, the United States has agreed to an ongoing Harmonization Work Program (HWP) under the auspices of the WTO Committee on Rules of Origin and the World Customs Organization. According to the USTR, however, reaching agreements on the technical aspects of the HWP are more complex than initially envisioned, and negotiations are expected to continue. Congress could, through legislation or other means, encourage the Administration to exercise leadership in this area with a view toward reaching a resolution to these negotiations. In fact, one of the principal negotiating objectives set forth in the Trade Act of 2002 was the conclusion of an agreement on rules of origin. Some observers assert that preferential ROO are inefficient and lack transparency. However, negotiators sometimes make incremental changes. For example, since October 2009, NAFTA partners have implemented four sets of changes to the NAFTA rules of origin. The fourth set of changes, agreed in January 2011, covered products whose annual trilateral trade exceeds $90 million. Therefore, it is possible for preferential ROO to be simplified through mutual agreement of the parties even after an FTA is implemented. If Congress desires to provide greater preferential access to the U.S. market (and gain reciprocal access to the markets of trading partners), it could urge U.S. negotiators to liberalize ROO, and to examine the costs and benefits of applying a uniform set of preferential ROO with respect to future FTA negotiations. Since the processes of globalization are likely to continue making origin determinations more complex, Congress might also consider providing CBP with additional legislative guidance, especially in the area of non-preferential rules. However, such efforts may adversely affect importers and manufactures that benefit from the current system. In addition, even though the determination process may be complex and lengthy, CBP has the flexibility to examine the complete manufacturing process, including design, sources of intermediate components, labor costs, and assembly processes in order to make its country of origin determination. Some trade policy analysts have called for the liberalization or revision of industry-specific preferential rules of origin. Others advocate the abolition of rules of origin entirely, because they inject a large amount of inefficiency in the world trading system, and because they can effectively serve as a form of protection for import-competing industries. Some trade policy analysts argue for the multilateral elimination of tariffs, which, they say, would eliminate the need for ROO entirely. However, the end of tariffs would automatically lead to the end of all preference programs for developing countries, as well as the tariff preference benefits of FTAs. In addition, eliminating ROO entirely could pose issues for other trade policy objectives such as collecting trade statistics, country of origin labeling, implementing trade sanctions, enforcing trade remedies, and other trade policy objectives.

Determining the country of origin of an imported product is important for properly assessing tariffs, enforcing trade remedies (such as antidumping and countervailing duties) or quantitative restrictions (tariff quotas), and statistical purposes. Other commercial trade policies are also linked with country of origin determinations, such as labeling and government procurement regulations. Rules of origin (ROO),the methodology used to prove country of origin, can be very straightforward--as long as the parts of a product are manufactured and assembled in one country. However, when a finished product's component parts originate in many countries, as is often the case in today's global trading environment--determining origin can be a more complex process. U.S. Customs and Border Protection (CBP) is the U.S. agency responsible for determining country of origin. CBP uses non-preferential ROO to determine the origin of goods imported from countries with which the United States has most-favored-nation (MFN) status. A key principle used in non-preferential ROO cases is "substantial transformation," which means the country in which the product was last substantially transformed, or made into a "new and distinct" product. Since no U.S. laws specifically govern non-preferential ROO, these determinations are made by CBP primarily on a case-by-case basis using CBP's own rules and precedents. Preferential ROO are used to determine the eligibility of imports from U.S. free trade agreement (FTA) partners to receive FTA benefits, and whether goods from eligible developing countries qualify for tariff benefits under U.S. trade preference programs like the Generalized System of Preferences (GSP). Preferential ROO apply specifically to each FTA or preference, meaning that they vary from agreement to agreement and preference to preference. CBP has periodically proposed implementing a more uniform system of determining non-preferential ROO. CBP's last proposal was made in July 2008, when it suggested that a system implemented under North American Free Trade Agreement (NAFTA) ROO "has proven to be more objective and transparent and provide greater predictability in determining the country of origin of imported merchandise than the system of case-by-case adjudication they would replace." The NAFTA scheme had already been used for several years to determine the origin of imports under NAFTA. The proposed ROO modifications received so many responses from the public that the deadline for public comment was extended twice. Changes in ROO requirements are opposed by some importers due to the costs involved in transitioning to new rules, or because they assert that some products they import might be at a disadvantage under different ROO methodology. According to a subsequent Federal Register notice, CBP implemented a portion of the proposed regulations applicable to a few specific products, including glass optical fiber, pipe fittings and flanges, and greeting cards. This report deals with ROO in three parts. First, it describes the reasons that country of origin rules are important and describes U.S. laws and methods that provide direction in making ROO determinations. Second, it discusses some of the more controversial issues involving rules of origin, including the apparently subjective nature of some CBP origin determinations, and the effects of the global manufacturing process on ROO. Third, it concludes with some alternatives and options that Congress could consider that might assist in simplifying the process.

The Secretary of the Department of Homeland Security (DHS) is charged with preventing the entry of terrorists, securing the borders, and carrying out immigration enforcement functions. The Department of Defense's (DOD) role in the execution of this responsibility is to provide support to DHS and other federal, state and local (and in some cases foreign) law enforcement agencies, when requested. Since the 1980s, the DOD (and National Guard), as authorized by Congress, has conducted a wide variety of counterdrug support missions along the borders of the United States. After the attacks of September 11, 2001, military support was expanded to include counterterrorism activities. Although the DOD does not have the "assigned responsibility to stop terrorists from coming across our borders," its support role in counterdrug and counterterrorism efforts appears to have increased the Department's profile in border security. Some states, particularly those along the southern border that are experiencing reported escalations in crime and illegal immigration, are welcoming the increased military role and have taken steps to procure additional military resources. Governor Janet Napolitano of Arizona, for example, sent the DOD a request for federal funding to support the state's deployment of National Guard troops to the border after reportedly exhausting available state resources for combating illegal immigration and drug trafficking. Others view the increased presence of military support along the borders as undiplomatic, potentially dangerous, and a further strain on already overextended military resources. Nonetheless, the concerns over aliens and smugglers exploiting the porous southern border continue to grow, and some now argue that the military should play a much larger and more direct role in border security. On May 15, 2006, President Bush announced that up to 6,000 National Guard troops would be sent to the southern border to support the Border Patrol. According to the President, the Guard will assist the Border Patrol by operating surveillance systems, analyzing intelligence, installing fences and vehicle barriers, building roads, and providing training. Guard units will not be involved in direct law-enforcement activities and will be under the control of the Governors. The Administration has indicated that the vast majority of the force at the border would be drawn from Guardsmen performing their regularly scheduled, two- or three-week annual training, pursuant to Title 32 of the U.S. Code (see later discussion). Initial deployments of Guardsmen to the border began in June 2006 under the mission name, "Operation Jump Start." As of November 2006, approximately 5661 guardsmen were participating in the mission. In the 109 th Congress, Senate-passed S. 2611 and House-passed H.R. 5122 , as well as H.R. 1986 , H.R. 3938 , and H.R. 3333 , would have authorized, under certain parameters, the use of military forces or the National Guard along the border. The military does not appear to have a direct legislative mandate to protect or patrol the border or to engage in immigration enforcement. Indeed, direct military involvement in law enforcement activities without proper statutory authorization might run afoul of the Posse Comitatus Act. The military does have, however, general legislative authority that allows it to provide support to federal, state, and local law enforcement agencies (LEA) in counterdrug and counterterrorism efforts, which might indirectly provide border security and immigration control assistance. Military personnel for these operations are drawn from the active and reserve forces of the military and from the National Guard. The primary restriction on military participation in civilian law enforcement activities is the Posse Comitatus Act (PCA). The PCA prohibits the use of the Army and Air Force to execute the domestic laws of the United States except where expressly authorized by the Constitution or Congress. The PCA has been further applied to the Navy and Marine Corps by legislative and administrative supplements. For example, 10 U.S.C. SS375, directs the Secretary of Defense to promulgate regulations forbidding the direct participation "by a member of the Army, Navy, Air Force, or Marines in a search, seizure, arrest, or other similar activity" during support activities to civilian law enforcement agencies. DOD issued Directive 5525.5, which outlines its policies and procedures for supporting federal, state, and local LEAs. According to the Directive, the following forms of direct assistance are prohibited: (1) interdiction of a vehicle, vessel, aircraft, or other similar activity; (2) a search or seizure; (3) an arrest, apprehension, stop and frisk, or similar activity; and (4) use of military personnel in the pursuit of individuals, or as undercover agents, informants, investigators, or interrogators. It is generally accepted that the PCA does not apply to the actions of the National Guard when not in federal service. As a matter of policy, however, National Guard regulations stipulate that its personnel are not , except for exigent circumstances or as otherwise authorized, to directly participate in the arrest or search of suspects or the general public. The PCA does not apply "in cases and under circumstances expressly authorized by the Constitution." Under the Constitution, Congress is empowered to call forth the militia to execute the laws of the Union. The Constitution, however, contains no provision expressly authorizing the President to use the military to execute the law. The question of whether the constitutional exception includes instances where the President is acting under implied or inherent constitutional powers is one the courts have yet to answer. DOD regulations, nonetheless, do assert two constitutionally based exceptions--sudden emergencies and protection of federal property. The PCA also does not apply where Congress has expressly authorized use of the military to execute the law. Congress has done so in three ways: by giving a branch of the armed forces civilian law enforcement authority (e.g., the Coast Guard), by addressing certain circumstances with more narrowly crafted legislation, and by establishing general rules for certain types of assistance. The military indirectly supports border security and immigration control efforts under general legislation that authorizes the armed forces to support federal, state, and local LEAs. Since the early 1980s, Congress has periodically authorized an expanded role for the military in providing support to LEAs. Basic authority for most DOD assistance was originally passed in 1981 and is contained in Chapter 18 of Title 10 of the U.S. Code--Military Support for Civilian Law Enforcement Agencies. Under Chapter 18 of Title 10, Congress authorizes DOD to share information (SS371); loan equipment and facilities (SS372); provide expert advice and training (SS373); and maintain and operate equipment (SS374). For federal LEAs, DOD personnel may be made available, under SS374, to maintain and operate equipment in conjunction with counterterrorism operations (including the rendition of a suspected terrorist from a foreign country) or the enforcement of counterdrug laws, immigration laws, and customs requirements. For any civilian LEA, SS374 allows DOD personnel to maintain and operate equipment for a variety of purposes, including aerial reconnaissance and the detection, monitoring, and communication of air and sea traffic, and of surface traffic outside the United States or within 25 miles of U.S. borders, if first detected outside the border. Congress placed several stipulations on Chapter 18 assistance, e.g., LEAs must reimburse DOD for the support it provides unless the support "is provided in the normal course of military training or operations" or if it "results in a benefit...substantially equivalent to that which would otherwise be obtained from military operations or training." Pursuant to SS376, DOD can only provide such assistance if it does not adversely affect "the military preparedness of the United States." Congress incorporated posse comitatus restrictions into Chapter 18 activities in SS375. In 1989, Congress began to expand the military's support role. For example, Congress directed DOD, to the maximum extent practicable, to conduct military training exercises in drug-interdiction areas, and made the DOD the lead federal agency for the detection and monitoring of aerial and maritime transit of illegal drugs into the United States. Congress later provided additional authorities for military support to LEAs specifically for counterdrug purposes in the National Defense Authorization Act for FY1991. Section 1004 authorized DOD to extend support in several areas to any federal, state, and local (and sometimes foreign) LEA requesting counterdrug assistance. This section has been extended regularly and is now in force through the end of FY2011. As amended, SS1004 authorizes the military to: maintain, upgrade, and repair military equipment; transport federal, state, local, and foreign law enforcement personnel and equipment within or outside the U.S.; establish bases for operations or training; train law enforcement personnel in counterdrug activities; detect, monitor, and communicate movements of air, sea, and surface traffic outside the U.S., and within 25 miles of the border if the detection occurred outside the U.S.; construct roads, fences, and lighting along U.S. border; provide linguists and intelligence analysis services; conduct aerial and ground reconnaissance; and establish command, control, communication, and computer networks for improved integration of law enforcement, active military, and National Guard activities. Section 1004 incorporates the posse comitatus restrictions of Chapter 18. Unlike Chapter 18, however, this law does allow support which could affect military readiness in the short-term, provided the Secretary of Defense believes the support outweighs such short-term adverse effect. The National Guard is a military force that is shared by the states and the federal government and often assists in counterdrug and counterrrorism efforts. After September 11, for example, President Bush deployed roughly 1,600 National Guard troops for six-months under Title 10 authority to support federal border officials and provide a heightened security presence. Under "Title 10 duty status," National Guard personnel operate under the control of the President, receive federal pay and benefits, and are subject to the PCA. Typically, however, the National Guard operates under the control of state and territorial Governors. In "state active duty" National Guard personnel operate under the control of their Governor, are paid according to state law, can perform activities authorized by state law, and are not subject to the restrictions of the PCA. Because border security is primarily a federal concern, some states have looked to the federal government for funding to support some of their National Guard activities. Under Title 32 of the U.S. Code, National Guard personnel generally serve a federal purpose and receive federal pay and benefits, but command and control remains with the Governor. This type of service is commonly referred to as "Title 32 duty status," and examples are discussed below. According to the Administration, the deployment of the 6,000 Guardsmen derives its authority from 32 U.S.C. SS502(a), which allows the Secretary of the Army and Air Force to prescribe regulations for National Guard drill and training and SS502(f), described below. Federal funding may be provided to a state for the implementation of a drug interdiction program in accordance with 32 U.S.C. SS112. Under this section, the Secretary of Defense may grant funding to the Governor of a state who submits a "drug interdiction and counterdrug activities plan" that satisfies certain statutory requirements. The Secretary of Defense is charged with examining the sufficiency of the drug interdiction plan and determining whether the distribution of funds would be proper. While the emphasis is certainly on counterdrug efforts, a state plan might include some related border security and immigration-related functions that overlap with drug interdiction activities. Arizona's drug interdiction plan, for example, recognizes related border issues created by human smuggling and terrain vulnerabilities with respect to the illegal entry of aliens into the United States. By approving the State of Arizona's drug interdiction plan, the Secretary of Defense has enabled the Arizona National Guard to engage in some border security measures. Section 502(f) of Title 32 has been used to expand the operational scope of the National Guard beyond its specified duties. This provision provides that "a member of the National Guard may ... without his consent, but with the pay and allowances provided by law ... be ordered to perform training or other duty " in addition to those he is already prescribed to perform (emphasis added). This is the provision of law that was used to provide federal pay and benefits to the National Guard personnel who provided security at many of the nation's airports after September 11 and who participated in Katrina and Rita-related disaster relief operations. States, such as Arizona, have argued that the "other duty" language should be liberally applied (like it was for Hurricane Katrina and Rita) to include activities associated with border security efforts. Some question, however, whether domestic operations, in general, are a proper use of this Title 32 authority. In 2004, Congress passed another law that could arguably provide federal funding for National Guard personnel conducting border security operations under Title 32. Chapter 9 of Title 32 of the U.S. Code authorizes the Secretary of Defense to provide federal funding at his discretion to a state, under the authority of the Governor of that state, for the use of their National Guard forces if there is a "necessary and appropriate" "homeland defense activity." A "homeland defense activity" is statutorily defined as "an activity undertaken for the military protection of the territory or domestic population of the United States ... from a threat or aggression against the United States." Although a deployment of National Guard troops for border security purposes could arguably be an activity "undertaken for the military protection" of a "domestic population," it is unclear whether the porous nature of the border or illegal entry of aliens is the type of "threat" or "aggression" that would be "necessary and appropriate" for National Guard troops. The State of Arizona requested federal funds for its National Guard under Chapter 9 for the performance of homeland defense-border security activities.

The military generally provides support to law enforcement and immigration authorities along the southern border. Reported escalations in criminal activity and illegal immigration, however, have prompted some lawmakers to reevaluate the extent and type of military support that occurs in the border region. On May 15, 2006, President Bush announced that up to 6,000 National Guard troops would be sent to the border to support the Border Patrol. Addressing domestic laws and activities with the military, however, might run afoul of the Posse Comitatus Act, which prohibits use of the armed forces to perform the tasks of civilian law enforcement unless explicitly authorized. There are alternative legal authorities for deploying the National Guard, and the precise scope of permitted activities and funds may vary with the authority exercised. This report will be updated as warranted.

Traumatic brain injury (TBI) has become known as a "signature wound" of Operations Enduring Freedom and Iraqi Freedom (OEF/OIF). Several years into these operations, both Congress and the executive branch showed increased attention to the health care needs of servicemembers and veterans returning from deployments with injuries--and specifically the needs of those with TBI. For example, pursuant to the Traumatic Brain Injury Act of 2008 ( P.L. 110-206 ), the Centers for Disease Control and Prevention (CDC), the National Institutes of Health (NIH), the Department of Defense (DOD), and the Department of Veterans Affairs (VA) formed a Leadership Panel to (among other things) recommend ways for the four agencies to collaborate further to develop and improve TBI diagnosis and treatment. These four agencies have implemented many of the Leadership Panel's recommendations, and in some cases implementation is ongoing. Congressional attention to TBI among veterans has continued as well. This report focuses on current efforts of the VA's Veterans Health Administration (VHA) to understand, identify, and treat TBI among veterans. It begins with an overview of TBI as background for the subsequent discussion of VA programs and services relevant to veterans with TBI, some of which focus on (or are limited to) OEF/OIF veterans. The Brain Injury Association of America defines TBI as "an alteration in brain function, or other evidence of brain pathology, caused by an external force." In the general population, TBI results mainly from falls, motor vehicle/traffic accidents, assaults, and other instances in which the head is struck by or strikes an object. In military servicemembers, TBI may result from those kinds of events or from improvised explosive devices (IEDs), mortars, grenades, bullets, or mines. Some explosives cause a blast wave (i.e., over-pressurization force), which may result in TBI without outward physical signs of injury. TBI caused by blast waves may be accompanied by other injuries (e.g., to hearing or vision). The DOD reports that in 2013 (the most recent full-year data), a total of 27,324 servicemembers sustained TBI. The total number of veterans who have experienced TBI is not known, in part because TBI is difficult to identify, and in part because some veterans have not accessed VA health care services. Traumatic brain injury is not a specific diagnosis; the term encompasses a range of conditions. A TBI may be classified as focal or diffuse; open or closed; and mild, moderate, or severe. If the injury is localized to a small area of the brain, it is a focal injury; an injury occurring over a large area is diffuse. If the head hits, or is hit by, an object that penetrates the skull and the brain's protective coverings, the injury is open (also called penetrating); otherwise, the injury is closed and can be further classified as mild, moderate, or severe. Many methods have been used to classify TBI as mild, moderate, or severe based on one or more of the signs and symptoms that characterize TBI immediately following the injury. For example, one method determines severity based on whether an individual loses consciousness and, if so, how long the loss of consciousness persists. Another method determines severity based on the duration of post-traumatic amnesia (i.e., an inability to recall events that occur after the injury, accompanied by disorientation or confusion). The Glasgow Coma Scale takes into account multiple signs of TBI, assigning points in three areas (eye opening, verbal response, and motor response), such that the sum of points ranges from 3 to 15, with lower scores indicating greater severity of TBI. Table 1 summarizes the criteria for mild, moderate, and severe TBI using these three methods, which are among the most commonly used. Individuals with TBI may experience a range of problems, including changes in physical functioning, cognition, sensory processing, communication, and behavior. In the days or weeks following a TBI, approximately 40% of patients (including those with mild TBI) develop an array of symptoms collectively called postconcussion syndrome: headaches, dizziness, vertigo, memory problems, concentration problems, sleeping problems, restlessness, irritability, anxiety, depression, and apathy. For some people, postconcussion syndrome and other problems associated with TBI may resolve over time; for others, the problems may persist for a lifetime. Signs and symptoms may depend in part on the severity of the TBI, which part of the brain was injured, the individual's age and general health, whether there has been prior injury, and other factors. Common physical signs and symptoms of mild TBI include headaches, fatigue, lethargy, dizziness, and lightheadedness. Individuals with moderate to severe TBI may experience any of these signs and symptoms, as well as repeated nausea or vomiting, a persistent or worsening headache, seizures or convulsions, numbness or weakness in their feet or hands, and loss of coordination. Their pupils might be dilated and their speech might be slurred. Individuals with TBI may experience cognitive problems that hinder efforts to return to work or school, or, in some cases, to manage situations in everyday life. They may become easily confused or distracted. They may experience problems with memory, attention, or concentration. They may have difficulty making plans, solving problems, or exercising judgment. Moderate to severe TBI is associated with more cognitive problems than mild TBI. Repeated mild injuries--each of which might have gone unnoticed--may result in cognitive problems equal to a moderate or severe injury. Individuals with mild TBI may also experience problems with vision, hearing, taste, smell, or touch. Vision problems, the most common sensory problems, may interfere with the ability to drive a car or operate machinery. Difficulties with hand-eye coordination may cause individuals with TBI to bump into things, drop objects, or seem unsteady. More rarely, some individuals with TBI may experience ringing in the ears; a bad taste in the mouth; a persistent noxious smell; or sensations of tingling, itching, or pain. Individuals with TBI often experience communication problems that may cause confusion and frustration for them and others around them. They may have difficulty speaking and understanding what others say. They may also struggle with non-verbal communication such as body language or facial expressions. They may have problems writing and reading. Most individuals with TBI experience some behavioral problems, and their family members often find these to be the most difficult problems to handle. They may feel depressed, apathetic, anxious, paranoid, agitated, irritable, frustrated, or angry. They may experience mood swings or sleep problems. They may engage in behavior that is impulsive, socially inappropriate, aggressive, or violent. Individuals with TBI may also suffer from comorbid conditions, which include both mental and physical illnesses. Mental disorders associated with TBI include posttraumatic stress disorder (PTSD) and depression; estimates of how often such conditions co-occur with TBI vary. Although some studies have found a link between TBI and increased alcohol or drug use, a report by the Institute of Medicine (IOM) found just the opposite: limited/suggestive evidence of an association between TBI and decreased alcohol and drug use within one to three years of the injury. Individuals with TBI are at increased risk of developing epilepsy and neurodegenerative diseases such as Alzheimer's disease, Lewy body dementia, or Parkinson's disease. Repetitive blows to the head can result in chronic traumatic encephalopathy, a condition that may begin with loss of concentration, attention, or memory and may eventually progress to problems with coordination, gait, slurred speech, and tremors. Post-traumatic hypopituitarism, a neuroendocrine disorder associated with TBI, may lead to other neuroendocrine conditions, including hypothyroidism and deficiencies in growth hormone and gonadotropin. Individuals with TBI may also develop sleep disturbances, obstructive sleep apnea, incontinence, sexual dysfunction, metabolic dysfunction, or musculoskeletal dysfunction. How TBI is treated varies with the severity of the injury, along with other factors. Most cases of mild TBI resolve without medical attention; education about mild TBI can effectively "normalize symptoms and provide expectation of rapid recovery." Moderate or severe TBI requires medical attention; treatment may include surgery, medication, rehabilitation, psychotherapy, case management, and other services. In the case of severe TBI, which often co-occurs with other serious injuries, individuals often experience long-term physical or mental disabilities that require ongoing rehabilitation and nursing care. The various types of treatment may be provided in a variety of settings, from inpatient surgery in an acute care hospital to home-based rehabilitation services. Both the required types of treatment and the appropriate setting of care may change over time, as an individual with moderate to severe TBI moves from acute care to post-acute care to long-term services and supports (if needed). In general, acute care refers to short-term care for a serious illness or injury. For individuals with moderate to severe TBI, acute care may include surgical interventions (e.g., to relieve pressure inside the skull), medication (e.g., to prevent further injury), and other interventions (e.g., life support) for both the TBI and any other injuries. Acute care for individuals with moderate to severe TBI may begin at the location the injury occurred or in a medical facility; it may be delivered in a hospital's emergency department or intensive care unit, for example. Acute care generally involves a multidisciplinary team of health care providers representing neurosurgery, neurology, physical medicine, psychiatry, and neuropsychology. Some experts have suggested that the best outcomes are achieved when ancillary services (e.g., physical and occupational therapy, audiology, and optometry) begin during the acute phase of treatment rather than later during the post-acute phase, which is more typical. The duration of acute care for individuals with moderate to severe TBI may vary, depending on the severity of TBI, the level of functional impairment, comorbid conditions (e.g., other injuries or diseases), and other characteristics (e.g., age). Acute care continues until an individual is medically stable, at which point the individual may be released or transferred to post-acute care, depending on the severity of the TBI and any other medical conditions. Post-acute care generally begins when an individual is medically stable, no longer in need of acute care services, and still in need of some services. For an individual with moderate to severe TBI, post-acute care primarily takes the form of intensive rehabilitation to maximize functioning. Post-acute rehabilitation services may be provided in inpatient, outpatient, or home-based programs, among other settings. A treatment plan is tailored to meet the individual's needs in areas such as physical, occupational, and speech therapy; physical medicine (physiatry); mental health care; and social support. Over time, the treatment plan changes to address the individual's changing needs. Long-term services and supports are intended to help maintain or improve an individual's level of physical functioning and quality of life. The need for long-term services and supports is generally defined by limitations on an individual's ability to independently perform basic personal care activities--known as activities of daily living (ADLs)--over an extended period of time. (See the textbox for more information about ADLs.) In individuals with moderate to severe TBI, such limitations may be due to either physical problems (which may require hands-on assistance) or cognitive problems (which may require supervision or guidance). Services may include preparing meals, doing laundry and other housework, and helping with medication, among others. Supports may include the use of special equipment, assistive devices, or technology by a physically impaired person (e.g., a wheelchair ramp). An individual's need for long-term services and supports may change over time as his or her condition changes. Long-term services and supports may be provided in institutional settings such as nursing facilities, in community-based settings such as adult day health care centers, or in private homes. Both formal (paid) and informal (unpaid) caregivers may provide long-term services and supports. Formal caregivers may be licensed or skilled health care workers such as nurses, physical or occupational therapists, and social workers. More often, however, they are non-licensed health care workers such as certified nursing assistants, home health aides, and personal care aides. Informal (unpaid) caregivers such as family members, friends, and neighbors provide the vast majority of long-term services and supports. Although the early stages of TBI treatment may occur within the military health care system if the initial injury occurs during military service, a description of the military health care system is beyond the scope of this report, which focuses on the VA health care system. In FY2014, VA spending for TBI was $229 million (including $55 million for OEF/OIF veterans). In FY2015, VA spending for TBI is estimated to be $234 million (including $61 million for OEF/OIF veterans). The VA projects the 10-year (FY2016-FY2025) costs of TBI to be $2.2 billion (including $0.5 billion for OEF/OIF veterans). It should be noted that OEF/OIF veterans represent approximately 11% of patients treated by the VA. As discussed above, the type of treatment needed depends on the severity of the injury. The VA and the DOD have jointly developed evidence-based clinical practice guidelines treating mild TBI, which represents the majority of injuries. Most cases of mild TBI, however, resolve without medical attention. Moderate or severe TBI requires immediate treatment. In the case of servicemembers, treatment begins at the site of the event and continues at a military treatment facility. Once stabilized, servicemembers may remain at a military treatment facility or be sent to VA medical facilities for continuing treatment, rehabilitation, and transitional care. VA programs and services relevant to TBI include (1) coordinating the transition from DOD to VA care, (2) screening and evaluation, (3) acute and post-acute care provided through the VA Polytrauma/TBI System of Care (PSC), and (4) long-term services and supports. In addition, the VA conducts TBI research, both independently and collaboratively. When servicemembers transfer from DOD to VA facilities (regardless of whether they are discharged from active duty to veteran status), coordination between the two systems is necessary. Three VA and joint VA/DOD programs seek to address the transition from DOD to VA health care facilities: (1) the VA Liaison Program, (2) OEF/OIF Care Management, and (3) the Federal Recovery Coordinator Program. These programs are available to veterans with TBI as well as other qualified veterans and servicemembers. Since 2003, the VA Liaison Program has placed VA employees at military treatment facilities, where they provide onsite consultation about VA resources. Liaisons coordinate referrals with the OEF/OIF Care Management teams at local VA facilities; they maintain involvement until health care is arranged and transfer is complete. Since 2007 every VA Medical Center has had an OEF/OIF Care Management Team to coordinate, monitor, and track the care of severely ill or injured OEF/OIF servicemembers and veterans. The team consists of (at a minimum) a program manager, a clinical case manager, and a transition patient advocate. Program managers and clinical case managers are either nurses or social workers. Transition patient advocates serve as personal advocates for patients moving through the VA health care system. This service is available to all OEF/OIF veterans without referral. In 2007, the VA and the DOD jointly established the Federal Recovery Coordination Program (FRCP), which coordinates services provided by the DOD, the VA, and other public and private entities. Veterans and servicemembers with TBI (one of several qualifying conditions) can self-refer to the FRCP or be referred by clinicians, family members, veterans service organizations, and others. Each veteran (or servicemember) enrolled in the FRCP is assigned a Federal Recovery Coordinator, who coordinates care but does not provide direct services. As of December 2012, the FRCP had 24 Federal Recovery Coordinators and 902 active clients, including 412 veterans. In 2011, the Government Accountability Office (GAO) found that the FRCP faced challenges when coordinating with other programs. Because the majority of enrollees are enrolled in at least one other program for wounded servicemembers or veterans, the FRCP must coordinate the efforts of care providers and other care coordinators. Having multiple care coordinators increases the potential for duplication of effort, conflicting treatment goals, or failure to address problems (if each coordinator thinks someone else is handling the problem). In November 2012, the Interagency Care Coordination Committee (IC3) was chartered to monitor DOD and VA care coordination and case management activities for wounded, injured, or ill servicemembers and veterans (not limited to those with TBI), as well as their families and other caregivers. The IC3 found that, across the DOD and the VA, more than 50 programs were operating in accordance with more than 240 agency policies. In January 2013, the IC3 launched a feasibility assessment of a "Lead Coordinator" concept at two VA medical centers and one military treatment facility; the assessment has been expanded to include more--but still a small minority of--facilities. Moderate or severe TBI is likely to be recognized immediately at the time of the initial injury; however, mild TBI may go unnoticed if an individual walks away from an injury seemingly unharmed. Despite repeated assessments of servicemembers by the DOD, veterans may enter the VA health care system with undiagnosed TBI. Since 2007, VA policy has required that all OEF/OIF veterans receiving medical care in the VA health care system be screened for possible TBI (to identify cases of TBI that might otherwise go untreated). Those who screen positive must be offered further evaluation and specialized treatment. The VA adapted a screening instrument from one used by the DOD. This screening instrument was incorporated into the computerized patient record system, which automatically alerts providers when a screening is required and prompts them to ask a series of questions. If a veteran screens negative for possible TBI, no further action is required. If a veteran screens positive for possible TBI, a follow-up evaluation is required (unless refused by the veteran), because not all veterans who screen positive actually have TBI. Accurately diagnosing TBI is complicated by symptoms that overlap with posttraumatic stress disorder (PTSD), such as difficulty concentrating, irritability or angry outbursts, and memory loss. Because of the complexity of diagnosing TBI and differentiating symptoms of other disorders, specialized training is required to conduct the Comprehensive TBI Evaluation, which includes determining the origin of the injury, administering a 22-item neurobehavioral symptom inventory, conducting a targeted physical examination, and preparing a treatment plan. The VA Office of Inspector General found that a majority of VA staff informed veterans of TBI screening results; appropriately referred veterans who screened positive for comprehensive evaluations (or documented veterans' refusals); made sufficient attempts to reschedule when veterans failed to appear for evaluation appointments; and offered families relevant training. Of the cases the Office of Inspector General examined, 21% did not complete the comprehensive evaluation within 30 days of a positive screen (or document veterans' refusal); 21% did not have a case manager assigned at the time of the evaluation; 15% did not have care plans; and 22% had no documentation that care plans were shared with the veterans and/or their families. Veterans with moderate or severe TBI may receive care through the VA Polytrauma/TBI System of Care (PSC), which is also available to veterans with other traumatic injuries. Established in 2005 pursuant to the Veterans Health Programs Improvement Act of 2004 ( P.L. 108-422 ), the PSC is designed to function within the existing VA health care system, which is organized into 21 geographic regions, called Veterans Integrated Service Networks (VISNs). Like the larger VISN structure, the PSC is geographically dispersed, thereby making the specialized treatment more accessible to veterans, regardless of where they live. The PSC operates as a "hub and spoke" model with four components: (1) Polytrauma Rehabilitation Centers, (2) Polytrauma Network Sites, (3) Polytrauma Support Clinic Teams, and (4) Polytrauma Points of Contact. In FY2013, across all four components, the PSC served 50,516 unique patients (including both veterans and servicemembers) in outpatient clinics and 1,381 unique patients in inpatient units; however, these patients did not necessarily all have TBI. Five regional Polytrauma Rehabilitation Centers serve as regional referral centers, the "hubs" of the PSC. They provide acute inpatient medical and rehabilitation services and consultation, as well as research and education related to polytrauma and TBI. Each Polytrauma Rehabilitation Center has an interdisciplinary treatment team, which includes a rehabilitation physician (physiatrist), registered nurses, social workers, speech-language pathologists, physical therapists, occupational therapists, recreation therapists, and a neuropsychologist, among others. Twenty-three Polytrauma Network Sites extend the "spokes" of the PSC to each VISN (including one co-located with each of the Polytrauma Rehabilitation Centers) plus Puerto Rico. Polytrauma Network Sites provide continued medical care and rehabilitation services in a setting appropriate to the needs of veterans, servicemembers, and families following discharge from a Polytrauma Rehabilitation Center. Polytrauma Network Sites may also serve as entry points for rehabilitation services for those with mild to moderate TBI or polytraumatic injury. Figure 1 shows the location of each Polytrauma Network Site, including the Polytrauma Rehabilitation Centers. Eighty-six Polytrauma Support Clinic Teams extend care to VA medical facilities that do not have Polytrauma Rehabilitation Centers or Polytrauma Network Sites. In coordination with Polytrauma Network Sites, Polytrauma Support Clinic Teams allow veterans, servicemembers, and families to continue their medical care and rehabilitation services closer to home and may also serve as entry points for rehabilitation services for those with mild to moderate TBI or polytraumatic injury. Thirty-nine VA medical centers have designated Polytrauma Points of Contact, who are responsible for coordinating the treatment of veterans at facilities that lack the necessary services to provide specialized care. In addition to coordinating case management and referrals throughout the PSC, Polytrauma Points of Contact may provide a limited range of rehabilitation services. The VA provides a range of long-term services and supports through multiple programs with varying eligibility criteria. TBI may be one of many qualifying conditions for participation, rather than the focus of the programs. Long-term services and supports have historically been provided in institutional settings (e.g., nursing homes); however, if a veteran is able to live in the community and receive home or community-based treatment, this arrangement is generally preferable to institutional care. The VA has an ongoing pilot program providing assisted living services to veterans with TBI. In addition to institutional and noninstitutional services for veterans, the VA offers services for some caregivers. The VA provides institutional long-term services and supports for eligible veterans--including but not limited to those with TBI--who require a nursing home level of care (i.e., 24-hours supervision, medical care, skilled nursing care, and help with activities of daily living). This level of care may be delivered in VA Community Living Centers, private nursing homes under contract with the VA, or state veterans' homes. Veterans may stay in these institutional settings temporarily (e.g., as a transitional placement between a hospitalization and returning home) or permanently. The VA provides a range of noninstitutional long-term care services for veterans who are able to live independently if they have some assistance to accommodate their health conditions. These programs, which are available to (but not specifically for) veterans with TBI, include community residential care, adult day health care, home-based primary care, skilled home care, homemaker and home health aide services, home hospice care, respite care, and home telehealth. Table 2 summarizes these programs. The VA has an ongoing pilot program to assess the effectiveness of providing assisted living (AL) services to eligible veterans with TBI. The AL-TBI pilot program is administered through contracts with non-VA (private sector) residential care facilities that specialize in rehabilitation for individuals with TBI. In administering the AL-TBI pilot program, the VA collaborates with the Defense and Veterans Brain Injury Center, a component of the Defense Centers of Excellence for Psychological Health and Traumatic Brain Injury (which itself is a collaborative effort of the VA and the DOD). The AL-TBI pilot program was established as a five-year pilot program pursuant to Section 1705 of the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ). Section 501 of the Veterans Access, Choice, and Accountability Act of 2014 ( P.L. 113-146 , as amended) extends the pilot program through October 6, 2017. The program was further amended by the Veterans Traumatic Brain Injury Care Improvement Act of 2014 ( P.L. 113-257 ), which changed reporting requirements and modified the terminology (e.g., changing ''assisted living'' to ''community-based brain injury residential rehabilitative care''). In addition to the pilot program, the VA has authority to contract with non-VA (private sector) facilities to provide assisted living services specifically to OEF/OIF veterans with TBI whose deficits in ADLs and IADLs would otherwise require nursing home care that generally exceeds their nursing needs. This authority was established under Section 507 of the Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ). Within the category of Community Residential Care (as described in Table 2 ), Medical Foster Homes (MFHs) serve more medically complex and disabled veterans by combining placement in a small adult foster home with enrollment in Home-Based Primary Care (as described in Table 2 ). Currently more than 600 VA-approved caregivers provide MFH care to more than 700 veterans in 43 states--paid by the veterans. The VA has proposed legislation authorizing payments for care in VA-approved MFHs for veterans who would otherwise need nursing home care. The VA argues that many veterans who presently reside in nursing homes at VA expense would opt for MFH instead if the VA paid for it. The VA estimates that the 10-year (FY2016-FY2025) costs would be $176 million. The Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ) required the VA Secretary to establish a "program of comprehensive assistance for family caregivers" of any eligible veteran who has a serious injury incurred or aggravated in the line of duty on or after September 11, 2001, and who is in need of personal care services. For approximately 25% of program participants, TBI is the qualifying injury. For caregivers who are designated as the primary provider of personal care services for an eligible veteran, the program offers a monthly stipend, medical care, mental health care, and respite care (i.e., temporary care provided to relieve the usual caregiver). Additional services available to these and other caregivers include training in providing personal care services, payment for travel to the veterans' medical appointments, and counseling. The Government Accountability Office (GAO) found that the VA had initially underestimated demand for services in the caregiver program. More than three times the estimated number of caregivers were approved to participate in the program during its first few years, and the workload was consequently larger than anticipated, leading to delays in delivering program benefits. The VA's "program of general caregiver support services" (also established under P.L. 111-163 ) provides more limited benefits (e.g., no monthly stipend) to caregivers for a larger group of veterans (e.g., not limited to post-9/11 veterans). This program is open to caregivers for any veteran who needs personal care services because of an inability to perform one or more activities of daily living, a need for supervision or protection based on symptoms or residuals of neurological or other impairment or injury, or such other matters as specified by the VA Secretary. Under this program, caregiver support services include information about the supportive services available to caregivers from the VA and other agencies, training in providing personal care services, appropriate respite care, and counseling. Some VA services for caregivers (e.g., respite care) predate the specific programs established under P.L. 111-163 . In a 2014 report about caregivers for wounded servicemembers and veterans (termed "military caregivers"), RAND finds that post-9/11 military caregivers differ from caregivers for veterans of previous eras. In addition to being younger on average and caring for younger veterans, post-9/11 military caregivers are more likely to be veterans themselves, nonwhite, employed, and unconnected to a support network. Post-9/11 military caregivers are also more likely to care for someone with mental health or substance use disorders. RAND finds that military caregivers "consistently experience worse health outcomes, greater strains in family relationships, and more workplace problems than non-caregivers, and post-9/11 military caregivers fare worst in these areas." The RAND report includes four recommendations, summarized in the textbox below. Within the VA, TBI research is supported by two organizational units: the Office of Research and Development and the Mental Health Strategic Healthcare Group. In general, the Office of Research and Development funds intramural research by individual VA investigators and researchers. Research related to TBI includes developing and testing new treatments, as well as studying changes in the brain, thinking, and psychological well-being. Research on TBI and related conditions may also be conducted under the auspices of the VA's Mental Health Strategic Healthcare Group, which supports research efforts conducted at the National Center for PTSD, four Centers of Excellence, and 10 Mental Illness Research Education and Clinical Centers. The VA is collaborating with the Department of Education's National Institute on Disability and Rehabilitation Research (NIDRR) to develop the Traumatic Brain Injury Veterans Health Registry, which is intended to facilitate future research by providing longitudinal data on the demographics, military service, injury, and treatment of all OEF/OIF veterans with TBI. The VA is also working with the NIDRR to establish a database similar to the institute's existing TBI Model System National Database (established in 1989), which is intended to facilitate research collaboration and program evaluation. Congress has encouraged and in some cases required the VA to collaborate with other entities involved in TBI research. For example, the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ) required the VA to collaborate with the TBI rehabilitation research community, the Defense and Veterans Brain Injury Center, NIDRR grantees, and other governmental entities engaged in TBI rehabilitation.

In recent years, Congress, the Department of Defense (DOD), and the Department of Veterans Affairs (VA) have increased attention to traumatic brain injury (TBI), which is known as a "signature wound" of Operations Enduring Freedom and Iraqi Freedom (OEF/OIF). Although the early stages of TBI treatment may occur within the military health care system (if the injury occurs during military service), this report focuses on the VA health care system. In FY2015, VA spending for TBI is estimated to be $234 million. The VA projects the 10-year (FY2016-FY2025) costs of TBI to be $2.2 billion (including $0.5 billion for OEF/OIF veterans). The type of treatment needed depends on the severity of the injury. Most cases of mild TBI--representing the majority of injuries--resolve without medical attention. Moderate or severe TBI requires immediate treatment. In the case of servicemembers, treatment begins at the site of the event and continues at a military treatment facility. Once stabilized, servicemembers may remain at a military treatment facility or be sent to VA medical facilities. When servicemembers transfer from DOD to VA facilities, coordination between the two systems is necessary. Three VA and joint VA/DOD programs seek to address the transition from DOD to VA health care facilities: (1) OEF/OIF Care Management, (2) the VA Liaison Program, and (3) the Federal Recovery Coordinator Program. These programs are available to veterans with TBI as well as other qualified veterans and servicemembers. Mild TBI may go unnoticed if an individual walks away from an injury seemingly unharmed. Despite repeated assessments of servicemembers by the DOD, veterans may enter the VA health care system with undiagnosed TBI. Thus, VA policy requires that all OEF/OIF veterans receiving medical care in the VA health care system be screened for possible TBI and that those who screen positive be offered further evaluation and specialized treatment. Veterans with moderate or severe TBI may receive care through the VA Polytrauma/TBI System of Care (PSC), which is also available to veterans with other traumatic injuries. The PSC is geographically dispersed, thereby making specialized treatment more accessible to veterans, regardless of where they live. The PSC operates as a "hub and spoke" model with four components: (1) Polytrauma Rehabilitation Centers, (2) Polytrauma Network Sites, (3) Polytrauma Support Clinic Teams, and (4) Polytrauma Points of Contact. The VA provides a range of long-term services and supports, most of which are available to veterans who have TBI as well as other qualified veterans. Long-term services and supports have historically been provided in institutional settings (e.g., nursing homes); however, if a veteran is able to live in the community and receive home- or community-based treatment, this arrangement is generally preferable to institutional care. The VA has an ongoing pilot program providing assisted living services to veterans with TBI and has requested authority to pay for care in Medical Foster Homes. The VA also offers services for some caregivers for veterans with TBI. The VA conducts and collaborates on TBI research. For example, the VA is collaborating with the Department of Education's National Institute on Disability and Rehabilitation Research to develop the Traumatic Brain Injury Veterans Health Registry, and to establish a database similar to the institute's existing TBI Model System National Database.

Depending on one's point of view, new chemicals legislation in the European Union (EU) is likely to vastly improve environmental and public health protections and serve as a model for future U.S. law, or it might unnecessarily burden commercial enterprises with regulations and interfere with international trade. The subject of such conjecture is an EU law for Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH) in EU commerce, which went into force June 1, 2007. This report summarizes REACH and progress in its implementation. For information about U.S. chemical law, see CRS Report RL34118, The Toxic Substances Control Act (TSCA): Implementation and New Challenges , by [author name scrubbed]. On June 1, 2007, the EU began to implement a new approach to the management of chemicals in EU commerce. The REACH directive simplifies and consolidates more than 40 former regulations in an effort to balance two EU goals: to protect public health and the environment from hazardous chemicals and to ensure the continuing competitiveness of European industry. Although certain chemicals are exempt entirely, and requirements for the other chemicals are being phased in over 11 years, the law generally will apply to nearly all chemicals in EU commerce, including imported chemicals, chemical mixtures, and certain articles that release chemicals to the environment. The REACH legislation is based on a proposal developed by the EU General Directorates for Enterprise and Environment, which was adopted by the European Commission in February 2001. The draft law was revised several times in response to public comments and amendments adopted by the European Parliament and Council of Ministers (which is comprised of the executive officers of EU member states). The final regulation is binding on all member states. REACH requires all chemical producers and importers of more than one metric ton (t) per year of any chemical to register the product by submitting a technical dossier of information about the properties of that chemical and its uses to a new agency created by the law, the European Chemicals Agency (ECHA). The dossier also must contain information about how any risks associated with use of that chemical should be managed. Downstream users of chemicals are required to manage their risks in the manner indicated by producers. Information requirements for the dossier increase as production volume increases beyond 10 t, 100 t, and 1,000 t. Since June 1, 2008, when the ECHA began to function, registration has been required for new chemicals before they enter commerce. Companies had between one year and 18 months to pre-register existing chemicals. Pre-registration ended November 30, 2008. The first registration deadline for existing chemicals was on November 30, 2010, and applied only to "substances of very high concern," or substances produced in volumes greater than 1,000 t annually or greater than 100 t annually if they are very toxic to aquatic life. A total of 4,632 substances reportedly were registered by the first deadline. The second registration deadline for existing chemicals is May 31, 2013, and applies to substances produced in the 100 to 1,000 t range annually. A total of 2,998 substances reportedly were registered by the second deadline. The final deadline is May 31, 2018, by which point all substances produced or imported in small quantities, between 1 and 100 t annually, must be registered. Member states (i.e., the nations of the EU) evaluate the dossiers based on guidelines provided by the ECHA, and may require additional data, if such data are needed to assess health and environmental effects of potential chemical exposure. Member states also may determine that action should be taken to authorize or restrict particular chemical uses. The list of substances currently under evaluation is published and updated in the REACH Community Rolling Action Plan (CoRAP). On February 29, 2012, ECHA announced that it had used the information submitted in the first round of data collection for substances produced in high volumes to identify 90 high-priority substances for risk evaluation by Member States. These will be the first chemicals subject to the evaluation stage of REACH, because ECHA suspects that use of these substances might pose a risk to human health or the environment. The evaluations will aim to clarify such risks to determine whether additional data should be collected and whether authorizations or restrictions may be necessary. On March 20, 2013, ECHA published an update to the CoRAP stating that it will evaluate 115 substances in the next two years. Fifty-three substances were transferred from the 90 high-priority substances previously identified. Producers of "substances of very high concern" may be required to apply for authorization of each particular use, demonstrate that the risks can be adequately controlled (e.g., through labeling or worker training), and justify such uses by submitting additional information to authorities. Companies will not be allowed to manufacture, import, or use a chemical after a specified date unless they have obtained an authorization for a use. In addition, producers will be required to submit an analysis of possible substitutes, a "substitution plan" if substitutes are available, or a research and development plan if no suitable substitute exists. As of October 23, 2013, 22 substances have been identified as substances of very high concern (SVHC) that are effectively banned from use in the EU unless such use is authorized under the law. In all, ECHA has identified 144 chemicals or chemical groups as SVHC candidates for authorization, with many more chemicals being evaluated for this designation, including approximately 1,350 chemicals known or likely to be carcinogens, mutagens, or chemicals toxic to reproductive systems; persistent, bioaccumulative, and toxic chemicals (PBTs); or very persistent and very bioaccumulative chemicals (vPvBs). According to the law, no use of PBTs or vPvBs is to be authorized unless there is no suitable alternative, and the socioeconomic benefits of the use outweigh the risks. If a chemical use presents unacceptable risks, that chemical use may be restricted. High-production-volume chemicals routinely will be subject to the authorization process. The authorization and restriction processes also may be applied to chemicals produced or imported in volumes less than 1 t. The U.S. government was actively engaged throughout the development of REACH. The Bush Administration expressed concerns about its trade implications for U.S.-produced chemicals. Specific concerns included increased costs of and timelines for testing chemicals exported to the EU; placement of responsibility on businesses (as opposed to governments or consumers) to generate data, assess risks, and demonstrate the safety of chemicals; possible inconsistency with international rules for trade adopted by the World Trade Organization (WTO); and the effect of the legislation on efforts to improve the coherence of chemical regulatory approaches among countries in the Organization for Economic Cooperation and Development (OECD). Some U.S. chemical industry representatives believe that REACH is "impractical." Industry has expressed objections to the proposed list of "high concern" chemicals, some of which are essential building blocks for the manufacture of other chemicals. The EU chemical industry is concerned about the cost of compliance, and what it might mean to innovation and international competitiveness. Some national governments of the EU also are concerned about the impact of REACH on their economies and employment, especially if REACH leads to companies relocating outside the EU (i.e., no longer producing or selling products in the EU). The EU has estimated that about 12% of chemicals in commerce will be withdrawn by chemical producers, because continued production under REACH will be costly and distribution not sufficiently profitable to recoup costs. In cases where no substitute is available, loss of a production source might leave some end users without the chemicals they need. Many environmental, health, and U.S. and EU labor organizations strongly supported the original proposal for REACH, but some are less enthusiastic about the final regulation, which retains its basic purpose and shape but exempts some chemicals from requirements. Nevertheless, these groups agree that REACH addressed some of what they saw as flaws in older EU laws covering chemicals. For example, REACH reduces and coordinates EU regulatory requirements for providing health and safety information about chemicals new to the EU market (as well as the number of new chemicals subject to such requirements), while at the same time increasing collection of such information for chemicals already in the EU market, thus potentially removing disincentives to innovation and encouraging substitution of less toxic for more toxic chemicals in various chemical applications. In addition, to address concerns about the slow pace of chemical risk assessment and management by the EU government, REACH shifts responsibility for assessing and managing the safety of chemicals away from the government and onto chemical manufacturers, importers, and users. Some public interest groups are urging U.S. legislators to adopt a similar legislative approach. For more discussion of the perceived flaws of U.S. law, see CRS Report RL34118, The Toxic Substances Control Act (TSCA): Implementation and New Challenges , by [author name scrubbed].

On June 1, 2007, the European Union (EU) began to implement a new law governing chemicals in EU commerce: Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH). It is intended to protect human health and the environment from hazardous chemicals while at the same time protecting the competitiveness of European industry. REACH evolved over eight years and reflects compromises reached among EU stakeholders. The final regulation reduces and coordinates EU regulatory requirements for chemicals new to the EU market and increases collection of such information for chemicals already in the EU market, thus potentially removing disincentives to innovation that existed under the former law. It also shifts responsibility for safety assessments from government to industry and encourages substitution of less toxic for more toxic chemicals in various chemical applications. Some U.S. chemical industry representatives believe that REACH is "impractical," in part due to the large number of chemicals and difficulties of identifying end uses of chemicals in many products. In contrast, some public-interest groups are urging U.S. legislators to adopt a similar legislative approach.

Since 1984, Congress has designated 49 national heritage areas (NHAs) to recognize and assist efforts to protect, commemorate, and promote natural, cultural, historic, and recreational resources that form distinctive landscapes. Congress has established heritage areas for lands that are regarded as distinctive because of their resources, their built environment, and the culture and history associated with these areas and their residents. A principal distinction of these areas is an emphasis on the interaction of people and their environment. Heritage areas seek to tell the story of the people, over time, where the landscape helped shape the traditions of the residents. In a majority of cases, NHAs now have, or have had, a fundamental economic activity as their foundation, such as agriculture, water transportation, or industrial development. The attributes of each NHA are set out in its establishing law. Because they are based on distinctive cultural attributes, NHAs vary in appearance and expression. They are at different stages of developing and implementing plans to protect and promote their attributes. Table 1 identifies the NHAs established by Congress. Congress designated the first heritage area--the Illinois and Michigan Canal National Heritage Corridor--in 1984. This area was located in one of the nation's most industrialized regions and sought to combine a diversity of land uses, management programs, and historical themes. A goal was to facilitate grassroots preservation of natural resources and economic development in areas containing industries and historic structures. The federal government would assist the effort (e.g., through technical assistance) but would not lead it. The idea of linking and maintaining a balance between nature and industry, and encouraging economic regeneration, resonated with many states and communities, especially in the eastern United States. Interest in establishing heritage areas was commensurate with growing public interest in cultural heritage tourism. Since the creation of the first NHA in 1984, interest in additional NHA designations has grown considerably. For example, from 2004 to 2009 (108 th -111 th Congresses), the number of heritage areas more than doubled. Further, during this period, dozens of proposals to designate heritage areas, study lands for heritage status, or amend laws establishing heritage areas were introduced, and Congress held many hearings on heritage bills and issues. The number of measures to study or establish heritage areas has been smaller in the 112 th -114 th Congresses than in earlier Congresses. One factor accounting for the decline might be the establishment of a relatively large number of NHAs in the 108 th -111 th Congresses. Another factor could be changes in House and Senate rules and protocols regarding introduction and consideration of legislation containing earmarks, including a House Republican Conference "standing order" expressing conference policy that no Member request an earmark. The sizeable number of existing NHAs, along with proposals to study and designate new ones, fostered interest by some Members and Administrations in establishing a standardized process and criteria for designating NHAs. (See " Legislative Activity ," below.) However, the absence over the decades of such a systemic law has provided legislative flexibility in the creation of new NHAs and the modification of existing ones. Further, some opponents of NHAs believe that they threaten private property rights, are burdensome, or present other problems and challenges, so Congress should oppose any efforts to designate new areas and/or to create a "system" of NHAs. (See " Support, Opposition, and Challenges ," below.) NHAs reflect an evolution in roles and responsibilities in protecting lands. The traditional form of land protection for the National Park Service (NPS) has been through government ownership, management, and funding of lands set aside for protection and enjoyment. By contrast, NHAs typically are nonfederally owned, managed by local people with many partners and NPS advice, funded from many sources, and intended to promote local economic development as well as to protect natural and cultural heritage resources and values. The NPS provides technical and financial aid to NHAs, but these areas are not part of the National Park System. Congressional designation of heritage areas is commonly viewed as a less expensive alternative to creating and operating new units of the National Park System. That system now has 409 diverse units: national parks, national monuments, national historic sites, national battlefields, national preserves, and other designations. Heritage areas consist mainly of private properties, although some include publicly owned lands. In most cases, the laws establishing NHAs do not provide for federal acquisition of land, and once designated, heritage areas generally remain in private, state, or local government ownership or a combination thereof. However, in a few cases Congress has authorized federal acquisition of land in heritage areas. For instance, Congress authorized creation of the Cane River Creole National Historical Park (LA) within the Cane River NHA. Many laws establishing national heritage areas contain provisions intended to address concerns about potential loss of, or restrictions on use of, private property as a result of NHA designation. For example, P.L. 111-11 , which established the nine newest NHAs, stated for each area that the law does not abridge the right of any property owner; require any property owner to permit public access to the property; alter any land use regulation; or diminish the authority of the state to manage fish and wildlife, including the regulation of fishing and hunting within the NHA. P.L. 111-88 , the Department of the Interior, Environment, and Related Agencies Appropriations Act, 2010, contained a more general provision allowing any private property owner within an NHA to opt out of participating in any plan, project, program, or activity conducted within the area. There is no comprehensive statute that establishes criteria for designating NHAs or provides standards for their funding and management. NHA designation is often a two-step process, involving first a study of the suitability and feasibility of designating an area and then enactment of legislation to designate the NHA. However, although legislation authorizing an NHA might follow a positive study recommendation, an area study is not a requirement for enacting legislation to designate an NHA. When directed by Congress, the NPS prepares studies as to the suitability and feasibility of designating an area as an NHA. Such studies typically address a variety of topics, including whether an area has resources reflecting aspects of American heritage that are worthy of recognition, conservation, interpretation, and continued use. They usually discuss whether an area would benefit from being managed through a public-private partnership, and if there is a community of residents, businesses, nonprofit organizations, and state and local agencies that would work to support a heritage area. They also often identify a potential management entity and the extent of financial resources for the area. In other cases, a study is undertaken by another entity, such as a local nonprofit organization, community members, or state or local government. The NPS does not fund these studies, but provides guidance to these efforts. For instance, the agency recommends that these studies evaluate the importance of the resources, opportunities to increase public access to and understanding of the resources, capacity of an organization to coordinate activities in the area, and support for the region for a heritage designation. The NPS often assists communities interested in attaining the NHA designation by reviewing studies and helping them craft a regional vision for heritage preservation and development. The particulars for establishment and management of a heritage area typically are provided in its enabling legislation. Whereas there tended to be more variety in the creation and operation of earlier heritage areas, the establishment and management of heritage areas have become somewhat more standardized through the inclusion of some similar provisions in their enabling legislation. Common understandings and characteristics are discussed below. NHAs usually involve partnerships among the NPS, states, and local interests. In establishing heritage areas, Congress typically designates a management entity to coordinate the work of the partners. Management entities could include state or local government agencies, nonprofit corporations, and independent federal commissions. The management entity usually develops and implements a plan for managing the NHA, in collaboration with partners and other interested parties. Although the components of the plans vary, in accordance with the authorizing legislation and local needs, they often identify resources and themes; lay out policies and implementation strategies for protection, use, and public education; describe needed restoration of physical sites; discuss recreational opportunities; outline funding goals and possibilities; and define the roles and responsibilities of partners. Once the Secretary of the Interior approves a plan, it essentially becomes the blueprint for managing the heritage area and is implemented as funding and resources are available. Implementation of management plans is accomplished primarily through voluntary actions. The NPS may provide a variety of types of assistance to areas once designated by Congress--administrative, financial, policy, technical, and public information. Following an area designation, the NPS typically enters into a cooperative agreement, or compact , with the designated management entity, often comprised of local activists, to help plan and organize the area. The compact outlines the goals for the heritage area and defines the roles and contributions of the NPS and other partners, typically setting out the parameters of the NPS's technical assistance. It also serves as the legal vehicle for channeling federal funds to nongovernmental management entities. NHAs might receive funding to prepare and implement their plans from a wide array of sources, including philanthropic organizations, endowments, individuals, businesses, and governments. Congress and the NPS do not ordinarily want to provide NHAs with full and permanent federal funding, but rather encourage NHAs to develop alternative sources of funding. Any federal appropriations for the area typically are provided to the management entity. Federal funds might be used to help rehabilitate an important site, develop tours, establish interpretive exhibits and programs, increase public awareness, and sponsor special events to showcase an area's natural and cultural heritage. Although heritage areas have not been funded entirely by federal monies, typically they have received some federal financial assistance each year since their establishment. Some Members and the Obama Administration have expressed interest in having heritage areas become financially self-sufficient. In 2011, the NPS provided a series of training courses for heritage area managers and organizations to assist with long-term organizational sustainability. Courses addressed topics including entrepreneurial funding strategies, strategic planning, business planning, and fundraising. The NPS seeks to evaluate heritage areas before the expiration of the authorization for federal funds. At least three years before this expiration, the NPS evaluates a heritage area to make recommendations on the future NPS role (if any). For example, P.L. 110-229 required the NPS to evaluate nine heritage areas designated in 1996. The law required an evaluation of the "accomplishments" of the areas; an assessment of the management entity in achieving the purposes of the law designating the area and the goals and objectives of the management plan for the area; an analysis of the impact of investments in the area; and a review of the management structure, partnership arrangements, and funding for the area so as to identify components required for sustainability. The law also required the NPS to report its results and recommendations to Congress. To aid with these evaluations, the NPS developed a methodology to assess the strengths and weaknesses of NHAs. The NPS has completed and submitted to Congress its evaluations for the nine areas: America's Agricultural Heritage Partnership, also known as Silos and Smokestacks; Augusta Canal NHA; Essex NHA; Hudson River Valley NHA; National Coal Heritage Area; Ohio and Erie National Heritage Canalway; Rivers of Steel NHA; South Carolina National Heritage Corridor; and Tennessee Civil War Heritage Area. The NPS is continuing to evaluate other heritage areas. Some believe that the benefits of heritage areas are considerable and thus Congress should expand its assistance for creating and sustaining heritage areas. Supporters view NHAs as important for protecting history, traditions, and cultural landscapes, especially where communities are losing their traditional economic base (e.g., industry or farming), facing a loss of population, or experiencing rapid growth from people unfamiliar with the region. Advocates see NHAs as unifying forces that increase the pride of people in their traditions, foster a spirit of cooperation and unity, and promote a stewardship ethic among the general public. Advocates of NHAs assert that they foster cultural tourism, community revitalization, and regional economic development. Heritage areas are advertised as entertaining and educational places for tourists, and may involve activities such as stories, music, food areas, walking tours, boat rides, and celebrations. Through increased tourism, communities benefit locally when services and products are purchased. In some cases, increased heritage tourism, together with an emphasis on adaptive reuse of historic resources, has attracted broader business growth and development. Some supporters see NHAs as generally more desirable than other types of land conservation. They often prefer the designation of NHAs, because the lands typically remain in nonfederal ownership, to be administered locally. Other NHA backers view establishing and managing federal areas, such as units of the National Park System, as too costly, and observe that small federal investments in heritage areas have been successful in attracting funds from other sources. Some proponents also see NHAs as flexible enough to encompass a diverse array of initiatives and areas, because the heritage concept lacks systemic laws or regulations, while others favor a standardized program and process. Property rights advocates take the lead in opposing heritage areas. They contend that some national heritage areas lack significant local support. These opponents promote routine notification of private property owners when their lands fall within proposed heritage areas, on the grounds that the NPS could exert a degree of federal control over nonfederal lands by influencing zoning and land-use planning. Some fear that any private property protections in legislation would not be routinely adhered to by the federal government. They are concerned that localities have to obtain the approval of the Secretary of the Interior for heritage area management plans and believe that some plans are overly prescriptive in regulating details of private property use. Another concern of opponents is that NHA lands may one day be targeted for purchase and direct management by the federal government. The lack of a general statute providing a framework for heritage area establishment, management, and funding has prompted criticism that the process is inconsistent and fragmented. Some see a need to establish and define the criteria for creating NHAs, specify what NHAs are and do, and clarify the federal role in supporting these areas. They are concerned that the enactment of additional heritage bills could substantially increase the administrative and financial obligations of the NPS. Some detractors assert that federal funds would be more appropriately spent on NPS park units and other existing protected areas rather than on creating new heritage areas. Still others cite a need for a mechanism to hold the management entities accountable for the federal funds they receive and the decisions they make. Some observers recommend caution in creating NHAs, because in practice NHAs may face an array of challenges to success. For instance, heritage areas may have difficulty providing the infrastructure that increased tourism requires, such as additional parking, lodging, and restaurants. Other areas may need additional protective measures to ensure that increased tourism and development do not degrade the resources and landscapes. Still other NHAs may require improvements in leadership and organization of the management entities, including explaining their message and accomplishments. Some NHAs may experience difficulty attracting funds because the concept is not universally accepted as a sustainable approach to resource preservation or economic development. Some conservationists think the protective measures are not strong enough and some economic development professionals think the heritage idea does not fit the traditional framework for development. Also, achieving and maintaining appropriate levels of public commitment to implementation may be challenging. Each Congress typically considers a number of bills to designate heritage areas or authorize the study of areas to determine the suitability and feasibility of designating the study area as a heritage area. Such proposals introduced in the 114 th Congress as of February 9, 2016, are reflected in Table 2 . Other legislation in the 114 th Congress pertains to existing NHAs. One issue is the expiration of funding authorizations for some NHAs. The laws establishing heritage areas typically contain provisions explicitly authorizing the Secretary of the Interior to provide financial assistance to the areas for certain years. Were the authorization for federal funding to expire, the NHA itself would not necessarily cease to exist. For example, the area could continue to be managed with funding from other sources (unless the authority for the managing entity also expired). P.L. 114-113 extended the authorizations for three NHAs--the South Carolina National Heritage Corridor, the Augusta Canal NHA, and the Tennessee Civil War Heritage Area--through September 30, 2017. P.L. 114-113 also increased the maximum lifetime funding for three NHAs--the Rivers of Steel NHA, the Essex NHA, and the Ohio & Erie Canal National Heritage Corridor--from $15 million to $17 million, and increased the maximum lifetime funding for the Wheeling NHA from $11 million to $13 million. Another 114 th Congress bill, S. 936 , would repeal the limitation on the total amount of funding that may be appropriated for the Ohio & Erie Canal National Heritage Canalway. Other 114 th Congress measures would make various types of changes to existing NHAs. For instance, H.R. 2879 and S. 1662 would expand the boundary of the Abraham Lincoln National Heritage Area in Illinois by adding one county and two cities to the NHA. H.R. 3004 would extend the authorization for the management entity of the Gullah/Geechee Heritage Corridor (the Gullah/Geechee Cultural Heritage Corridor Commission) through October 12, 2021. H.R. 581 in the 114 th Congress would establish a National Heritage Areas System governing the designation, management, and funding of NHAs. The system would be composed of existing NHAs and future NHAs designated by Congress. The bill sets out the relationship between the NHA System and the National Park System, stating explicitly that NHAs are not to be considered units of the Park System nor subject to the authorities applicable to that system. The NHA System would expire 10 years after enactment of H.R. 581 . For areas under consideration for NHA designation, the Secretary of the Interior would be required to conduct feasibility studies, when directed by Congress, or to review and comment on such studies prepared by others. The bill sets out criteria by which areas would be evaluated, including inclusion of resources associated with nationally significant themes and events; selection of a local managing entity; and demonstration of support by local governments, residents, businesses, and nonprofit organizations. The bill provides a procedure for developing NHA management plans and specifies components of such plans. The planning process is to provide opportunities for stakeholders to be involved in developing, reviewing, and commenting on the draft plan. A management plan is to include an inventory of the resources related to the nationally significant themes and events that should be "protected, enhanced, interpreted, managed, or developed"; identify goals, strategies, policies, and recommendations; outline a strategy for the local managing entity to achieve financial sustainability; and contain an implementation plan, among other components. Designation of an NHA by Congress is to be contingent on the prior completion of a management plan, as well as a determination by the Secretary of the Interior that the area meets the criteria established under the act. The bill outlines the responsibilities of the local managing entity, such as developing and submitting the management plan to the Secretary of the Interior for approval/disapproval, as well as submitting an annual report. It also lists the purposes for which the entity can use federal funds, with the prior approval of the Secretary of the Interior, such as for making grants, entering into cooperative agreements, hiring staff, and supporting activities of partners. The bill seeks to protect private property owners--for instance, by not requiring their participation in NHA plans and activities. It also seeks to protect existing regulatory authorities--for example, by not altering any "duly adopted" land use regulation, approved land use plan, or other regulatory authority. For each NHA, the bill authorizes appropriations for various purposes. Authorizations include $0.3 million per year for all NPS feasibility studies, of which not more than $0.1 million could be used for any one study, and $0.7 million per year for the activities of each local managing entity. The provision of federal funds is contingent on specified matching requirements. The Secretary of the Interior would be required to evaluate and report to Congress on NHAs. The evaluation would assess the progress in achieving the purposes in the establishing law and the goals and objectives in the management plan, determine the leverage and impact of investments in the area, and identify the components for sustaining the area. The report is to include recommendations on the future role of the NPS, including whether federal funding should be continued or eliminated. The Obama Administration has expressed support for developing systemic NHA program legislation that would establish criteria for evaluating areas for heritage designation and set out processes for designating and administering heritage areas. For instance, in testimony on systemic NHA legislation ( H.R. 445 ) in the 113 th Congress , a National Park Service representative stated that the Department of the Interior has "long supported legislation to establish a National Heritage Area program within the National Park Service that standardizes timeframes and funding for designated national heritage areas and formally establishes criteria for establishing new heritage areas." Obama Administration representatives also have testified in favor of deferring action on certain bills to study or establish heritage areas until heritage program legislation is enacted. The development of systemic heritage area legislation also has been advocated by an independent commission and the George W. Bush Administration, among others. Opposition to an NHA system, as with opposition to individual NHAs, has come primarily from advocates of private property rights. These opponents have expressed concerns that, even with legislative provisions to safeguard property rights, NHA system legislation would lead to restrictive regulations and loss of private land ownership. For example, they have stated that heritage area management entities--though themselves lacking power to make regulatory changes--could influence local legislators to change zoning laws and other regulations. A different concern is the expanded federal funding commitment that could accompany a system of NHAs. Some of the testimony on H.R. 445 in the 113 th Congress, which would have authorized appropriations for NHAs for a period of 25 years, addressed such concerns. As part of its annual budget justification, the Administration submits to Congress its desired funding level for the NPS Heritage Partnership Program. Appropriations for heritage areas typically have been provided in the annual Interior, Environment, and Related Agencies Appropriations laws. In general, the laws establishing NHAs require a 1:1 match in funding by the managing entities. NHAs can use funds for varied purposes including staffing, planning, and implementing projects. In recent years, Congress has provided direction to the NPS as to how the total appropriation should be allocated among NHAs. The NPS has indicated that since FY2009, funds have been allocated to heritage areas using formula-based criteria. For FY2016, the total appropriation for heritage areas was $19.8 million. In its explanatory statement on FY2016 appropriations, Congress allocated this funding to NHAs under a three-tier system. This included $150,000 for each authorized area that is developing its management plan, known as Tier I areas; $300,000 for Tier II areas, which are those with recently approved management plans; and FY2015 funding levels for "longstanding areas." The total FY2016 appropriation for heritage areas was $0.5 million (2%) less than the FY2015 appropriation of $20.3 million. During the five-year period from FY2012 through FY2016, funding for the NPS for national heritage areas rose and fell but ended up $2.4 million (14%) higher (in current dollars). During this period, no new NHAs were created. The Administration had sought a reduction to $10.0 million for the NPS for heritage areas for FY2016. The FY2016 budget request provided little explanation of the proposed cut, while noting that the NPS continued to work with heritage areas on sustainability efforts such as development of fundraising and financial resource plans. Prior Obama Administration requests also often called for reduced NHA funding. In its explanatory statement on FY2016 Interior appropriations, Congress directed the NPS to submit a plan that provides alternatives to implement proposed funding allocation changes in future fiscal years so as to minimize impacts on existing heritage areas.

Over more than 30 years, Congress has established 49 national heritage areas (NHAs) to commemorate, conserve, and promote areas that include important natural, scenic, historic, cultural, and recreational resources. NHAs are partnerships among the National Park Service (NPS), states, and local communities, in which the NPS supports state and local conservation through federal recognition, seed money, and technical assistance. NHAs are not part of the National Park System, in which lands are federally owned and managed. Rather, lands within heritage areas typically remain in state, local, or private ownership or a combination thereof. Heritage areas have been supported as protecting lands and traditions and promoting tourism and community revitalization, but opposed as potentially burdensome, costly, or leading to federal control over nonfederal lands. There is no comprehensive statute that establishes criteria for designating NHAs or provides standards for their funding and management. Rather, particulars for each area are provided in its enabling legislation. Congress designates a management entity, usually nonfederal, to coordinate the work of the partners. This entity typically develops and implements a plan for managing the NHA, in collaboration with other parties. Once approved by the Secretary of the Interior, the management plan becomes the blueprint for managing the area. NHAs might receive funding from a wide variety of sources. Congress typically determines federal funding for NHAs in annual appropriations laws for Interior, Environment, and Related Agencies. NHAs can use federal funds for many purposes, including staffing, planning, and projects. The FY2016 appropriation for the NPS for assistance to heritage areas was $19.8 million. The Obama Administration has expressed interest in having NHAs become financially self-sufficient. Some appropriators and other Members have emphasized self-sufficiency for these areas as well. One role of the NPS is to evaluate heritage areas at least three years before the expiration of the authorization for federal funds. The NPS has completed evaluations of nine NHAs designated in 1996 and continues to evaluate others. Each Congress typically considers bills to establish new heritage areas, study areas for possible heritage designation, and amend existing heritage areas. Bills with similar purposes are pending in the 114th Congress. Other 114th Congress measures seek to extend the authorizations for NHAs to receive financial assistance. The sizeable number of existing NHAs and proposals in recent years to study and designate new ones has fostered legislation to establish a system of NHAs, and to provide criteria for their designation, standards for their management, and limits on federal funding support. In the 114th Congress, one such measure (H.R. 581) has been introduced. The Obama Administration has supported such systemic NHA legislation. Some opponents believe that NHAs present numerous problems and challenges and that Congress should oppose efforts to designate new areas and to create a system of NHAs.

The Prevent All Cigarette Trafficking Act (PACT Act) requires remote retailers of cigarettes and smokeless tobacco--that is, retailers who sell cigarettes and smokeless tobacco without a face-to-face transaction with the buyer--to pay all state and local taxes before delivering the purchased goods. Three remote retailers have challenged the PACT Act on the ground that it violates the Due Process Clause. In Quill Corp. v. North Dakota , the Supreme Court held that the Due Process Clause of the Fourteenth Amendment "requires some definite link, some minimum connection, between a state and the person, property, or transaction it seeks to tax and that the income attributed to the State for tax purposes must be rationally related to values connected with the taxing State." In Red Earth LLC v. United States and Gordon v. Holder , the federal district courts for the Western District of New York and the District of Columbia, respectively, granted preliminary injunctions concluding, among other things, that the plaintiffs were likely to prevail in demonstrating that the PACT Act's requirement that remote retailers pay the state and local taxes of the jurisdictions to which they send cigarettes and smokeless tobacco violates due process because it does not require minimum contacts. The U.S. Court of Appeals for the Second Circuit upheld the preliminary injunction in Red Earth , and the U.S. Court of Appeals for the D.C. Circuit will consider the preliminary injunction in Gordon on appeal in the coming months. In Musser's Inc. v. United States , the federal district court for the Eastern District of Pennsylvania rejected the due process argument because, it concluded, the PACT Act is merely a federal statute that requires compliance with state and local laws and does not implicate due process. The PACT Act, the court determined, is no different in principle from other federal statutes that incorporate state law. Moreover, the court determined, the plaintiff had minimum contacts with the jurisdictions into which it shipped tobacco products because it transacted business through its interactive website. The Supreme Court stated in Quill : "While Congress has plenary power to regulate commerce among the states and may thus authorize state actions that burden interstate commerce, it does not similarly have the power to authorize violations of the Due Process Clause." It seems from this statement that Congress may not be able to require remote retailers to pay taxes to jurisdictions with which they do not have minimum contacts. It appears, therefore, that the constitutionality of the PACT Act would depend on what constitutes minimum contacts for remote retailers. In Quill , in the context of catalogue retailers, the Supreme Court noted that in connection with jurisdiction to adjudicate lawsuits against out-of-state defendants, it has said that the existence of minimum contacts depends on the degree to which the retailer has "purposefully avail[ed] itself of an economic market in forum State" or "purposefully directed" activities at the state's residents. Moreover, in Quill , the Supreme Court wrote that due process requires that the tax paid must be rationally related to "values connected with the taxing State." In another case, the Supreme Court wrote that this requirement means that the state must give something for which it can ask return. Among the purposes of the PACT Act were to require remote sellers of cigarettes and smokeless tobacco to abide by the same laws that apply to law-abiding brick and mortar retailers; to increase the collection of federal, state, and local excise taxes; to discourage cigarette smuggling; and to reduce youth access to inexpensive cigarettes and smokeless tobacco. To increase the taxes collected on remote sales of cigarettes and smokeless tobacco, the PACT Act does two things. First, the PACT Act in effect deems interstate sales to be intrastate sales: With respect to delivery sales into a specific State and place, each delivery seller shall comply with-- All state, local, tribal, and other laws generally applicable to sales of cigarettes or smokeless tobacco , as if the delivery sales occurred entirely within the specific state and place , including laws imposing-- excise taxes; licensing and tax-stamping requirements; restrictions on sales to minors; and other payment obligations or legal requirements relating to the sale, distribution, or delivery of cigarettes or smokeless tobacco. Second, the PACT Act requires that prior to delivery, a remote seller pay to the state and local government all taxes that apply to sales of cigarettes and smokeless tobacco in the buyer's locality and apply required stamps or other indicia to indicate that the taxes have been paid. Two constitutional provisions govern state taxation of out-of-state businesses doing business within the state: the Commerce Clause and the Due Process Clause of the Fourteenth Amendment. Under the Commerce Clause, state taxes may not be imposed in a manner that unduly burdens or discriminates against interstate commerce. Under the Due Process Clause, states may not impose taxes on a foreign business unless the business has a sufficient connection to the state and the taxes reasonably relate to value that the taxpayer receives from the state. Congress may authorize state activities that would otherwise violate the Commerce Clause, but it may not authorize state activities that would violate the Due Process Clause. The Commerce Clause and the Due Process Clause, therefore, are "analytically distinct." The remote retailers have challenged the PACT Act under the Due Process Clause. The due process issue is governed by the Supreme Court's opinion in Quill . In Quill , the Court considered whether the State of North Dakota could require an out-of-state mail order retailer to collect a use tax on merchandise sold in the state. The retailer argued that the Due Process Clause required that it have a physical presence in the state in order to satisfy the requirement of minimum contacts. Concluding that the reasoning for state taxation of out-of-state businesses was "comparable" to reasoning for jurisdiction over out-of-state defendants, the Court quoted its opinion in Burger King Corp. v. Rudzewicz , in which the Court upheld the jurisdiction of Florida courts over an out-of-state franchisee who remotely conducted business in Florida and had a contract with a Florida corporation: Jurisdiction in these circumstances may not be avoided merely because the defendant did not physically enter the forum State. Although territorial presence frequently will enhance a potential defendant's affiliation with a State and reinforce the reasonable foreseeability of suit there, it is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted. So long as a commercial actor's efforts are purposefully directed toward residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there. Because the retailer in Quill had directed a "deluge of catalogues" to North Dakota residents, the Court concluded that the retailer had "fair warning" that it would be subject to the tax and that it had purposefully directed its activities at North Dakota residents, unquestionably satisfying the requirement for minimum contacts. Under Quill , therefore, the issue is whether the out-of-state business has directed its activities at the taxing state and whether, as a result, it has fair warning that it would be liable for the taxes. In Red Earth , the plaintiffs, members of the Seneca Nation of Indians who own and operate tobacco retail businesses that advertise on the Internet and take telephone and mail orders, sought a preliminary injunction against, among other things, enforcement of the PACT Act's requirement that they pay taxes on their sales of tobacco products. The plaintiffs claimed that the PACT Act violates the Due Process Clause because "it subjects them to the taxing jurisdiction of state and local governments without regard to whether they have sufficient minimum contacts with those taxing jurisdictions." The United States argued that there was no due process problem with the PACT Act because minimum contacts were satisfied by the fact that the plaintiffs maintain websites advertising their products for sale and the fact that plaintiffs ship their goods into the taxing jurisdictions. The district court rejected these arguments. The court found two problems with the argument that maintaining a website provided minimum contacts. First, not all the plaintiffs have websites. The PACT Act, however, applies to all the plaintiffs whether they have websites or not. Second, the websites are "passive." The court noted that, "The website is akin to a virtual mail order catalog of cigarettes and smokeless tobacco, available for interested customers to view from their home computer (if they specifically seek out the website by doing an Internet search), but with no ability to consummate the purchase over the Internet." Purchasers can merely get information off the website but the purchase is not consummated until the retailer receives a money order. Therefore, a passive website, the court determined, did not satisfy the requirement for minimum contacts. The court also rejected the United States' argument that a shipment into a state satisfied the minimum contacts requirement. As the court put it, "it would appear that the defendants are urging this Court to conclude that each sale itself creates the minimum contacts necessary to impose a duty to collect taxes on an out-of-state seller." While conceding that such a bright-line rule was appealing, the court rejected it because the Supreme Court and the federal courts of appeals have not adopted the rule and "existing cases suggest the opposite--that a single, isolated sale may not be enough to subject a seller to a foreign jurisdiction." The court could find no cases holding that a single sale satisfied the minimum contacts requirement but found a number of cases holding that a single sale did not satisfy the requirement. Moreover, the court wrote, if a single sale were sufficient, the Supreme Court in Quill would likely have based its decision on the defendant's sale into the state instead of the defendant's "continuous and widespread solicitation of business" within North Dakota, including a "deluge of catalogues" sent into the state. Ultimately, the court wrote: By failing to require any minimum contacts before subjecting the out-of-state retailer to "all state, local, tribal, and other laws generally applicable to sales of cigarettes or smokeless tobacco," Congress is broadening the jurisdictional reach of each state and locality without regard to the constraints imposed by the Due Process Clause. That it cannot do. It would appear that the PACT Act seeks to legislate the due process requirement out of the equation. The district court granted the plaintiffs' motion for a preliminary injunction. The government appealed to the U.S. Court of Appeals for the Second Circuit, challenging the district court's conclusion that the PACT Act violated the Due Process Clause. The Court of Appeals characterized the issue as "whether Congress can, consistent with constitutional due process, require a vendor to submit to the taxing jurisdiction of any state into which it makes at least one sale, without regard to the extent of that vendor's contact with the state." The court upheld the district court's preliminary injunction: The PACT Act requires a seller to collect state and local taxes based on its making of one delivery, but the federal courts have for decades steered away from the question of whether a single sale is enough to satisfy the requirements of due process. The Supreme Court has never found that a single isolated sale is sufficient. Nor has it held that a single sale into a state is insufficient for due process purposes, although its previous holdings suggest as much. Where the underlying constitutional question is close, a court reviewing the issuance of a preliminary injunction should uphold the injunction and remand for trial on the merits. Because the district court reached a reasonable conclusion on a close question of law, there is no need for us to decide the merits at this preliminary stage. In Musser 's , the plaintiff was a tobacco retailer who did business in all 50 states through an interactive website and the telephone. Like the plaintiffs in Red Earth , the plaintiff in Musser's sought a preliminary injunction on the ground that the PACT Act requires retailers to pay state and local taxes even though they do not have minimum contacts with the jurisdictions, in violation of the Due Process Clause. The district court denied the injunction under two alternative analyses. First, the court rejected the Red Earth district court's analysis because it concluded the court in that case erred in analyzing the PACT Act as if the taxes were imposed by a state: [T]he Act's tax-payment requirement is not being imposed by a state, acting unilaterally, but by Congress, and the legislative due process analysis must reflect the federal character of the legislation. In regulating interstate commerce, Congress has for decades required interstate businesses to comply with state and local law. For example, firearms, distributors, online pharmacies, farmers, distributors of explosives, inter alia , have all been required by Congress to ensure that the sale of their products are in compliance with all state and local laws of the states in which they distribute/deliver the products. Federal requirements like these have been found not to offend due process. Interstate businesses are subject to the legislative jurisdiction of Congress, which is free to require compliance with state and local law as a condition of engaging in interstate commerce. The court's analysis could be interpreted as conflating Congress's authority under the Commerce Clause to allow state regulation of interstate commerce with the separate issue of Congress's authority to allow state taxation of out-of-state businesses that do not have minimum contacts with the taxing jurisdiction. Second, the court concluded that the plaintiff had minimum contacts in all 50 states because of the interactive nature of its website. The court employed the sliding scale approach developed by the court in Zippo Mfg. Co. v. Zippo Dot Com, Inc. : At one end of the spectrum are situations where a defendant clearly does business over the Internet. If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper. At the opposite end are situations where a defendant has simply posted information on an Internet website which is accessible to users in foreign jurisdictions. A passive website that does little more than make information available to those who are interested in it is not grounds for the exercise of personal jurisdiction. The middle ground is occupied by interactive websites where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the website. In Musser's , the court concluded the plaintiff had purposefully availed itself of doing business in all 50 states because, "[i]ts website does more than post information, or exchange information. Customers can place orders over the Internet, pay for the products over the Internet, and have those products delivered to states in which they live.... [S]elling products over the Internet and knowingly conducting business through the Internet in a state is a sufficient contact to satisfy due process concerns." Thus, it appears that under the court's reasoning, minimum contacts would be satisfied by a single sale if that sale were transacted through an interactive website. Gordon, a member of the Seneca Nation of Indians, owns a store and a telephone order business that sells cigarettes and other tobacco products. He has a passive website that directs viewers to call his store to place an order. Like the plaintiffs in Red Earth and Musser's , Gordon sought a preliminary injunction against enforcement of the PACT Act's requirement that he pay the state and local taxes of the jurisdictions to which he sends tobacco products on the ground that it violates due process because it does not require minimum contacts. Initially, the district court denied Gordon's motion because it determined it was untimely. Gordon appealed the denial to the U.S. Court of Appeals for the D.C. Circuit (D.C. Circuit). The Court of Appeals reversed and remanded the case to the district court, concluding that the motion was timely. The Court of Appeals offered the following observation to the district court: The government's suggestion that there can be no Due Process violations when Congress authorizes state levies based on minimum contacts collapses the Due Process and Commerce Clause aspects of Gordon's claims. As the Supreme Court has explained, the inquiries are analytically distinct and should not be treated as if they were synonymous. Even national legislation which can permissibly sanction burdens on interstate commerce--cannot violate Due Process principles of "fair play and substantial justice." Although Quill did not deal with excise taxes, there remains an open question whether a national authorization of disparate state levies on e-commerce renders concerns about presence and burden obsolete: Quill 's analytical approach is instructive. Before the district court on remand, the government made two arguments in response to Gordon's due process claim: "(a) because the PACT Act is a federal law, Gordon need only have minimum contacts with the United States, not any individual state; and (b) even if minimum contacts with each state are required, each of Gordon's tobacco sales into a state satisfies minimum contacts with that state." In support of the first argument, the government cited Supreme Court cases in which, it claimed, the Court found that in situations in which Congress required interstate businesses to comply with the laws of the jurisdiction to which they shipped their products, the interstate businesses were not subject to the jurisdiction of any particular states. The court distinguished those cases because the statutes at issue "merely required individuals to comply with existing state laws, [but] the PACT Act appears to impose a new, independent duty on the delivery seller by requiring that they ensure that the applicable state and local taxes are paid." Furthermore, the court believed the U.S. Court of Appeals for the D.C. Circuit had rejected this argument by stating, in remanding the case back to the district court, that "'while Congress has plenary power to regulate commerce among the States and thus may authorize state actions that burden interstate commerce, it does not similarly have the power to authorize violations of the Due Process Clause.'" The court discussed the opinion in Musser's and wrote that, in concluding that the PACT Act was like federal statutes requiring compliance with state law, the Musser's court "collapses the Due Process and Commerce Clause aspects" of the PACT Act challenge, as the D.C. Circuit found the government did when the court rejected the government's similar argument. Before addressing the government's argument that each of Gordon's sales establishes minimum contacts, the court reviewed "the seminal due process cases setting forth the personal jurisdiction law upon which Quill built." The court reviewed International Shoe Co. v. Washington , in which "the Supreme Court framed the relevant [due process] inquiry as whether a defendant had minimum contacts with the jurisdiction such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Next, the court outlined the reasoning in Burger King Corp. v. Rudzewicz , in which the Court held that personal jurisdiction can be found "[s]o long as a commercial actor's efforts are purposefully directed toward residents of another State." The district court quoted the Supreme Court's opinion in Burger King : Jurisdiction is proper ... where the contacts proximately result from actions by the defendant himself that create a substantial connection with the forum State. Thus where the defendant deliberately has engaged in significant activities within a State, or has created continuing obligations between himself and residents of the forum, he manifestly has availed himself of the privilege of conducting business there, and because his activities are shielded by the benefits and protections of the forum's laws it is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum as well. The district court wrote that the Burger King Court "noted that a single act can support jurisdiction so long as it creates a substantial connection with the forum." However, acts which "create only an attenuated affiliation with the forum" are not sufficient because litigation in the forum is not reasonably foreseeable. The district court explained that in World-Wide Volkswagen Corp. v. Woodson , the Supreme Court elaborated "that the foreseeability that is critical to due process analysis ... is that the defendant's conduct and connection with the forum state are such that he should reasonably anticipate being haled into court there." This focus on foreseeability, the Supreme Court wrote, "gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit." Finally, the district court discussed Quill : Addressing Quill's due process challenge, the Supreme Court summarized its earlier due process jurisprudence, stating that "[t]he Due Process Clause requires some definite link, some minimum connection, between a state and the person, property or transaction it seeks to tax ... and that income attributed to the State for tax purposes must be rationally related to values connected with the taxing State." In Quill , "[t]he Court found that Quill's mail order business had minimum contacts with North Dakota sufficient to meet the requirement of due process because there was no question that Quill purposefully directed its activities at North Dakota residents, that the magnitude of those contacts is more than sufficient for due process purposes, and that the use tax is related to the benefits Quill receives from access to the State." The district court found that the Quill standard was not met in Gordon . "[T]he Court cannot say that Gordon's business purposefully avails itself of the benefits of [the] economic market of the states into which he sells his products or that it purposefully directed its activities at residents of these states." Moreover, even if a single sale in a state could provide the requisite "minimum connection," the district court did not "find that the tax on Gordon's products is rationally related to the values connected with the taxing State." Quoting the Supreme Court in MeadWestvaco Corp. v. Illinois Dept. of Revenue , the district court stated that fulfillment of this requirement depends on "whether the taxing power exerted by the state bears fiscal relation to protection, opportunities and benefits provided by the state--that is, whether the state has given anything for which it can ask return." "The Court cannot determine what, if any, protection, opportunities, [or] benefits Gordon receives from the state into which he delivers his products, aside from the fact that his buyer resides there." Accordingly, the court found that the PACT Act may violate due process. "In sum, this Court concludes that Gordon has a likelihood of success on his claim that due process is not satisfied by a single sale of cigarettes into a state." In authorizing state taxation of out-of-state businesses in the PACT Act, Congress appears to have exercised its authority under the Commerce Clause to subject out-of-state businesses to state laws that would otherwise violate the Commerce Clause. However, if the PACT Act subjects out-of-state businesses to the taxing authority of states with which they do not have minimum contacts, it appears that its provisions may not comport with the requirements of the Due Process Clause. The courts in Red Earth and Gordon analyzed the constitutionality of the PACT Act under the Due Process Clause exclusively and considered whether the PACT Act authorized state taxation of retailers that do not have minimum contacts with the taxing jurisdiction. The opinion in Musser's may be interpreted as conflating the Commerce Clause and the due process analyses to conclude that the PACT Act does not implicate due process. Even applying the due process analysis exclusively, however, it is not clear whether higher courts will conclude that a single sale into a jurisdiction satisfies the due process requirement of minimum contacts. As the U.S. Court of Appeals for the Second Circuit noted in reviewing the preliminary injunction in Red Earth , whether one sale into a jurisdiction satisfies the due process requirements for minimum contacts is a "close question."

The Jenkins Act requires out-of-state sellers of cigarettes to register and file a report with the states in which they sell cigarettes listing the name, address, and quantity of cigarettes sold to state residents. In the past, the states would use this information to collect taxes from the buyers directly. However, with the rise of Internet sales of cigarettes, compliance with the Jenkins Act was very low, and it was estimated that billions of dollars of state and local taxes went unpaid. In 2010, Congress passed the Prevent All Cigarette Trafficking Act (PACT Act), which amends the Jenkins Act, to address this problem. The PACT Act requires remote retailers of cigarettes and smokeless tobacco--that is, retailers who sell without an in-person transaction with the buyer--to pay the state and local taxes of the jurisdiction in which the buyer receives the goods. Three remote retailers have challenged the PACT Act in federal courts seeking to enjoin enforcement of the act, claiming that forcing remote sellers to pay state and local taxes violates due process. The Supreme Court held in Quill Corp. v. North Dakota that the Due Process Clause of the Fourteenth Amendment "requires some definite link, some minimum connection, between a state and the person, property, or transaction it seeks to tax and that the income attributed to the State for tax purposes must be rationally related to values connected with the taxing State." In Red Earth LLC v. United States and Gordon v. Holder, the federal district courts for the Western District of New York and the District of Columbia, respectively, issued preliminary injunctions, concluding that the plaintiffs were likely to succeed in demonstrating that the PACT Act violates due process because it subjects the retailers to the taxing authority of foreign states regardless of whether they have the required minimum contacts with the taxing jurisdictions. The Court of Appeals for the Second Circuit upheld the Red Earth preliminary injunction, and the United States has appealed the preliminary injunction issued in Gordon to the U.S. Court of Appeals for the D.C. Circuit. In Musser's Inc. v. United States, the federal district court for the Eastern District of Pennsylvania rejected the due process argument, concluding that because the PACT Act is federal legislation, the due process requirements of the Fourteenth Amendment, which applies to states, do not apply. The PACT Act, the Musser's court determined, is not different in principle from other federal statutes that incorporate state laws. In any event, the court determined, because the plaintiff took orders over the Internet, it had minimum contacts in the jurisdictions into which it shipped tobacco products. The Supreme Court stated in Quill: "While Congress has plenary power to regulate commerce among the states and may thus authorize state actions that burden interstate commerce, it does not similarly have the power to authorize violations of the Due Process Clause." In Gordon, the district court for the District of Columbia characterized the issue as whether one sale into a taxing jurisdiction satisfied the due process requirement for minimum contacts, and concluded it did not. The U.S. Court of Appeals for the Second Circuit, in upholding the preliminary injunction in Red Earth, described the issue as a "close question."

The Elementary and Secondary Education Act (ESEA) was last amended by the No Child Left Behind Act of 2001 (NCLB; P.L. 107-110 ). Most programs authorized by the ESEA were authorized through FY2007. As Congress has not reauthorized the ESEA, appropriations for ESEA programs are currently not explicitly authorized. However, because the programs continue to receive annual appropriations, appropriations are considered implicitly authorized. During the 112 th Congress, both the House and Senate have considered legislation to reauthorize the ESEA. On October 20, 2011, the Senate Health, Education, Labor, and Pensions (HELP) Committee considered and ordered reported the Elementary and Secondary Education Reauthorization Act of 2011 ( S. 3578 ; S.Rept. 112-221 ) by a bipartisan vote of 15-7. The House Education and Workforce Committee considered and ordered reported two bills that together would provide for a comprehensive reauthorization of the ESEA: (1) the Student Success Act ( H.R. 3989 , H.Rept. 112-458 ), and (2) the Encouraging Innovation and Effective Teachers Act ( H.R. 3990 ; H.Rept. 112-459 Part 1). Both bills were ordered reported on February 28, 2012, on strictly partisan votes (23-16 in each case). It is unclear whether S. 3578 or H.R. 3989 and H.R. 3990 will be considered on the Senate or House floors, respectively. S. 3578 and H.R. 3989 and H.R. 3990 would take different approaches to reauthorizing the ESEA, most notably in three key areas: (1) accountability for student achievement, (2) teacher quality versus teacher effectiveness, and (3) targeted support for elementary and secondary education versus the use of a block grant. In addition, both the HELP Committee and Education and Workforce Committee bills would eliminate existing programs, while creating new programs. This report examines major features of S. 3578 , H.R. 3989 , and H.R. 3990 with respect to current law. The report begins by discussing the approach that each bill takes toward reshaping the ESEA in key areas. Next, the report provides a structured orientation by ESEA title and part to how the ESEA would be reconfigured under each bill. Then it more thoroughly summarizes the major proposals in the aforementioned bills, focusing on those aspects of the bills that would fundamentally change a portion of current law. The report does not aim to provide a comprehensive summary of these bills or of technical changes that would be made by each measure. The report concludes with an appendix that examines the proposed program authorizations included in each bill. As H.R. 3989 and H.R. 3990 would collectively provide for a comprehensive reauthorization of the ESEA, beginning with the structured orientation to how the bills would change the ESEA, they are considered as if they are one bill. For the purposes of this report, a program is considered to be a new program if the program is a newly proposed program or is a substantively changed or reconfigured existing program (e.g., changes multiple aspects of a program, such as the purpose of the program, distribution of funds, uses of funds, or eligible recipients of funds). Programs included in the ESEA reauthorization bills are considered to be similar to programs in current law if they are substantively similar in purpose, recipients, and activities. The tables in this report refer to these programs as being "retained" by a particular bill. For example, the Advanced Placement program is considered to be retained under S. 3578 , as the new program (Accelerated Learning) would be substantively similar to the program included in current law, despite the inclusion of new funding to support tests administered under the International Baccalaureate program. On the other hand, the block grant program created under H.R. 3990 is considered a new program, as it differs from the current Innovative Programs block grant program in numerous ways including program purposes, funding to subgrantees, and allowable activities. Concurrently, the current law block grant program is considered to be "not retained" under H.R. 3990 . It should be noted that an indication that a particular program or activity would not be included in a particular bill does not mean that all of the activities authorized under current law for the program would be eliminated. The activities may be continued under a different program. For example, while H.R. 3989 and H.R. 3990 would no longer retain many of the current ESEA programs, H.R. 3990 would include a block grant program under which funds could potentially be used for similar activities as were permitted or required under some programs that would not be retained. The uses of funds under the proposed block grant program are discussed in this report. Similarly, if an existing program or activity is not specifically mentioned as allowable under a new program, it should not be assumed that funds could not be used to support such programs or activities. It is beyond the scope of this report to discuss proposed programs or activities in great detail. At the same time, an indication that a program would be "similar to current law" does not mean that it would be retained without changes. As previously discussed, this report focuses on major changes that would be made to current law, so there may be additional changes made to a program or activity that are not highlighted in this report. This section of the report examines the reauthorization approaches taken by S. 3578 , H.R. 3989 , and H.R. 3990 in three key areas: (1) accountability for student achievement, (2) teacher quality versus teacher effectiveness, and (3) targeted support for elementary and secondary education versus the use of a block grant. For each of the three areas, a brief discussion of the treatment of the issue under current law is included, followed by a summary of how S. 3578 , H.R. 3989 , and H.R. 3990 would address the issues. Under NCLB, a series of comprehensive standards-based accountability requirements were enacted. States, local educational agencies (LEAs), and schools must comply with these requirements in order to receive Title I-A funds. The key features of these requirements are discussed below. This is followed by a brief discussion of how S. 3578 and H.R. 3989 would treat each of these requirements. Standards. At a minimum, each state must adopt challenging academic content and challenging student academic achievement standards in mathematics and reading/language arts (hereinafter referred to as reading) for each of grades 3-8 and for one grade in grades 10-12. States must also adopt content and achievement standards for science for at least three grade levels (grades 3-5, grades 6-9, and grades 10-12). States may choose to adopt standards for other subject areas. Assessments. All states must develop and implement yearly assessments aligned with content and achievement standards in reading and mathematics for grades 3-8 and one grade in grades 10-12. In addition, the state must develop and administer science assessments aligned with content and achievement standards once in grades 3-5, grades 6-9, and grades 10-12 Annual measurable objectives (AMOs). States must develop AMOs that are established separately for reading and mathematics assessments, are the same for all schools and LEAs, identify a single minimum percentage of students who must meet or exceed the proficient level on the assessments that applies to the all students group and each subgroup for which data are disaggregated, and must ensure that all students will meet or exceed the state's proficient level of achievement on the assessments based on a timeline established by the state. The timeline must incorporate concrete movement toward meeting an "ultimate goal" of all students reaching a proficient or higher level of achievement by the end of the 2013-2014 school year. Adequate yearly progress (AYP). AYP is determined based on three components: student academic achievement on the required state reading and mathematics assessments, with a focus on the percentage of students scoring at the proficient level or higher; 95% student participation rates in assessments by all students and for any subgroup for which data are disaggregated; and performance on another academic indicator, which must be graduation rates for high schools. Schools or LEAs meet AYP standards only if they meet the required threshold levels of performance on all three indicators for the all students group and any subgroup for which data are disaggregated. AYP must be determined separately and specifically not only for all students but also for all subgroups for which data must be disaggregated within each school, LEA, and state. Consequences based on performance. States are required to identify LEAs, and LEAs are required to identify schools, for program improvement if the LEA or school failed to meet the state AYP standards for two consecutive years. LEAs or schools that fail to meet AYP standards for additional years are required to take a variety of actions. For example, schools that fail to meet AYP for two consecutive years are identified for school improvement and must offer public school choice to students, develop a school improvement plan, and use Title I-A funds for professional development. Failure to make AYP for an additional year results in a school also having to offer supplemental educational services (SES). LEAs are required to reserve 20% of their Title I-A funds for transportation for public school choice and for SES. Schools that fail to make AYP for an additional year continue to do all of the aforementioned activities and enter into corrective action. Under corrective action, they are required to take one of several statutorily specified actions, including replacing school staff, changing the curriculum, extending the school year or school day, or working with an outside expert. Subsequent failure to make AYP requires a school to plan for and, ultimately, implement restructuring. Restructuring involves the continuation of the aforementioned activities and implementation of an alternative governance structure, such as converting to a charter school. It should be noted that these consequences are applied regardless of the extent to which a school failed to make AYP in a given year but consequences need only be applied to schools receiving Title I-A funds. S. 3578 would retain similar requirements related to standards and assessments; however, all states would be required to develop college and career ready standards in reading and mathematics, and assessments would have to be aligned with these new standards. States would have the discretion to administer a single annual summative assessment or multiple assessments administered throughout the school year that result in a single summative score. They would no longer be required to establish AMOs, but they would be required to determine whether students were on-track to being college- and career-ready by the time they graduated from high school. The bill would also eliminate the concept of AYP. It would require that assessments be administered to not less than 95% of all students and not less than 95% of the members of each subgroup for which data are disaggregated. The bill would also require that high school graduation rates be reported. While no specific consequences are associated with failing to meet the participation rate requirement, schools with relatively low graduation rates may be subject to interventions. In addition, while states would be required to determine whether students are on-track to being college- and career-ready, there would be no "ultimate goal" with associated consequences toward which states, LEAs, and schools must work. With respect to "consequences," states would be required to identify "persistently low-achieving schools," which would include the lowest performing 5% of elementary and secondary schools (not including high schools) based on assessment results, the lowest 5% of high schools based on graduation rates and assessment results, and all other high schools with less than a 60% graduation rate. These schools would be required to implement a transformation, strategic staffing, turnaround, whole school reform, restart, or closure model, or other strategies approved by the Secretary. The bill would require that public school choice be offered to students attending these schools. There would be no requirement to offer SES. The bill would also require states to identify "achievement gap schools." These would be the 5% of elementary and secondary schools (not including high schools) and 5% of high schools that are not identified as persistently low achieving but have the largest achievement gap among subgroups or the lowest performance by subgroup with respect to being college and career ready or graduation rates. LEAs would be required to develop an intervention plan for these schools. Under H.R. 3989 , states would be required to adopt content and achievement standards for mathematics and reading and any other subject as determined by the state. Assessments would have to be aligned with these standards and be administered in each of grades 3-8 and once in grades 9-12. The state would no longer be required to have science standards or aligned assessments. States would have the discretion to administer a single annual summative assessment or multiple assessments administered throughout the school year that result in a single summative score. States would no longer be required to establish AMOs. The bill would also eliminate the concept of AYP. It would require that assessments be administered to not less than 95% of all students and not less than 95% of the members of each subgroup for which data are disaggregated. The bill would also require that high school graduation rates be reported. In addition, there would be no "ultimate goal" with associated consequences toward which states, LEAs, and schools must work. The bill would eliminate current outcome accountability requirements. States would be required to include a system for school improvement for public schools receiving Title I-A-1 funds that would be implemented by LEAs and includes implementing interventions that are designed to address such schools' weaknesses. While public school choice and SES would no longer be required, the bill would create a new reservation of funds, however, for direct services to students under Section 1003A. States would be required to reserve 3% of the total amount received by the state under Title I-A-1 (Grants to LEAs) to make competitive grants to LEAs to provide public school choice or high-quality academic tutoring that is designed to help increase student academic achievement. With the enactment of NCLB, new requirements were included in Title I-A to ensure an equitable distribution of highly qualified instruction across schools and establish minimum professional standards for what constitutes a highly qualified teacher. NCLB also authorized programs to support efforts to meet the teacher quality requirements as well as systems that reward teacher performance. These provisions are described below followed by a discussion of how S. 3578 , H.R. 3989 , and H.R. 3990 would amend them. Distribution. Current law requires that states ensure Title I schools provide instruction by highly qualified instructional staff and take specific steps to ensure that poor and minority children are not taught at higher rates than other children by inexperienced, unqualified, or out-of-field teachers. Newly hired teachers. Each LEA receiving Title I-A funds must ensure that all newly hired teachers teaching in a program supported by such funds be highly qualified. Highly qualified teacher (HQT). The definition of an HQT has two basic components involving professional credentials and subject-matter knowledge. First, to be deemed highly qualified, a teacher must possess a baccalaureate degree and full state teaching certification. Second, a teacher must demonstrate subject-matter knowledge in the areas that she or he teaches. The manner in which teachers satisfy the second component depends on the extent of their teaching experience and the educational level at which they teach. Deadline. Each state receiving Title I-A funds was required to have a plan to ensure that, by no later than the end of the 2005-2006 school year, all public school teachers teaching in core academic subjects within the state met the definition of an HQT. The plan was required to set annual measurable objectives to meet this deadline. Support. The Teacher and Principal Training and Recruitment Fund (Title II-A) provides formula grants to support state and local efforts to meet ESEA teacher quality requirements. Performance. The Teacher Incentive Fund (Title V-D) supports competitive grants for high-need schools to develop and implement performance-based teacher and principal compensation systems that must consider gains in student academic achievement as well as classroom evaluations conducted multiple times during each school year, among other factors. S. 3578 would retain similar requirements to those in current law regarding the equitable distribution of teachers with some adjustments in determining whether teachers are equally distributed. Most notably, states would be required to use at least two of five measures of teacher quality and performance including the percentage and distribution of teachers who (1) are HQT, (2) are inexperienced, (3) have not completed a preparation program, (4) are teaching out-of-field, or (5) are rated in the highest and lowest categories under an approved teacher evaluation system. The bill would also retain a similar definition of HQT and require each LEA receiving Title I-A funds to meet the requirement for all teachers in core academic subjects as defined in current law. The bill would provide an exception to the HQT requirement for LEAs in a state that has fully implemented an approved teacher evaluation system. Such LEAs would be required to meet the HQT requirement with respect to new core subject matter teachers only. An approved teacher evaluation system is defined in a manner that is similar to the definition currently used in the Teacher Incentive Fund. An approved evaluation system must be based "in significant part" on student academic achievement, involve classroom observations, provide meaningful feedback, establish multiple performance categories, use multiple measures, inform professional development, and include training for evaluators. The bill would retain the Title II-A formula grant program with modest amendments. H.R. 3989 would eliminate current requirements regarding the equitable distribution of instructional quality and highly qualified teachers. In addition, under H.R. 3990 , as a condition of receiving Title II-A funds, LEAs would be required to have a teacher evaluation system in place that uses student achievement as a "significant factor," is based on multiple measures, involves more than two performance categories, and is used to make personnel decisions within three years of enactment. H.R. 3990 would retain formula grant funding under Title II-A; however, the enrollment and poverty elements used for allocation would be modified. The bill would also curtail allowable activities largely to those that support the development and implementation of state and local evaluation systems for teachers. Under current law, the ESEA includes several formula grant programs that provide grants to states, LEAs, or other entities (e.g., Indian tribes). These programs provide aid to support specific student populations (e.g., disadvantaged students, limited English proficient students), provide additional aid to entities based on their location (i.e., rural LEAs), or provide funds for a specific set of activities (e.g., those related to literacy or school safety). The ESEA also contains numerous competitive grant programs, which generally receive less funding than formula grant programs. The competitive grant programs included in the ESEA address issues such as counseling, arts education, physical education, and magnet schools. As shown in Table 1 , many of the competitive grant programs and some of the formula grant programs included in the ESEA are no longer funded. The HELP Committee and the Education and Workforce Committee have proposed fundamentally different approaches with respect to how to continue to provide funding through the ESEA. In general, S. 3578 would retain several competitive grant programs and create new programs to support activities that are currently supported under either formula or competitive grant programs that would otherwise be eliminated. H.R. 3989 and H.R. 3990 would eliminate some formula grant programs and most competitive grant programs included in current law but would include a block grant program whose funding could potentially be used to support similar activities to those that are supported under programs slated for elimination. The divergent approaches taken by these bills with respect to targeted support and block grants are discussed in more detail below. S. 3578 would retain most of the current formula grant programs, while eliminating several competitive grant programs (see Table 1 ). It would add several targeted grant programs that would broadly support similar activities as those supported under programs being eliminated. For example, the bill would add a new literacy program; a new science, technology, engineering, and mathematics program; a program to support a well-rounded education which would fund subject-matter specific activities (e.g., arts, economics); and a program focused on student well-being. The bill would not include a block grant program. H.R. 3989 and H.R. 3990 would retain some, but not all, of the existing formula grant programs and would eliminate most competitive grant programs (see Table 1 ). However, H.R. 3990 includes a new block grant program (the Local Academic Flexible grant) that would be authorized at $2.7 billion and would provide formula grants to states. In contrast, the Innovative Programs grant program, the block grant included under current law, was last authorized at $600 million and last funded at $99 million in FY2007. The new block grant program would afford states considerable flexibility in how funds are used. Under the new block grant program, states would be required to use at least 75% of the funds received to award competitive grants to eligible entities which include partnerships of LEAs, community-based organizations (CBOs), business entities, and nongovernmental entities. All partnerships are required to include at least one LEA. In addition, the state would be required to use not less than 10% to award competitive grants to nongovernment entities. States could use funds for state level activities as well. For instance, SEAs could use funds to develop standards and assessments, to administer assessments, to monitor and evaluate programs and activities receiving funding, to provide training and technical assistance, for statewide academic focused programs, to share evidence-based and other effective strategies, and for administrative costs. Grants to LEAs and other eligible entities could be used for either (1) supplemental student support activities (e.g., before or after school activities, tutoring, expanded learning time) but not in-school learning activities; and (2) activities to support students (e.g., academic subject specific programs, extended learning time programs, parent engagement) but not class-size reduction, construction, or staff compensation. Nongovernmental entities must use funds for a program or project to increase the academic achievement of public school students attending a public elementary or secondary school. Thus, it is possible that funds provided under this program could be used to support activities that previously received ESEA support, but which would no longer have a targeted funding stream under H.R. 3989 or H.R. 3990 . However, there is no way to know whether a state or an LEA would receive the same amount of funding, less funding, or more funding under the proposed block grant program as it would if programs that would be eliminated under H.R. 3989 and H.R. 3990 were retained. Table 1 provides a structural orientation by ESEA title and part of how S. 3578 , H.R. 3989 , and H.R. 3990 would modify current law based primarily on line-item amounts for ESEA programs included in appropriations tables, as well as the individual programs included under the Fund for the Improvement of Education. This list of "programs" does not take into account the number of programs, projects, or activities that may be funded under a single line-item appropriation, so the actual number of ESEA programs, projects, or activities being supported through appropriations is not shown. Current ESEA programs under which the federal government provides grants to the initial grantee (as opposed to a subgrantee) by formula are noted on the table. The table provides appropriations information for FY2012. It also indicates where S. 3578 , H.R. 3989 , and H.R. 3990 would place a given program in a reauthorized ESEA if the program is retained. It should be noted that an indication that a program would not be retained does not mean that all of the activities authorized under current law for the program would be eliminated. The activities may be continued under a different program. For example, while H.R. 3989 and H.R. 3990 would no longer retain many of the current ESEA programs, H.R. 3990 would include a block grant program under which funds could potentially be used for similar activities as were permitted or required under some programs that would not be retained. In addition, if an existing ESEA program would not be retained but a new, targeted program would address similar broad purposes (e.g., literacy, dropout prevention), this has been noted in the table. At the same time, an indication that a program would be retained does not mean that it would be retained without changes. For example, while both S. 3578 and H.R. 3990 would retain a state grant program focused on teachers like Title II-A of the ESEA, both bills would modify the formula used to award grants and would change the uses of funds. In addition, an indication that a program would be retained does not mean that it would be retained under the same name. For example, the Advanced Placement program in current law would be retained as the Accelerated Learning program under S. 3578 . The program would be expanded to include International Baccalaureate programs and exams. Table 2 compares S. 3578 , H.R. 3989 , and H.R. 3990 to current law. It provides a more detailed description of specific features of each bill. It is arranged thematically, focusing on key issues that have arisen during the reauthorization process. The themes are as follows: Overall structural and funding issues Accountability Title I-A Other issues related to special populations/areas Teachers, principals, and school leadership Science, technology, engineering, and mathematics (STEM) education Flexibility and choice Other program areas addressed by current law Programs currently authorized outside of the ESEA and proposed for inclusion in the ESEA General provisions Key changes included in ESEA reauthorization bills to non-ESEA programs/acts No attempts were made to provide a comprehensive analysis of each of the bills or to compare S. 3578 with H.R. 3989 and H.R. 3990 . Table A-1 examines specific program authorizations included in current law compared with those included in S. 3578 , H.R. 3989 , and H.R. 3990 . Overall, current law included 46 specific authorizations compared with 36 in S. 3578 and 12 in H.R. 3989 and H.R. 3990 . It should be noted that a single authorization may apply to more than one program. Table A-1 was designed to show the actual number of explicit authorizations included in current law and each of the bills. In order to make this table more useful, however, if proposed statutory language indicated that certain programs receive a specific share of a given authorization, this has been indicated on the table as well. For example, H.R. 3989 includes only two authorizations, but proposed statutory language would provide a specified share of one of those authorizations to multiple, individual programs. A new program authorization under S. 3578 , H.R. 3989 , or H.R. 3990 should not be interpreted to mean that the program was not authorized under current law. For example, S. 3578 would include separate authorizations for Teacher Incentive Fund (TIF) grants and for Promise Neighborhoods. Both of these programs are currently funded and were enacted through appropriations language using general authority available to the Secretary under the Fund for the Improvement of Education (FIE; Title V-D-1). Under current law, there is only one authorization for FIE that encompasses 21 subparts, including Title V-D-1, without specifying a share of the authorization for a given subpart. Therefore, under current law, separate authorizations are not listed for the TIF or Promise Neighborhoods program. In general, all of the authorizations included in S. 3578 are for "such sums" for FY2012 and each of the four succeeding fiscal years (i.e., through FY2016). H.R. 3989 and H.R. 3990 specify authorization amounts for FY2013 only. The amounts authorized for FY2014 through FY2018 would be determined by increasing the FY2013 authorization amount by a percentage equal to the percentage of inflation as determined by the Consumer Price Index for the calendar year ending prior to the beginning of that fiscal year. Given that most of the authorizations in current law and all of the authorizations in S. 3578 are for "such sums as may be necessary," it is not possible to calculate the total amount authorized across current law and the ESEA reauthorization bills. With that said, the total authorized level in H.R. 3989 and H.R. 3990 is $24.0 billion. FY2012 appropriations for ESEA under current law are $23.3 billion. It should be noted that an authorization of an appropriation is only an authorization. Congress can and does enact appropriations at funding levels that differ from authorization levels.

The Elementary and Secondary Education Act (ESEA) was last amended by the No Child Left Behind Act of 2001 (NCLB; P.L. 107-110). During the 112th Congress, both the House and Senate have considered legislation to reauthorize the ESEA. On October 20, 2011, the Senate Health, Education, Labor, and Pensions (HELP) Committee considered and ordered reported the Elementary and Secondary Education Reauthorization Act of 2011 (S. 3578; S.Rept. 112-221) by a bipartisan vote of 15-7. The House Education and Workforce Committee considered and ordered reported two bills that together would provide for a comprehensive reauthorization of the ESEA: (1) the Student Success Act (H.R. 3989, H.Rept. 112-458), and (2) the Encouraging Innovation and Effective Teachers Act (H.R. 3990; H.Rept. 112-459 Part 1). Both bills were ordered reported on February 28, 2012, on strictly partisan votes (23-16 in each case). It is unclear whether S. 3578 or H.R. 3989 and H.R. 3990 will be considered on the Senate or House floors, respectively. S. 3578 and H.R. 3989 and H.R. 3990 would take different approaches to reauthorizing the ESEA, most notably in three key areas: 1. Accountability for student achievement: Both S. 3578 and H.R. 3989 would modify current accountability requirements related to student achievement, including eliminating the requirement to determine adequate yearly progress (AYP) and the requirement to apply a specified set of outcome accountability provisions to all schools, regardless of the extent to which they failed to make AYP. While both bills would continue to require that states have standards for, and assess students annually in, reading and mathematics, only S. 3578 would continue to require states to have standards and assessments in science. S. 3578 would require various interventions to be implemented in certain low achieving schools, while H.R. 3989 would not require specific actions to be taken in low performing schools. 2. Teacher quality versus teacher effectiveness: S. 3578 would retain requirements related to "teacher quality" unless a state met several requirements related to teacher performance evaluation, including using student achievement as part of the teacher evaluation process. H.R. 3989 and H.R. 3990 would eliminate current "teacher quality" requirements but would require local educational agencies to implement teacher performance evaluation systems based, in part, on student achievement. 3. Targeted support for elementary and secondary education versus the use of a block grant: Each bill would consolidate some existing competitive grant programs, but H.R. 3989 and H.R. 3990 would consolidate a greater number of programs than S. 3578. At the same time, S. 3578 would create several new targeted grant programs, while H.R. 3990 would greatly expand the use of block grant funding.

When the House considers legislation, one of the last steps it takes is to consider a motion to recommit. The motion to recommit represents the last chance of the House to affect a measure. In practice, that means either to offer amendatory language or to send the bill back to committee. In practice, the motion to recommit, as authorized by Rule XIX, is offered after the previous question has been ordered on passage. For these motions, the Speaker affords priority in recognition to those opposed to the measure and gives preference among those opposed to a minority party Member, which has resulted in the motion being dubbed, "the minority's motion." Among minority opponents, priority to offer the motion is given first to the minority leader or his or her designee and then to Members from the reporting committee in order of their committee seniority. Only one proper motion to recommit is in order. If a motion to recommit is ruled out of order, a second, proper motion to recommit may be offered. A motion to recommit may be amended (although it is uncommon in practice) but only if the previous question has not yet been ordered on the motion. A motion to recommit offered after the previous question has been ordered on the bill may not be tabled. House rules specifically prohibit the House Committee on Rules from reporting a special rule that would prevent the motion to recommit from being offered on initial passage of a bill or joint resolution. House rules also guarantee that the motion to recommit may include instructions that include an amendment otherwise in order if offered by the minority leader or his or her designee. This guarantee does not apply to consideration of a Senate bill for which the text of a House-passed measure has been substituted, because the motion would have been protected during initial consideration of the House-passed measure. Motions to recommit are characterized as being of two types. The first type, referred to as a "simple" or "straight" motion to recommit, includes no instructions. If adopted by the House, it returns the underlying measure to committee. When a "straight" motion to recommit is offered, the clerk will report it in the following form: Mr. Obey of Wisconsin moves to recommit the bill, H.R. 3010 to the Committee on Appropriations. The other type of motion to recommit, offered much more frequently, includes instructions and must contain language directing that the legislation be reported "forthwith," meaning that if the House adopts such a motion, the measure remains on the House floor, and the committee chair (or designee) immediately rises and reports the bill back to the House with any amendment(s) contained in the instructions of the recommittal motion. The House votes on agreeing to the amendment(s) before moving to final passage of the bill as it may have been amended. Typically, if the motion to recommit has been agreed to, the amendment in the instructions is agreed to by voice vote. However, amendment(s) in the instructions are subject to division of the question if it consists of two or more separable substantive propositions. When a motion to recommit with instructions is offered, the clerk will report it in the following form: Mr. Scott of Virginia moves to recommit the bill H.R. 10 to the Committee on Oversight and Government Reform with instructions to report the same back to the House forthwith with the following amendment: Add at the end of section 6 the following new subsection:(f) Requiring Protection of Students and Applicants Under Civil Rights Laws.--Section 3008 (sec. 38-1853.08, D.C. Official Code) is amended by adding at the end the following new subsection: "(i) Requiring Protection of Students and Applicants Under Civil Rights Laws.--In addition to meeting the requirements of subsection (a), an eligible entity or a school may not participate in the opportunity scholarship program under this Act unless the eligible entity or school certifies to the Secretary that the eligible entity or school will provide each student who applies for or receives an opportunity scholarship under this Act with all of the applicable protections available under each of the following laws:" (1) Title IV of the Civil Rights Act of 1964 (42 U.S.C. 2000c et seq.). Both types of motions to recommit are debatable for 10 minutes. The majority floor manager of a bill or joint resolution may ask that debate time be extended to one hour. In either case, debate time is equally divided between the Member making the motion and a Member opposing it. Instructions in a motion to recommit generally may not propose to do that which may not be done by amendment under the rules of the House. For example, instructions that do any of the following would be out of order: Propose an amendment that is not germane to the measure. Amend or eliminate an amendment already adopted by the House, unless permitted by a special rule. Propose an amendment in violation of Rule XXI clause 2, 4, or 5. Propose an amendment in violation of Rule XXI, clause 10, "the CUTGO rule." Authorize a committee to report at any time or direct a committee to report by a date certain. A motion to recommit may have several procedural effects. First, it allows the minority to offer and obtain a vote on policy language of their design, an opportunity that might otherwise be unavailable if the measure is being considered under the terms of a special rule that restricts or prevents the offering of amendments. Further, a motion to recommit grants the minority the last opportunity to amend legislation before final passage. The motion to recommit even allows the offering of an amendment previously rejected by the House during consideration in Committee of the Whole. House approval of a "straight" motion to recommit could have the effect of sending the bill back to the committee from which it was reported for further work on the measure. If the underlying legislation was not first reported by the committee of jurisdiction before coming to the floor--either because it was never referred to committee or because the committee was discharged from further consideration of the bill--the minority might try to use the motion as a way to put the legislation before the committee for its consideration. A motion to recommit can also send a measure to a committee to which the bill had not been originally referred. This kind of action could be tied to the creation of an ad hoc committee, such as in the following example: Mr. Ryan of Wisconsin moves to commit the resolution ( H.Res. 6 ) to a select committee composed of the Majority Leader and the Minority Leader with instructions to report back the same to the House forthwith with only the following amendment. An ad hoc committee like this has no permanence and is not required to meet. Such motions to commit are frequently used in conjunction with the House rules package on the opening day of Congress, before standing committees have been established. Additionally, the motion to recommit might seek to send the bill to a committee to which it was not referred due to jurisdictional issues. For example, in 1975, a "straight" motion to recommit attempted to send a bill which had been reported by the Committee on Ways and Means, not only to that committee, but also to the Committee on Interstate and Foreign Commerce. This motion to recommit appeared to suggest that the goal of the underlying legislation might be achieved in additional ways under the jurisdiction of this second panel. "Straight" motions to recommit could also create a situation that would effectively dispose of the underlying measure, since once the measure is recommitted, a committee is not obligated to take further action. It could be argued that it would be unlikely for a committee to report back a measure that the House has voted to remove from the floor. Debate in the House on a "straight" motion to recommit may, however, provide a committee with a non-binding understanding of what should be done to improve the measure. A committee's decision whether to act on a recommitted measure might also be influenced by House and committee rules. For instance, a Speaker pro tempore observed in response to a parliamentary inquiry, "The Chair cannot say what in the rules of a committee might constrain the timing of any action it might take. Neither can the Chair render an advisory opinion whether points of order available under the rules of the House might preclude further proceedings on the floor." As described below, the motion to recommit underwent fundamental changes in 1909 with the stated purpose of giving the minority the right "to have a vote upon its position upon great public questions." This seems to imply that the motion was intended to have not only procedural effects but also political ones, allowing Members to go on record as supporting or opposing a specific policy, an opportunity that may be important for demonstrating their policy preference to constituents that might not otherwise occur in the absence of the motion. Besides providing a policy vote, the motion to recommit can have additional political effects. A motion to recommit may combine several proposed amendments, providing the opportunity to package together a set of views as a way to create a comprehensive public record to emphasize the minority party's differences from the platform of the majority. As described above, using a "straight" motion to recommit without instructions can have the effect of delaying or even "killing" a measure, since a committee to which the measure is recommitted would never be required to act. Motions to recommit may also have the effect of providing an outlet for the minority to express its discontent with restrictions related to the openness or fairness of the legislative process. For example, a minority dissatisfied with the number of amendments its Members have been allowed to offer in the Committee of the Whole may make use of their right to offer a motion to recommit with instructions as a means for expressing their opposition to the policies of the majority party. The motion to recommit has its antecedents in the British Parliament and has existed since the First Congress. Prior to 1909, however, it operated differently than it does today, and priority in recognition for the offering of the motion to recommit was not reserved for a Member opposed to the measure. Instead, as former Speaker of the House Joseph Cannon remarked: The object of this provision [for a motion to recommit] was, as the Chair has always understood, that the motion should be made by one friendly to the bill. Often, the majority floor manager of a bill would make a "straight" motion to recommit with the expectation that it would be defeated. Since only one proper motion to recommit is in order, this would preclude anyone else from trying to use the motion in order to defeat or amend the measure. For most of the history of the House, the purpose of the motion to recommit more closely resembled the current usage of the motion to reconsider. Recommittal provided Members with a final opportunity to correct errors within the measure, and in 1891, the Speaker ruled that a bill could be recommitted "forthwith," meaning the committee chair would report the amendments in the motion at once without the bill having to be sent back to committee. The use of the motion to recommit changed substantially in 1909 as a result of changes made in House procedures championed largely by a coalition of Democrats and Progressive Republicans who opposed the autocratic rule of Speaker Cannon. During debate on the adoption of the rules package for the 61 st Congress (1909-1910), the previous question was defeated, allowing Representative John Fitzgerald to propose a set of rules changes, one of which guaranteed priority in recognition to offer the motion to recommit to a Member opposed to the bill. This rules change was offered with the stated purpose of giving the minority the right "to have a vote upon its position upon great public questions." Further, the Fitzgerald amendment prohibited the Rules Committee from reporting any special rule that would prevent the offering of a motion to recommit. This amended rules package passed 211-173. It was not until 1932, however, that precedent definitively established giving priority in recognition to offer the motion to a minority party Member opposed to the bill. This solidified the motion as a "minority right." At the beginning of the 92 nd Congress (1971-1972), the language now contained in House Rule XIX, clause 2(b), was added to the standing rules, allowing 10 minutes of debate on a motion to recommit with instructions, equally divided between a proponent and an opponent. Also in the 92 nd Congress, a new rule made recorded votes in the Committee of the Whole in order for the first time, causing some to question whether the motion to recommit had become redundant or unnecessary. An earlier ruling by the Speaker pro tempore noted that in the Committee of the Whole, "there is no roll-call vote, so that the only opportunity that a minority may have to go on record is by means of a motion to recommit in the House." Because the rules now allowed for recorded votes in the Committee of the Whole, some argued that the motion's main purpose could be achieved in other ways, making the motion to recommit "much less necessary." The right of the minority to offer a motion to recommit, however, remained intact, even in light of the expanded rules on voting. Following the successful adoption of a motion to recommit in 1984 that included the Crime Bill as amendatory instructions, the House decided that 10 minutes of debate might not always be sufficient, since these motions had the potential of adding substantial portions of legislation to an underlying measure. At the start of the 99 th Congress (1985-1986), the current language in clause 2(c) of the rule was added, allowing the majority floor manager to demand that debate time on the motion be extended to one hour equally divided and controlled by the proponent and an opponent. To date, the one-hour extension has been demanded only once. During the 1980s and 1990s, the Rules Committee issued what the minority perceived to be an increased number of special rules restricting both the amending process as well as the motion to recommit. In 1995, the House added language now in Rule XII, clause 6(c), prohibiting the Rules Committee from reporting a special rule that would prevent the offering of a motion to recommit with instructions, thereby preventing the Rules Committee from restricting the scope or content of the motion to recommit. During the 110 th Congress (2007-2008), there was a significant increase in motions to recommit offered, specifically motions to recommit with instructions that did not include the term forthwith , referred to as motions to recommit with "non-forthwith" instructions (or sometimes referred to as "promptly" motions). If adopted, a motion to recommit with "non-forthwith" instructions would have returned the bill to the specified committee whose eventual report, if any, would not have been immediately or automatically before the House. Motions to recommit with "non-forthwith" instructions sometimes had the effect of creating a difficult political choice for Members who supported both the underlying measure and the amendment contained in the motion to recommit. Some Members argued that motions to recommit with "non-forthwith" instructions were designed to trap majority party Members reluctant to vote against the motion's amendment, forcing them into a "lose-lose" situation. Also, it was argued that the use of motions to recommit with "non-forthwith" instructions including specific policy amendments were not necessary because the motion could usually be offered "forthwith," which if successful would have immediately incorporated the motion's amendments. These arguments led the House to amend its rules. The rules adopted by the House at the beginning of the 111 th Congress (2009-2010) added a requirement that any instructions must be in the form of a direction to report an amendment or amendments back to the House "forthwith." The rules package of the 111 th Congress further altered the rules surrounding the motion to recommit by making "straight" motions to recommit debatable. Prior to this, only motions to recommit with instructions had been debatable. These changes are still in effect.

The motion to recommit provides a final opportunity for the House to affect a measure before passage, either by amending the measure or sending it back to committee. The motion to recommit is often referred to as "the minority's motion," because preference in recognition for offering a motion to recommit is given to a member of the minority party who is opposed to the bill. The stated purpose of giving the minority party this right was to allow them to "have a vote upon its position upon great public questions." House rules protect this minority right, as it is not in order for the House Committee on Rules to report a special rule that would preclude offering a motion to recommit a bill or joint resolution prior to its initial passage. Motions to recommit are of two types: "straight" motions and motions that include instructions. A Member offering a "straight" motion to recommit seeks to send the measure to committee with no requirement for further consideration by the House. A Member offering a motion to recommit with instructions seeks to immediately amend the underlying bill on the House floor. A motion to recommit may have various procedural effects, including amending an underlying measure, sending it to one or more committees, providing additional time for its consideration, or potentially disposing of the legislation. Due to its inclusion of policy language, the motion to recommit might also have political effects, such as allowing Members to go on record as supporting or opposing a specific policy and creating a comprehensive public record to emphasize the minority party's differences from the platform of the majority. This report provides an overview of House rules and precedents governing the motion to recommit and describes procedural and political effects of the motion. This report will be updated to reflect any changes in House rules governing the usage of the motion to recommit.

On October 5, 2009, President Obama signed Executive Order (EO) 13514, Federal Leadership in Environmental, Energy, and Economic Performance , to establish an integrated strategy towards "sustainability" in the federal government and to make reduction of "greenhouse gas" (GHG) emissions a priority for federal agencies. The order requires federal agencies to set GHG emissions reduction targets, increase energy efficiency, reduce fleet petroleum consumption, conserve water, reduce waste, support sustainable communities, and leverage federal purchasing power to promote environmentally-responsible products and technologies. The federal government represents the largest single consumer of energy in the U.S. economy, occupying nearly half a million buildings, operating more than 600,000 vehicles, and purchasing over $500 billion in goods and services annually. EO 13514 directs federal agencies to lead by example in setting sustainability performance standards "to create a clean energy economy" in order to increase the Nation's prosperity, promote energy security, protect the interests of taxpayers, and safeguard the health of the environment. Federal agencies must weigh both economic and social benefits and costs in annual evaluations of project performance, expanding projects with net benefits, and reassessing or discontinuing under-performing projects. These evaluations must be transparent, with actions taken to comply with the Order disclosed on publicly available federal websites. Military and related national security activities appear to be exempted from the requirements of EO 13514. This report discusses the more significant provision of EO 13514. However, the concept of "sustainability" is left for a separate report. EO 13514 establishes new goals and provisions, augments or expands many existing provisions, and extends some dates for compliance. It does not revoke any provision of previous Executive Orders. Previous administrations issued several executive orders addressing various energy and environmental goals and practices of federal agencies. Specifically, EO 13423- Strengthening Federal Environmental, Energy and Transportation Management (January 24, 2007)-replaced five earlier executive orders addressing energy and environmental management by agencies of the federal government, establishing goals, practices, and reporting requirements for environmental, energy, transportation performance, and accountability. Refer to this report's Appendix for a summary of EO 13423 provisions. The following sections summarize the major energy and environmental provisions and goals in the new EO 13514. They also compare provisions and goals to previous environmental and energy efficiency goals of EO 13423, with a summary provided in Table 1 . EO 13514 now directs federal agencies to establish GHG percentage reduction targets for scope 1 (federally owned or controlled sources) and scope 2 (federally purchased or generated energy) GHG emissions by FY2020. Agencies must report their reduction targets to both the Chair of the Council of Environmental Quality (CEQ) and to the Director of the Office of Management and Budget (OMB Director). In establishing the target, the new order directs each agency to consider reductions associated with reduced energy intensity in buildings, increased use of renewable energy, implementing renewable energy projects on agency property, and reduced use of fossil fuels in vehicles. Each agency also must develop and implement a Strategic Sustainability Performance Plan (SSP) (within 240 days of the order). Thereafter, an annually updated plan is due. The SSP will establish priorities for agency actions based on a lifecycle return on investment, as detailed in Section 8 of the order. Along with the SSP, a percentage reduction target for scope 3 (federally contracted actions) GHG emissions must be established and reported to the Chair of the CEQ and the Director of OMB. Each agency head is to designate a "Senior Sustainability Officer" who will be accountable for accomplishing the new EO 13514 goals. The order includes the key requirement for integrating the SSP into the agency's strategic planning and budget process, including the agency's strategic plan under section 3 of the Government Performance and Results Act of 1993 (GPRA). Within 15 months, each agency is to report a comprehensive inventory of scope 1 , scope 2 , and scope 3 emissions to the CEQ Chair and the OMB Director. EO 13423 had no specific GHG emission reduction target. Instead, that order set a goal to improve energy efficiency, and reduce GHG emissions through a 30% reduction in "energy intensity" by 2015. At least half of the renewable energy purchased annually for agency consumption was required to come from new renewable energy sources, and these projects where feasible were to be located on agency property. General Comments : The new EO 13514 will require federal agencies to understand and measure their GHG footprint before making recommendations about reducing the size of that footprint. The requirement to weigh both economic and social benefits and costs may require further clarification as value systems may enter the solution evaluation process. Federal contractors may be required to sign up with a voluntary registry to report GHG emissions. EO 13514 increases goals for water use efficiency and management to reduce potable water consumption by 2% annually through FY2020. Federal agency industrial, landscaping, and agricultural water consumption must be reduced 2% annually through FY2020. Water reuse strategies and storm water management are part of these goals. EO 13423 had set a goal for federal agencies to reduce water consumption intensity 16% by FY2015 (relative to a FY2007 baseline) through life-cycle cost-effective measures. The requirement incorporated the "Federal Leadership in High Performance and Sustainable Buildings Memorandum of Understanding (2006)" to reduce potable water use. General Comments : EO 13514 adds five years to the deadline for meeting the water efficiency target. While estimates indicate that overall water use in the United States has been declining, water shortages in various regions show that continued improvement in water use efficiency can be of benefit. The benefits of increasing energy efficiency are also apparent with almost half of the 410 billion gallons of daily water use going to the thermoelectric production of power. EO 13514 sets goals for pollution prevention and waste elimination that rely on measures to reduce waste and pollutant generation before the effluents enter the waste stream. Agencies must divert at least 50% of their construction demolition debris and 50% of other non-hazardous solid waste from landfill disposal to recycling or recovery operations. Other pollution prevention goals include pest management programs and controls for chemical uses and processes. EO 13423 did not set any specific quantitative goals for pollution prevention or waste elimination. It did direct agencies to reduce the quantity of toxic and hazardous chemicals and materials acquired, used, and disposed of by the agency. It also called for the increased diversion of solid waste, as appropriate, and directed agencies to conduct cost-effective waste prevention and recycling programs at their facilities. EO 13514 directs that the design of all planned new federal buildings beginning in 2020 achieve zero net-energy use by 2030. Existing buildings must reduce their consumption of energy, water, and materials, and identify alternatives to renovation. It encourages cost-effective, innovative strategies to minimize water and energy consumption, for example, reflective or vegetated roofs. Rehabilitation of federally owned, historic buildings should employ "best practices" and technologies to promote long-term viability. The new order also gives priority to the developing site selection procedures to site federal buildings in sustainable locations. EO 13423 had required new construction and major renovation of agency buildings comply with the Guiding Principles for Federal Leadership in High Performance and Sustainable Buildings established in the Federal Leadership in High Performance and Sustainable Buildings Memorandum of Understanding . At least 15% of each agency's existing federal capital asset building inventory had to incorporate the sustainable practices in the Guiding Principles by the end of FY2015. General Comments : The new order takes the next step by raising the bar on energy efficiency to aim for zero net-energy buildings. To achieve this goal in new buildings, it may be necessary to incorporate solar photovoltaic (and other technologies) into windows and other aspects of building design. Life-cycle considerations may require modular design of both internal and external components to ensure that these features will continue to be productive (or enable improvements) over the useful life of such buildings. To ensure full functionality and safety for public buildings, new standards may be required which consider human comfort and productivity levels in zero net-energy building environments. EO 13514 requires sustainable acquisition practices to ensure that 95% of new contracts for products and services, including task and delivery orders (but excluding weapons systems) be energy-efficient (i.e., Energy Star or Federal Energy Management Program (FEMP) designated criteria), water-efficient, biobased, environmentally-preferable (i.e., Electronic Product Environmental Assessment Tool (EPEAT) certified), non-ozone depleting, contain recycled content, and non-toxic or less-toxic alternatives. Sustainable practices promote the procurement of Energy Star or FEMP-designated electronic equipment (ensuring a procurement preference for EPEAT-registered electronic products), and the implementation of "best management practices" for energy-efficient servers and federal data centers. Disposal of excess or surplus electronics must employ environmentally sound practices. All agency electronic products are to enable power management, duplex printing, or other energy efficient or environmentally preferable features. EO 13423 stated that agency acquisition of goods had to use sustainable environmental practices, including the acquisition of biobased, environmentally preferable, energy-efficient, water-efficient, and recycled content goods. Paper used by agencies was required to have at least 30% post-consumer fiber content. At least 95% of electronic products had to satisfy the requirements for EPEAT registered equipment, and computers and monitors had to include Energy Star features. It also directed agencies to implement policies that extended the useful life of agency electronic equipment and used environmentally sound practices to dispose of electronic equipment at the end of its useful life. EO 13514 creates an implementation team and a management structure to coordinate federal agencies activities that is similar in structure and make-up to the management and reporting structures created previously by EO 13423. While the new order continues to afford federal agencies flexibility in making recommendations to meet the goals, it should guide the agencies as to the types of actions they can consider and hold them accountable for meeting the requirements. EO 13514 establishes an interagency committee composed of the Federal Environment Executive and agency Senior Sustainability Officers to advise the CEQ Chair and the OMB Director on the implementation of the order and to facilitate implementation of each agency's SSP. The Steering Committee will also determine what federal actions are appropriate to achieve the order's policy goals. Each agency's SSP will be subject to the OMB Director's approval. The SSP is to identify the activities, policies, plans, procedures, and practices of the agency that are relevant to the implementation of the order. Specific agency goals, schedules, milestones, and quantifiable metrics are to be developed. These should consider environmental measures as well as economic and social benefits and costs in evaluating projects and activities based on a lifecycle return on investment. The SSP should also evaluate climate change risks and vulnerabilities of the agency's operations and mission in both the "short and long term." EO 13514 directs the Department of Energy (DOE) (through FEMP) in coordination with the Environmental Protection Agency (EPA), the General Services Administration (GSA), the Departments of Commerce, Defense, and the Interior, and other federal agencies to develop recommendations for reporting and procedures for accounting GHG emissions. The recommendations and procedures are due for submission to the CEQ Chair and OMB Director within 180 days of the date of the order. The order emphasizes accuracy and consistency in quantifying and accounting for GHG emissions from all scope 1 , 2, and 3 sources. If significant changes in agency missions render the initial baseline information unsuitable as a benchmark, the order permits choosing an alternative to the FY2008 baseline. Recommendation must consider past federal agency efforts to reduce GHG emissions. EO 13514 directs DOE to coordinate with the General Services Administration and issue guidance on federal fleet management within 180 days of the order. The guidance must address the acquisition of alternative fuel vehicles, the use of alternative fuels with the goal of improving fleet fuel economy, and the reduction of fleet petroleum use 30% by 2020. The guidance must consider electric vehicles for appropriate functions. EO 13514 directs GSA to coordinate with EPA and the Department of Defense to provide recommendations on working with the federal vendor and contracting community to reduce scope 3 emissions. These are emissions derived from the supply of products and services to the federal government. The recommendations should consider the potential impacts on the procurement process, and on the federal vendor and contracting community. Federal agencies may consider various market-based solutions in making sustainability improvements. Using the private sector in this way can help federal agencies meet the goals of EO 13514 while conserving financial resources to meet their primary missions. Two widely used contracts - Energy Savings Performance Contracts (ESPCs) and Utility Energy Savings Contracts (UESCs) - provide federal agencies with the means of improving energy efficiency through private sector financing. Under an ESPC, a private-sector energy services company (ESCO) develops and installs energy improvements such as energy efficient lighting or heating, ventilation and air conditioning systems (HVAC). The federal agency then repays the ESCO for the capital expenditure over a maximum of 25-year period from resultant energy savings. EPSCs, in particular, have gained widespread use throughout the federal sector. Federal agencies have invested approximately $2.3 billion through ESPCs, with more than 460 contracts awarded in 47 states. ESPCs come with an incentive that allows facility managers to apply the cash benefit of energy savings to other improvements or programs. The Congressional Budget Office's (CBO) view of ESPCs is that they impose a future financial obligation on the federal government. CBO began scoring ESPCs as mandatory spending, coinciding with the expiration of the 1990 Budget Enforcement Act pay-as-you-go (PAYGO) rules. The CBO scoring reflects how ESPCs create future commitments to appropriations. The Government Accountability Office (GAO) finds that the benefits of ESPCs could be achieved using upfront funds (that is, fully funded in advance) and with lower financing costs, but agencies generally do not receive sufficient funds upfront for doing so and see ESPCs as a necessary supplement to upfront funding in order to achieve the longer-term energy savings benefits. UESCs can accomplish the energy efficiency improvements similar to ESPCs. With a UESC, a utility finances the costs of capital improvements and recovers its investment over the contract term from the customer's utility rates. The utility benefits by reducing its customer's demand for energy, thus increasing its spare capacity for periods when energy demands peak. Unlike ESPCs, however, there are no statutory requirements that an agency realize savings from reduced energy consumption. Facility managers, however, can stipulate terms for energy cost savings. Much of EO 13514 requires federal agencies to examine the environmental and social impacts of their mission, personnel and logistical operations with regard to sustainability. The definition of sustainability carries over from EO 13423, without discussion of how the private sector views or generally implements the concept. Given that the order has elevated sustainability to a high priority, a broader discussion would help clarify the concept and possibly promote better policy solutions. Reducing greenhouse gas emissions is EO 13514's most significant requirement. Energy consumption, and thereby fossil fuels use, is arguably involved in almost every aspect and activity of all federal agencies. In establishing targets for reducing GHG emissions, agencies may need to weigh the potential impacts on their missions while also considering whether advances in technology are likely over the timeframe of compliance. The requirement for federal agencies to reduce scope 3 GHG emissions could have many implications, including the evaluation of telecommuting as an imperative for many federal employees to reduce gasoline consumption. Upgrading security for computer-based systems and adding equipment for communications could be major considerations on the cost side. This latest energy- and environment-related executive order requires federal agencies to recommend how they will achieve mandatory goals, but CEQ and OMB must approve and decide the federal actions that agencies may actually employ. CEQ and OMB may become arbiters of these recommendations, weighing the mission and criticality of agency activities, as solutions deemed appropriate in some circumstances may not be appropriate for others. Conflicts between priorities can emerge. For example, if more electricity is required to charge hybrid and electric vehicles and that electricity comes from traditional steam-electric power plants, water consumption could increase thus making water-use goals less achievable. Increased coal use to generate the electricity could exacerbate GHG emissions. Such potential conflicts and possible impacts on the priorities of other agencies are likely to be taken up by the Steering Committee. The development of a process for resolving such issues is likely be an area of considerable focus. In signing Executive Order (EO) 13423, Strengthening Federal Environmental, Energy and Transportation Management , President George W. Bush revoked five earlier executive orders affecting federal agencies' energy and environmental management. Section 11 of the order consolidated and strengthened the five executive orders and two memorandums of understanding (MOU) and established new and updated goals, practices, and reporting requirements for environmental, energy, and transportation performance and accountability. In some cases, the Bush order put in place replacement energy and environmental efficiency goals for previous goals with target dates that had passed. EO 13423 also implemented and supplemented provisions of the 2005 Energy Policy Act (EPACT; P.L. 110-140 ) dealing with energy and environmental management by federal agencies. The combination of EPACT (Title I, Part A) and EO 13423 defined the energy efficiency objectives for federal agencies under the Bush Administration. EO 13423 directed all federal agencies to improve energy efficiency and reduce greenhouse gas emissions through reductions in energy intensity (3% annually through the end of FY2015, and 30% by the end of FY2015, relative to each agency's baseline energy use in FY2003). Agencies scored progress in reaching building energy-efficiency goals in terms of reductions in energy consumption versus gross building area. For the energy reduction goals of EPACT, EO 13423 excluded some inherently inefficient industrial types of buildings were from this scoring. EO 13423 (Section 2f) mandated specific energy reduction targets for new construction and renovations. Further, it directed federal agencies to meet objectives set in the Federal Leadership in High Performance and Sustainable Buildings Memorandum of Understanding ("Sustainable Buildings MOU"). The Sustainable Buildings MOU called for new buildings to be 30% more cost efficient than industry standards, and for buildings undergoing major renovations to be 20% more cost efficient than a pre-renovation, 2003 baseline. The order also encouraged federal agencies to incorporate sustainable practices into projects underway, and sell or dispose of unneeded assets. The revoked EO 13123 had directed improvements in building energy efficiency, promoted the use of renewable energy, and set goals for reduction of greenhouse gas (GHG) emissions associated with energy use in buildings, among other energy-related requirements. In contrast, Bush's EO 13423 had no specific GHG reduction target. However, Section 2.a of EO 13423 did include the goal of cutting GHG emissions by federal agencies through reductions in the energy intensity of agency operations, but does not specify a GHG reduction target. EPACT only credited electricity from renewable energy sources in meeting federal purchase requirements. EO 13423 required that at least half of the EPACT renewable energy requirement comes from new (put in service after January 1, 1999) renewable energy sources. Agencies could also use new non-electric renewable energy sources to meet the requirement for new renewable energy. (Examples of non-electric renewable energy include thermal energy from solar ventilation pre-heat systems, solar heating and cooling systems, solar water heating, ground source heat pumps, biomass heating and cooling, thermal uses of geothermal and ocean resources.) However, these non-electric renewable energy sources could not apply toward meeting the EPACT renewable electricity requirement. In meeting EPACT's energy-intensity reduction goals (Btu/gsf), agency credits for renewable energy purchases started to phase out in FY2008 and reduce to zero by FY2011. Finally, EO 13423 required each federal agency to annually report to the President. The Office of Management and Budget (OMB) provided general reporting guidance in Circular No. A-11 (Section 55, Information on Energy Use, Costs, and Efficiency ). A 2008 DOE memorandum provided detailed reporting guidance in to federal agency energy coordinators.

On October 5, 2009, President Obama signed Executive Order 13514, Federal Leadership in Environmental, Energy, and Economic Performance, to establish an integrated strategy towards sustainability in the federal government and to make reduction of greenhouse gas (GHG) emissions a priority for federal agencies. Executive Order 13514 (EO 13514) requires federal agencies to set GHG emissions reduction targets, increase energy efficiency, reduce fleet petroleum consumption 30% by 2020, conserve water, reduce waste, support sustainable communities, and leverage federal purchasing power to promote environmentally-responsible products and technologies. Under the previous administration, EO 13423, Strengthening Federal Environmental, Energy and Transportation Management, replaced five earlier executive orders addressing energy and environmental management by federal agencies, established goals, practices, and reporting requirements for environmental, energy, transportation performance, and accountability. The terms "sustainability and sustainable" carried over from EO 13423 without a discussion of the concepts or how the concepts apply outside of the federal government. Given that EO 13423 elevated "sustainable" to a high priority, discussion of the concept may promote better solutions. The new EO 13514 does not revoke any provision of the previous EO 13423. It does establish new goals and provisions, augments or expands many existing provisions, and extends some dates for compliance. Much of Executive Order 13514 requires the agencies to examine the environmental and social impacts of their mission, personnel, and logistical operations with regard to sustainability. EO 13514 requires federal agencies to assess and measure their GHG footprint and submit emissions targets (within 90 days of the order). A requirement to weigh both "economic and social benefits and costs" of these targets may require further clarification as value systems may enter the solution evaluation process. Environmentally sustainable products and services are required immediately for 95% of all new procurements. The new order adds a requirement to reduce water use in federal industrial, landscaping, and agricultural applications by at least 20% from 2010 levels. The new order also increases the energy efficiency levels required of new building designs, and sets a target of zero net-energy consumption for new buildings by 2030. EO 13514's most significant new goal is reducing greenhouse gas emissions. Fossil fuel use constitutes the federal government's major source of GHG emissions. GHG emission-reduction targets may require federal agency managers to weigh the potential impacts on their agency missions, considering available technology and the timeframe needed for complying. Conflicting priorities may emerge in implementing the goals of the new executive order. Consideration of unintended consequences and their potential impacts on the priorities of other agencies is likely to be an area of considerable focus.

In the 110 th Congress, Members have introduced numerous bills that would directly or indirectly address climate change. This report describes and compares bills that directly address climate change, as opposed to those that primarily address other issues (e.g., energy efficiency and conservation) but could have ancillary impacts on climate. In some cases, it is difficult to draw a line between direct and indirect climate change bills, because a specific bill or action may seek to achieve multiple objectives. This report focuses on legislative actions--including comprehensive bills with individual climate change titles or sections--that explicitly address climate change issues. These bills fall into six major categories: (1) research on the causes and effects of climate change and on methods to measure and predict climate change; (2) deployment of emission-reducing technologies in the United States or other countries; (3) requirements for U.S. participation in international climate agreements; (4) investments in systems to adapt to changes in climate; (5) establishment of greenhouse gas (GHG) monitoring systems as a basis for research or for any potential reduction program; and (6) implementation of mandatory GHG emission reduction programs. These categories are not mutually exclusive, and several bills address more than one of the above categories. There has been considerable interest in climate change issues in the 110 th Congress. As of the date of this report, Members have introduced more than 100 bills that would directly address climate change issues. Congress has enacted six legislation proposals that address climate change to some degree: P.L. 110-140 : The President signed the Energy Independence and Security Act of 2007 December 19, 2007. Among other provisions, some of which indirectly address GHG emissions, this act amends the Energy Policy Act of 2005 to expand the carbon capture research and development program. It also directs the Department of the Interior to conduct a national assessment of geologic storage capacity for carbon dioxide (CO 2 ), and instructs the Department of Energy to implement a program to demonstrate technologies for the large-scale capture of CO 2 from industrial sources of CO 2 . In addition, the act establishes within the Department of Transportation an Office of Climate Change and the Environment to coordinate research and implement strategies to address transportation issues associated with climate change. P.L. 110-161 : The President signed the Consolidated Appropriations Act of 2008 into law December 26, 2007. Among other provisions, this statute directs EPA to promulgate regulations that require mandatory reporting of GHG emissions "above appropriate thresholds in all sectors of the economy." The act directs EPA to develop the proposed rule by September 2008 and the final rule by June 2009. In addition, the act instructs NOAA to work with the National Academy of Sciences to establish a Climate Change Study Committee that will study climate change issues and make recommendations regarding climate change mitigation strategies. P.L. 110-181 : On January 28, 2008, the President signed the National Defense Authorization Act for Fiscal Year 2008. In addition to many non-climate related provisions, the act directs the Department of Defense to assess the risks of projected climate change to the department's facilities, capabilities, and missions. P.L. 110-229 : On May 8, 2008, the President signed the Consolidated Natural Resources Act of 2008. Among other provisions, the act requires the Secretary of Energy, when reviewing research and development activities for possible inclusion in the steel research and development initiative, to expand the plan in order to consider among steel project priorities the development of technologies that reduce GHG emissions. P.L. 110-246 : On June 18, 2008, Congress enacted (overriding the President's veto) the Food, Conservation, and Energy Act. Among many other provisions, the act (Section 2709) directs the Department of Agriculture (USDA) to establish technical guidelines 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." USDA is to give priority to carbon markets. P.L. 110-343 : On October 3, 2008, the President signed the Emergency Economic Stabilization Act of 2008. Among many other provisions, the legislation provides a tax credit for select (geologic) carbon sequestration activities. In addition, the act directs the Department of Treasury to enter into an agreement with the National Academy of Sciences (NAS) to "undertake a comprehensive review of the Internal Revenue Code of 1986 to identify the types of and specific tax provisions that have the largest effects on carbon and other greenhouse gas emissions and to estimate the magnitude of those effects." NAS is to report its findings to Congress by October 3, 2010. In addition to enacted legislation, the House and Senate have passed several bills. Numerous bills have been reported out of committees. These bills address a range of climate change topics. These topics are discussed briefly below. Appendix A categorizes the bills and enacted legislation by the topics discussed below. Appendix B provides a brief summary of each bill's provisions and status in the legislative process. Global climate change is a complex issue. While most scientists agree that the climate is changing in response to GHG emissions, uncertainties concerning the causes and effects of climate change remain and are a continuing subject of extensive scientific research. These uncertainties include the potential effects on natural systems, as well as effects on social and political systems. Further, research is ongoing regarding technologies that improve efficiency, reduce fossil fuel consumption, and capture and store carbon dioxide (CO 2 ) emissions. One approach to addressing climate change is to promote the deployment and diffusion of technologies to reduce GHG emissions, such as carbon capture and storage (or sequestration). Within the legislative proposals, there are different methods of promoting technology deployment. One deployment strategy may involve tax incentives for investment in technologies to improve efficiency and/or lower emissions. Other deployment strategies would provide grants, loans, and other incentives for technology transfer to developing countries. In the 110 th Congress, some bills deal solely with technology deployment through tax incentives for lower-carbon technology or grants to develop and deploy carbon capture and sequestration, or through requirements that the federal government use technology with lower emissions. Other bills that create mandatory GHG reduction programs also include technology deployment as one component. The United States ratified the United Nations Framework Convention on Climate Change (UNFCCC) in 1992. Five years later, the United States signed the convention's Kyoto Protocol, but it was never submitted to the Senate for ratification. In 2001, President George W. Bush rejected the Kyoto Protocol and withdrew the United States from subsequent negotiations. Since that time, the United States has entered into other cooperative agreements, including the Asia-Pacific Partnership on Clean Development and Climate. This partnership focuses on voluntary action by member states to promote cleaner technology and related goals. However, U.S. participation in discussions over binding agreements has been limited. Some critics of GHG regulation argue that the effects on global GHG concentrations--and consequently the effects on climate--from any reduction scheme will be limited. Some therefore contend that investment should focus on preparing communities and systems to adapt to the effects of a changing climate. This notion is shared by some proponents of GHG regulation, who argue that because of earlier greenhouse gas emissions, some level of warming will occur regardless of mitigation activity. Those stakeholders support adaptation initiatives in concert with mitigation efforts. Pursuant to the UNFCCC, the United States publishes annual reports on its GHG emissions. The U.S. Environmental Protection Agency (EPA) reports this information using various techniques (e.g., fuel analysis for CO 2 ). The 2005 emissions estimates indicate that the three dominant sources of GHG emissions are electricity generation (33%), transportation (28%), and industry (19%). At the national level, the 1990 Clean Air Act requires most electric utilities to report their GHG emissions, but there is no overall national GHG reporting requirement. However, some states also gather data through voluntary registries or mandatory GHG emissions reporting mechanisms. The United States has no federal GHG reduction requirements, although there have been proposals to require such reductions. These proposals include "command and control" regulations and market-based techniques to limit emissions. Market-based programs typically take as their model the Clean Air Act's acid rain program, which employs a cap-and-trade design to control several air pollutants. Cap-and-trade systems set strict limits on specific emissions from a particular group of sources. Sources may reduce their own emissions or purchase credits (i.e., trade) from other sources that have reduced emissions below their individual allotment. This flexibility in who makes reductions can lead to lower costs. In an efficient market, entities that face relatively low emission-reduction costs would have an incentive to achieve extra emission reductions, because these additional reductions could be sold to entities that face higher emission-reduction costs. An entity facing higher costs could purchase allowances that would allow it to emit more than its initial emissions allotment. Total U.S. emissions may decrease or increase, depending on the entities covered, the GHGs controlled, and the emissions trading schemes. In the 110 th Congress, some bills cover just the electric utility sector, while others cover most or all emissions throughout the economy. Another market-based option is to establish a "carbon tax"--a direct tax on GHG emissions or on the fuels that generate emissions when combusted. To the extent that emissions reductions can be achieved at costs lower than the tax rate, those reductions will be undertaken; if emissions reductions are more expensive, covered entities would opt to pay the tax. In this way, there is an upper limit to the cost of the control program. Members have introduced several bills in the 110 th Congress that would control emissions from only the electric utility sector. The rationale for such a policy is that electricity generation emits the highest percentage of GHGs by sector, and the number of covered sources would be relatively small compared to other sectors (e.g., transportation). Moreover, power plants have experience with reporting (if not reducing) their CO 2 emissions under the Clean Air Act. Sector-specific bills generally fall into two categories: (1) bills that would control only GHGs and (2) bills that would control both GHGs and other pollutants such as mercury, sulfur dioxide, and nitrogen oxides. This latter category of bills is generally referred to as "multi-pollutant" legislation. A broader approach is to require emission reductions from multiple economic sectors. Several bills in the 110 th Congress would apply to most or all U.S. GHG emissions. These bills are often described as an "economy-wide" GHG reduction approach. These bills vary in their coverage: some bills cover the most high-emitting sectors (e.g., electricity generation, industry, and transportation) while excluding other sectors (e.g., residential and commercial); other bills grant EPA broad authority to establish regulations to reduce the most emissions at the lowest cost. Appendix A. Major Focus Areas of Climate Change Bills and Enacted Legislation in the 110 th Congress Appendix B. Key Provisions of Climate Change Legislation in the 110 th Congress

Congressional interest in climate change legislation has grown in recent years. In the 110th Congress, Members have introduced numerous bills that directly address various aspects of climate change. These bills cover a wide spectrum, ranging from climate change research to comprehensive greenhouse gas (GHG) emissions cap-and-trade programs. As of the date of this report, Congress has enacted six broader pieces of legislation that--among many other non-climate-related provisions--address climate change in some fashion: P.L. 110-140 expands the carbon capture research and development program, requires a national assessment of geologic storage capacity for CO2, and supports technologies for the large-scale capture of CO2 from industrial sources. The act also establishes an Office of Climate Change and the Environment to coordinate research and implement strategies to address climate change-related transportation issues. P.L. 110-161 directs the Environmental Protection Agency (EPA) to develop regulations that establish a mandatory GHG reporting program that applies "above appropriate thresholds in all sectors of the economy." P.L. 110-181 directs the Department of Defense (DOD) to assess the risks of projected climate change to the department's facilities, capabilities, and missions. P.L. 110-229 requires the Secretary of Energy, when reviewing research and development activities for possible inclusion in the steel research and development initiative, to expand the plan in order to consider among steel project priorities the development of technologies that reduce GHG emissions. P.L. 110-246 directs the Department of Agriculture (USDA) to establish technical guidelines 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." USDA is to give priority to carbon markets. P.L. 110-343 provides a tax credit for select (geologic) carbon sequestration activities. In addition, the National Academy of Sciences (NAS) is "to identify the types of and specific tax provisions that have the largest effects on carbon and other greenhouse gas emissions and to estimate the magnitude of those effects." NAS is to report its findings to Congress by October 3, 2010. This report briefly discusses the basic concepts on which climate change bills are based, and compares major provisions of the bills in each of the following categories: climate change research; emissions reduction technologies; U.S. actions pursuant to international emission reduction agreements; adaptation to the effects of climate change; GHG reporting and registration; and GHG emissions reduction programs.

A major policy concern for Congress has been when and whether to address the "fiscal cliff," tax increases and spending cuts that would have substantially reduced the deficit in 2013 relative to 2012. According to projections in March 2012 by the Congressional Budget Office (CBO), this fiscal restraint constituted 5.1% of output in 2013 and was projected to reduce growth to 0.5% from 4.4%. Unemployment would have increased by 2 million. CBO's August 2012 midyear update of economic and budget projections projected growth for 2013 at an even lower level, a negative 0.5%, with a contraction of 2.9% in the first half of the year, which would likely be considered a recession. The unemployment rate would have risen to 9.1% by the fourth quarter of 2013. The American Taxpayer Relief Act, H.R. 8 , eliminated a number of provisions of the fiscal cliff, primarily by extending most expiring tax cuts. Policy choices with respect to the fiscal cliff are difficult because of the conflict between short-run and long-run economic and budgetary objectives. In the short run, the reduction in demand from the reduced budget deficit could damage an already fragile recovery. In the longer run, however, deficit reduction is needed to address a projected unsustainable debt level. Aside from these issues of short-run stimulus and long-run deficit reductions, a variety of other issues arise, such as effects of marginal tax rates on behavior and distributional considerations. These issues are acknowledged at the conclusion of the report but are not addressed in detail. Some legislation had already been introduced in 2012, primarily associated with a temporary extension of some or all of the 2001 and 2003 (so-called Bush) tax cuts (last extended in 2010) and with the increased taxes under the alternative minimum tax (AMT). The latter provision has been the subject of a continual temporary "patch," largely to keep the exemption current with inflation, with the last patch having expired at the end of 2011. Republican proposals, H.R. 8 and S. 3413 , would have extended the Bush tax cuts for another year and extended the AMT patch for two years. An amendment drafted by Senator Orrin Hatch would have extended the Bush tax cuts for another year with a one-year AMT patch for 2012 ( S.Amdt. 2491 proposed but not offered to S. 2237 ). A Democratic proposal, S. 3412 , would have extended the Bush tax cuts, except for the estate tax and the tax cuts for high-income individuals, while also extending some provisions originally enacted in the 2009 stimulus legislation (the American Recovery and Reinvestment Act of 2009 [ARRA]; P.L. 111-5 ). S. 3412 has a one-year AMT patch for 2012. Legislation has also been proposed to address other expiring tax cuts. The final legislation, H.R. 8 , contained most of the elements of these proposals, although it made most of the 2001 and 2003 tax cuts and the AMT patch permanent, rather than extending it temporarily. It allowed some of the 2001 and 2003 tax cuts to expire for higher-income individuals but at a higher level than S. 3412 . Other expiring tax provisions were extended through either 2017 (the 2009 stimulus provisions) or through 2013 (depreciation provisions and the other "extenders" that have been enacted on a temporary basis). It also addressed some of the spending reductions. The first section of this report summarizes the size and composition of the original fiscal cliff. The next section provides details of recent legislation. The following sections review aggregate economic effects, the differential effects of components of the cliff, and the magnitude of the remaining contractionary effects. Earlier legislative proposals are summarized in an appendix. The Congressional Budget Office defined the fiscal restraint as being composed of the following: The expiration of tax cuts originally enacted in 2001 and 2003 (popularly referred to as the Bush tax cuts), and extended in December 2010, which were to expire at the end of 2012. The 2001 tax cuts include the 10% rate bracket (lowered from 15%) and the lower rates for higher-income individuals (25%, 28%, 33%, and 35%, compared with 28%, 31%, 36%, and 39.6%); the elimination of the phase-out of itemized deductions and personal exemptions (PEP and Pease); the increase in the child credit; the provisions reducing the marriage penalty (increasing the standard deduction and width of lower rate brackets for joint returns); the reduction in the estate tax; and some other smaller provisions. The 2003 tax cuts are the lower rates for dividends (15% rather than ordinary income tax rates) and capital gains (15% rather than 20%). The expiration after 2012 of some smaller tax provisions enacted in the 2009 stimulus legislation--generally more beneficial provisions for education (American Opportunity Credit) and greater refundability of the child credit. The AMT "patch," a temporary increase in the exemption for the alternative minimum tax to reflect inflation, along with some smaller changes to continue allowing certain credits against the tax. The AMT patch had already expired at the end of 2011. The temporary two-percentage-point reduction in the employee's share of the Social Security payroll tax that was to expire at the end of 2012. Other tax provisions that expired at the end of 2011, or were scheduled to expire at the end of 2012, the largest of which is the expiration of bonus depreciation (end of 2012). Also included are expensing provisions for small business (Section 179 expensing) and the "extenders," a series of temporary provisions that are normally reinstated whenever they expire. Taxes imposed beginning in 2013 by the Affordable Care Act (health reform), including the additional "Medicare" tax and other taxes, such as those on medical devices. The automatic spending reductions in the Budget Control Act (BCA) adopted in 2011. The lapse of extended unemployment benefits at the end of 2012. Reductions in payments to physicians under the Medicare Sustainable Growth Rates that have been overridden only on a temporary basis and would have taken effect automatically. Increasing these payments is referred to as the "doc fix." Table 1 lists the effects on the deficit of those provisions for FY2013 compared with FY2012, with the first three bulleted items listed above combined. Because most provisions change on a calendar year basis, the effect on FY2013, which ends at the end of September, reflects the effects for the first three quarters of the calendar year and not the full year's effect. The share of the calendar year effect reflected in the fiscal year varies, however, from one provision to another. For example, the rate changes in the 2001 tax cuts would be reflected in withholding at the beginning of 2013, so that the FY2013 changes would generally capture less than a year's effect. The effects of the lapse of the AMT patch in 2011 would largely be reflected in FY2013, because it is not generally captured in withholding, but would be collected when tax returns are filed by mid-April of 2013. Effects of the estate tax would generally be small because of the lag in filing estate tax returns. As Table 1 shows, the fiscal cliff was largely composed of tax increases, which accounted for 80% of the total associated with legislative changes, and two-thirds of the total when including changes arising from non-policy sources. CBO also analyzed a subset of these provisions that are part of its alternative baseline. While CBO's baseline reflects current laws (and hence assumed the Bush tax cuts would expire at the end of 2012), the alternative baseline assumed that all tax cuts except the payroll tax reduction would be extended, the AMT patch would occur, the doc fix is made each year, and the Budget Control Act automatic spending cuts do not occur, although the discretionary spending caps remain. This scenario, therefore, assumed that the payroll tax cuts would not be extended, that the health taxes would occur as scheduled, and that the extended emergency unemployment benefits would not be continued. The provisions that are retained as part of the alternative baseline account for $362 billion of the $607 billion total in Table 1 , or 60% of the total, and 72% of policy-related changes. Within the $362 billion, 79% of this amount covers extensions of expiring tax cuts, 3% the doc fix, and the remaining 18% spending effects. In Table 1 , many of the estimates are in broad categories. Expirations of individual income tax cuts are largely combined into one major category that accounts for 44% of the policy-related fiscal cliff of $502 billion. Extension of these tax cuts had been the major focus of legislative efforts to substantially reduce the fiscal cliff. Note also that, by combining these provisions, there are no separate estimates of the three expiring provisions listed in the second line in Table 1 . In particular, the AMT patch, which were the most likely of the provisions to be adopted and might have been altered earlier than other provisions (because it related to tax returns being filed as early as January 2013), did not have a separate estimate. However, CBO has elsewhere reported separate estimates that indicate that the estimate for the AMT patch is $89 billion, making it 40% of the total for the sum of the AMT plus the 2001, 2003, and 2009 tax cuts. Note, however, that interactions between provisions means that it would make a difference whether the AMT is patched by assuming the Bush tax cuts expire or are made permanent. The patch costs more when the tax rates are lower because more taxpayers fall under the AMT. The cost of the AMT patch would be larger if it was estimated by assuming the tax cuts are made permanent. While not an official "score," Table 2 provides detailed estimates for FY2013 and FY2014 of the deficit effects of the provisions in the original fiscal cliff by the Committee for a Responsible Federal Budget (CRFB). This table estimates the increase in the deficit compared with current law due to a permanent extension of expiring tax cuts, AMT patch, and extenders, and a permanent elimination of most spending cuts, including the doc fix. It also assumes that the Affordable Care Act taxes will not take effect. However, it assumes that the payroll tax and additional unemployment benefits are extended for one year. These estimates have more detail on the components of the cliff as compared with Table 1 . They can also be calculated for both FY2013 and FY2014. The estimates for two fiscal years provide some insight into timing effects. These effects are important because, the earlier the effects occur, the greater the contraction in short-run demand. The estimates in Table 2 differ from Table 1 , which reports the projected decreases in the deficit, including changes outside of policy choices. Hence, the total CRFB estimates are about $500 billion, the rough total of policy-related provisions in Table 1 , and do not include the additional $105 billion from economic factors not related to policy. If all taxes were reflected only in withholding, the FY2014 costs would be slightly more than a third the size of the FY2013 cost because FY2013 is only three-fourths of calendar year 2013. This pattern is seen in the rate reductions at higher-income levels. For many of the tax changes, outside of rate reductions, effects are less likely to be fully captured in withholding, and they occur when tax returns are filed. Thus a smaller effect occurs in FY2013, and effects for calendar year 2013 would in part appear with the filing of tax returns in 2014. Capital gains revenue patterns appear to measure the effect of not extending the lower rate and presumably include the expectation that gains would be realized in the last quarter of 2012 in advance of the tax rate increase (and thus reflected in 2013 with the filing of FY2012 tax returns). Very little of the estate tax revenues would be reflected in FY2013 because estate tax returns do not need to be filed until nine months after death (so that no estate tax returns would be required in FY2013 for calendar year 2013 decedents); these returns are also sometimes allowed extensions. Because the AMT patch had already expired for 2012 and is in part reflected when returns are filed, more tax increase occurs in FY2013 than in subsequent years. Note also that the AMT patch costs more if the lower tax rates are extended, and there is also then a different distribution across fiscal years. If the tax cuts expired, the higher regular tax rates mean that fewer individuals would be on the AMT. Thus the $90 billion figure for FY2013 is the cost if current law remains in place (and higher tax rates come into play), whereas $125 billion is the cost if tax cuts are extended. In revenue estimates presented for legislative proposals, the AMT is scored last and so reflects the rate changes included in the bills. Note that some proposals would have provided a two-year AMT patch, and the second year would largely appear in FY2014. Because the Social Security payroll tax and unemployment benefits are assumed to be extended for only a year, the costs of those policies are concentrated in FY2013. As compared with the original policy-related fiscal cliff, H.R. 8 's offsets are smaller, and the changes are more concentrated in tax cuts. These calculations compare effects from H.R. 8 (reported in detail in Table 3 ) to the measures in Table 1 . However, there is some indication from subsequent tax estimates that the original fiscal cliff was about $10 billion larger for FY2013 and this higher number is used which makes a slight difference. Table 3 also reports the total costs over the budget horizon, which are more relevant for long-term effects on the debt. Note that the cost estimates are compared with the current law baseline, a baseline that presumes the fiscal cliff provisions occur. Thus, they indicate a revenue loss from tax changes and an increase in spending. However, compared with current policies that have been in practice (lower taxes and higher spending) they indicate a tax increase and a spending cut. The reduction in revenues and increases in spending for FY2013 are 64% of the policy-related fiscal cliff. The decrease in the deficit is 54% of the total fiscal restraint including non-policy-related effects. The share in tax cuts is slightly higher in H.R. 8 , 85%, than in the original policy-related fiscal cliff, which was 80%. The share of tax increases in the fiscal cliff offset for FY2013 is 68%. The tax increases that were not addressed were the payroll tax (23%), the tax increases in the Affordable Care Act (4%), and the tax increases from the 2001-2003 tax cuts for high-income individuals (4%). Rate increases (including a marginal rate increase to 39.6% and increases in capital gains and dividend rates to20% for joint returns with taxable incomes over $450,000 and single returns with taxable incomes over $400,000), plus the retention of PEP and Pease for joint returns with adjusted gross incomes over $300,000 and single returns over $250,000). The rate for the estate tax was increased from 35% to 40% although the $5 million exemption was retained and indexed. Less than half (47%) of the spending decreases were offset. Most of the spending cuts in the Budget Control Act (78%) are still in place. More than 98% of the long-run cost is in tax cuts. As these observations suggest, there continues to be a significant fiscal restraint that will exert a contractionary effect on the economy, with the largest effects from increased payroll taxes and across-the-board budget cuts. The contraction in aggregate demand resulting from the original fiscal cliff, according to standard economic analysis, would have reduced output and employment in the economy. A number of estimates and comments suggested that the fiscal cliff, which CBO expected to reduce the deficit by 5.1% of output in calendar year 2013, would also reduce aggregate demand and have a large negative effect on the economy in the short run. Chairman of the Federal Reserve Ben Bernanke indicated in testimony before Congress that, while there is a need for long-run debt sustainability, the tax increases and spending cuts occurring in 2013 could endanger the recovery. The International Monetary Fund, an organization that often stresses the need for reducing debt levels, expressed concern that the fiscal cliff would damage the U.S. and worldwide economy and recommended that the deficit decrease by only 1% of GDP (output), about a fifth of the fiscal cliff. The IMF also identified the fiscal cliff as the most important risk to global recovery: In the short term, the main risk relates to the possibility of excessive fiscal tightening in the United States, given recent political gridlock. In the extreme, if policymakers fail to reach consensus on extending some temporary tax cuts and reversing deep automatic spending cuts, the U.S. structural fiscal deficit could decline by more than 4 percentage points of GDP in 2013. U.S. growth would then stall next year, with significant spillovers to the rest of the world. In its May 2012 report, CBO considered a range of estimates. The midpoint of those estimates indicated that, if the fiscal cliff occurred, GDP would actually contract by 1.3% in the first half of calendar year 2013, with growth of 2.3% in the second half, for an overall growth over the year of 0.5%. With elimination of the fiscal cliff, their midpoint estimate indicated that growth would be 4.4% (5.3% in the first half and 3.4% in the second half). Thus, the fiscal cliff would be projected to lead to a reduction in output of 3.9%. CBO projected that not eliminating the fiscal cliff would have increased unemployment by 2 million. CBO's analysis noted some uncertainty about these effects. Although the midpoint estimate was a reduction of 3.9% of output, the range of potential effects of the fiscal cliff in the CBO analysis was set at 0.9% to 6.8% of output. Thus, the effects might have been considerably smaller, but they also could have been much larger. CBO did not explicitly analyze the fiscal cliff in its August 2012 budget update, but it did project a larger initial contraction of 2.9% in the first half of 2013 under current law, followed by a 1.9% increase, with unemployment reaching 9.1% by the last quarter. This contraction would qualify as a recession. The overall difference in output was about 5%. Other forecasters projected similar effects, although they varied somewhat in what they included in the fiscal cliff. Mark Zandi of Moody's Analytics estimated a fiscal cliff deficit reduction at 4.6% of output, producing a contraction of 3.6% of output. Morgan Stanley reported a deficit effect of 5% of output, for a contraction of 5% of output, and Goldman Sachs reported a deficit effect of 4% of output, for a contraction of 4% of output. IHS Global Insight assumed that the fiscal cliff would be avoided in its forecasts but indicated that going over the fiscal cliff would lead to recession. The principal reason the fiscal cliff had such a potential to slow and even contract the economy in the short run was its size. At a deficit reduction of 5% of GDP, the changes in policies constituted a large contractionary effect. However, the effect of the fiscal cliff on the economy also depends on the mix of policies. The differential contractionary effects of different elements of the fiscal cliff could have played a role in balancing short-term and long-run objectives. The contractionary effect of spending cuts and tax increases occurs because these changes reduce spending and contract demand. Reductions in direct spending directly reduce demand, and increases in taxes or decreases in transfers may partly cause a reduction in savings and partly a reduction in private spending. This decreased demand causes fewer workers to be hired and less output to be produced; some of the resulting reduced income also reduces spending, with another round of contraction. The outcome of these successive rounds of reduced spending are called multipliers. There are forces in the economy that limit the effects. For example, with a relatively small contraction for an economy at full employment, the multiplier could be close to zero because the contraction may lower interest rates or prices or both without any real output effects. Even with an underemployed economy, there are aspects that dampen the effects on the economy. For example, part of each round of decreased income reduces savings rather than spending, or some part of the contraction in demand decreases imports rather than domestic production, or some of the contraction drives down interest rates and increases private investment. (During this recession and recovery, there has been little evidence of fiscal policies altering interest rates.) The CBO projections initially indicated an aggregate multiplier for the fiscal cliff of 0.76 (a 3.9% contraction in output divided by a 5.1% decrease in the deficit relative to output). Zandi's multiplier is about the same at 0.78 (3.6% divided 4.6%), whereas the other two forecasters indicate multipliers of one. CBO's later projections indicated a multiplier closer to one. A crucial feature that causes different policies to have different effects is the size and speed of the first round of spending cuts. If the federal government decreases direct purchases of goods and services, spending is reduced by 100% of that amount. However, if the government increases taxes, individuals would reduce spending by only a fraction of that tax increase (with savings falling as well). If only half of a tax increase decreases spending, a tax multiplier is half as large as a spending multiplier. Reduced transfers and tax increases for low-income individuals are likely to reduce spending because these individuals are usually liquidity constrained (unable to borrow to meet their spending objectives). Higher-income individuals are more likely to reduce spending by a smaller share of a tax increase, and businesses are also unlikely to change their spending very much. Reductions in transfers to state and local governments may also partially reduce savings, although these governments are now generally financially constrained and may be more likely to reduce spending. There are also issues of timing. If spending increases are authorized but cannot take place quickly, their effect would be delayed. This concern was a significant one in considering spending increases in 2009, particularly with respect to infrastructure, where a planning period might have been needed. Of course, that timing issue would be different because the policy in this case involves not a spending increase, which could take some time but avoiding a spending cut. Presumably, cuts could be made more quickly than increases. (Note that in measuring the fiscal cliff, CBO projects spending changes under the BCA, not changes in budget authority.) The general patterns of differentials can be seen in CBO's analysis of the effects of the 2009 stimulus (tax cuts and spending increases to expand the economy) as shown in Table 4 . Considering the midpoint of multipliers in the last column, changes in federal spending have a higher multiplier than a low-to-middle-income tax change. Tax changes for higher-income individuals and businesses have the smallest multipliers. Transfers to individuals (such as unemployment benefits) have a somewhat smaller multiplier effect than spending changes but considerably higher effects than tax cuts. Similar patterns are found in some of the alternatives reported in earlier testimony shown in Table 5 . The smaller effect of infrastructure may reflect expectations that the spending will occur slowly (whereas in Table 4 that spending is already in place). Both of these tables show multipliers from stimulus (which produces output increases) but the concept is the same as a contraction, just reversed. CBO's report on the fiscal cliff also contained additional estimates that allow separate multipliers for different components of the fiscal cliff. CBO indicates that the fiscal cliff with a deficit decrease at 5.1% of GDP comparing calendar 2012 and 2013 will result in a decrease in output of 3.9%. CBO also estimates that the decreases in the deficit under the alternative baseline compared with current law, which accounts for 3% of GDP, would lead to an offsetting gain of 1.6% of output, with the remainder of the fiscal cliff (including non-policy-related amounts) leading to a 2.3% reduction. These estimates imply that these largely tax changes have a multiplier of 0.5 (1.6% divided by 3%) and the other provisions a multiplier of 1.1 (2.3% divided by 2.1%). In its August report, CBO estimates a similar reduction comparing the current law baseline and the alternative scenario (-0.5% versus 1.7% for a net increase of 2.2%). Apparently, CBO's August update compared with the May analysis indicates a gloomier outlook in general. Table 6 shows the estimates of the individual components of the fiscal cliff by private forecaster Mark Zandi. Multipliers are calculated by dividing the contractionary effect by the deficit decrease. The data in Table 6 indicate that the largest multiplier is for cutting unemployment insurance, followed by the automatic spending cuts, both with multipliers above one. The components of the tax extenders plus the doc fix have a weighted multiplier of about 0.6, whereas the remaining components of the fiscal cliff have a multiplier averaging about one. These results are similar to the CBO calculations for the extenders. A final set of multipliers derived from models is shown in Table 7 . As with Table 4 and Table 5 , these are the result of a stimulus, which is the reverse of a contraction but yields a multiplier that could be applied to a contractionary policy. These estimates are averages from several different structural models that would roughly be considered "New Keynesian." These models are also referred to as dynamic stochastic general equilibrium (DSGE) models, which involve optimization over time. These models embed the standard macroeconomic models (which might be loosely referred to as IS-LM models) in a dynamic intertemporal model. The ranking of multipliers in those estimates are similar to those in the tables above, with the largest multipliers for spending, followed by transfers to lower income individuals. All of the tax cut multipliers (and general transfers) are smaller than those in earlier tables although, as indicated in Table 7 , spending multipliers and multipliers for transfers to lower-income individuals are similar to those in earlier tables. To some extent, the larger discrepancy between tax cuts and spending is because only a fraction of consumers change their spending when income increases temporarily, a result of the optimization element of DSGE models. Most consumption is by individuals who optimize over an infinite time period (or a very long one) and a single year or two of reduced income has no effect. Some fraction of consumers are liquidity constrained (varying from 0% to 27%) and respond. Targeted transfers are directed at these lower-income individuals and thus have a larger stimulus effect than other transfers. The numbers in Table 7 assume that the monetary authorities accommodate the fiscal stimulus by keeping nominal interest rates fixed; without this monetary accommodation, the multipliers (except for labor income taxes) drop significantly. In general, these models are more popular with academics and tend to not be as influential among policymakers and private forecasters. Some researchers raise questions about whether the spending behavior in these models is consistent with direct evidence. Multipliers are also directly estimated using multiple time series regressions (statistical studies that examine changes in deficits and output over time), but often these studies focus on government spending (where the policies are more uniform and the first round can be presumed to be spent) or do not distinguish among the types of policies (although theory suggests that tax cut multipliers should be smaller). An important issue that has been raised about these studies (and about estimates of multipliers in general) is that multipliers should be estimated in a way that allows different multipliers in booms and recessions. One recent study indicated that the government spending multiplier was between 0 and 0.5 during expansions and between 1 and 1.5 in recessions. As the analysis above suggests, a significant portion of the total fiscal constraint, about 46% , remains after the enactment of H.R. 8 . If the omitted elements have the same multipliers as the included elements, and the contraction is 4% to 5%, a contraction of 1.8% to 2.3% would remain. Based on the multipliers for individual elements in Table 6 they would appear to have similar multipliers. Ignoring the non-policy-related segment, the contraction due to the policy-related cliff that remains would be about 1%. A JP Morgan expert has indicated a similar level, about 1%, looking only at the policy-related cliff. Brad Delong has estimated a 1.7% reduction although it is not clear what he is including. The policies that have received significant legislative attention during 2012 that would change the size of the fiscal cliff--extending the expiring tax cuts--are a majority of the fiscal cliff but a minority of the economic effects, although the economic effects are still notable. According to the implications of the CBO estimates of the effects of the alternative fiscal scenario (which largely extends the expiring tax cuts), the provisions in the alternative scenario are responsible for 60% of the fiscal cliff but 40% of the contraction. Hence extending the expiring tax cuts eliminates less than half of the projected contraction in the economy due to the fiscal cliff. The final package appeared to leave more than a third of the policy-related fiscal contraction in place, and almost half of the total fiscal cliff. As shown in Table 8 , presenting Zandi's estimates of provisions in the original fiscal cliff and a percentage of spending and a percentage of the contraction, many of the items omitted from the legislation had a more powerful than average effect on the economy per dollar of deficit, especially the payroll tax cut and the budget cuts. Even though much of the contractionary effect has been eliminated, the economy will still slow due to fiscal restraint. The trade-off between short-run and long-run issues remain, but these contractionary effects might be considered during future discussions about budget cuts or other provisions that might offset (if spending increases) or magnify (if spending decreases) the present fiscal contraction. If the only issue were the trade-off between effects on the debt and the short-term contractionary effects, one option would have been to allow the less robust tax provisions to expire and concentrate on (and perhaps even replace them with) more robust spending and transfer programs. However, there are many other issues involved in these choices that complicate decisions. For example, had the AMT not been patched, millions of taxpayers would have to deal with a provision originally designed to affect only a few. Other issues involve the general size of the government which affects choices, with respect to debt reductions, between taxes and spending. The focus of legislative change that would have affected the fiscal cliff during 2012 was largely on the expiring tax cuts. Although spending cuts have been the subject of legislative proposals, these proposals were largely about reordering spending rather than affecting the magnitude of the cuts. Proposals in both the House and Senate addressed the expiring tax cuts from 2001, 2003, and 2009, which had been extended in 2010, along with the AMT patch, which together contributed $221 billion (44%) of the policy-related fiscal cliff. A separate bill to address the AMT patch and the "extenders" had also been approved by the Senate Finance Committee. Democrats and Republicans had offered alternative plans to address the 2001, 2003, 2009 rate cuts and the AMT, as shown in Table A-1 and Table A-2 ( S. 3412 ; H.R. 8 , and S. 3413 ). The main difference between the plans was that the Republican proposal contained $49 billion of income tax cuts for higher-income individuals (generally married couples and single individuals with $250,000 and $200,000, respectively, or more in income) and $31 billion of estate tax cuts that also benefit higher-income deceased taxpayers, that were not in the Democrats' plan (a total of $80 billion). The Democrats' plan extended $27 billion of tax cuts (primarily the expanded education, child, and earned income credits) in the 2009 legislation that are not in the Republicans' plan. These latter provisions are phased out as incomes rise and tend to benefit lower- and moderate-income taxpayers. The Republican plan also proposed a two-year AMT patch, whereas the Democratic plan has a one-year patch. The Democratic proposal would have eliminated about a third of the policy-related fiscal cliff for FY2013, and the Republican proposal would have eliminated about 40% with the one-year AMT patch, and 45% with the two-year AMT patch. Because more of the tax cuts in H.R. 8 and S. 3413 were directed at higher-income taxpayers, where effects were more likely to be captured when returns are filed, the revenue losses in the Republican plan were 37% larger than the Democratic plan in FY2013, but 61% higher during the budget window of FY2013-FY2022. The Senate passed a bill ( S. 3521 ) that would have combined a two-year AMT patch, extension of Section 179 expensing (which allows equipment investments to be deducted immediately with a higher cap), and the "extenders." Provisions would have expired at the end of 2013. Table A-3 shows the revenue effects of these provisions. There are 50 extenders but most of them--40--are for businesses and energy rather than for individuals. Two business provisions (the research credit and deferral of foreign-source financing income) accounted for two-thirds of the business total, and the renewable energy production tax credit accounted for two-thirds of the energy extenders. Continuing the extenders, which is not included in the other bills discussed above, would have eliminated about 7% of the policy-related fiscal cliff. In his latest budget, President Obama proposed extending some but not all of the tax cuts (as in S. 3412 ) and reducing spending cuts, along with other proposals.

A major policy concern for Congress has been when and whether to address the "fiscal cliff," a set of tax increases and spending cuts that would have substantially reduced the deficit in 2013. In projections made in March 2012 by the Congressional Budget Office (CBO), this fiscal restraint, constituting 5.1% of output in 2013, would have reduced growth to 0.5% from 4.4%. Unemployment would increase by 2 million. In August, updated estimates projected growth at a negative 0.5%. The American Taxpayer Relief Act (H.R. 8) eliminated part of the fiscal cliff. Policy choices with respect to the fiscal cliff are difficult because of the conflict between short-run and long-run economic and budgetary objectives. In the short run, the reduction in demand from the reduced budget deficits could damage an already fragile recovery. In the longer run, however, deficit reduction is needed to address a projected unsustainable debt level. For FY2013, compared with FY2012, the original policy-related fiscal cliff was projected at $502 billion, 80% reflecting tax increases, with an additional $105 billion from other changes. The expiration of the 2001, 2003, and 2009 tax cuts (extended in 2010) and the expiration of the alternative minimum tax (AMT) "patch," which indexes the AMT exemption for inflation, accounted for 44% of the policy-related fiscal cliff. Other tax provisions included expiration of the temporary two percentage-point reduction in the employee's Social Security payroll tax (19%); the expiration of other tax cuts, including depreciation and the "extenders" (13%); and taxes scheduled to come into effect as a part of health reform (4%). Spending reductions included the automatic spending cuts under the Budget Control Act (13%); the expiration of extended unemployment insurance benefits (5%); and the "doc fix" that would have lowered Medicare payments (2%). Most changes would have taken effect after 2012, although the AMT and many of the extenders expired after 2011. CBO estimates were similar to those of other forecasters. Estimates are uncertain; CBO suggested a range of potential reductions in growth from 0.9% to 6.8% if the fiscal cliff occurred. Thus, the effects could have been much smaller, but they could also have been significantly larger, than CBO's mid-point estimate. Different parts of the cliff were projected to have different effects per dollar of budgetary effects, with larger effects from the automatic budget cuts and ending extended unemployment benefits than from ending tax cuts for higher-income individuals. H.R. 8 passed by the House on January 1, 2013 (after previous Senate approval) eliminated two-thirds of the policy-related fiscal cliff, and slightly over half of the total (including non-policy-related provisions). Thus about half of the contractionary effect remains, which would appear to reduce output by about 2%. H.R. 8 permanently extended the 2001 and 2003 income tax cuts, except for high-income taxpayers and the $5 million exemption for the estate taxes (but with a higher rate). It extended the 2009 cuts through 2017. It extended unemployment insurance benefits, the doc fix, and bonus depreciation and the "extenders" through 2013. It delayed the automatic spending cuts for two months. Elements of the fiscal cliff that will continue to reduce the deficit in 2013 compared with 2012, and potentially exert a contractionary effect, are the payroll tax reduction, which expired; some individual income tax cuts for high-income individuals; tax increases enacted in health reform; the remaining budget cuts; and non-policy-related effects.

S hort-time compensation (STC), sometimes called work sharing, is a program within the federal-state unemployment compensation (UC) system. It provides pro-rated unemployment benefits to workers whose hours have been reduced in lieu of a layoff. STC may be helpful to a firm and its workers during an economic downturn or other periods when employers determine that a temporary reduction in work hours is necessary. The STC program has never reached many workers. As will be discussed below, approximately half of states have enacted STC legislation and, within these states, few firms and workers have participated. The reasons for this seem to be a combination of difficulty the U.S. Department of Labor (U.S. DOL) has had in implementing the 1992 authorizing legislation, lack of awareness on the part of employers, unsuitability of work sharing arrangements for some firms or workers, and costs of the program. Congress passed legislation in February 2012, P.L. 112-96 , which provided clarification to the definition of STC and also provided incentives to states to adopt and modify STC programs. Despite these changes, the proportion of UC claimants participating in STC remains low. The terms short-time compensation and work sharing are sometimes used interchangeably, however the term work sharing also refers more broadly to any arrangement under which a firm chooses to reduce work hours across the board for many or all workers instead of permanently laying off a smaller number of workers. In a typical example of work sharing, a firm that must temporarily reduce its 100-person workforce by 20% would accomplish this by reducing the work hours of the entire workforce by 20%--from five to four days a week--in lieu of laying off 20 workers. Workers whose hours are reduced are sometimes compensated with STC, which is equivalent to regular unemployment benefits that have been pro-rated for the partial work reduction. In this example, workers' STC benefits would be 20% of the unemployment benefit they would have been entitled to had they been laid off. As unemployment benefits generally replace almost half of an average worker's wages (with considerable variation among states), STC benefits for a worker who has experienced a 20% reduction in hours would amount to about 10% of the worker's wages before the reduction in hours. Employees would therefore receive a combined income of about 90% of their full-time wages as compensation for four days of work: 80% as wages plus 10% as STC. Working reduced hours because of economic conditions is currently quite common. In September 2016, an estimated 61% (3.5 million) of all part-time workers were employed part-time because of slack work or business conditions. Work sharing has a decades-long history in the United States. For example, in the early 1930s, President Hoover encouraged employers to reduce employees' hours instead of laying them off. In 1932, the President's Organization on Unemployment Relief issued a report that concluded, "Reduction in the working time is the principal method of spreading employment" through such means as reduced days per week, reduced hours per day, or rotating time off. The federal government introduced a temporary, national STC program in 1982 with the Tax Equity and Fiscal Responsibility Act (TEFRA; P.L. 97-248 ), which expired in 1985. The U.S. DOL did not curtail the program's operation in existing states, nor did it stop new states from adopting the program. The recession of 1990-1991 brought renewed attention to STC, leading Congress to enact permanent STC legislation, the Unemployment Compensation Amendments of 1992 (UCA; P.L. 102-318 ). However, at the time, government officials argued that the 1992 law was restrictive in application and would have put many existing state STC programs out of compliance and required clarification. In February 2012, Congress passed P.L. 112-96 , which, among other provisions, clarifies requirements related to STC programs. Under P.L. 112-96 , the term short-time compensation program means a program under which employers participate on a voluntary basis and submit a written plan to the appropriate state agency; an employer reduces the number of hours worked by employees in lieu of layoffs; employees' workweeks have been reduced by at least 10% and by no more than the percentage determined by the state (if any, but in no case by more than 60%); STC is paid as a pro rata portion of the unemployment compensation that would otherwise be payable to the employee if such employee were employed; eligible employees are not required to meet the "able, available and actively seeking work" requirement of regular unemployment compensation, but they must be available for their normal workweeks; eligible employees may participate in a state-approved, employer-sponsored, or Workforce Investment Act training program; and employers who provide health or retirement benefits (defined benefit or defined contribution pension plans) must certify to the appropriate state agency that such benefits will continue to be provided to STC participants under the same terms and conditions as though the workweek of such employee had not been reduced or to the same extent as other employees not participating in the STC program. As described below, P.L. 112-96 provided temporary, federal financing for 100% of STC benefits in states that meet the new definition of an STC program. A transition period of up to two years and six months from enactment of this law was provided for states with existing STC programs that did not meet the new definition. Currently, over half of the states and the District of Columbia have enacted STC programs. A description of STC programs in the states that currently operate them can be found in the Appendix . The federal-state unemployment insurance system also permits payment of "partial unemployment benefits" to a worker whose hours have been reduced significantly or to an unemployed worker who has accepted a part-time job while searching for a permanent, full-time job. To qualify for partial unemployment benefits, however, a worker must generally experience a significant reduction in work hours and pay. States provide partial unemployment benefits to part-time workers who are earning less than their weekly benefit amount (which is based on previous earnings). States reduce a worker's unemployment benefit by the amount of earnings from work, usually less a small disregard (for example, $50 or 25% of the weekly UC benefit amount), with the result that a person may receive almost no benefit if he or she has part-time earnings greater than the benefit amount. Unemployment benefits generally replace almost 50% of average wages, up to a cap, although there is considerable variation by state. As a result, to qualify for partial unemployment benefits, an average worker generally must have a reduction of 50% or more in his or her normal hours. For higher-income employees this may translate into even deeper cuts in work hours. Partial unemployment benefits may help employees whose hours are reduced by 50% or more, but they offer little incentive for employees to accept voluntarily a smaller reduction in work hours. By comparison, most state STC programs cap work hour reductions under a qualified work sharing plan to no more than 60%. STC benefits are available to employees whose work hours have been cut by as little as 10% and are not offset by work earnings. Although just over half of states now have STC programs, there continues to be only limited use of the option. From 1982 through 2008, the ratio of STC beneficiaries to regular unemployment compensation beneficiaries among all states attained 1% only twice, in 1992 and in 2001. In 2009, however, the ratio of STC beneficiaries to regular unemployment compensation beneficiaries rose to 2%, and this ratio reached nearly 3% in 2010, as shown in Table 1 . Use of STC is highly countercyclical to business conditions because employers are more likely to be interested in work sharing when they need to manage labor costs in the face of relatively low demand for their products. The local peaks in 1992, 2001, and 2009-2011 correspond with the recessions of July 1990 to March 1991, March 2001 to November 2001, and again with the December 2007-June 2009 recession. Almost 98,000 workers received STC in 1992, about 111,000 received STC in 2001, about 314,000 received STC benefits in 2010, and about 236,000 workers received STC in 2011. In 2013, STC use fell significantly to under 74,000 beneficiaries. By 2015, the number of new STC beneficiaries had fallen to just over 60,000; however, it remains higher than numbers reported in the pre-recessionary years of 2004-2007. Table 2 shows first payments of STC benefits during 2015 in states with STC programs. STC usage varies significantly among the states with STC programs. For example, the ratio of STC beneficiaries to beneficiaries of regular unemployment compensation ranged from negligible usage in many states to over 9% in Missouri. A 2002 study (hereinafter, MaCurdy et al.) in California, the largest (numerically) user of STC, found that manufacturing firms were more likely than other firms to use STC. Manufacturing firms accounted for only 11% of firms generating unemployment benefits of all kinds but they accounted for 62% of STC firms. Wholesale trade was the other sector more likely than average to use STC. Firms that used STC were generally older and larger than non-STC users. The average employment in STC firms was 239, compared to average employment of only 40 workers in firms that generated UI charges through layoffs in 2002. Older and larger firms were also more likely to have human resources departments to assist with implementing STC. In Connecticut in 2009, manufacturing firms were more likely than other firms to use STC. An interesting finding in the California study is that STC firms often have jobs that require lengthy apprenticeships or on-the-job training programs in which workers learn skills not taught in school. Within the manufacturing sector, the industries that used STC the most were manufacturers of electronics, industrial machinery, fabricated metals, instruments, furniture, primary metals, leather, rubber and plastics, and paper products. Within the construction sector, STC firms were more likely than other construction firms to be "specialty trades contractors" such as plumbers and electricians. A firm's decision to seek STC as part of a work sharing arrangement hinges on a number of factors, for example whether work sharing is appropriate for both a firm and its employees. The low usage rate of STC, even in some states that offer the program, may be due in part to the fact that work sharing itself is not appropriate for all firms or all employees. Work sharing programs in combination with STC can provide macroeconomic benefits to a state by preserving jobs during cyclical downturns, maintaining consumption through continued wages and STC, and ensuring the continuation of employer-sponsored health insurance and pensions, thereby reducing reliance on state-provided services and supports. As is well known, widespread unemployment leads to lower consumer spending and sales tax revenues. In addition, state employment services realize savings through work sharing because they are not called on to provide job search and other assistance. In 2010, the National Governors Association promoted STC as one of a number of recommended policies for assisting workers in an economic downturn. The administrative costs of STC programs have been a concern for state labor agencies. In many states, STC is still paper-based and states approve employers' work sharing plans on a case-by-case basis. In addition, STC may increase processing costs for the state agency relative to layoffs because, for a given firm, work sharing affects a larger number of workers than if the firm were to lay off workers. Some suggest that states would experience at least partially offsetting savings as a result of not having to administer certain components of the regular unemployment system, such as the requirements that a worker be actively seeking work and that he or she not refuse suitable work. No studies have attempted to quantify STC's net administrative cost to states, however. Some states have responded to high administrative costs by reducing the layers of approval for plan submissions, by automating the claims process, and by switching from employee-filed claims to employer-filed claims. States that have developed strategies to automate STC filing, approval, and ongoing claims have been able to reduce administrative costs, according to a study by Berkeley Planning Associates and Mathematica Policy Research, Inc. (hereinafter, Berkeley Planning Associates and Mathematica). Massachusetts has gone the furthest by fully automating its STC program in 2001 and 2002. The system is Internet-based, and employers use it to submit their work sharing plans and their weekly STC transactions. Massachusetts has offered to make its software available at no cost to other states. The impact of STC benefits on the solvency of state unemployment programs, as reflected in the balance of state unemployment trust fund (UTF) accounts, is likely small. The immediate impact is negative as STC benefit payments increase with the onset of a recession. Increased state unemployment tax receipts respond with a lag. STC benefits are experience-rated in approximately the same manner as regular unemployment benefits. As a result, the study by Berkeley Planning Associates and Mathematica concluded that the long-run effect on a state's UTF account, relative to layoffs, is probably minimal, although the impact could potentially be more serious if STC participation rates were very high and tax schedules were constrained. When STC was first implemented in some states in the late 1970s and 1980s, proponents argued that it would help protect the gains made by affirmative action. Because women and minorities were newer to the workforce, they were considered more vulnerable to layoffs than workers with seniority. However, the 1997 study by Berkeley Planning Associates and Mathematica found no evidence that STC disproportionately benefits ethnic or racial minorities, or women, although it is still possible that the program could help entry-level and newer workers in general. Under P.L. 112-96 , the Labor Secretary was authorized to award grants to eligible states for STC programs, with one-third of each state's grant available for implementation and improved administration purposes and two-thirds of each state's grant available for program promotion and enrollment of employers. The maximum amount of all grants to states authorized under P.L. 112-96 was $100 million; in the end, states received almost half ($46 million) of those funds. For employers, the decision between layoffs and an arrangement combining work sharing with STC may rest on both financial and non-quantifiable factors such as employee morale. Some firms may find that the combination of work sharing and STC helps reduce total costs during a downturn; however, other firms may find that layoffs are more cost-effective. Immediate cost savings to employers under a work sharing/STC arrangement come largely from reduced expenditures on wages and salaries. If a work sharing arrangement that involves all employees is the alternative to laying off low-seniority (and generally lower paid) employees, then STC would presumably save the employer in wage costs. Work sharing and STC arrangements can also reduce recruitment and training costs for employers. When business improves, employers can increase the hours of existing employees rather than recruit and train new ones. Some employers find work sharing and STC programs attractive because they prevent the firm from losing skilled employees during an economic downturn and reduce the risk that skilled employees may leave for other companies. According to the MaCurdy et al. study of STC in California, employees of STC firms tended to be older and better paid than workers collecting regular unemployment benefits, suggesting that employers were using STC to retain highly skilled workers. Some employers use work sharing and STC to protect specific groups of highly skilled workers within a larger organization that is undergoing layoffs. For example, New York State's STC program allows employers to apply different percentage reductions to hours and wages in different departments, and STC may be implemented at the level of one or more departments, shifts, or units. Berkeley Planning Associates and Mathematica, as part of their 1997 study of STC, surveyed 500 employers who used work sharing in combination with STC and found that the ability to retain valued employees was a major attraction. Most employers who used the STC program reported that they were satisfied and would use it again, according to the same 1997 survey. In fact, many firms used STC repeatedly, with some firms using it in every quarter over a three-year period. Work sharing and STC arrangements may help sustain employee morale and productivity compared to layoffs. Even employees who survive a layoff may be vulnerable to "survivor's guilt" and emotional contagion (picking up on the despair of laid-off employees) that can reduce productivity. The most frequent complaint found in the survey conducted by Berkeley Planning Associates and Mathematica was that firms' state unemployment taxes increased following use of the STC program. In the survey, firms using STC experienced higher unemployment insurance (UI) charges compared to firms that had not used STC. The STC firms, however, also continued to lay off workers. One interpretation offered by the survey's authors is that STC firms were experiencing greater economic distress than similar non-participating firms. In states where STC is charged to the firm according to the experience rating rules of the regular unemployment program, the firm incurs no more in UI tax costs by using STC than it would through layoffs. For example, MaCurdy et al. wrote about California's STC system that "it does not matter for UI tax calculations whether a firm generates $1,000 in UI benefits through work sharing or layoffs." Seven states also impose additional tax provisions on work sharing employers, in order to ensure that employers who already pay the maximum state unemployment tax rate share in the burden. According to the Berkeley Planning Associates and Mathematica study of STC, states appear to experience-rate STC claims at least as well as regular unemployment compensation claims. Certain nonprofit organizations, state and local governments, and federally recognized Indian tribes are permitted to reimburse their state unemployment funds for unemployment benefit payments attributable to service in their employ, instead of contributing taxes to the state's trust fund. Most state laws provide that reimbursing employers will be billed at the end of each calendar quarter, or another period, for benefits paid during that period. For these "reimbursing" employers, STC is not a cost-effective option. There likely are several reasons why most reductions in hours take the form of layoffs rather than shorter work schedules. Employers' lack of awareness of STC has been cited as one reason for low employer participation. In addition, production technologies may make it expensive or impossible to shorten the work week. This is the case in some manufacturing industries, for example, where the costs of shutting down and starting up equipment are high. Moreover, a work sharing arrangement may not reduce total costs to employers in exact proportion to the reduction in work hours. Some non-wage employment costs--referred to as "quasi-fixed" costs--are largely independent of the number of hours worked. Health and pension benefits are among those that fall into this category. P.L. 112-96 required employers to certify that health insurance and pension benefits during the period of the work sharing arrangement will not be reduced. Thus, STC firms continue to bear the full (rather than the pro-rated) costs of the two benefits. Work sharing helps workers who would have faced layoffs avoid significant hardship, while spreading more moderate earnings reductions across more working individuals and families. When work sharing is combined with STC, the income loss to work sharing employees is reduced. Many state STC programs also require that employers continue to provide health insurance and retirement benefits to work sharing employees as if they were working a full schedule. Some employees are simply happy to have any job in a tough labor market. One worker who received STC in 2009 in conjunction with a work sharing arrangement told a Rhode Island newspaper, "Versus being totally unemployed, it's a big plus. There aren't any jobs out there." Analysts have suggested that work sharing could shift the impact of an economic downturn from younger workers to older workers because it spreads the pain of a workforce reduction among workers of all ages. Younger employees, who are often the first to be fired in a downturn, presumably have the most to gain by work sharing combined with STC. More experienced and more highly paid workers would presumably have the most to lose, particularly in firms where jobs are protected by seniority. Consequently, employees with seniority may oppose a program that shares reductions across the labor force. Some research suggests that reduced work hours may have different implications for professional employees compared to hourly workers. Professional employees sometimes welcome a better work-life balance, while in some cases hourly workers rely not just on a full work schedule but also on overtime in order to make ends meet. When STC was introduced in the 1970s and 1980s, labor groups warned that safeguards were necessary to avoid reducing workers' health insurance and pensions. One concern had been that reduced work hours and pay could result in smaller contributions to pension plans. Traditional defined benefit pension plans generally calculate benefits based in part on a worker's high three or high five earnings years, so that workers close to retirement could be directly affected by a reduction in work hours and pay. As will be discussed below, Congress included protections for health and pension benefits when it authorized a temporary STC program from 1982 to 1985. These concerns seem to have died down during the 1980s, however, and Congress did not include health or pension safeguards when it passed a permanent law authorizing STC in 1992. By 2012, these concerns had resurfaced and as a result P.L. 112-96 requires employers to certify that health insurance and pension benefits during the period of the work sharing arrangement will not be reduced. An argument can be made that, in declining industries, work sharing and STC arrangements may cause some workers to delay serious job searches or retraining efforts. The relative advantages and disadvantages for an individual will depend in part on his or her particular skill set. STC cannot forestall what may be an inevitable layoff, however. It is sometimes said that states are laboratories for policy, and the history of STC appears to bear this out. Following the recession of 1973-1975, state governments, businesses, and labor groups began to promote work sharing arrangements that included government-provided income support. Table 3 provides the enactment year for all states with an STC program. New York was the first state to consider STC legislation, in 1975, as part of a broader employment policy bill. The legislation died in committee. In 1978, California became the first state to enact an STC law. California's action was in response to anticipated large-scale public sector layoffs arising from Proposition 13 tax reductions that limited state spending. Although the public sector layoffs never occurred, the private sector used the program. California was followed by Arizona in 1981. Oregon enacted STC legislation in 1982, with strong support from the Motorola Corporation. During this period of state innovation, U.S. DOL did not challenge states' STC programs, although federal unemployment compensation law did not explicitly allow states to use their unemployment trust funds to pay STC. The federal government introduced a temporary, national STC program in 1982 with the Tax Equity and Fiscal Responsibility Act (TEFRA; P.L. 97-248 ). Motorola and the Committee for Economic Development both lobbied in Washington for the legislation. The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), after some initial opposition, came to support STC provided that safeguards were incorporated to protect pension and health insurance benefits and to secure union certification for employers' work sharing plans. TEFRA, which expired in 1985 after three years, authorized states to use monies in their state accounts in the Unemployment Trust Fund to pay STC benefits to eligible employees whose work hours had been reduced by at least 10% under a qualified employer work sharing plan. The law required the employer to draw up a formal work sharing plan and to seek the relevant state agency's approval of the plan as well as certification by the relevant union(s) if applicable. TEFRA also provided that employees who received STC benefits would not be required to meet a state's work search and refusal of suitable work requirements for unemployment benefits. Employees would, however, be required to be available to work a normal work week. TEFRA required employers to continue to provide health and pension benefits to employees whose workweek was reduced as if the employees worked their normal hours. The act required that employers who used STC be charged in the same manner as other UI taxes, in order to ensure that STC costs were paid by participating employers instead of being passed on to other employers. TEFRA directed the Secretary of Labor to develop model STC legislation for use by the states and also to provide technical assistance to states. Finally, P.L. 97-248 directed the Secretary of Labor to submit a final report evaluating the program and making recommendations. U.S. DOL published model state legislative language and guidelines in July 1983. During TEFRA's three-year experimental period, eight additional states enacted STC programs. Following the expiration of the three-year temporary program in 1985, the existing state programs continued. U.S. DOL stopped promoting STC when its mandate to act expired with the end of the temporary federal law. However, U.S. DOL did not curtail the program's operation in existing states, nor did it stop new states from adopting the program. U.S. DOL allowed states to use the expired 1983 federal guidance and continued to collect reporting data on STC programs in the states. The recession of 1990-1991 renewed attention to STC, leading Congress to enact permanent STC legislation, the Unemployment Compensation Amendments of 1992 (UCA; P.L. 102-318 ). The 1992 law amended the Internal Revenue Code to authorize states to pay STC benefits from their accounts in the Unemployment Trust Fund. UCA essentially consisted of a five-point definition of STC as a program under which (1) individuals' workweeks were reduced by at least 10%; (2) STC was paid as a pro rata portion of the full unemployment benefit that an individual would have received if totally unemployed; (3) STC beneficiaries were not required to meet availability for work and work search requirements, unlike beneficiaries of regular unemployment compensation, but they were required to be available for their normal work week; (4) STC beneficiaries could participate in employer-sponsored training programs; and (5) the reduction in work hours was in lieu of layoffs. UCA also directed the Secretary of Labor to assist states in establishing and implementing STC programs by developing model legislative language and providing technical assistance and guidance to the states. Finally, UCA directed U.S. DOL to report on implementation of the STC program. UCA did not contain the employee and employer safeguards that had been present in TEFRA. In particular, UCA did not require employers to do the following: submit work sharing plans to the state for approval; certify to the relevant state agency that the reduction in work hours was in lieu of temporary layoffs; win consent from the relevant union(s); or contribute to health insurance or pension plans as if the employee continued to be fully employed. UCA also did not contain the TEFRA provision that STC be charged to employers "in a manner consistent with the State law" for the purposes of determining state unemployment taxes on employers ( P.L. 97-248 SS194(e)). Finally, UCA did not give the U.S. Secretary of Labor the ability to determine what program elements would be appropriate beyond the 1992 law's five definitional items. These provisions were removed by committee staff in order to give states more flexibility. From 1992 until 2012 (when Congress passed P.L. 112-96 ), U.S. DOL largely sidestepped implementation of STC, neither developing new model state legislative language nor providing new guidance to the states. U.S. DOL did, however, support a study of the program (the 1997 study by Berkeley Planning Associates and Mathematica). Shortly after enactment of the 1992 law, U.S. DOL and Clinton Administration officials claimed the permanent federal law was "unworkable," according to an article by David E. Balducchi and Steven Wandner (hereinafter, Balducchi and Wandner). At the time, government officials argued that the 1992 law was restrictive in application and would have put many existing state STC programs out of compliance. For example, Clinton Administration and U.S. DOL officials were concerned that existing state provisions requiring employers to continue to provide health and pension benefits were out of compliance with UCA's definition of STC, and U.S. DOL would need to require states to roll back these provisions. On February 22, 2012, the President signed into law P.L. 112-96 , the Middle Class Tax Relief and Job Creation Act of 2012, which was a comprehensive package of measures that includes STC provisions based largely on stand-alone bills S. 1333 (Senator Jack Reed) and H.R. 2421 (Representative Rosa DeLauro). P.L. 112-96 clarified the definition of STC and offered incentives to states to adopt and modify STC programs. Under the new legislation, employers voluntarily submitted written STC plans for approval by the relevant state agency; eligible workers would receive unemployment compensation on a pro rata basis and would be able to participate in state-approved training; employees would meet the availability for work and work search requirements while collecting STC by being available for their work week as required by the state agency; and employers who provide health and retirement benefits would be required to certify that these benefits would continue to be provided under the same terms and conditions as though employees' work weeks had not been reduced or to the same extent as other employees not participating in the STC program. A state was able to ask U.S. DOL to approve other appropriate provisions in the state's STC law. For states that were administering STC programs that did not meet the new definition in P.L. 112-96 , a transition period equal to the earlier of 2 1/2 years or the date the state changes its STC law was provided. P.L. 112-96 provided temporary (up to three years) federal financing for 100% of STC benefits in states that met the new definition of an STC program. States with existing STC programs that did not meet the new definition were eligible for 100% federal financing during a transition period of two years. The 100% federal financing ended on August 22, 2015. States without existing STC programs were allowed to enter into an agreement with U.S. DOL to receive federal reimbursement for temporary (up to two years) federal financing of 50% of STC payments to individuals, as well as federal reimbursement for additional administrative expenses, with employers paying the other 50% of STC benefit costs. If a state entered into an agreement with the U.S. Secretary of Labor and subsequently enacted a state law meeting the criteria in P.L. 112-96 , that state was eligible to receive 100% federal financing for STC programs for a total period exceeding no longer than three years. Under P.L. 112-96 , U.S. DOL awarded grants to eligible states, with one-third of each state's grant available for implementation and improved administration purposes and two-thirds of each state's grant available for program promotion and enrollment of employers. The maximum amount of all grants was limited to $100 million, less a small amount to be used by U.S. DOL for outreach. U.S. DOL was required to develop model legislative language and to provide technical assistance and guidance to states, in consultation with employers, labor organizations and state workforce agencies. U.S. DOL was directed to establish reporting requirements concerning the number of averted layoffs and participating employers. States had to apply for the STC grant(s) on or before December 31, 2014. Finally, P.L. 112-96 provided $1.5 million for U.S. DOL to report to Congress and the President, within four years of enactment, on the implementation of the legislation, including a description of states' best practices, analysis of significant challenges, and a survey of employers in all states to determine the level of interest in STC. STC is currently legislated in just over half of the states and the District of Columbia. In these states, it has never reached a large number of workers, although there is evidence of increased use in 2009 through 2011. Congress passed P.L. 112-96 in February 2012 to promote state adoption and implementation of STC programs; however, STC remains a little-used program. Currently, 27 states and the District of Columbia have active STC programs. Table A-1 displays how STC is implemented in those states. The basic structure of each state's STC program is broadly similar: eligible individuals have had their workweeks reduced by at least 10%, and this reduction in work hours must be in lieu of temporary layoffs. The amount of unemployment compensation payable to an individual is a pro rata share of the unemployment compensation to which that individual would have been entitled if he or she had been totally unemployed. Eligible employees are not required to meet the "able and available for work" requirement of regular unemployment compensation, but they must be available for their normal workweek. Finally, eligible employees may participate in an employer-sponsored training program. Within these broad outlines there is considerable variation among states. An employer's STC agreement cannot exceed a period of 6 months in 5 states but may span up to approximately 1 year in 20 states and the District of Columbia. An individual may receive STC benefits for up to 18 weeks in Colorado or for up to 52 weeks in 8 states. Alternatively, California, Michigan, Washington, and Wisconsin place no limits on the number of weeks a worker may receive STC benefits, although these states have caps on total benefits paid to an individual to the maximum potential total UC entitlement.

Short-time compensation (STC) is a program within the federal-state unemployment insurance system. In states that have STC programs, workers whose hours are reduced under a formal work sharing plan may be compensated with STC, which is a regular unemployment benefit that has been pro-rated for the partial work reduction. Although the terms work sharing and short-time compensation are sometimes used interchangeably, work sharing refers to any arrangement under which workers' hours are reduced in lieu of a layoff. Under a work sharing arrangement, a firm faced with the need to downsize temporarily chooses to reduce work hours across the board for all workers instead of laying off a smaller number of workers. For example, an employer might reduce the work hours of the entire workforce by 20%, from five to four days a week, in lieu of laying off 20% of the workforce. Employers have used STC combined with work sharing arrangements to reduce labor costs, sustain morale compared to layoffs, and retain highly skilled workers. Work sharing can also reduce employers' recruitment and training costs by eliminating the need to recruit new employees when business improves. On the employee's side, work sharing spreads more moderate earnings reductions across more employees--especially if work sharing is combined with STC--as opposed to imposing significant hardship on a few. Many states also require that employers who participate in STC programs continue to provide health insurance and retirement benefits to work sharing employees as if they were working a full schedule. Work sharing and STC cannot, however, avert layoffs or plant closings if a company's financial situation is dire. In addition, some employers may choose not to adopt work sharing because laying off workers may be a less expensive alternative. This may be the case for firms whose production technologies make it expensive or impossible to shorten the work week. For other firms, it may be cheaper to lay off workers than to continue paying health and pension benefits on a full-time equivalent basis. Work sharing arrangements in general also redistribute the burden of unemployment from younger to older employees, and for this reason the arrangements may be opposed by workers with seniority who are less likely to be laid off. From the perspective of state governments, concerns about the STC program have included the program's high administrative costs. Massachusetts has made significant strides in automating STC systems and reducing costs, but many other states still manage much of the STC program on paper. Currently, approximately half of the states and the District of Columbia have enacted STC programs to support work sharing arrangements. However, few UC beneficiaries are STC participants. At the peak of its use in 2010, the STC beneficiaries totaled nearly 3% of regular unemployment compensation first payments. The reasons for low take-up of the STC program are not completely clear, but key causes include lack of awareness of the program, administrative complexity for employers, and employer costs. P.L. 112-96, passed in February 2012, offered grants to states to help bring attention to the states' STC laws. In addition, P.L. 112-96 provided temporary federal funding to states that have existing STC programs or to create a new one. Despite these changes, the proportion of UC claimants receiving funds from STC remains low relative to overall UC claims.

The United States currently addresses issues related to global hunger and food security through two primary types of approaches: (1) agricultural development, such as the Obama Administration's Feed the Future initiative; and (2) emergency and humanitarian food aid and assistance, such as the Food for Peace (P.L. 480) program. Foreign assistance, including agricultural development and some emergency food assistance programs, is administered primarily by the U.S. Agency for International Development (USAID), using existing authorities provided in the Foreign Assistance Act of 1961, as amended. Funding is provided through the annual Department of State and Foreign Operations appropriation bill. Funding for bilateral agricultural development and food security-related activities is allocated primarily from USAID's Development Assistance (DA) account, but also from the Economic Support Fund (ESF), and from the Assistance for Europe, Eurasia, and Central Asia (AEECA), Global Health and Child Survival (GHCS), and International Development Assistance (IDA) accounts. In addition, funding for some multilateral efforts, such as the World Bank Global Agriculture and Food Security Program (GAFSP) Trust Fund, is provided through annual appropriations to the Treasury Department. U.S. international food aid programs are administered by USAID and USDA's Foreign Agricultural Service (FAS), as authorized by the 2008 farm bill ( P.L. 110-246 ), and are funded through annual Agriculture appropriation bills. In June 2009, at the G8 Summit in L'Aquila, Italy, President Obama pledged $3.5 billion over three years (FY2010 to FY2012) to a global hunger and food security initiative to address hunger and poverty worldwide. The U.S. commitment is part of a global pledge, by the G20 countries and others, of more than $22 billion. In May 2010, the Department of State officially launched the Administration's global hunger and food security initiative, called Feed the Future (FtF). FtF aims to sustainably reduce hunger and poverty by "addressing the root causes of hunger that limit the potential of millions of people," and by "establishing a lasting foundation for aligning our resources with country-owned processes and sustained, multi-stakeholder partnerships." The two primary objectives of the FtF initiative are (1) to accelerate inclusive agricultural sector growth, and (2) to improve the nutritional status in developing countries, particularly of women and children. The Department of State was the lead agency initially in developing the Feed the Future strategy, while USAID is the primary agency responsible for coordinating its implementation. Feed the Future builds on the five principles for sustainable food security first articulated at L'Aquila and endorsed at the 2009 World Summit on Food Security in Rome: (1) supporting comprehensive strategies; (2) investing in country-owned plans; (3) improving coordination among donors; (4) leveraging effective multilateral institutions; and (5) delivering on sustained and accountable commitments. In order to "increase the effectiveness of [our] investments," FtF focuses activities in 20 developing countries in sub-Saharan Africa, Asia, and Latin America and the Caribbean that have been determined by USAID to have the greatest potential to realize impact based on the Rome Principles ( Table 1 ). Investments are taking place in two phases, depending on the extent that country investment plans have been developed in a given host country. The Feed the Future strategy does not explicitly include food aid funding or programs (such as Food for Peace/P.L. 480), but the strategy guide states "that the United States will maintain its strong commitment to providing emergency and humanitarian food assistance to meet urgent needs and mitigate unexpected disasters." In addition to bilateral engagement, the United States also has committed to provide funding for multilateral efforts to address global food security. In January 2010, the World Bank Board approved the establishment of the Global Agriculture and Food Security Program (GAFSP) Trust Fund in direct response to a request made by the leaders of the G20 in 2009. The primary objective of the GAFSP is to improve the food security and livelihoods of the poor in developing countries through more effective public and private sector investment in the agricultural and rural sectors. On April 22, 2010, the World Bank officially launched GAFSP with contributions from the United States, Canada, Spain, South Korea, and the Bill & Melinda Gates Foundation. Subsequently in 2010, Ireland and Spain made contributions. Financial commitments to the GAFSP Trust Fund as of January 31, 2011, totaled $925.2 million and are allocated to public and private sector funding windows. GAFSP financing is available to International Development Association (IDA)-eligible World Bank member countries. Additional need-based screens, such as undernourishment levels, per capita GDP, a suitable policy environment, and the development of a comprehensive agricultural development strategy, further restrict country eligibility. The GAFSP Trust Fund has awarded a total of $337 million to eight countries, including Bangladesh ($52.5 million); Ethiopia ($54 million); Haiti ($36.75 million); Mongolia ($13.125 million); Niger ($34.6 million); Rwanda ($52.5 million); Sierra Leone ($52.5 million); and Togo ($41 million) For over 55 years, the United States has provided food aid for emergency food relief and to support development projects. Foreign food aid is distributed primarily through five program authorities: the Food for Peace Act (P.L. 480); Section 416(b) of the Agricultural Act of 1949; the Food for Progress Act of 1985; the McGovern-Dole International Food for Education and Child Nutrition Program; and the Local and Regional Procurement Pilot Project. The Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 , the 2008 farm bill) authorizes through FY2012 and amends most U.S. international food aid programs. These programs are primarily funded through the annual Agriculture appropriations bills and are administered either by USAID or by USDA's Foreign Agricultural Service (FAS). The 2008 farm bill also reauthorizes the Bill Emerson Humanitarian Trust (BEHT), a reserve of commodities and cash for use in the Food for Peace programs to meet unanticipated food aid needs. Average annual spending on all international food aid programs over the past decade has been approximately $2.2 billion, with Food for Peace Title II activities comprising the largest portion of the total budget (about 50% to 90% of the total food aid budget annually over the past decade). Also, in recent years, the President's budget request has included up to $300 million annually in International Disaster Assistance for emergency food assistance interventions such as local and regional procurement and cash vouchers as options for delivering food assistance. As mentioned previously, funding for foreign assistance and agricultural development activities, including Feed the Future, is made available through the annual Department of State, Foreign Operations, and Related Programs appropriations bill from several different budget accounts at USAID. For FY2010, the Administration allocated about $1.31 billion to FtF from resources available. FtF allocations in FY2010 included $1.17 billion for agricultural development programs at USAID, $75 million for nutrition-related activities from the Global Health and Child Survival (GHCS) account at USAID, and $67 million allocated to the World Bank GAFSP. Separately, the Title II program within Food for Peace received $1.84 billion and the McGovern-Dole International Food for Education and Child Nutrition Program was allocated $209.5 million. The FY2011 congressional budget justification for the Department of State and Foreign Operations was the first instance in which the Administration requested funds specifically to implement FtF. The Administration's FY2011 budget request included $1.84 billion for FtF-related activities, which was a little over 3% of the total international affairs budget request, and just over 40% more than the estimated FY2010 allocation to similar activities. The FY2011 increase was largely due to a new request in FY2011 of $408 million for the World Bank GAFSP Trust Fund. For FY2011, the Administration also requested an additional $2 billion for humanitarian and emergency assistance related to food security, which included $1.690 billion for Food for Peace Title II emergency and non-emergency food aid, and $861 million for International Disaster Assistance (IDA), of which up to $300 million from the IDA account was designated for emergency food assistance purposes, as was the case in FY2010. On April 14, 2011, Congress passed a continuing resolution (final FY2011 CR; P.L. 112-10 ) that funded federal agencies and programs through the remainder of FY2011. The final FY2011 CR included funding allocations to the major USAID budget accounts, such as Development Assistance (DA), Economic Support Fund (ESF), Assistance to Europe, Eurasia, and Central Asia (AEECA), Global Health and Child Survival (GHCS), and International Disaster Assistance (IDA), but it did not provide specific recommendations about how much funding from these accounts should be allocated toward FtF programming. As a result, it is unclear at this point how the changes in USAID's FY2011 funding level will translate to changes in the level of funding and programming for FtF activities ( Table 2 ). After appropriations bills have been passed and become law, USAID is required to submit a statement known as a Section 653(a) report to Congress to show how USAID plans to allocate the appropriated budget to each USAID mission and how funds will be allocated by country. The Section 653(a) report, which is typically completed a few months after the final appropriations bill is passed, should provide additional insights about FtF funding levels for FY2011. The final FY2011 CR included $2.53 billion for DA, which is essentially no change from FY2010 levels, but is 15% less than the Administration's FY2011 request; $5.96 billion for ESF, which is a 20% decrease from FY2010 and an almost 24% decrease below the Administration's FY2011 request; $697 million for AEECA, which is a 6% decrease from FY2010 and about 30% under the Administration's FY2011 request; and $2.42 billion for GHCS activities administered by USAID, which is an almost 4% reduction from FY2010 levels and the Administration's request ( Table 2 ). The tight federal fiscal situation, the need to find areas for deficit reduction, and the generally less than positive view of foreign assistance by the current House leadership are all in part responsible for the reductions in several of the USAID foreign aid funding accounts. The most dramatic cut made to ESF may be due to Congress's growing desire to reduce funding to "frontline states," such as Iraq and Afghanistan. ESF funds are typically used to promote special U.S. economic, political, or security interests. For instance, following the Camp David accords, most ESF funds went to countries such as Egypt and Jordan to support the Middle East peace process. Since 9/11, ESF has primarily been used to support countries of importance in the war on terrorism. While many activities funded through ESF are essentially identical to those provided under regular humanitarian and development programs (such as those funded through Development Assistance), the objectives, decision criteria, and motivation for project and country selection are based more on the direct political and strategic interests of the United States, and less on the development and humanitarian needs of the recipient country. In addition, the final FY2011 CR includes $1.5 billion for Title II Food for Peace food aid programs, an 18% decrease from FY2010 levels and 11% below the Administration's request; $199.5 million for the McGovern-Dole Food for Education program, an almost 5% decrease from the FY2010 levels and the Administration's request; and $865 million for IDA, a 33% decrease from FY2010 and about 2% above the Administration's request ( Table 3 ). In February 2011, the Administration submitted its FY2012 budget, which requests funding of $1.56 billion for the FtF initiative, about $250 million, or 19%, more than the amount allocated in FY2010 ( Table 3 ). The largest component of FY2012 FtF funding would be the allocation of $922.3 million of Development Assistance (DA) for bilateral agricultural development-related activities, and the request also includes $134.4 million for ESF and $43.5 million for AEECA ( Table 4 ). The FY2012 request for FtF activities further includes $150 million for the Global Health and Child Survival program, to be directed to nutrition activities linked with the FtF initiative, and a U.S. contribution of $308 million to the World Bank GAFSP. Separately, for FY2012, the Administration also requests $1.690 billion for Food for Peace Title II emergency and non-emergency food aid and $300 million of International Disaster Assistance for emergency food security, which could be used for local and regional purchase of food and interventions such as cash vouchers and cash transfer programs to facilitate access to food ( Table 3 ). A breakdown of the Administration's proposed FtF funding allocation for FY2012 by region and activities is given in Figure 1 . In addition to bilateral investments in focus countries, the FtF initiative will also include investments in related and complementary programming in the following areas: regional programs to address food security challenges that require cooperation across national borders; multilateral mechanisms such as the World Bank GAFSP Trust Fund (as described above); strategic partners, such as Brazil, India, and China, in order to promote technical, policy, and scientific cooperation with FtF focus countries; and global research and innovation to improve technology development and dissemination that will continue to drive agricultural productivity around the world.

The United States currently addresses issues related to global hunger and food security through two primary types of approaches: (1) agricultural development and (2) emergency and humanitarian food aid and assistance. Agricultural development activities, such as the Administration's Feed the Future initiative and some emergency food assistance programs, are administered primarily by the U.S. Agency for International Development (USAID) using existing authorities provided in the Foreign Assistance Act of 1961, as amended. Funding is provided through the annual Department of State and Foreign Operations appropriation bill. In addition, funding for some multilateral efforts, such as the World Bank Global Agriculture and Food Security Program (GAFSP) Trust Fund, is provided through annual appropriations to the Treasury Department. U.S. international food aid programs are administered by USAID and USDA's Foreign Agricultural Service (FAS), as authorized by the 2008 farm bill (P.L. 110-246), and are funded through annual Agriculture appropriation bills. For FY2010, the Administration allocated about $1.31 billion to its Feed the Future (FtF) initiative, which included $1.17 billion for bilateral agricultural development programming, $75 million for nutrition-related activities carried out in collaboration with global health initiatives, and $67 million allocated to the World Bank GAFSP. Separately, in FY2010, about $1.84 billion was allocated to Title II activities under the Food for Peace program, $209.5 million for the McGovern-Dole International Food for Education and Child Nutrition Program, and $300 million from the International Disaster Assistance account at USAID for other emergency food assistance activities including safety net programs, cash vouchers, and local and regional procurement. The FY2011 congressional budget justification for the Department of State and Foreign Operations was the first instance in which the Administration requested funds specifically to implement FtF. The Administration's FY2011 budget request included $1.84 billion for FtF-related activities, which was more than a 40% increase in the FY2010 allocation, primarily due to a $408 million request for the World Bank GAFSP Trust Fund. On April 14, 2011, Congress passed a continuing resolution to provide government-wide funding through the end of FY2011 (P.L. 112-10). The FY2011 CR provided allocations only to primary USAID budget accounts, several of which, such as Development Assistance, the Economic Support Fund, and the Global Health and Child Survival accounts at USAID, received decreases in funding relative to FY2010 levels. At the same time, the final FY2011 CR did not include specific allocations from USAID budget accounts for food security-related activities, so the implications of the FY2011 budget-level changes on the funding and programming for the Feed the Future initiative remain uncertain. The final FY2011 CR also included $1.5 billion for Title II Food for Peace food aid programs and $199.5 million for the McGovern-Dole Food for Education program. The Administration's FY2012 request includes $1.56 billion for the FtF initiative, about $250 million, or 19%, more than the amount allocated in FY2010. This includes $1.1 billion in bilateral agricultural development assistance, $150 million for nutrition-related activities, and a U.S. contribution of $308 million to the World Bank GAFSP. Separately, for FY2012, the Administration is also requesting $1.690 billion for Food for Peace Title II emergency and non-emergency food aid, $200.5 million for the McGovern-Dole Food for Education Program, and $300 million of International Disaster Assistance for emergency food security-related activities.

Many U.S. officials and Members of Congress consider Spain to be an important U.S. ally and one of the closest U.S. partners in Europe. Political developments in Spain, cooperation between the United States and Spain on security issues and counterterrorism, and U.S.-Spain economic ties are possible topics of continuing interest during the 115 th Congress. Members of Congress may have an interest in considering the dimensions and dynamics of current issues in U.S.-Spain or U.S.-European relations, or with regard to NATO, in the course of oversight or legislative activities, or in the context of direct interactions with Spanish legislators and officials. The Congressional Friends of Spain Caucus is a bipartisan group of Members of Congress who seek to enhance U.S.-Spain relations and promote political, economic, and social ties between the two countries. The U.S.-Spain Council brings together U.S. and Spanish leaders to promote economic, educational, and cultural ties. Since the council was founded in 1996, five of the six chairmen have been Members of the U.S. Senate. The government of Spain is led by Prime Minister Pedro Sanchez of the center-left Socialist Workers' Party (PSOE). Sanchez became prime minister in June 2018 after launching a parliamentary vote of no confidence that defeated the previous government led by Mariano Rajoy of the center-right Popular Party (PP). Rajoy's leadership was damaged by the outcome of a scandal in which Spain's High Court convicted senior PP figures on corruption charges in May 2018 and found that the party benefitted from a scheme involving kickbacks for public contracts. The changeover was the first time in Spain's history that a prime minister had been removed by a vote of no confidence and the first time a prime minister took office without winning an election. Prime Minister Sanchez leads a minority government which holds less than one-quarter of the seats in the Congress of Deputies. His government relies on support from left-wing party Podemos and regional nationalist parties from Catalonia and the Basque region to maintain viability and secure the votes needed for passing legislation. Given this fragile political situation, some observers question whether the Sanchez government will last until the end of the four-year parliamentary term. Barring an early election, the next general election is due to occur in July 2020. Rajoy had begun his second term as prime minister in October 2016 at the head of a minority government, following a 10-month political deadlock in which two general elections (held in December 2015 and June 2016) did not produce a majority government. After winning an absolute majority in the 2011 election, the PP came in first place in both the 2015 and 2016 votes but fell far short of a parliamentary majority. The PP won 137 seats in the 2016 election, with 33% of the vote. The Socialists came in second place with 85 seats (23% of the vote). Unidos P odemos ("United We Can"), an electoral alliance of left-wing parties including Podemos , a new anti-establishment party that grew out of Spain's anti-austerity protest movement, won 71 seats (21% of the vote). Another new party, Ciudadanos ("Citizens"), a centrist party that made anti-corruption one of its main campaign themes, won 32 seats (13% of the vote). More broadly, the emergence of P odemos and Ciudadanos as significant political actors indicates a decided shift in a political system long dominated by the PP and PSOE. Between the 2011 and 2016 elections, widespread public discontent was driven by economic conditions and austerity policies, and many observers grew deeply concerned about the social impacts of high unemployment, including youth unemployment that spiked above 50%, as well as cuts to health and education spending (see below). Large public demonstrations and protest movements conveyed an angry backlash against the financial sector and politicians' management of the economy. The public view of the country's politicians has been further soured by a series of corruption allegations, including the scandal involving leading figures in the PP. The global financial crisis and recession of 2008-2009 hit Spain especially hard. The crisis has had a lasting impact on the Spanish economy, and the country's economic challenges have been a central issue over the past decade. Although Spain's economic conditions remain difficult, there have been signs of considerable improvement over the past three to four years. Spain is the world's 14 th -largest economy and the 4 th -largest economy in the Eurozone. Prior to 2008, Spain experienced more than a decade of strong economic growth relying largely on a housing and construction boom and fueled by private sector access to cheap credit. The credit and real estate bubbles collapsed in 2009, however, and the Spanish economy contracted sharply and entered a prolonged recession that lasted until 2014. The government budget deficit jumped from 4.5% of gross domestic product (GDP) in 2008 to 10.5% in 2012, and public debt has increased from about 40% of GDP in 2008 to more than 95% of GDP. Unemployment has increased dramatically since 2008, peaking at 26% in 2013 and remaining at about 15%. Spain became a focal point of the wider Eurozone crisis in 2012, facing heavy market pressure in the form of high borrowing costs and receiving EUR41 billion (about $48 billion) in emergency loans from its Eurozone partners to stabilize Spanish banks. The PP took office in 2011 with an emphasis on budgetary austerity, while implementing structural reforms to increase competitiveness and labor market flexibility. The Rajoy government remained committed to austerity as necessary to reduce the country's deficit and regain the confidence of financial markets and undertook measures including cutting spending on education and health care, reducing unemployment benefits and pensions, selling state-owned properties, and increasing the value-added tax. Since 2015, the economy has experienced a period of relatively strong recovery, with average annual growth of 3.2% over the period 2015-2017, and 2.7% growth expected for 2018. Analysts assert that Spain's austerity and reform efforts have been relatively effective in that the country's budget deficit has decreased to an expected 2.7% of GDP this year and the country's borrowing costs appear to have stabilized at a manageable level. The PP-led government loosened fiscal policy in the 2018 budget by increasing public pensions and spending on social benefits and public investments, as well as cutting income taxes. The Spanish state consists of 19 provincial territories referred to as "self-governing communities" or "autonomous communities." Two Spanish regions in particular, Catalonia and the Basque region, maintain a distinctive cultural identity, and politics in these regions features the strong presence of nationalist independence movements. The Basque region is in north-central Spain, on the Bay of Biscay near the border with France. The separatist terrorist group Basque Fatherland and Liberty (ETA) waged a violent campaign against the central government starting in the 1960s, killing approximately 800 people. In recent years, ETA was weakened by arrests of key leaders and declared a cease-fire in 2011. All Basque nationalist parties now appear to have renounced violence in favor of pursuing independence through politics. In April 2017, ETA moved to formally disarm, handing over the locations of eight weapons caches to French authorities. Catalonia is in northeast Spain, on the Mediterranean Sea and the border with France, and includes Barcelona, Spain's second-largest city. With a population of approximately 7.45 million, Catalonia has about 15% of Spain's population. It is one of Spain's wealthiest regions, accounting for approximately one-fifth of the country's GDP, generating approximately one-quarter of its exports, and receiving approximately one-quarter of its foreign investment. It is also one of the most indebted regions, with the regional debt-to-GDP ratio tripling since 2009, to 35%. In Catalonia, the independence movement has been additionally fueled by an economic argument that Catalans unfairly support the country's other regions because they pay more in taxes than they receive back in state spending. The Spanish government adamantly disputes this argument, maintaining that Catalonia pays the same percentage of taxes as it contributes to Spain's GDP and receives a share of public spending proportional to its population. On October 1, 2017, the regional government of Catalonia attempted to hold a unilateral referendum on independence. The referendum was the third vote in three years declared by pro-independence leaders as a plebiscite on Catalan independence. In a similar effort in November 2014, with turnout below 40%, about 80% of those who voted (approximately 1.6 million people) answered that they wanted Catalonia to be an independent state. With the referendum nonbinding in nature and no organized campaign against independence, the relatively low turnout suggested that many of those opposed to independence did not participate. Catalan leaders subsequently sought to portray the result of the September 2015 election for the regional Catalan parliament, in which a coalition of separatist parties won a combined majority of seats (72 out of 135) despite receiving less than 50% of the popular vote, as an endorsement of plans to proclaim independence within 18 months. The government of Spain has strongly opposed the organization of independence referendums in Catalonia, condemning them as illegal. Spain's courts have supported this view, ruling such referendums unconstitutional. The Spanish Constitution makes no provision for provincial territories to legally separate from the state. The document states that, "The constitution is based on the indissoluble unity of the Spanish nation, the common and indivisible homeland of all Spaniards; it recognizes and guarantees the right to autonomy of the nationalities and regions of which it is composed, and the solidarity among them all." Spanish authorities assert that the central government cannot therefore agree to allow a legally binding independence referendum (as was the case with the 2014 Scottish independence referendum in the UK, for example), because such an agreement would in itself be illegal and unconstitutional. They argue that under the constitution a decision about Catalonia separating from Spain is a matter for all of the people of Spain--that is, the constitution would need to be changed to allow the possibility of such a procedure. The Spanish government vowed to prevent the October 1, 2017, vote from taking place and to take legal action against its organizers. National police attempted to disrupt the vote and seize ballot boxes, resulting in large public protests and violence between police and protesters. In the end, organizers estimated voter turnout at 42%, with 90% of participants in favor of independence. Analysts again suggested that many of those opposed to independence did not participate in the vote. On October 27, 2017, the Catalan parliament held a vote for independence, with 70 members voting in favor and 10 against, but with 55 abstentions after opposition representatives walked out of the chamber. The Spanish central government (with the support of main opposition parties) subsequently received permission from the Spanish Senate to trigger Article 155 of the Spanish Constitution, dissolving the regional government and assembly of Catalonia on October 28, and taking direct control of the regional police force. Article 155 allows the central government to take direct control of an autonomous region if that region "does not fulfil the obligations imposed upon it by the Constitution or other laws, or acts in a way that is seriously prejudicial to the general interest of Spain." The Spanish government asserts that the independence vote was illegal and outside the jurisdiction of the regional parliament, that it took place despite explicit orders from the courts, and that it violated democratic principles and parliamentary procedures. The head of Catalonia's regional government, Carles Puigdemont, and four other former regional ministers subsequently fled to Brussels in an attempt to appeal to EU leaders and avoid arrest on charges of rebellion and misuse of public funds, offenses that could carry a sentence of up to 30 years in prison. Eight other separatist leaders who stayed in Spain are facing the same charges, including former deputy leader Oriol Junqueras, who remains in pretrial custody. On November 8, 2017, Spain's constitutional court annulled the Catalan parliament's independence declaration. New regional elections held on December 21, 2017 did not appreciably change the dynamics of the regional parliament. Ciudadanos came in first place in the election (36 out of 135 seats), but three pro-independence parties again won a combined majority of seats (70 out of 135), with 48% of the popular vote. In May 2018, after protracted efforts to name a new regional president, the Catalan parliament selected Quim Torra, a strong supporter of Catalan independence. Spain subsequently lifted Article 155. The separatist crisis appears to have entered a period of stalemate. Spain's imposition of Article 155 and prosecution of separatist leaders, as well as related Spanish court rulings, sapped momentum from pro-independence forces but did not definitively resolve the crisis. Pro-independence parties, meanwhile, face internal divisions over strategy and tactics, as well as an increasingly difficult challenge in convincing moderate and anti-independence Catalans to shift their views. Polls show that the Catalan population is about equally divided over the question of independence. While remaining firmly opposed to any moves toward Catalan independence and declining to intervene in the ongoing prosecution of separatist leaders, Prime Minister Sanchez has adopted a relatively less confrontational approach to the separatist issue compared to his predecessor. (Prime Minister Rajoy had refused to enter into any talks with separatist leaders.) Sanchez has proposed a referendum on greater regional autonomy, suggested reviving a commission for resolving disputes between the regional government and the central government, and engaged in dialogue with Torra in an effort to normalize relations. Critics of Sanchez's more conciliatory approach point out that his government relies on parliamentary support from pro-independence Catalan parties. In early October, Torres threatened to withdraw this support from Sanchez's government unless it offered a plan for regional independence. These remarks followed scenes of violent unrest perpetrated by a radical minority of the pro-independence crowd at a protest in Barcelona marking the October 1 anniversary. The U.S. State Department long declined to take a position on the issue of Catalan separatism, characterizing it as an internal matter for Spain to decide. Following the regional parliament's independence vote on October 27, 2017, however, the State Department released a statement that, "Catalonia is an integral part of Spain, and the United States supports the Spanish government's constitutional measures to keep Spain strong and united." Earlier, in the press conference following Prime Minister Rajoy's visit to the White House on September 26, 2017, President Trump spoke out in favor of maintaining a united Spain, stating " ... I bet you if you had accurate numbers and accurate polling, you'd find that they love their country, they love Spain, and they wouldn't leave. So I'm just for united Spain.... I really think the people of Catalonia would stay with Spain. I think it would be foolish not to." European Union (EU) officials and officials from EU member state governments have declined to intervene in support of separatist arguments or calls for negotiations, framing the issue as an internal matter for Spain. EU leaders have indicated that an independent Catalonia would not automatically become an EU member but would need to reapply for membership, with approval requiring unanimous support from all current member states (including Spain). Cooperation between Spain and the United States on counterterrorism issues is strong. In past years, Spain has been a base for Islamist extremists, including some of those involved in the 9/11 attacks. In March 2004, terrorists inspired by Al Qaeda killed 191 people in a series of bombings on the Madrid train system three days before national elections. On August 17, 2017, a terrorist attack in Barcelona killed 14 people and injured more than 100 when a van drove through a crowded pedestrian area. The Islamic State claimed responsibility for the attack, and Spanish authorities subsequently identified a terrorist cell of 12 people, all of whom were either arrested (4), shot by police (6), or killed attempting to make explosives at a house (2). Analysts agree that the cell was inspired by the Islamic State, but authorities were unable to determine that its members had direct links to the Islamic State organization. The members of the Barcelona terrorist cell were all born in Morocco. (About 70% of the approximately 1.18 million Muslims living in Spain have their origins in Morocco.) Spain and Morocco cooperate closely with regard to counterterrorism, including regular intelligence exchanges and joint operations against terrorist organizations and recruiting networks. Moroccan authorities coordinated with their Spanish counterparts in support of the investigations following the Barcelona terrorist attack. Compared to many other Western European countries, a relatively low number of people have traveled from Spain as "foreign fighters" seeking to join the Islamic State or other jihadist groups fighting in Syria and Iraq. Spanish authorities estimate that approximately 150 Spanish nationals or permanent residents (mostly Moroccan nationals) have traveled to the conflict zones in those two countries. In recent years, Spanish police have conducted raids to dismantle jihadist recruiting networks active in Ceuta and Melilla, Spanish enclaves located on the north coast of Africa, as well as in Madrid. From 2015 to 2017, Spanish security forces reportedly conducted 128 police operations against domestic terrorist networks, resulting in the arrest of 242 individuals. In 2015, the Spanish Parliament adopted legislation backed by the PP and PSOE to strengthen counterterrorism laws and police powers in response to the foreign fighter threat. The new legislation made it a criminal offense to receive terrorist training or to participate in an armed conflict abroad; allows for passport seizures, accelerated expulsion orders, and reentry bans of identified extremists; and introduces streamlined search and capture warrants for police to arrest fighters attempting to travel to conflict zones. The government also initiated reforms to the regulation of evidence collection and standards for witness protection, in order to improve the success rate of terrorism-related prosecutions. The United States and Spain have close links in many areas, including extensive cultural ties. The U.S.-Spain political relationship rests on a foundation of cooperation on a number of important diplomatic and security issues. Spain has been a member of NATO since 1982. The Rajoy government (2011-2018) maintained a relatively low profile in international affairs, while continuing the main tenets of past Spanish foreign policy: support for European integration, friendly and cooperative relations with the United States, and strong ties with Central and South America. The PP has traditionally promoted a strongly "Atlanticist" foreign policy that emphasizes close security ties with the United States. The PP-led government of Prime Minister Jose Maria Aznar (1996-2004) supported the U.S.-led invasion of Iraq in 2003 and contributed forces to the coalition. During the Socialist-led government of Prime Minister Jose Luis Rodriguez Zapatero (2004-2011), U.S.-Spain tensions arose over differences in approach to issues including Iraq, the Middle East peace process, and Spain's engagement with Cuba and Venezuela. Prime Minister Sanchez is not expected to make any dramatic changes to Spain's foreign policy. His government has adopted a distinctly pro-EU approach and an outlook emphasizing multilateral foreign policy cooperation through Spain's membership in institutions such as NATO and the United Nations. The PSOE is in favor of maintaining U.S.-Spain defense cooperation and security ties (see below). Spain plays a significant role in U.S. defense strategy with regard to Europe and Africa. Under the terms of a bilateral Agreement on Defense Cooperation, the United States has access to several Spanish military bases, including a naval base at Rota and an airbase at Moron that has been a key transportation link to U.S. forces in the Middle East. An increased U.S. presence at these bases during the last five years reversed a decade-long downsizing of U.S. forces in Spain. In 2011, the United States, Spain, and NATO announced that four U.S. Aegis BMD-capable ships (Arleigh Burke-class destroyers equipped with the Aegis Ballistic Missile Defense system) would be based at Rota as part of the European Phased Adaptive Approach (EPAA) for missile defense in Europe. The ships forward deployed to Rota in 2014 and 2015. The ships' primary mission is to operate in the Mediterranean to help defend Europe against theater-range ballistic missiles that could be launched from counties such as Iran. The ships also have undertaken other missions, including patrolling the Black Sea and launching Tomahawk land attack missiles in April 2017 in retaliation for the Syrian government's use of chemical weapons. Following the 2012 terrorist attack against the U.S. diplomatic facility in Benghazi, Libya, the United States deployed 500 U.S. Marines to Moron in 2013 to serve as a rapid reaction force protecting U.S. interests and personnel in North Africa. The deployment increased to 850 Marines in 2014. In 2015, the Spanish government approved a U.S. request to upgrade the basing agreement, making Moron the permanent task force headquarters for the Special-Purpose Marine Air-Ground Task Force Crisis Response-Africa (SPMAGTF-CR-AF). The arrangement allows a permanent U.S. military presence of up to 2,200 personnel, including 850 SPMAGTF Marines and 500 civilian staff, and up to 26 aircraft. It also allows a surge deployment of an additional 800 task force Marines and 14 aircraft during contingency operations. The SPMAGTF is a rotational expeditionary force incorporating command, ground, aviation, and logistics units, with a primary mission of responding to emergency calls for security assistance at U.S. embassies and other U.S. operations in Africa. The task force may also undertake a variety of other missions, including evacuation of noncombatants, humanitarian assistance and disaster relief, or training and security cooperation activities with partner forces. Spain is an active participant in international security and peacekeeping operations, with more than 3,000 soldiers and guardias civiles (Spain's national police force) deployed in 17 missions as of March 2018. Deployments include more than 600 soldiers to the United Nations peacekeeping mission in Lebanon, 473 to the international coalition ( Inherent Resolve ) countering the Islamic State in Iraq and Syria, and 336 (including a mechanized infantry company) with the multinational battlegroup stationed in Latvia as part of NATO's Enhanced Forward Presence mission. Spain contributes naval forces to the EU anti-piracy mission off the Somali coast ( Atalanta ), the EU ( Sophia ) and NATO ( Sea Guardian ) maritime security missions in the Mediterranean Sea, and the Standing NATO Maritime Group (SNMG/SNMCMG). Spain also participates in NATO's Resolute Support training mission in Afghanistan and EU military training missions in Mali and Somalia, and provides air transport in support of French and EU operations in Mali, Central African Republic, and the Sahel region. Spain has deployed a battery of Patriot missiles to Turkey to guard against possible ballistic missile threats from Syria. From 2002 to 2015, Spain maintained a sizeable deployment as part of the NATO-led International Security Assistance Force (ISAF) in Afghanistan. In the context of U.S. concerns about a long-standing downward trend in European defense spending, analysts note that Spain's defense budget was negatively affected by the country's economic difficulties. Overall defense spending was cut considerably between 2009 and 2014, although Spain has enacted modest annual increases to the defense budget since 2015. According to NATO, Spain's defense expenditures for 2017 were $11.655 billion. At 0.92% of the country's GDP, this figure remains well below the 2% of GDP set by NATO as the minimum defense spending target for its member states. Recent funding increases have been directed largely to the Spanish navy, including plans for the construction of new class of diesel attack submarines and the acquisition of five frigates, patrol vessels, and marine helicopters. A force structure review in 2016 resulted in a reorganization of Spanish army brigades to make the forces more deployable for operations, with an emphasis on mechanized formations and more special operations forces. In 2018 or 2019, the Spanish air force expects to receive the final six of 73 contracted Eurofighter Typhoon combat aircraft. Spain is reportedly considering the acquisition of 45 to 50 F-35As, which would replace its fleet of 85 F-18 aircraft as they are gradually phased out between 2020 and 2025. As the Spanish navy's Harriers near the end of their service life, Spain is also reportedly considering the purchase of 12 to 15 F-35Bs in order to maintain a naval aviation capability. The U.S.-Spain economic relationship is large and mutually beneficial. In 2016 (most recent complete data available), U.S. foreign direct investment (FDI) in Spain was $37.4 billion and Spanish FDI in the United States was $68.2 billion. Spain's FDI in the United States has increased every year since 2002, and the value of Spanish assets invested in the United States has increased nearly five-fold over the past decade. Approximately 1,100 U.S. firms operate subsidiaries and branches in Spain (including, for example, Apple, General Electric, General Motors, Ford, and AT&T). More than 90 Spanish firms operate affiliates in the United States (including, for example, BBVA, OHL, and Banco Santander). In 2016, U.S. affiliates employed more than 181,500 people in Spain and Spanish affiliates accounted for more than 83,000 jobs in the United States. In 2017, U.S. goods exports to Spain totaled more than $11 billion, and U.S. goods imports from Spain totaled about $15.66 billion. U.S. services exports to Spain were $6.8 billion in 2016, and U.S. services imports from Spain were $6.3 billion. In 2013, the U.S. Department of the Treasury announced the signing of a new protocol amending the U.S.-Spain bilateral tax treaty of 1990. Analysts assert that the protocol will modernize the agreement and make it more similar to U.S. treaties with other European countries in terms of avoiding double taxation and preventing tax evasion. Ratification of the protocol is awaiting the advice and consent of the Senate. The author thanks CRS Visual Information Specialist Amber Wilhelm and CRS Information Research Specialist [author name scrubbed] for their work in creating the graphics for this report.

The United States and Spain have extensive cultural ties and a mutually beneficial economic relationship, and the two countries cooperate closely on numerous diplomatic and security issues. Spain has been a member of NATO since 1982 and a member of the European Union (EU) since 1986. Given its role as a close U.S. ally and partner, developments in Spain and its relations with the United States are of continuing interest to the U.S. Congress. Domestic Political and Economic Issues The government of Spain is led by Prime Minister Pedro Sanchez of the center-left Socialist Workers' Party (PSOE). Sanchez became prime minister at the head of a minority government in June 2018, after a parliamentary vote of no confidence against Prime Minister Mariano Rajoy of the center-right Popular Party (PP). Rajoy, who had led the government since 2011, was damaged by a corruption scandal involving senior PP figures. Holding less than a quarter of the seats in parliament, the Sanchez government relies on support from the left-wing party Podemos and several regional parties. Economic conditions, austerity policies, and corruption scandals have fueled public backlash against Spain's political establishment in recent years. This dynamic fractured Spain's two-party system, dominated for more than 30 years by the PP and the PSOE, with the emergence of two new parties, Ciudadanos and Podemos. Over the past several years, Spain's economy has experienced a relatively strong recovery, with growth averaging more than 3% annually, a decreasing government budget deficit, and stabilized financial conditions. The global financial crisis of 2008-2009 plunged Spain into a prolonged recession and has had a lasting impact on the country. Unemployment has decreased to 15% after peaking at 26% in 2013. Catalonia Crisis A crisis over Catalan independence efforts has been the predominant issue in Spain since late 2017. Spain's central government invoked Article 155 of the Spanish Constitution to dissolve the regional assembly and executive and take direct control of the region after the Catalan parliament held an illegal vote for independence in October 2017. The issue remains deadlocked after separatist parties retained a majority of seats in the regional parliament following a new regional election in December 2017. Spain has charged 13 separatist leaders with rebellion and misuse of public funds, offenses that could carry a lengthy prison sentence. Catalonia accounts for about 15% of Spain's population and one-fifth of its economy. Counterterrorism The United States and Spain cooperate closely on counterterrorism issues. Spanish authorities have dismantled numerous recruiting networks over the past several years, many of them based in Ceuta and Melilla, Spanish enclaves on the north coast of Africa. In 2015, the Spanish Parliament adopted new legislation to strengthen counterterrorism laws and police powers in response to the foreign fighter threat. U.S.-Spain Defense Relations Spain plays an important role in U.S. defense strategy for Europe and Africa. Four U.S. destroyers equipped with the Aegis Ballistic Missile Defense system are based at Rota naval base, and Moron air base is the headquarters for a rapid reaction force of U.S. Marines that protects U.S. interests and personnel in North Africa. Spanish armed forces participate in numerous international peacekeeping and security operations, including the United Nations peacekeeping mission in Lebanon, the international coalition countering the Islamic State in Iraq and Syria, NATO's Enhanced Forward Presence mission in Latvia, EU and NATO maritime security missions, and EU operations in the Sahel region. Spain's defense spending was cut during the economic crisis but has been increasing since 2015. With the acquisition of new Eurofighter combat aircraft nearly complete, additional spending is focused largely on planned naval acquisitions. U.S.-Spain Economic Relations Investment flows between the United States and Spain totaled more than $105 billion in 2016, and Spanish foreign direct investment in the United States has increased every year since 2002. Annual U.S.-Spain trade in goods and services totals nearly $40 billion. Approximately 1,100 U.S. firms operate subsidiaries and branches in Spain. Affiliates of Spanish companies account for approximately 83,000 jobs in the United States.

O ver the last decade there has been a growing U.S. trade deficit in fresh and processed fruits and vegetables. Although U.S. fruit and vegetable exports totaled more than $6 billion in 2015, U.S. imports were nearly $18 billion, resulting in a gap between imports and exports of more than $11 billion for the year ( Figure 1 ). This trade deficit has widened over time, as growth in imports has outpaced export growth. As a result, the United States has gone from being a net exporter of fruits and vegetables in the 1970s to having a net trade balance in the mid-1990s to being a net importer today. Figure 1. U.S. Fruit and Vegetable Trade (Excluding Nuts), 1990-2015Source: Compiled by CRS from data in the U.S. International Trade Commission's Trade DataWeb database (version 2.8.4). Includes fresh and processed products; excludes nuts. A number of factors are shaping current competitive market conditions worldwide and global trade in fruits and vegetables. In the buildup to the 2008 farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246 ), the trade situation contributed to demands by the U.S. produce sector that Congress consider expanding support for domestic fruit and vegetable growers in farm bill legislation. Historically, specialty crops had not benefitted from the federal farm support programs traditionally included in the farm bill, compared to the long-standing support provided to the main program commodities (such as grains, oilseeds, cotton, sugar, and milk). The 2008 farm bill, and later the 2014 farm bill (Agricultural Act of 2014, P.L. 113-79 ), provided additional support for programs supporting fruit and vegetable production, as well as programs addressing existing trade barriers and marketing of U.S. specialty crops. This report presents recent trends in U.S. fruit and vegetable trade, and highlights some of the factors contributing to these trends. This summary excludes trade data for tree nuts and processed tree nut products. Although not presented here, U.S. exports and imports of tree nuts and processed tree nut products (excluding peanuts) have shown continued increases and, generally, a growing U.S. trade surplus. The U.S. trade deficit in fresh and processed fruits and vegetables totaled more than $11 billion in 2015, following a decade of steady gains in U.S. imports, with more variable gains in U.S. exports ( Table 1 , Figure 1 ). In the early 1990s, U.S. imports and exports of fresh and processed fruits and vegetables were more or less in balance, with some years showing the United States as a net exporter. This situation reversed in the mid-1990s. Despite rising U.S. exports of fruits and vegetables, growth in U.S. imports has outpaced export growth. Since the 1990s, imports have grown by an average of about 5% each year, whereas exports grew an average rate of about 1% during the same period, measured in terms of trade value ( Table 1 ). The gap between imports and exports has grown from $0.5 billion in 1990 to more than $11 billion in 2015. The gap in trade reached an estimated high of $11.4 billion in 2015, given continued import gains accompanied by stagnated or decreasing exports. This deficit cannot be solely explained by imports of bananas ( Table 1 ), which are generally not grown in the United States. Table 1 breaks down U.S. trade into three major product categories: (1) fresh fruit, including dried, frozen, or otherwise preserved, (2) fresh vegetables, including dried, frozen, or otherwise preserved, and (3) processed fruit and vegetable products. Since the mid-1990s, the value of U.S. fruit and vegetable exports has nearly doubled, with the largest gains in exports of fresh fruits and processed products. For fresh fruits, export gains were greatest for strawberries/berries, peaches/pears, apples, grapes, and other miscellaneous fresh fruit. For fresh vegetables, export gains were greatest for lettuce, spinach, tomatoes, potatoes, and legumes/beans. For processed products, export gains were for processed potato products, certain preserved vegetables, fruit juices and juice mixtures, and other processed fruit and vegetable products. Gains in imports, however, have exceeded those for exports, as the total value of U.S. fruit and vegetable imports has more than tripled since the 1990s. Increased imports were greatest for fresh citrus, strawberries/berries, tropical fruits (excluding bananas), grapes, peaches/pears, plums/apricots, and apples. Imports of fresh vegetables and processed products were higher across most categories. Imports of preserved mushrooms and processed tomatoes declined over the period. Together, roughly one-half of this trade deficit for fruits and vegetables was composed of bananas and fresh tomatoes and other vegetables, including bell peppers. Given that the value of U.S. banana imports has remained largely unchanged, imports of fresh tomatoes and peppers, among other fresh and frozen vegetables, have accounted for the widening gap in U.S. trade. Other products with a large and increasing net trade value include other tropical fruits, grapes, asparagus, cucumbers, canned fruit, fruit juices and juice mixtures, olives, and miscellaneous fresh fruits and preserved vegetables. Table 2 breaks down U.S. fruit and vegetable imports from the leading supplying countries in 2015. In descending order (by the share of total import value in 2015), these include Mexico (44%), Canada (12%), Chile (8%), the European Union (7%), China (6%), Peru (5%), and Costa Rica (3%). Other leading import suppliers were Guatemala, Thailand, Brazil, Argentina, Turkey, the Philippines, and Ecuador. All other importing countries accounted for about 5% of trade. The major imported products were tomatoes, peppers, bananas, other tropical fruits, potatoes, onions, garlic, cucumbers, melon, citrus, grapes, tree fruit, fruit juices, and various fresh and processed products. A number of factors are shaping current competitive market and trade conditions worldwide, and may be contributing to trends in U.S. fruit and vegetable trade: a relatively open U.S. import regime and lower average import tariffs in the United States, with products from most leading suppliers entering the U.S. duty-free or at preferential duty rates; increased competition from low-cost or subsidized production of fruit and vegetable products; continued non-tariff trade barriers to U.S. exports in some countries, including restrictive import and inspection requirements, technical product standards, and sanitary and phytosanitary (SPS) requirements; opportunities for counter-seasonal supplies , driven, in part, by increased domestic and year-round demand for fruits and vegetables; and other market factors , such as exchange rate fluctuations and structural changes in the U.S. food industry, as well as increased U.S. overseas investment and diversification in market sourcing by U.S. companies. Lower tariffs on U.S. fruit and vegetable imports combined with relatively higher tariffs on U.S. exports into other countries, in part, may explain why U.S. export growth has not kept pace with import growth. The U.S. Department of Agriculture (USDA) reports that the global average tariff for fruits and vegetables is more than 50% of the import value. In the United States, however, about 60% of U.S. tariffs on fruits and vegetables are less than 5%. This compares to Japan and the European Union (EU), where more than 60% of import tariffs range from 5%-25%; additionally, nearly 20% of tariffs exceed 25%. Import tariffs in some developing countries are often higher, with more than 80% of tariffs ranging from more than 25% to over 100%. Countries with relatively high tariffs on fruit and vegetable imports include China, Egypt, India, Korea, and Thailand. Most of the leading import suppliers of fruits and vegetables to the United States are granted trade preferences under an existing free trade agreement (Canada and Mexico, Australia, Chile, Peru, and several Central American and some Middle Eastern nations), pending or negotiated free trade agreements, or other types of preferential arrangements (Argentina, Brazil, Ecuador, Thailand). Such trade preferences allow imports to the United States to enter duty-free or at reduced rates, and may be contributing to rapid import growth. In some cases, duty-free or reduced tariffs provide an added advantage to supplying countries that may already benefit from lower-cost fruit and vegetable production compared to that in the United States. Many of the countries that have entered into trade preference programs with the United States supply products such as bananas and other tropical fruits that are grown in limited supplies in the United States. Many also provide fruits and vegetables counter-seasonally (off-season) to production in the United States. However, there is concern that an increasing share of imports are now directly competing with domestically produced commodities throughout the year. USDA reports significant gains in intraregional trade between the United States, Canada, and Mexico following the adoption of the North American Free Trade Agreement (NAFTA) in 1994. Cooperation on phytosanitary issues and tariff elimination has heightened integration in North America's fruit and vegetable markets, resulting in both higher U.S. imports (and exports) of fruits and vegetables. In particular, U.S. imports of tomatoes and fresh peppers from Mexico have risen sharply. Imports from Canada have also increased but from a smaller base. Mexico and Canada now account for about one-half of all U.S. produce imports ( Table 2 ). Rising consumer demand has also influenced imports, given the year-round availability of a wider diversity of consumer choices, including new products, varieties, and colors and hothouse-grown produce. Since the U.S.-Chile FTA entered into force in 2004, Chilean imports--particularly imports of fresh fruits and fruit juices--have continued to increase ( Table 2 ). Most imports from Chile, however, continue to be supplied during the U.S. off-season. Imports under the U.S.-Dominican Republic-Central American (DR-CAFTA) FTA, which entered into force in July 2006, were expected to be limited since many of these countries already had duty-free access to the United States under previous trading arrangements, such as the Generalized System of Preferences (GSP) and the Caribbean Basin Economic Recovery Act. Imports under DR-CAFTA have increased, particularly imports of tropical fruits and vegetables but also other fresh fruits. Previously, some U.S. produce growers had complained that some FTAs were allowing for greater access to the United States without creating equal U.S. access to foreign markets, and they further claimed that with each FTA the U.S. produce sectors had been negatively impacted through higher imports, lower prices, and a growing trade deficit. More recent statements by industry representatives, however, acknowledge the need to continue "leveling the playing field" of specialty crop exports and imports while also recognizing gains from opening up markets for U.S. exports in global markets in China and elsewhere. Industry representatives as well as the Agricultural Technical Advisory Committee (ATAC) for Trade in Fruits and Vegetables, a USTR advisory group, have stated their general support for the Trans-Pacific Partnership (TPP) Agreement, an FTA involving the United States and several other countries. An investigation by the U.S. International Trade Commission (USITC) reports that TPP would benefit the U.S. produce sectors through reduced phytosanitary barriers to trade and improved market access. Among the leading U.S. fruit and vegetable import suppliers, China and most European countries do not benefit from preferential import treatment under current U.S. trade laws. However, fruit and vegetable imports from these countries are growing, partly because of their lower costs of producing, packing, and/or processing fruits and vegetables, compared to producers in the United States. Among many developing countries, lower costs are generally associated with lower overall production and input costs, particularly for labor. Among EU countries, lower costs largely are a function of farm subsidies and payments along with other forms of government support for fruit and vegetable production, as part of the Common Agricultural Policy. For example, in China, average farm-level costs are low because the majority of farm production is labor-intensive on small-scale, low-technology operations, using little or no mechanized inputs. Generally, labor is abundant and costs are low. Marketing costs for produce also are low, given only basic packing and packaging techniques, and lack of uniform product sizes and grading standards. At modernized facilities, certain capital and production technology costs are higher, but per-unit labor costs and overall input costs still remain much lower than in the United States. Given such differences, available cost data show that average per-unit production costs in China for tomatoes, peppers, and citrus are roughly one-tenth those in the United States. China remains the world's largest producer and exporter of many types of fruits and fruit juices. By comparison, U.S. production costs are relatively high and generally increasing due to rising costs for energy, transportation, labor, and other farm inputs. In the United States, farm labor accounts for 42% of the variable production expenses for U.S. fruit and vegetable farms (although labor's share may vary depending on the commodity). Most fruits and vegetables are fragile and perishable and must be hand-picked, which limits opportunities for mechanized harvesting. In addition, historically, many U.S. farmworkers have been largely unauthorized, and increased enforcement of immigration laws is resulting in labor shortages in some production areas, especially for harvesting tree fruits and specialty row crops. As a result, immigrant guest worker programs have been a growing priority for U.S. produce growers. Higher production costs in the United States might also be due to a generally more stringent regulatory regime--e.g., workers' compensation requirements; air, water quality, and land use regulations; and pesticide application and registration. Studies have shown that such regulations can be costly to producers, particularly in California, where a large share of the nation's fruits and vegetables are grown. Farm costs in the EU also are relatively high. However, fruit and vegetable producers in most European countries directly benefit from support programs that effectively offset their production costs and allow them to become competitive on world markets. The EU's fruit and vegetable subsidies vary by commodity, but often include direct farm payments, compensation for further processing, co-financing of operational funds for producer organizations, export subsidies, promotional aid, and other types of support and financial aid. Commodities that benefit under such programs include tomatoes, cauliflowers, stonefruit, olives, grapes, citrus, eggplants, apples and pears, among others. The total value of support notified to the World Trade Organization (WTO) for EU's fruit and vegetable sector (including olive oil) is estimated at about $39 million (EUR30.8 million) for the 2012/2013 marketing year. The EU wine sectors received another $809 million (EUR646.8 million) in support. This support includes direct product-specific support, which is considered to be "production distorting" by the WTO and is subject to reduction commitments. Comparable expenditures for the U.S. fruit and vegetable sectors were negligible. Other nonproduct-specific support and other indirect support is not included in these estimates. In the United States, fruit and vegetable producers do not directly benefit from traditional federal farm support programs that might help offset their production costs. However, they may benefit indirectly from certain government research and farm assistance programs that are generally not considered "production distorting." The European Commission has been implementing reforms to the current subsidy program for fruits and vegetables that could increase the sector's market orientation. Even with reforms, the EU's program would continue to provide government-funded income support and risk protection not similarly afforded to U.S. producers. Most developing countries do not directly support their fruit and vegetable production. However, some have government-funded programs that help farmers obtain specific varieties, adopt better farming practices, provide research and agricultural extension services, promote exports, and provide market information. In some countries, preferential policies and support exist at the local government level, and may include production subsidies or income guarantees, or assistance with start-up costs. In particular, there has been rising concern about unfair competition and support within China's agricultural sectors. Although not involving fruit and vegetable production, the Office of the United States Trade Representative (USTR) has filed a complaint on behalf of U.S. farmers alleging that China is not meeting its WTO commitments for rice, wheat, and corn. Previous USITC investigations have highlighted the increased competitive market and trade pressures on U.S. fruit producers from lower-cost foreign fruit and vegetable producers (such as those in China, Thailand, Chile, Argentina, and South Africa) as well as from countries with subsidized fruit and vegetable production (such as in the EU, including Spain). Import injury investigations initiated by the United States further highlight concerns that some countries might be supplying imports at prices below fair market value. Since the 1990s, dumping petitions filed by the U.S. fruit and vegetable sectors have included charges against imports of fresh tomatoes (Canada, Mexico), frozen raspberries (Chile), apple juice concentrate (China), frozen orange juice (Brazil), lemon juice (Argentina, Mexico), fresh garlic (China), preserved mushrooms (China, Chile, India, Indonesia), canned pineapple (Thailand), table grapes (Chile, Mexico), and tart cherry juice (Germany, former Yugoslavia). Many of these petitions were decided in favor of U.S. domestic producers and resulted in higher tariffs being assessed on U.S. imported products from some of these countries. In addition to tariff-related barriers to trade, market access of agricultural products may be restricted by non-tariff trade barriers, which may limit both U.S. exports to and imports from other countries. Non-tariff trade barriers vary widely by importing country and commodity, and may include, but are not limited to, import and inspection requirements, safety and product standards, and requirements regarding inputs, production, processing, and mitigation. Generally, individual country requirements are provided for under WTO agreements that allow governments to act on trade matters in order to protect human, animal, or plant life or health, provided they do not discriminate or use restrictions as disguised protectionism. There are two specific WTO agreements dealing with food safety and animal and plant health and safety, and with product standards in general: (1) the Agreement on Sanitary and Phytosanitary (SPS) Measures, and (2) the Agreement on Technical Barriers to Trade (TBT). The SPS Agreement is designed to protect animals and plants from diseases and pests, and to protect humans from animal- and plant-borne diseases and pests, and food-borne risks. The TBT Agreement covers technical regulations, voluntary standards, and procedures relating to health, sanitary, animal welfare, and environmental regulations. Actual SPS/TBT requirements span across several broad categories and types, but tend to vary widely depending on the commodity and the importing country (as shown in the box on page 11 ). Among the more common SPS/TBT examples for produce imports and exports are restrictions due to pest or disease concerns, and requirements specifying certain post-harvest treatment and fumigation. Other requirements that reportedly have inhibited U.S. fruit and vegetable exports to some countries are phytosanitary requirements, food safety protocols, and marketing standards. A summary of the current U.S. concerns regarding SPS and TBT issues across all agricultural commodities and U.S. trading partners is provided in annual reports compiled by USTR. Other background information is available in CRS Report R43450, Sanitary and Phytosanitary (SPS) and Related Non-Tariff Barriers to Agricultural Trade . A summary of some of the reported SPS/TBT barriers to U.S. produce exports follows: disease transmission --e.g., fire blight, brown rot, canker, potato wart, fungus, among others, and other unspecified diseases; pest transmission --e.g., coddling moth, golden nematode, fruit flies, moths, among others, and other unspecified quarantine pests; chemical and pesticide residues --e.g., methyl bromide, hydrogen gas; also Maximum Residual Levels (MRLs) for certain pesticides; treatment and mitigation requirements --e.g., chemical and other treatment options, including fumigation and quarantine; restrictive import and administrative procedures-- e.g., specific inspection requirements for import; other administrative requirements --e.g., protocols, risk assessments, waivers, licenses, import tolerances, packaging requirements; import bans on products from specific producing areas --e.g., because of specific pest or disease concerns particular to a region; import bans on production inputs --e.g., nursery stock, seeds; product and/or processing specifications --e.g., restrictions on the use of antimicrobials, sulfur dioxide, sorbic acid, potassium sorbate, biotech and genetic materials, wax coating, etc.; and health risks-- depending on product and perceived risk. Non-tariff barriers to trade remain a key concern to U.S. produce growers. For example, under the U.S.-Korea FTA, despite tariff liberalization and increases in tariff-rate quotas for many fruits and vegetables, phytosanitary barriers have restricted U.S. exports to Korea of most key fresh fruits, including apples, pears, peaches, and citrus. Also, an ongoing dispute has limited exports of U.S. fresh potatoes to Mexico, which have currently only been shipped within a 26-kilometer zone inside the U.S.-Mexico border. Similar restrictions and other technical barriers also have limited U.S. fruit and vegetable exports with other key U.S. trading partners, including Argentina, Australia, Brazil, Canada, China, EU, India, Israel, Japan, Korea, Mexico, New Zealand, South Africa, Taiwan, and Venezuela. Aside from governmental requirements, retailers in some countries have developed required standards and practices and require certification as a prerequisite for doing business. For example, EU's retail-based GLOBALGAP (formerly known as EUREPGAP) for fruits and vegetables specifies a list of requirements regarding traceability; recordkeeping; varieties and rootstocks; site history and management; soil and substrate management; fertilizer usage; irrigation; crop protection; harvesting; post-harvest treatments; waste and pollution management; recycling and reuse; worker health, safety, and welfare; environmental issues; complaint form; and internal audits. However, many U.S. trading partners point to U.S. phytosanitary and other technical requirements as possible barriers restricting imports of these same commodities from other countries. In the United States, USDA's Animal and Plant Health Inspection Service regulates fresh produce imports through phytosanitary certificates, importation rules, and inspections. U.S. imports of some fresh fruits and vegetables are also subject to federal marketing orders that require written permits for imported fresh produce or create mandatory grade, size, quality, and maturity requirements that apply to domestic and imported products. As consumer demand for fruits and vegetables has grown, the United States has become a growing market for off-season fruit and vegetable imports. Most counter-seasonal trade occurs between the Northern and Southern Hemisphere countries, which often tend to have opposite production cycles. Improvements in transportation and refrigeration also have made it easier to ship fresh horticultural products. Counter-seasonal U.S. imports of fruits and vegetables are supplied by Chile, Argentina, Australia, and South Africa, but also to some extent Mexico and some Central American countries. Counter-seasonal imports from these countries are said to complement U.S. production of fresh grapes, citrus, tree fruits, and berries. However, technological and production improvements are further influencing this trend. In particular, the development of early- and late-maturing varieties has expanded U.S. production seasons, allowing producers to grow many types of fruits and vegetables throughout the year. As the U.S. production season has expanded, the winter window for some imports has narrowed. As a result, imports of some fruits and vegetables are directly competing with U.S. production. These include fresh tomatoes, peppers, potatoes, onions, cucumbers, melon, citrus, grapes, apples, and other tree fruits. Imports of processed fruit and vegetable products, such as fruit juices and various processed fruits and vegetables, directly compete with U.S. processed products year-round. Imports of counter-seasonal fruits and vegetables are generally considered to have a positive impact on U.S. consumer demand by ensuring year-round supply and by introducing new products and varieties, which often stimulate additional demand. Other perceived market benefits include lowering costs (given a wider supply network), improving eating quality, assuring food safety, conducting promotions, and reducing product losses. For example, imports of fresh tomatoes may have contributed to increased overall demand by providing for the introduction of new domestic varieties, including hothouse-grown tomatoes, that are valued by consumers for their taste, perceived higher and consistent quality, and wider year-round availability; similarly, imports of peppers, cucumbers, and sweet onions have contributed to increased demand through the introduction of new colors, mini-varieties, and other highly regarded product qualities. This expansion in consumer choice has contributed to overall higher demand for fruits and vegetables. Between 1980 and 2010, per capita consumption of all fresh and processed fruits and vegetables increased from roughly 600 pounds to a high of more than 710 pounds in the late 1990s, and dropping back to about 650 pounds in 2010. Gains in consumption, in turn, necessitate the need for year-round supplies, resulting in higher counter-cyclical import demand. During the period from 1980 to 2005, imports as a share of total domestic consumption nearly doubled from about 27% to nearly one-half for all fresh fruits, and more than tripled from 8% to about 25% for all fresh vegetables ( Table 3 ). These averages mask even greater import gains for some commodities. Imports of grapes, asparagus, and garlic, for example, accounted for roughly 10% of consumption in 1980 and altogether now account for at least 50%. More recent USDA estimates show continued growth in imports as a share of all fruit and vegetable consumption in the United States. There also is concern from some that the availability of imports may be lowering prices for fruits and vegetables because of increasing overall supplies. However, producer prices paid for fresh fruits and vegetables have remained strong and have generally tracked overall increases in food prices, although price changes may vary for individual commodities. Among other market factors widely known to contribute to shifts in global agricultural trade are exchange rate fluctuations and structural changes in the U.S. food industry, including increased U.S. overseas investment and diversification in market sourcing by U.S. companies. Generally, as the dollar depreciates against foreign currencies, U.S. exports become more competitive and relatively less expensive than commodities produced domestically in the importing country, indicating a subsequent increase in price competitiveness for U.S. exports or a relative increase in import prices. Conversely, as the U.S. exchange rate appreciates (stronger dollar), U.S. exports may become less competitive or relatively more costly. Information from USDA's Agricultural Exchange Rate Data Set indicates that as the U.S. dollar has steadily depreciated each year since 2002, U.S. agricultural products, including fruit and vegetable exports, have likely become more price competitive. However, the extent to which this will actually result in reduced prices on imported products in a foreign country will ultimately depend on how much an exporter or importer is willing to pass on to customers. Monetary policies within a country, such as China's fixed exchange rate, may also affect its export potential by influencing relative price differences between countries. Further appreciation of the Chinese exchange rate could make imports more affordable, thus raising U.S. agricultural exports. Other factors reportedly influencing produce trade are evolving business practices in how produce is marketed and sold. A USDA study highlights some of these factors for the produce industry. They include increased consolidation and concentration in the retail and shipping sectors, and the emergence of new industry trade practices including increased use of fee-based services, additional packaging and certification requirements, increased use of contract and marketing agreements with buyers, and development of emerging technologies and improved transportation. The extent to which these factors may be influencing the individual produce sectors varies by commodity and also by marketing channel (e.g., retail versus food service sectors). Structural changes in the U.S. food industry are further influenced by other economic and market changes that are occurring, including increased diversification in supply sourcing and increased foreign investment and global integration by U.S. agribusiness firms. A growing share of U.S. fruit and vegetable trade (both imports and exports) is carried out by U.S. and foreign multinational companies or enterprises. These companies may produce the products they trade, while some may only further process products and some companies only trade the products of other firms. Among the reasons why companies choose to extend their businesses globally are to build a global supply base to ensure continued, year-round supplies to meet demand, but also to source lower-cost production in countries with relatively lower input and technology costs, particularly for labor. These trends may have been facilitated by the cross-national economic and financial integration that has followed bilateral and multilateral agreements among countries. The increasing importance of multinational companies and their role in international trade complicates an analysis of global trade statistics. This includes cases where a U.S. company has subsidiaries located overseas, where products are produced and processed, but marketed under the company's own branded labels; in other cases, a U.S. company may import foreign processed products made from U.S.-exported raw material abroad only to be re-imported to the United States as finished products. For example, a recent USITC import investigation highlights how U.S.-based Dole Food Company owns and operates fruit canneries in Thailand that rely largely on imported fruit from the United States to produce canned peach, pear, and mixed fruit products, which are repackaged into plastic jars and cups in Thailand, and then re-exported back to the United States in the form of retail-ready products. Thailand's competitive advantages in producing canned fruit are based primarily on relatively inexpensive labor and technological investments provided by Dole Food Company, which accounts for the majority of Thailand's peach and pear canning industry through its subsidiary Dole Thailand Ltd. Thailand is currently a leading global exporter of canned peaches, pears, and fruit mixtures, despite its insignificant domestic production of fresh peaches and pears. Many U.S. companies are implementing business strategies that source complementary fruit and vegetable products globally, which some argue may compete with domestically produced product. An import injury investigation brought by U.S. mushroom processors highlights competition concerns by some domestic producers about competition from imports of transnational production by U.S.-based multinational companies. Among the marketers of preserved mushrooms participating in the case was General Mills, Inc., which imports a range of food products produced and processed by its subsidiaries overseas (in Indonesia and India among other countries), including preserved mushrooms that are marketed under its Green Giant brand. Among the reasons General Mills officials cite for establishing overseas operations are year-round product availability and lower labor costs. Some companies do not own and operate foreign operations, but instead enter into licensing arrangements with other foreign companies who produce, pack, or process products, which are marketed under the company's own branded labels and either sold in the United States or in other foreign markets. Examples of such firms were described in another USITC import investigation into the global sourcing strategies among the major global suppliers of fresh oranges and lemons. Reasons cited by some U.S. produce companies for implementing global business strategies include the desire to source complementary fruit and vegetable products globally to meet year-round demand, reduce processing costs, and build an international customer network and brand recognition. Starting in 2005, the Specialty Crop Farm Bill Alliance began promoting recommendations for the 2008 farm bill, initially through the efforts of the United Fresh Produce Association and a number of specialty crop organizations nationwide. The alliance's goal has continued to work toward enhancing the competitiveness of U.S. fruits, vegetables, tree nuts, and other specialty crops by promoting specific programs and provisions as part of the periodic omnibus farm bill, including the most recent 2014 farm bill. In the buildup to the 2008 farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246 ), concerns over the trade situation for fruits and vegetables, among other production issues, contributed to demands by the U.S. produce growers that Congress consider expanding support for domestic fruit and vegetable growers in farm bill legislation. Historically, fruit and vegetable crops have not benefitted from the federal farm support programs traditionally included in the farm bill, compared to the long-standing support provided to the main program commodities (such as grains, oilseeds, cotton, sugar, and milk). The 2008 farm bill contained a horticultural title that included new and expanded provisions for specialty crops and organic production. These programs and provisions were reauthorized and in some cases expanded as part of the 2014 farm bill (Agricultural Act of 2014, P.L. 113-79 ). Among the farm bill's key trade-related provisions are those that specifically address SPS/TBT issues in the specialty crops sectors, as well as those that generally address export market promotion and barriers to U.S. trade: Market Access Program (MAP). Reauthorized MAP funding to encourage domestic exports, and included an amendment to cover organic products. MAP funds cost sharing of foreign market promotion activities. Technical Assistance for Specialty Crops (TASC). Reauthorized TASC program to address SPS and technical barriers to U.S. exports, and required an annual congressional report describing factors that affect specialty crops exports. Eligible projects include seminars and workshops, study tours, field surveys, pest and disease research, and pre-clearance programs. Both the 2008 and 2014 farm bills also provided for a range of other programs and support that generally support the specialty crop sectors but may also enhance exports and trade, including expanded plant pest and disease management and detection; increased collection of market data and information; and increased specialty crop food safety and related research issues, among other provisions. Often, farm bill legislation might also amend marketing orders governing the grades and standards for some commodities and requiring imports to meet similar standards. Information on these and other farm bill provisions directed to the specialty crop sectors is in CRS Report R42771, Fruits, Vegetables, and Other Specialty Crops: Selected Farm Bill and Federal Programs .

Over the last decade, there has been a growing U.S. trade deficit in fresh and processed fruits and vegetables. Although U.S. fruit and vegetable exports totaled $6.3 billion in 2015, U.S. imports of fruits and vegetables were $17.6 billion, resulting in a gap between imports and exports of $11.4 billion (excludes nuts and processed nut products). This trade deficit has generally widened over time as growth in imports has outpaced export growth. As a result, the United States has gone from being a net exporter of fresh and processed fruits and vegetables in the early 1970s to being a net importer of fruits and vegetables today. A number of factors shaping current competitive market conditions worldwide, and global trade in fruits and vegetables in particular, partially explain the rising fruit and vegetable trade deficit. These include: a relatively open domestic import regime and lower average import tariffs in the United States, with products from most leading suppliers entering the U.S. duty-free or at preferential duty rates; increased competition from low-cost or government-subsidized production; continued non-tariff trade barriers to U.S. exports in some countries, such as import and inspection requirements, technical product standards, and sanitary and phytosanitary (SPS) requirements; opportunities for counter-seasonal supplies, driven in part by increased domestic and year-round demand for fruits and vegetables; and other market factors, such as exchange rate fluctuations and structural changes in the U.S. food industry, as well as increased U.S. overseas investment and diversification in market sourcing by U.S. companies. In the buildup to the 2008 farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246), the trade situation contributed to demands by the U.S. produce sector that Congress consider expanding support for domestic fruit and vegetable growers in farm bill legislation. Historically, fruit and vegetable crops have not benefitted from the federal farm support programs traditionally included in the farm bill, compared to the long-standing support provided to the main program commodities (such as grains, oilseeds, cotton, sugar, and milk). The 2008 farm bill provided additional support for specialty crop programs, as well as organic programs. The farm bill also reauthorized two programs intended to address existing trade barriers and marketing of U.S. specialty crops, including (1) USDA's Market Access Program (MAP) to promote domestic agricultural exports, including specialty crops and organic agriculture; and (2) Technical Assistance for Specialty Crops (TASC) to address sanitary and phytosanitary (SPS) and technical barriers to U.S. exports. The 2014 farm bill (Agricultural Act of 2014, P.L. 113-79) reauthorized and expanded many of the provisions benefitting specialty crop growers.

The Corporation for National and Community Service (CNCS) was established by the National and Community Service Trust Act of 1993 ( P.L. 103-82 ). Operating as an independent federal agency, the CNCS oversees all national and community service programs authorized by the National and Community Service Act of 1990 (NCSA) and the Domestic Volunteer Service Act of 1973 (DVSA). The NCSA and DVSA were last reauthorized by the Edward M. Kennedy Serve America Act ( P.L. 111-13 ). Although authorization of appropriations under the Serve America Act expired in FY2014, NCSA and DVSA programs have continued to receive funding through the Departments of Labor, Health and Human Services, and Education and Related Agencies Appropriations Act (Labor-HHS-ED). CNCS programs are funded through the end of FY2018 under the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ). The final enacted appropriations law for FY2018 included $1.064 billion for CNCS. The overall FY2018 funding level for CNCS is 3% above the FY2017 level of $1.030 billion. This report provides a summary of each NCSA and DVSA program and compares funding under Labor-HHS-ED in the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ); the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ); the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ); and the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ). The purpose of the NCSA is to address unmet human, educational, environmental, and public safety needs and to renew an ethic of civil responsibility and community spirit in the United States by encouraging citizens to participate in national service programs. The NCSA was enacted in 1990 as P.L. 101-610 and last reauthorized in 2011 by the Edward M. Kennedy Serve America Act ( P.L. 111-13 ). NCSA programs include AmeriCorps State and National Grants, the National Service Trust, the National Civilian Community Corps (NCCC), and Learn and Serve America (LSA). See Table A-1 for NCSA funding information. Program Focus : Created in 1993, programs under AmeriCorps State and National Grants identify and address critical community needs, including tutoring and mentoring disadvantaged youth, managing or operating after-school programs, helping communities respond to disasters, improving health services, building affordable housing, and cleaning parks and streams. Grants include formula grants to states and territories, and competitive grants to states, territories, Indian tribes, and national nonprofit organizations. Volunteer Eligibility : Individuals aged 17 and older. Amount of Volunteer Service : Full-time or part-time for a 9- to 12-month period. Volunteer Benefits : Some full-time AmeriCorps members receive a living allowance, health coverage, and child care for those who qualify. Participants in AmeriCorps may receive educational awards for their service through the National Service Trust (see the following section of this report). AmeriCorps members can also obtain loan forbearance (i.e., postponement) in the repayment of their qualified student loans while participating in these programs and have the interest on their accrued loans paid from the trust once they earn an educational award. Administrative Entity : Each state and territory governor appoints members of a service commission to manage, monitor, and administer annual grant applications for the state. CNCS reviews the state commission formula package and makes the awards. For multistate or national awards, grantees are selected competitively by the CNCS headquarters office. The National Service Trust, a special account in the U.S. Treasury, provides educational awards for participants in AmeriCorps Grants, NCCC, and Volunteers in Service to America (VISTA). An individual may not receive more than an amount equal to the aggregate value of two awards for full-time service. The educational award for full-time service is equal to the maximum amount of a Pell Grant in effect at the beginning of the federal fiscal year in which the Corporation approves the national service position. AmeriCorps members serving in programs funded in FY2018 will receive an education award of up to $5,920, which is the Pell Grant maximum in the year the positions were approved. Prorated awards are also made for other terms of service, such as half-time (see Table 1 ). AmeriCorps members aged 55 or older at the beginning of a term of service may transfer the education award to a child, grandchild, or foster child. AmeriCorps State and National participants can serve a maximum of four terms of service. Full-time, half-time, reduced half-time, quarter time, and minimum time terms of service each count as one term of service. In addition to education awards, the National Service Trust provides interest payments on qualified student loans to recipients of AmeriCorps Grants and participants in NCCC or VISTA who have obtained forbearance (postponement of loan repayment). Program Focus : NCCC is a full-time residential program that focuses on short-term projects that meet national and community needs related to disaster relief, infrastructure improvement, environment and energy conservation, environmental stewardship, and urban and rural development. Volunteer Eligibility : Individuals aged 18 to 24. By statute (42 U.S.C.S. SS12613(c)), the Corporation is required to take steps to increase the percentage of program participants who are disadvantaged to 50% of all participants. Amount of Volunteer Service : Participants can serve up to two years full time. Full-time service is defined as 10 months each year. Volunteer Benefits : NCCC participants may receive a living allowance, room and board, limited medical benefits, and an educational award through the National Service Trust. Administrative Entity : NCCC programs are administered by the CNCS. CNCS continues to have broad authority to fund a range of activities as authorized by Subtitle I-H, Investment for Quality and Innovation. The Serve America Act established the following programs. Social Innovation Fund (SIF). The Social Innovation Fund leverages federal investments to increase state, local, business, and philanthropic resources to replicate and expand proven solutions and invest in the support of innovation for community challenges. P.L. 115-141 does not include funding for the Social Innovation Fund. Volunteer Generation Fund. The Volunteer Generation Fund awards competitive grants to state commissions and nonprofit organizations to develop and support community-based entities that recruit, manage, or support volunteers. Innovation, Demonstration, and Call to Service. The corporation supports innovative initiatives and demonstration programs, such as the Call To Service, which would engage Americans in community needs, such as the Martin Luther King Jr. National Day of Service and the September 11 th National Day of Service and Remembrance. Since 1990, NCSA has authorized community service programs benefitting students and communities through "service-learning," which integrates community service projects with classroom learning. This program was last funded in FY2010 by the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ). The DVSA was enacted in 1973 as P.L. 93-113 . Like the NCSA, it was last reauthorized in 2011 by the Edward M. Kennedy Serve America Act ( P.L. 111-13 ). The purpose of DVSA is to foster and expand voluntary citizen service throughout the nation. DVSA programs are designed to help the poor, the disadvantaged, the vulnerable, and the elderly. Administered by the CNCS, DVSA programs include VISTA and the National Senior Volunteer Corps. See Table A-1 for DVSA funding information. Program Focus : The VISTA program encourages Americans to participate in community service in an effort to eliminate poverty. Volunteer Eligibility : Individuals aged 18 and older. Amount of Volunteer Service : VISTA members serve full time for up to five years. Volunteer Benefits: VISTA members may receive a living allowance, student-loan forbearance, health coverage, relocation costs, training, and child care assistance. VISTA members have the option of receiving an educational award, which is equivalent to the educational awards earned by AmeriCorps or NCCC members, or they may choose to receive an end-of-service lump sum stipend of $1,500 instead. Like NCCC members, VISTA members receive an educational award based on the Pell Grant. Full-time, half-time, reduced half-time, quarter time, and minimum time terms of service each count as one term of service. Administrative Entity : CNCS state offices. The National Senior Service Corps consists of three programs, summarized below: the Retired Senior Volunteer Program (RSVP), the Foster Grandparent Program (FGP), and the Senior Companion Program (SCP). Program Focus : Volunteers in RSVP may play community service roles in education, health and nutrition services, community and economic development, and other areas of human need. Volunteer Eligibility : Individuals aged 55 and older. Amount of Volunteer Service : Participants can contribute up to 40 hours each week. Volunteer Benefits : The RSVP offers no direct benefits (e.g., stipends or educational awards), with the exception of mileage reimbursement and insurance coverage during assignments. Administrative Entity : CNCS state offices. Program Focus : FGP participants support children with exceptional needs by providing aid and services. FGP participants mentor children and teenagers, teach model parenting skills, and help care for premature infants and children with disabilities. Volunteer Eligibility : Individuals must be 55 or older to participate in FGP and meet income eligibility requirements to receive a stipend. Amount of Volunteer Service : Volunteer schedules, which range from 15 to 40 hours each week, average 20 hours per week. Volunteer Benefits : Income eligible participants may receive a tax-free hourly stipend. Participants may also receive mileage reimbursements and accident, liability, and automobile insurance coverage during assignments. Administrative Entity : CNCS state offices. Program Focus : SCP gives older adults the opportunity to assist homebound elderly individuals to remain in their own homes and to enable institutionalized elderly individuals to return to home care settings. Volunteer Eligibility : Individuals must be 55 or older to participate in SCP and meet income eligibility requirements to receive a stipend. Amount of Volunteer Service : Volunteer schedules, which range from 15 to 40 hours each week, average 20 hours per week. Volunteer Benefits : Participants may receive a stipend. Participants may also receive mileage reimbursements and accident, liability, and automobile insurance coverage during assignments. Administrative Entity : CNCS state offices.

The Corporation for National and Community Service (CNCS) is an independent federal agency that administers the programs authorized by two statutes: the National and Community Service Act of 1990 (NCSA; P.L. 101-610), as amended, and the Domestic Volunteer Service Act of 1973 (DVSA; P.L. 93-113), as amended. NCSA and DVSA programs were most recently reauthorized by the Edward M. Kennedy Serve America Act (P.L. 111-13). This report describes programs authorized by these laws and compares CNCS funding for FY2015, FY2016, FY2017, and FY2018. The NCSA is designed to meet unmet human, educational, environmental, and public safety needs and to renew an ethic of civic responsibility by encouraging citizens to participate in national service programs. The major programs authorized by NCSA include AmeriCorps State and National Grants and the National Civilian Community Corps (NCCC). The NCSA also authorizes the National Service Trust, which funds educational awards for community service participants. A central purpose of the DVSA, which authorizes the Volunteers in Service to America (VISTA) program and the National Senior Volunteer Corps, is to foster and expand voluntary service in communities while helping the vulnerable, the disadvantaged, the elderly, and the poor. The DVSA also authorizes the National Senior Volunteer Corps, which includes three programs for senior citizens: the Foster Grandparent Program, the Senior Companion Program, and the Retired and Senior Volunteer Program (RSVP). Appropriations for the DVSA and the NCSA programs are made annually through the Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act (Labor-HHS-ED). CNCS programs are funded through FY2018 under the Consolidated Appropriations Act, 2018 ( P.L. 115-141). The FY2018 appropriations amount for CNCS is $1.064 billion, which is $34 million more than the FY2017 amount of $1.030 billion. This report will be updated as warranted by legislative developments.

RS20522 -- Army Aviation: The RAH-66 Comanche Helicopter Issue Updated July 2, 2003 The RAH-66 Comanche is a next generation armed reconnaissance helicopter. It is the first helicopter designed anddeveloped specifically for this mission. The Comanche is being designed to stealthily penetrate enemy airspace andconductreconnaissance. It is to incorporate advanced computers and communications to play a leading role in the digital,networkcentric battlespace, with enough weaponry to engage a wide range of targets. Some call the Comanche the world'smostsophisticated combat helicopter, with more lines of software code than even the F/A-22 Raptor. (2) The Comanche's primaryroles would be to seek out enemy forces and designate targets for the AH-64 Apache attack helicopter at night, inadverseweather, and in battlefields obscured by smoke and dust.. Originally, the Army envisioned developing and procuring 5,023 Comanches to replace the Army's 1960s-era observation,utility transport, and attack helicopters (OH-6, OH-58, UH-1, AH-1). Budget constraints and force structuremodificationscaused significant modifications to the Comanche program. First, the utility transport version of the platform wascanceledand the procurement objective reduced to 1,292 armed reconnaissance helicopters. Second, the FY1993 budgetdeferred aproduction decision until 2006 and trimmed the number of prototypes from six to three. Third, in December 1994DoDtrimmed $2 billion from the RAH-66 program and dropped another prototype, going from three to two. Fourth, in1995, theArmy restructured the program to add 6 "experimental operational capability" helicopters within the reduced budgetlimits,in part by producing them without the armaments suite. In April 2000 the Comanche program successfully completed a series of tests and was cleared to begin its two-year, $3.1billion Engineering and Manufacturing Development phase (3) . Boeing-Sikorsy has built and flown two Comancheprototypes. The first pre-production model, and the third Comanche is being built and is expected to be flown firstin March2005. (4) The last plan was for five pre-productionaircraft to be built in this phase and eight production aircraft were due fordelivery by 2004 for initial operational testing and evaluation. A total of 14 initial operational capability RAH-66swasplanned for delivery at the end of 2006 (5) and 1,213Comanches were to have been produced through 2024. On October 21,2002 it was announced that former DoD acquisition chief Pete Aldridge had signed an acquisition decisionmemorandum(ADM) giving final approval for the latest restructuring of the RAH-66 program. Under this new plan, the totalpurchase ofComanches would be reduced from 1,213 to 650 aircraft. Seventy three aircraft will be produced during Low RateInitialProduction (LRIP) in different blocks. Nine EMD aircraft, which will most likely be used as trainers, will be builtanddelivered by 2006. The Comanche's Initial Operating Capability (IOC) will be achieved in September 2009, threeyearslater than originally planned, and nine months after the most recent plan. The remaining 577 aircraft will beproduced undera full rate production schedule of 60 aircraft per year, starting in 2011. The Army had wanted to boost the productionrate to96 aircraft per year as part of an effort to cut costs. (6) This restructuring reduces the Comanche's production phase from $39.3 billion to an estimated $26.9 billion. DoD hasagreed to add $3.7 billion to the helicopter's $3.2 billion full-scale development program. Army officials estimatethat thecost of each Comanche, adjusted for inflation, will increase by 33 percent - to $32.3 million (7) Much of the program's problems have been due to the amount of systems that have been developed concurrently. Forexample, the radar, armor, and navigation and communication systems were all being developed at the same time. (8) Thelatest restructuring will reduce this concurrence by delaying the fielding of certain capabilities - the radar system,a highlevel of control of UAVs, full air-to-air engagement with the turreted gun system, Link 16 datalink, and satellitecommunications - to later blocks. (9) The program was also restructured to field a companion UAV for the Comanche, which will be developed with fundsintended to upgrade Comanche itself. More sophisticated sensors and a better power drive system will be sacrificedin lieuof the UAV development. Comanche officials estimate that about $644 million between fiscal years 2004 and 2009will bespent on the Comanche's UAV instead of the platform itself. (10) The Army has experimented with teaming UAVs and bothApache and Comanche for several years, including work with the RQ-5A Hunter . (11) It is currently unclear whether theComanche's companion will be an operational UAV, one currently in development, or one developed specificallyfor thejob. If there are no further changes, Comanche prime contractors Boeing and Sikorsky would build helicopters through 2019." (12) However, the final word on Comanche numbers has not been spoken. Some note that while DoD originally plannedtoprocure approximately 1,100 H-60 helicopters, over 2,500 have been procured to date. (13) Army officials claim that 650aircraft are too few, and that they require 819 Comanches to effectively equip their Objective Force which is hopedto beready by 2008. Plans call for fielding detachments of 12 Comanche aircraft to the Objective Force brigade-strength'units ofaction,' accompanied by eight UAVs." (14) In May 2002, DoD's Inspector General (IG) reviewed the restructured Comanche program. The IG report called therestructuring a constructive approach to reducing risk and improving the program. However, the IG cautioned thatcontinued emphasis is required to ensure that integration problems do not emerge in the future that could result inincreasedcost and schedule. (15) The RAH-66 Comanche is designed to replace the aging AH-1 and OH-58D helicopters and to augment the AH-64 Apacheattack helicopter. Critics of the Comanche program argue that there is no need for a highly sophisticated, very lowobservable armed reconnaissance helicopter in today's threat environment. They contend that Comanche'scapabilities and mission requirements were developed in response to a Cold War threat environment that no longer exists. Criticsalso arguethat the Comanche's role and capabilities are too similar to the Apache's to justify the costs of the helicopter'sdevelopmentand production. They would cancel the RAH-66, and use the savings to upgrade the OH-58 aircraft and the AH-64DApache's Longbow (16) target acquisitioncapabilities. Others say that Comanche's reduced radar signature will do little tomake it more survivable than current helicopters. They note that in Iraq, Army and Marine Corps helicopters wereshotdown or damaged by IR-guided missiles, rocket-propelled grenades, and small arms fire, none of which use radarsfortargeting. Proponents of the RAH-66 agree that the Cold War threat has disappeared, but counter that today's low-intensity regionalconflicts (such as Kosovo and Somalia) place even greater burdens on Army aviation. U.S. Forces must be moredeployable, less reliant on forward bases, and more versatile than they were during the Cold War. Supporters arguethatComanche satisfies all three criteria. Furthermore, proponents argue that Comanche makes the whole force moreeffectiveand will reduce the Army's maintenance burden. This perspective, proponents argue, is supported by initial resultsfrom anArmy "Analysis of Alternatives." This study compared attack and air cavalry squadrons equipped with AH-64DLongbowsand OH-58D Kiowa Warriors to units composed of Apaches and Comanches. The force equipped with Comanchesreportedly demonstrated better situational awareness, survivability and lethality than the other force. The Comancheprovided better sensing, lethality, range, agility, survivability, and versatility than the Kiowa units. Comanche alsoimproved the effectiveness of the Longbow when the two aircraft were mixed in attack units. The RAH-66's stealthimproved Apache Longbow's survivability when cooperative tactics, techniques and procedures were used. (17) Claims of reduced maintenance burdens for the Comanche, however, are more controversial than are claims of itseffectiveness (18) . Projected ratios of maintenanceman-hours to flight hours have varied over time. The Army hopes toachieve a ratio of 2.6 hours of maintenance to every one hour of flight; however, both the General Accounting OfficeandCongressional Budget Office assert that projected reductions in maintenance are always optimistic. (19) Additionally, somestudies conclude that the Comanche is more expensive to fly than the Kiowa Warrior ($2,042/hour vs $1,598/hour),butless expensive than the AH-64D, which can cost as much as $3,622/hour to fly. (20) The Comanche's role vis-a-vis the Apache is a continued point of debate. The most recent reduction in the Comancheprogram has increased the prominence of the AH-64 Apache. To compensate for fewer Comanches, the Army isconsidering improvements to Apache, such as a life-extension program or upgrades. Another option may be toprocure more Longbow models. (21) Some suggest that the DABdecision reaffirms the Apache's place as the Army's attack aircraft, andquestion whether Comanche should pursue features such as the external fuel, Armaments and Munitions System,or anair-to-air missile capability. (22) Another issue is whether the Army will upgrade Comanche for 'heavy' attack requirements. In November 2001, Armyofficials said they were planning on a heavy variant of the RAH-66 as a replacement for the AH-64D. As part ofArmytransformation plan, Army officials said that the Comanche could perform the attack as well as the armedreconnaissancemission in the future. (23) It is unclear whether theRAH-66 could maintain its stealthy profile while carrying externalweapons, however, and some questions whether Comanche - which currently suffers from weight problems - hasthepower and fuel capacity to take on even more weight. (24) The Marine Corps is expected to seek a replacement for its AH-1ZSuper Cobra helicopters around 2020 and it has been suggested that a joint program with the Army is worthinvestigating. (25) Congress strongly supported the Comanche program by consistently meeting or exceeding DoD's budget requests forfunding. In its report on DoD's FY1996 budget request, the House Armed Services Committee reproached both theArmyand the DoD for tepid commitment to the program, urging that it be given a higher funding priority and thatfull-scaleproduction by 2004 be guaranteed. (26) Summary of Recent Comanche R&D Funding in $ Millions In their reports ( H.Rept. 108-106 , H.R. 1588; and S.Rept. 108-46 , S. 1050 ), House and Senate authorizers respectively matched the Administration's request for FY04 Comanche funding. In light of the facts and arguments presented above, Congress may wish to pursue the following lines of inquiry: Comanche is the Army's only major aviation development program. The Comanche Operational RequirementsDocument describes the RAH-66's contribution to future Army warfighting missions. It states that "Aviationcapabilitiesadd increased deployability, versatility, lethality, flexibility, mobility, extended coverage and sustainment toManeuver,Fire Support, Air Defense..."and other mission areas. If the Comanche buy is reduced, what effect will this have onlong-term capabilities? How much does Comanche contribute to combat power vis-a-vis the light armored vehiclesthatthe also Army wants? $6.8 billion has been spent on the Comanche through FY03. (27) Will a purchase of 650 helicopters be a sufficient returnon this R&D investment? Some say that in recent conflicts, fixed wing aircraft have played a more prominent role, than Army attackhelicopters.Might improved versions of the AC-130 and A-10, or the STOVL variant of the Joint Strike Fighter, be moreeffectiveproviders of Close Air Support to Army ground forces than the RAH-66? The need for Comanche has been challenged on the basis that its capabilities do not differentiate it sufficientlyfromApache to merit its development. However, turning this argument around, some would assert that the Comancheiswell-suited to be the Apache's replacement as the Army's premier attack helicopter and the Army's best platformforfuture growth and development in this area. Subsequently, one could anticipate a helicopter force structurecomposedsolely of heavy lift (CH-47), battlefield utility (UH-60), and scout/attack (RAH-66) aircraft. What are the merits ofthisforce structure? Consideration of export issues is part and parcel of any military program. How much might Comanche exportscontributeto sustaining the aviation industrial base and balancing U.S. trade? As a new platform, and one less overtly designedforattack than the Apache, might the Comanche be offered for export to a larger number of countries than the AH-64?Conversely, due to its low observable features might Comanche exports need to be limited to our closest allies? 1. (back) This report supercedes CRS Report 96-525 F, Army Aviation: RAH-66 Comanche , by Steven R. Bowman. Washington,1996 (Archived). 2. (back) Vernon Loeb. "Fate of Army Chopper OnThe Block." Washington Post . August 31, 2002. p.2. 3. (back) "Comanche Cleared to Begin Engineeringand Manufacturing Development." Defense Daily . April 6, 2000. 4. (back) Kent Faulk. "Comanche Helicopter OnLast Chance To Fly." Birmingham News . July 1, 2002. 5. (back) Telephone conversation with JackSatterfield, Boeing spokesman; Capaccio, Tony, U.S. Army To Make Decision onHelicopter Purchases in April, Bloomberg News Service , March 2, 2000. 6. (back) Neil Baumgardner. "Aldridge InksComanche Acquisition Decision Memorandum, Numbers Cut To 650." Defense Daily. October 21, 2002. 7. (back) Tony Capaccio. "Boeing, UTX SeePositive Impact in Comanche Cut." Bloomberg.com. October 23, 2002. 8. (back) Neil Baumgardner. "Army Ready to MoveForward with Comanche, Program Manager Says." Defense Daily. February28, 2002. 9. (back) Baumgardner. OpCit. "Aldridge Inks Comanche Acquisition Decision Memorandum." 10. (back) Erin Winograd. "Army LeadersAdamant That 650 Comanches Won't Meet Requirements." Inside the Army. October28, 2002. p.10. 11. (back) Kim Burger. "AUSA - Army EyesApache to Fill Comanche Gap." Jane's Defense Weekly. October 30, 2002. 12. (back) Robert Wall. "New Comanche PlanGets Green Light." Aviation Week & Space Technology. October 28, 2002. 13. (back) Ron Laurenzo. "Comanche's LookingUp, But Now Comes The Crunch." Defense Week. June 2, 2003. 14. (back) Burger. OpCit "AUSA- Army Eyes Apache to Fill Comanche Gap." 15. (back) James Asker. "Pentagon Inspector:Latest Comanche Development Plan Reduces Program Risk." Aviation Week &Space Technology. May 19, 2003. 16. (back) The AH-64D Longbow is an upgradedversion of the AH-64A which includes a millimeter-wave Fire Control Radartarget acquisition system and fire-and-forget Hellfire missiles. 17. (back) Erin Winograd. "Initial Results ofAlternatives Analysis Show RAH-66 Contributions." Inside the Army . January 24,2000. 18. (back) Claims of improved maintenancerequirements are based on projections of advanced processes and technologies whichwon't be proven until the aircraft is fielded. In general, more technologically sophisticated weapon systems are moredifficult to maintain than less sophisticated weapon systems. 19. (back) CRS Report 96-525, ArmyAviation: RAH-66 Comanche . P. 3-4. 20. (back) Winograd OpCit . "InitialResults of Alternatives Analysis Show RAH-66 Contributions." 21. (back) Burger. OpCit . "AUSA- Army Eyes Apache to Fill Comanche Gap." 22. (back) Winograd. OpCit . "ArmyLeaders Adamant That 650 Comanches Won't Meet Requirements." 23. (back) Neil Baumgardner. Heavy Comancheto Replace Apache, Army Officials Say. Defense Daily. November 13, 2001. 24. (back) Tony Capaccio. Boeing, United TechComanche Copter's Cost, Weight Hit by GAO. Bloomberg.com . May 18, 2001. 25. (back) Kim Burger. "US Army CutsComanche Buy." Jane's Defense Weekly. October 16, 2002. p.3. 26. (back) U.S. Congress. House ofRepresentatives. Committee on National Security, National Defense Authorization Act forFiscal Year 1996, 104th Cong., 1st Sess., H.R. 104-131, June 1, 1995. P.91. 27. (back) Selected Acquisition Report (SAR)Summary Tables. (As of June 30, 2002)Department of Defense, OUSD(A&T),Systems Acquisition. http://www.acq.osd.mil/ara/am/sar/index.html .

Although it has been a high Army priority, a number of factors havecomplicated the RAH-66 Comanche program. Since its inception, the program has been restructured severaltimes-postponing the initial operational capability (IOC) and increasing overall program costs. In late 2002, DoDrestructured the RAH-66 program again, cutting the number of aircraft to be procured in half. This report will beupdated

Federal regulations generally result from an act of Congress and are one significant means by which statutes are implemented. Congress delegates rulemaking authority to agencies for a variety of reasons, and in a variety of ways. The Patient Protection and Affordable Care Act (ACA, as amended) provides a notable example of congressional delegation of rulemaking authority to federal agencies. A previous CRS report identified more than 40 provisions in the ACA that explicitly require or permit the issuance of rules to implement the law. The rules that agencies have issued, and will continue to issue, pursuant to the ACA have a major impact on how the law is implemented. For example, in an article posted on the New England Journal of Medicine ' s Health Care Reform Center shortly after the ACA was signed into law, Henry J. Aaron and Robert D. Reischauer wrote, Making the legislation a success requires not only that it survive but also that it be effectively implemented. Although the bill runs to more than 2000 pages, much remains to be decided. The legislation tasks federal or state officials with writing regulations, making appointments, and giving precise meaning to many terms. The manner in which Congress delegates rulemaking authority to federal agencies determines the amount of discretion the agencies have in crafting the rules and, conversely, the amount of control that Congress retains for itself. Some of the more than 40 rulemaking provisions in the ACA are quite specific, stipulating the substance of the rules, whether certain consultative or rulemaking procedures should be used, and deadlines for their issuance or implementation. Other provisions in the ACA permit, but do not require, the agencies to issue certain rules (e.g., stating that the head of an agency "may issue regulations" defining certain terms, or "may by regulation" establish guidance or requirements for carrying out the legislation). As a result, the agency head has the discretion to decide whether to issue any regulations at all, and if so, what those rules will contain. Still other provisions in the ACA require agencies to establish programs or procedures but do not specifically mention regulations. In his book Building a Legislative-Centered Public Administration , David H. Rosenbloom noted that rulemaking and lawmaking are functionally equivalent (the results of both processes have the force of law), and that when agencies issue rules they, in effect, legislate. He went on to say that the "Constitution's grant of legislative power to Congress encompasses a responsibility to ensure that delegated authority is exercised according to appropriate procedures." Congressional oversight of rulemaking can deal with a variety of issues, including the substance of the rules issued pursuant to congressional delegations of authority and the process by which those rules are issued. Having an early sense of what rules agencies are going to issue, and when they are going to issue those rules, can help Congress conduct oversight over the regulations that are issued pursuant to the ACA. The previously referenced CRS report identifying the provisions in the act that require or permit rulemaking can be useful in this regard. A potentially effective way for Congress to identify upcoming ACA rules is by reviewing the Unified Agenda of Federal Regulatory and Deregulatory Actions (hereafter Unified Agenda), which is usually published twice each year--in the spring and fall. The Unified Agenda is published by the Regulatory Information Service Center (RISC), a component of the General Services Administration (GSA), for the Office of Management and Budget's (OMB's) Office of Information and Regulatory Affairs (OIRA). The Unified Agenda helps agencies fulfill two current transparency requirements: The Regulatory Flexibility Act (5 U.S.C. SS602) requires that all agencies publish semiannual regulatory agendas in the Federal Register , in April and October of each year, describing regulatory actions that they are developing that may have a significant economic impact on a substantial number of small entities. Section 4 of Executive Order 12866 on "Regulatory Planning and Review" requires that all executive branch agencies "prepare an agenda of all regulations under development or review." The stated purposes of this and other planning requirements in the order are, among other things, to "maximize consultation and the resolution of potential conflicts at an early stage" and to "involve the public and its State, local, and tribal officials in regulatory planning." The executive order also requires that each agency prepare, as part of the fall edition of the Unified Agenda, a "regulatory plan" of the most important significant regulatory actions that the agency reasonably expects to issue in proposed or final form during the upcoming fiscal year. The Unified Agenda lists upcoming activities, by agency, in three separate categories: "active" actions, including rules in the prerule stage (e.g., advance notices of proposed rulemaking that are expected to be issued in the next 12 months); proposed rule stage (i.e., notices of proposed rulemaking that are expected to be issued in the next 12 months, or for which the closing date of the comment period is the next step); and final rule stage (i.e., final rules or other final actions that are expected to be issued in the next 12 months); "completed" actions (i.e., final rules or rules that have been withdrawn since the last edition of the Unified Agenda); and "long-term" actions (i.e., items under development that agencies do not expect to take action on in the next 12 months). All entries in the Unified Agenda usually have uniform data elements, which typically include the department and agency issuing the rule, the title of the rule, the Regulation Identifier Number (RIN), an abstract describing the nature of action being taken, and a timetable showing the dates of past actions and a projected date (sometimes just the projected month and year) for the next regulatory action. Each entry also contains an element indicating the priority of the regulation (e.g., whether it is considered "economically significant" under Executive Order 12866, or whether it is considered a "major" rule under the Congressional Review Act). There is no penalty for issuing a rule without a prior notice in the Unified Agenda, and some prospective rules listed in the Unified Agenda are never issued, reflecting the fluid nature of the rulemaking process. Nevertheless, the Unified Agenda can help Congress and the public know what regulatory actions are about to occur, and, arguably, it provides federal agencies with the most systematic, government-wide method to alert the public about their upcoming proposed rules. The Spring 2014 edition of the Unified Agenda, published on May 23, 2014, is the seventh edition compiled and issued by RISC since enactment of the ACA. Federal agencies are usually required to submit data to RISC several weeks prior to publication, but some items may have been subsequently updated during the OIRA review process. This report examines the Spring 2014 edition of the Unified Agenda and identifies upcoming proposed and final rules and long-term regulatory actions expected to be issued pursuant to the ACA in the next 12 months. To identify those upcoming rules and actions, CRS searched all fields of the Unified Agenda (all agencies) using the term "Affordable Care Act," focusing on the proposed rule and final rule stages of rulemaking, as well as the "long-term actions" category. In this edition, agencies reported 14 proposed rules and 17 final rules they expect to issue pursuant to the ACA within the next 12 months. Agencies also reported a total of four long-term regulatory actions. The results of the search for proposed and final rules are provided in the Appendix to this report. For each upcoming proposed and final rule listed, the table identifies the department and agency expected to issue the rule, the title of the rule and its RIN, an abstract describing the nature of the rulemaking action, and the date the proposed or final rule is expected to be issued. The abstracts presented in the table were taken verbatim from the Unified Agenda entries. Within the proposed and final rule sections of the table, the entries are organized by agency. The Spring 2014 edition of the Unified Agenda listed 14 ACA-related rules in the "proposed rule stage" (indicating that the agencies expected to issue proposed rules on the topics within the next 12 months, or for which the closing dates of the comment periods are the next step). Ten of the 14 upcoming proposed rules were expected to be issued by components of the Department of Health and Human Services (HHS): Centers for Medicare & Medicaid Services (CMS, four rules); the Office of Inspector General (OIG, three rules); the Health Resources and Services Administration (HRSA, one rule); the Office for Civil Rights (OCR, one rule); and the Administration for Children and Families (ACF, one rule). Two other proposed rules were expected to be issued by the Equal Employment Opportunity Commission (EEOC). The final two proposed rules are to be issued jointly by CMS, the Department of Labor's (DOL) Employee Benefits Security Administration (EBSA), and the Department of the Treasury's (TREAS) Internal Revenue Service (IRS). Rules agencies intend to issue pursuant to the ACA may be considered notable for a variety of reasons--for example, they may be considered notable if they were listed in the agency's "regulatory plan," which is described below, or if they meet a particular statutory or executive order definition of significance. Some examples of notable rules are listed below. As stated earlier, Executive Order 12866 requires that each agency prepare, as part of the fall edition of the Unified Agenda, a regulatory plan detailing the most important regulatory actions the agency reasonably expects to issue in proposed or final form during the upcoming fiscal year. In the spring edition, agencies are asked to indicate whether their rules have appeared in the regulatory plan. However, of the proposed rules included in the Spring 2014 Unified Agenda, none had been included in the regulatory plan. Although none of the proposed rules were listed in the regulatory plan, the Unified Agenda listed three rules that were considered "economically significant" and/or "major" (one definition of "economically significant" or "major," for example, is that the rule is expected to have at least a $100 million annual effect on the economy). All three rules are to be issued by CMS: a rule on "Reform of Requirements for Long-Term Care Facilities and Quality Assurance and Performance Improvement (QAPI) Program"; a rule on "CY 2016 Notice of Benefit and Payment Parameters"; and a rule on "Application of the Mental Health Parity and Addiction Equity Act to Medicaid Programs." In addition to the above-mentioned rules, the agencies characterized 9 of the 14 upcoming proposed rules as "other significant," indicating that although they were not listed in the regulatory plan or expected to be "economically significant," they were expected to be significant enough to be reviewed by OIRA under Executive Order 12866: an HHS/OIG rule on "Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General's Civil Monetary Penalty Rules"; an HHS/OIG rule on "Fraud and Abuse; Revisions to the Office of Inspector General's Exclusion Authorities"; an HHS/CMS rule on "State Option To Provide Health Homes for Enrollees With Chronic Conditions"; an HHS/OCR rule on "Nondiscrimination Under the Patient Protection and Affordable Care Act"; an HHS/ACF rule on "Refugee Medical Assistance"; an EEOC rule on "Amendments to Regulations Under the Americans With Disabilities Act"; an EEOC rule on "Amendments to Regulations Under the Genetic Information Nondiscrimination Act of 2008"; an HHS/CMS, DOL/EBSA, and TREAS/IRS rule on "Ninety-Day Waiting Period Limitation"; and an HHS/CMS, DOL/EBSA, and TREAS/IRS rule on "Amendments to Excepted Benefits." The Regulatory Flexibility Act (RFA, 5 U.S.C. SSSS601-612) generally requires federal agencies to assess the impact of their forthcoming regulations on "small entities" (i.e., small businesses, local governments, and small not-for-profit organizations). Six of the ACA-related rules listed in the proposed rule section expected that they may trigger the requirements of the Regulatory Flexibility Act because of their effects on small entities: an HHS/CMS rule on "Reform of Requirements for Long-Term Care Facilities and Quality Assurance and Performance Improvement (QAPI) Program"; an HHS/CMS rule on "Application of the Mental Health Parity and Addiction Equity Act to Medicaid Programs"; an EEOC rule on "Amendments to Regulations Under the Americans With Disabilities Act"; an EEOC rule on "Amendments to Regulations Under the Genetic Information Nondiscrimination Act of 2008"; an HHS/CMS, DOL/EBSA, and TREAS/IRS rule on "Amendments to Excepted Benefits"; and an HHS/CMS, DOL/EBSA, and TREAS/IRS rule on "Ninety-Day Waiting Period Limitation." As of June 19, 2014, four proposed rules listed in the Unified Agenda had been published in the Federal Registe r : an HHS/OIG rule on "Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General's Civil Monetary Penalty Rules"; an HHS/OIG rule on "Fraud and Abuse; Revisions to the Office of Inspector General's Exclusion Authorities"; an HHS/CMS, DOL/EBSA, and TREAS/IRS rule on "Ninety-Day Waiting Period Limitation Under the Affordable Care Act"; and an HHS/CMS, DOL/EBSA, and TREAS/IRS rule on "Amendments to Excepted Benefits." An additional three upcoming proposed rules were expected to be issued in May or June 2014, but had not yet been issued as of June 19, 2014: an HHS/CMS rule on "Reform of Requirements for Long-Term Care Facilities and Quality Assurance and Performance Improvement (QAPI) Program"; an EEOC rule on "Amendments to Regulations Under the Americans With Disabilities Act"; and an EEOC rule on "Amendments to Regulations Under the Genetic Information Nondiscrimination Act of 2008." The remaining proposed rules listed in the Unified Agenda are expected to be issued sometime during the remaining months of 2014 or 2015. The Spring 2014 edition of the Unified Agenda listed 17 upcoming rules in the final rule section (indicating that the agencies expected to issue these final rules within the next 12 months). Eleven of the 17 upcoming final rules are expected to be issued by components of HHS: the Health Resources and Services Administration (HRSA, one rule); the Food and Drug Administration (FDA, two rules); and CMS (eight rules). Three of the 17 upcoming final rules are expected to be issued by TREAS/IRS. Other final rules are expected to be issued by DOL's Occupational Safety and Health Administration (OSHA, one rule); the Architectural and Transportation Barriers Compliance Board (ATBCB, one rule); and the Department of Veterans Affairs (VA, one rule). As discussed above, rules may be notable for a variety of reasons; several examples of notable upcoming final rules are listed in the section below. Three of the ACA regulations that were listed in the final rule section of the Unified Agenda had been considered important enough to be included in the agencies' regulatory plans: two HHS/FDA rules on "Food Labeling: Calorie Labeling of Articles of Food Sold in Vending Machines" and "Food Labeling: Nutrition Labeling of Standard Menu Items in Restaurants and Similar Retail Food Establishments," both of which the agency expects to publish in June 2014; an ATBCB rule on "Accessibility Standards for Medical Diagnostic Equipment," which the agency expects to publish in November 2014. The Unified Agenda listed seven entries in the final rule section that were considered "economically significant" and/or "major" (i.e., that were expected to have at least a $100 million annual effect on the economy): two HHS/FDA rules on "Food Labeling: Calorie Labeling of Articles of Food Sold in Vending Machines" and "Food Labeling: Nutrition Labeling of Standard Menu Items in Restaurants and Similar Retail Food Establishments," both of which the agency expects to publish in June 2014; an HHS/CMS rule on "Face-to-Face Requirements for Home Health Services; Policy Changes and Clarifications Related to Home Health," which the agency expects to publish in September 2014; an HHS/CMS rule on "Covered Outpatient Drugs," which the agency expects to publish in June 2014; an HHS/CMS rule on "Prospective Payment System for Federally Qualified Health Centers; Changes to Contracting Policies for Rural Health Clinics and CLIA Enforcement Actions for Proficiency Testing Referral," which the agency published as a final rule with comment period on May 2, 2014; an HHS/CMS rule on "Adoption of Operating Rules for HIPAA Transactions," which the agency expects to publish as an interim final rule in March 2015; and an HHS/CMS rule on "Eligibility Notices, Fair Hearing and Appeal Processes for Medicaid and Exchange Eligibility Appeals, and Other Eligibility and Enrollment Provisions," which the agency expects to publish in November 2014. In addition to the above-mentioned rules, six additional upcoming final rules listed in the Unified Agenda were characterized as "other significant," indicating that although they were not listed in the regulatory plan or expected to be "economically significant," they were expected to be significant enough to be reviewed by OIRA under Executive Order 12866: an HHS/HRSA rule on "Designation of Medically Underserved Populations and Health Professional Shortage Areas," which the agency expects to publish as an interim final rule in October 2014; an HHS/CMS rule on "Reporting and Returning of Overpayments," which the agency expects to publish in February 2015; an HHS/CMS rule on "Medicare Shared Savings Program; Final Waivers," which the agency expects to publish in November 2014; an HHS/CMS rule on "Patient Protection and Affordable Care Act; Third Party Payment of Qualified Health Plan (QHP) Premiums," which the agency published as an interim final rule on March 19, 2014; a DOL/OSHA rule on "Procedures for the Handling of Retaliation Complaints Under Section 1558 of the Affordable Care Act of 2010," which the agency expects to publish in February 2015; and an ATBCB rule on "Accessibility Standards for Medical Diagnostic Equipment," which the agency expects to publish in November 2014. Four of the upcoming final rules indicated they are likely to have effects on small entities (businesses, governments, and/or not-for-profit organizations) as defined by the Regulatory Flexibility Act (RFA, 5 U.S.C. SS602), possibly triggering the requirements of the RFA: an HHS/CMS rule on "Reporting and Returning of Overpayments"; an HHS/CMS rule on "Medicare Shared Savings Program; Final Waivers"; an HHS/CMS rule on "Eligibility Notices, Fair Hearing and Appeal Processes for Medicaid and Exchange Eligibility Appeals, and Other Eligibility and Enrollment Provisions"; and an HHS/CMS rule on "Patient Protection and Affordable Care Act; Third Party Payment of Qualified Health Plan (QHP) Premiums." Two of the rules listed in the final rule section of the Unified Agenda had been published as of June 19, 2014: an HHS/CMS rule on "Prospective Payment System for Federally Qualified Health Centers; Changes to Contracting Policies for Rural Health Clinics and CLIA Enforcement Actions for Proficiency Testing Referral"; and an HHS/CMS rule on "Patient Protection and Affordable Care Act; Third Party Payment of Qualified Health Plan (QHP) Premiums." An additional five upcoming final rules were expected to be issued in May or June 2014, but had not yet been issued as of June 19, 2014: an HHS/FDA rule on "Food Labeling: Calorie Labeling of Articles of Food Sold in Vending Machines"; an HHS/FDA rule on "Food Labeling: Nutrition Labeling of Standard Menu Items in Restaurants and Similar Retail Food Establishments"; an HHS/CMS rule on "Covered Outpatient Drugs"; a TREAS/IRS rule on "Branded Prescription Drug Fee"; and a TREAS/IRS rule on "Requirement of a Section 4959 Excise Tax Return and Time for Filing the Return." The remaining final rules listed in the Unified Agenda are expected to be issued sometime during 2014 or 2015. As noted earlier in this report, the Unified Agenda also identifies "long-term actions" (i.e., regulatory actions that are under development that the agencies do not expect to take action on in the next 12 months). The Spring 2014 edition of the Unified Agenda listed four long-term actions related to the ACA. In comparison to the proposed and final rules previously discussed, it is much less clear when the ACA-related long-term actions are expected to occur. In each of the four long-term actions listed, the agencies said that the dates for the actions were "to be determined": an HHS/HRSA proposed rule on "340B Civil Monetary Penalties for Manufacturers"; an HHS/HRSA proposed rule on "340B Drug Pricing Program; Administrative Dispute Resolution Process"; an HHS/HRSA proposed rule on "340B Ceiling Price Regulations"; and a DOL/EBSA "undetermined" action on "Automatic Enrollment in Health Plans of Employees of Large Employers Under FLSA Section 18A." None of the rules in the long-term actions section were considered "major" or "economically significant." The agencies considered two of the four actions to be "other significant," meaning that the agencies considered them significant enough to be reviewed by OIRA under Executive Order 12866, but they were not expected to be "economically significant": an HHS/HRSA rule on "340B Drug Pricing Program; Administrative Dispute Resolution Process"; and a DOL/EBSA "undetermined" action on "Automatic Enrollment in Health Plans of Employees of Large Employers Under FLSA Section 18A." None of the long-term actions indicated they expected to have an effect on small entities. However, that could be because of the preliminary nature of the rules included in that section. As noted earlier in this report, when federal agencies issue substantive regulations they are carrying out legislative authority delegated to them by Congress. Therefore, Congress often oversees the rules that agencies issue to ensure that they are consistent with congressional intent and various rulemaking requirements. In order for Congress to oversee the rules issued pursuant to the ACA, Congress must first know what rules are being issued--ideally as early as possible. The Unified Agenda is perhaps the best vehicle to provide that early information, as it describes the rules that are expected to be issued and provides information regarding their significance and timing. Congress has a range of tools available to oversee the rules that federal agencies are expected to issue to implement the ACA. Congress may conduct oversight hearings and confirmation hearings for the heads of regulatory agencies. Individual Members of Congress may also participate in the rulemaking process by, among other things, meeting with agency officials and filing public comments. Congress, committees, and individual Members can also request that the Government Accountability Office (GAO) evaluate the agencies' rulemaking activities. Another option is the Congressional Review Act (CRA, 5 U.S.C. SSSS801-808), which was enacted in 1996 to establish procedures detailing congressional authority over rulemaking "without at the same time requiring Congress to become a super regulatory agency." The CRA generally requires federal agencies to submit all of their covered final rules to both houses of Congress and GAO before they can take effect. It also established expedited legislative procedures (primarily in the Senate) by which Congress may disapprove agencies' final rules by enacting a joint resolution of disapproval. The definition of a covered rule in the CRA is quite broad, arguably including any type of document (e.g., legislative rules, policy statements, guidance, manuals, and memoranda) that the agency makes binding on the affected public. After these rules are submitted, Congress can use the expedited procedures specified in the CRA to disapprove any of the rules. CRA resolutions of disapproval must be presented to the President for signature or veto. For a variety of reasons, however, the CRA has been used to disapprove of only one rule in the 18 years since it was enacted. Perhaps most notably, it is likely that a President would veto a resolution of disapproval to protect rules developed under his own Administration, and it may be difficult for Congress to muster the two-thirds vote in both houses needed to overturn the veto. Congress can also use regular (i.e., non-CRA) legislative procedures to disapprove agencies' rules, but such legislation may prove even more difficult to enact than a CRA resolution of disapproval (primarily because of the lack of expedited procedures in the Senate), and if enacted could be subject to presidential veto. Finally, outside the CRA, Congress has regularly included provisions in the text of agencies' appropriations bills in order to influence the regulatory process. Such provisions include prohibitions on the finalization of particular proposed rules, restrictions on certain types of regulatory activity, and restrictions on implementation or enforcement of certain provisions. Appropriations provisions can also be used to prompt agencies to issue certain regulations or to require that certain procedures be followed before or after their issuance. The inclusion of regulatory provisions in appropriations legislation as a matter of legislative strategy appears to arise from two factors: (1) Congress's ability via its "power of the purse" to control agency action, and (2) the fact that appropriations bills are usually considered "must pass" legislation. Congress's use of regulatory appropriations restrictions has fluctuated somewhat over time. This report's Appendix contains a table listing the upcoming proposed and final rules published in the Spring 2014 Unified Agenda. For each upcoming proposed and final rule listed, the table identifies the department and agency expected to issue the rule, the title of the rule and its RIN, an abstract describing the nature of the rulemaking action, and the date that the proposed or final rule is expected to be issued. The abstracts presented in the table were taken verbatim from the Unified Agenda entries. Within the proposed and final rule sections of the table, the entries are organized by agency. The table includes only those Unified Agenda entries in which the Affordable Care Act was mentioned.

The Patient Protection and Affordable Care Act (ACA, as amended) was signed into law by President Barack Obama on March 23, 2010. As is often the case with legislation, the ACA granted rulemaking authority to federal agencies to implement many of its provisions. The regulations issued pursuant to the ACA and other statutes carry the force and effect of law. Therefore, scholars and practitioners have long noted the importance of rulemaking to the policy process, as well as the importance of congressional oversight of rulemaking. For example, one scholar noted that the "Constitution's grant of legislative power to Congress encompasses a responsibility to ensure that delegated authority is exercised according to appropriate procedures." Congressional oversight of rulemaking can deal with a variety of issues, including the substance of the rules issued pursuant to congressional delegations of authority and the process by which those rules are issued. Having a sense of what rules agencies are going to issue and when they are going to issue those rules can help Congress conduct oversight over the regulations that are issued pursuant to the ACA. One way in which Congress can identify upcoming ACA rules is by reviewing the Unified Agenda of Federal Regulatory and Deregulatory Actions, which is published by the Regulatory Information Service Center (RISC), a component of the U.S. General Services Administration (GSA), for the Office of Management and Budget's (OMB's) Office of Information and Regulatory Affairs (OIRA). The Unified Agenda lists upcoming activities, by agency, in three separate categories: "active" actions, including rules in the prerule stage (e.g., advance notices of proposed rulemaking that are expected to be issued in the next 12 months); proposed rule stage (i.e., notices of proposed rulemaking that are expected to be issued in the next 12 months, or for which the closing date of the comment period is the next step); and final rule stage (i.e., final rules or other final actions that are expected to be issued in the next 12 months); "completed" actions (i.e., final rules or rules that have been withdrawn since the last edition of the Unified Agenda); and "long-term" actions (i.e., items under development that agencies do not expect to take action on in the next 12 months). All entries in the Unified Agenda usually provide uniform data elements, which typically include the department and agency issuing the rule, the title of the rule, the Regulation Identifier Number (RIN), an abstract describing the nature of the action being taken, and a timetable showing the dates of past actions and a projected date for the next regulatory action. Each entry also indicates the priority of the regulation (e.g., whether it is considered "economically significant" under Executive Order 12866, or whether it is considered a "major" rule under the Congressional Review Act). The most recent edition of the Unified Agenda, which was published on May 23, 2014, is the seventh edition of the agenda since enactment of the ACA. In this edition, agencies reported 14 proposed rules and 17 final rules that they expect to issue pursuant to the ACA within the next 12 months. Agencies also reported a total of four long-term regulatory actions. The Appendix of this report lists the upcoming proposed and final rules published in the Spring 2014 Unified Agenda in a table.

Congress has expressed significant, ongoing interest in increasing the availability of broadband services throughout the nation, both in expanding the geographic availability of such services (e.g., into rural as well as more urban areas), as well as expanding the service choices available to consumers (e.g, promoting additional service options at reasonable prices). The telephone, cable, and satellite industries, and more recently the electric utilities, all provide broadband services to consumers. Electric utilities have long had the ability to send communications over their powerlines through what is called powerline communications (PLC) technology, but that capability was used primarily to maintain the operability of the power grid--remote monitoring of the grid and other management functions. It was not offered as a commercial product because of technical limitations and regulatory limitations under the 1935 Public Utility Holding Company Act (PUHCA). Specifically, regarding regulatory limitations, PUHCA prohibited electric utilities from entering the retail telecommunications market without all of their operations, including the telecommunications component, being regulated by the Securities and Exchange Commission under PUHCA. However, in 1996, driven by the elimination under the Telecommunications Act of the PUHCA limitations and the increasing demand for broadband services, electric utilities began exploring ways to turn PLC into a commercially viable, consumer service--Broadband over Powerlines (BPL). Many electric companies are now in the process of upgrading their transmission and distribution systems to provide BPL. This technology has the potential to play a significant role in increasing the competitive landscape of the electric utility and telecommunications industry, as well as making broadband available to more Americans than ever before. BPL, however, like any technology, has its advantages and disadvantages. For example, BPL, in general, is less expensive to deploy than the cable and telephone companies' broadband offerings because it does not require upgrades to the actual electric grid and is not limited by certain technical constraints of its competitors. Specifically, the telephone companies' broadband service, digital subscriber line (DSL), is limited to consumers within 18,000 feet of a central office unless expensive remote equipment is placed close to the customer. Cable companies, while not limited by the same distance restrictions as the telephone companies, still must upgrade their cable plant as well as the equipment at their "head end" to provide cable modem service. Finally, Internet service delivered via satellite is still primarily a downstream-only service, with a dial-up connection required to send data to the Internet. However, critics of BPL have expressed concern that it will interfere with licensed radio spectrum such as amateur radio, government, and emergency response frequencies. Companies both in the United States and abroad have pilot tested BPL and many are now deploying it commercially. For example, in 2004, Manassas, VA, began testing BPL service and became the first U.S. community with a commercial BPL offering. The service is now being used by roughly 1,000 of the 12,500 households in the Manassas area. However, in Manassas as well as in other areas where BPL is being deployed, there have been some concerns and difficulties. For example, amateur radio operators have stated their concern that BPL will interfere with their radio signals. Efforts are being made by industry and government to address these concerns while still continuing BPL deployment. In addition to providing new choices for consumers and increased competition in the broadband market, BPL can provide other benefits, both to the electric utilities and to others. As tests and commercial deployments continue, the electric utilities can capitalize on their existing relationships with consumers and the ubiquity of their networks. Also, BPL can be sold either as a retail service under the electric utility's brand or as a wholesale service to third-party ISPs, offering smaller broadband providers another wire to the customer--and electric utilities have expressed interest in providing such open access on a wholesale basis. Concerns among electric utilities and investors about BPL deployment do remain, however. Although the pilot tests and limited commercial deployments have thus far proven successful, the viability of large-scale commercial implementation remains unproven. Also, while name recognition will help the electric utilities as they roll out their service, there is also concern that they may have an unfair competitive advantage over smaller, less established providers. In this case, however, this may not be a significant concern because of the size of the established broadband providers, the telephone and cable companies. Finally, although BPL is likely to be deployed further out into rural areas than either cable or DSL, it remains to be seen if BPL is as economical to deploy in those areas as policymakers and rural consumers hope. The FCC opened a rulemaking proceeding on the technical issues related to BPL deployment in February 2004 and adopted a Report and Order on the proceeding in October 2004 (see "Regulatory Activity--Federal Communications Commission," page 6). Congress may wish to monitor how the FCC implements the rules that will guide BPL development and deployment, as well as monitor more general issues surrounding BPL, such as industry and societal issues, regulatory and industry governance issues, and technical issues. These three categories of issues are discussed in detail at the end of this report (see " Issues for Congress "). In addition to marketplace competitors and consumers, the key stakeholders in this issue are the BPL industry, amateur radio operators (represented primarily by the American Radio Relay League (ARRL)), and various government entities. In favor of BPL deployment and the FCC's rules is the BPL industry: the electric power companies, Internet service providers (ISP), BPL equipment manufacturers, BPL system solutions companies (such as Main.net), and the trade associations representing those companies. Trade associations involved include the Edison Electric Institute, the Powerline Communications Association (PLCA), the PLC Forum, United Power Line Council (UPLC), and the United Telecom Council (UTC). These groups have a financial stake in bringing BPL successfully to market and are eager to enter the broadband business. Amateur radio users have expressed opposition to BPL deployment because of concerns over its potential negative impact--specifically, interference--on amateur radio frequencies by BPL emissions. Although some of its concerns had been addressed in the BPL Report and Order, the ARRL remained concerned about the impact of widespread deployment of these systems. In addition to the abovementioned groups, several government entities have an interest in how BPL is deployed. Specifically, local and regional emergency responders, the Department of Defense, the Federal Emergency Management Agency (now part of the Department of Homeland Security), and the National Telecommunications and Information Administration (NTIA) within the Department of Commerce have expressed both concern and support for BPL. Although these groups express concerns similar to those of ARRL--namely that BPL could potentially interfere with emergency communications and steps need to be taken to ensure noninterference--they also express support for BPL because they believe it will contribute to a more secure and better-managed electric transmission and distribution network. The NTIA expresses support for BPL because of its potential to further close the "digital divide," one of its major goals. Further, because of the services that can be offered over BPL (e.g., voice over Internet Protocol [VoIP]), the law enforcement community is also concerned about the regulatory treatment of BPL--specifically, whether BPL services should be subject to federal wiretap requirements set forth in the Communications Assistance for Law Enforcement Act (CALEA). The FCC has the largest role in how BPL will be deployed. It not only is the regulatory agency that developed the rules governing BPL, it also has a statutory obligation under Section 706 of the Telecommunications Act of 1996 to "encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans." The FCC, therefore, will maintain a significant influence on how the market for BPL service develops. The FCC has been investigating BPL since 2003 and adopted rules regulating BPL systems in October 2004; it is also addressing BPL-related issues in its CALEA and IP-Enabled Services Proceedings. In April 2003, the FCC issued a Notice of Inquiry (NOI), Inquiry Regarding Carrier Current Systems, including Broadband over Powerline Systems , to gather comments concerning whether it should amend its Part 15 Rules "to facilitate the deployment of Access BPL while ensuring that licensed services continue to be protected." The FCC received over five thousand initial and reply comments in response to its NOI during July and August 2003. These comments were discussed at length in the FCC's February 2004 Notice of Proposed Rulemaking (NPRM). The FCC adopted its Report and Order (R&O or "Order") in this proceeding in October 2004. Specifically, the Order-- set forth rules imposing new technical requirements on BPL devices, such as the capability to avoid using any specific frequency and to remotely adjust or shut down any unit; established "excluded frequency bands" within which BPL must avoid operating entirely to protect aeronautical and aircraft receivers communications; and establishes "exclusion zones" in locations close to sensitive operations, such as coast guard or radio astronomy stations, within which BPL must avoid operating on certain frequencies; established consultation requirements with public safety agencies, federal government sensitive stations, and aeronautical stations; established a publicly available BPL notification database to facilitate an organized approach to identification and resolution of harmful interference ; changed the equipment authorization for BPL systems from verification to certification; and improved measurement procedures for all equipment that use RF energy to communicate over power lines. After the Order was released, the amateur radio community and the BPL industry filed a total of 17 petitions for reconsideration. The FCC released a Public Notice on February 28, 2005, announcing the petitions. Oppositions to petitions were due on March 23, 2005, and replies to the oppositions were due April 4, 2005. On August 3, 2006, the FCC adopted a Memorandum Opinion and Order (MO&O) in this matter. Specifically, the MO&O-- affirmed its rules regarding emission limits for BPL, including its determination that the reduction of emissions to 20 dB below the normal Part 15 emissions limits will constitute adequate interference protection for mobile operations; denied the request by the amateur radio community to prohibit BPL operations pending further study and to exclude BPL from frequencies used for amateur radio operations; denied the request by the television industry to exclude BPL from frequencies above 50 MHz; affirmed the July 7, 2006 deadline for requiring certification for any equipment manufactured, imported or installed on BPL systems, with the proviso that uncertified equipment already in inventory can be used for replacing defective units or to supplement equipment on existing systems for one year within areas already in operation; affirmed the requirement that information regarding BPL deployment must be provided in a public database at least 30 days prior to the deployment of that equipment; adopted changes regarding protection of radio astronomy stations by requiring a new exclusion zone and amending consultation requirements for these stations; adopted changes to provide for continuing protection for aeronautical stations that are relocated denied the request by the aeronautical industry to exclude BPL operating on low-voltage lines from frequencies reserved for certain aeronautical operations; and denied the request by the gas and petroleum industry to be considered as public safety entities. On October 10, 2006, the ARRL notified the U.S. Court of Appeals for the D.C. Circuit that it would appeal certain aspects of both the FCC's October 2004 R&O and August 2006 MO&O. The court issued its decision in the matter on April 25, 2008, finding that during its rulemaking process, the FCC relied on five scientific studies that measured BPL devices' radio emissions, in an attempt to determine interference risks with other users of the spectrum. Although the agency released those studies during a public comment process required by federal law, it redacted portions of them, arguing they were just "internal" communications that didn't influence its deliberations. But after reviewing the unredacted studies in private, the majority of the judges agreed with the ARRL that it was against federal administrative procedure law to keep those portions under wraps, particularly since they could call the FCC's rules into question. The court also said the FCC had not offered a "reasoned explanation" for why it rejected ARRL-submitted data that could have influenced its interference estimates and potentially reshaped its rules. The judges opted to send the rules back to the FCC with instructions to clarify those points and publicize its studies more fully, although they did not overturn the rules themselves. The court did not side entirely with the ARRL on other key points related to the substance of the rules. For instance, the ARRL had argued that the FCC was departing from longstanding agency precedent by refusing to require that BPL operations found to cause "harmful interference" be shut down immediately--the so-called "cease-operations" rule. The court wasn't persuaded by that argument, saying the FCC had explained adequately that there isn't ample evidence that "harmful interference" is a real risk. On August 5, 2005, the FCC ruled that providers of certain broadband and interconnected VoIP services must accommodate law enforcement wiretaps. Such a definition includes the type of service that would be provided via BPL. The FCC found that these services can be considered replacements for conventional telecommunications services currently subject to wiretap rules, including circuit-switched voice service and dial-up Internet access. As such, the new services are covered by CALEA, which requires the FCC to preserve the ability of law enforcement to conduct wiretaps as technology evolves. The rules are limited to facilities-based broadband Internet access service providers and VoIP providers that offer services permitting users to receive calls from, and place calls to, the public switched telephone network. On March 10, 2004, the FCC released an NPRM, In the Matter of IP-Enabled Services . This rulemaking, still under consideration at the FCC, will likely affect BPL in that it will determine how the services that will be offered via BPL will be regulated. Comments and replies to the NPRM were due May 28 and June 28, 2004, respectively. On June 3, 2005, the FCC released an order on Enhanced 911 services over IP-enabled services. In this order, the Commission adopted rules requiring providers of interconnected voice over Internet Protocol (VoIP) service to supply enhanced 911 (E911) capabilities to their customers. The characteristics of interconnected VoIP services have posed challenges for 911/E911, and threaten to compromise public safety. Thus, the FCC required providers of interconnected VoIP service to provide E911 services to all of their customers as a standard feature of the service, rather than as an optional enhancement. The Commission further required them to provide E911 from wherever the customer is using the service, whether at home or away from home. The FCC had no findings regarding whether a VoIP service that is interconnected with the public switched telephone network should be classified as a telecommunications service or an information service. On March 8, 2005, the FCC's Wireless Broadband Access Task Force released its report to the Commission containing its findings and recommendations. The report highlights how some BPL providers are using Wi-Fi (i.e., wireless networking) to complement their service offerings, either employing Wi-Fi access points within the BPL network to transmit information from one power line to another or to use wireless networking technologies to reach from utility poles to individual homes. Comments to the report were due April 22, 2005, and replies were due May 23, 2005. No further action has been taken at this time. In December 2005, the UPLC filed a petition for declaratory ruling requesting that the FCC find that BPL-enabled Internet access service is an information service, rather than a telecommunications service. In response, in October 2006, the FCC issued an MO&O affirming the UPLC's petition, which placed BPL-enabled Internet access service on an equal regulatory footing with other broadband services, such as cable modem service and DSL Internet access service. In April 2004, the NTIA released Phase 1 of a study on the potential for BPL to interfere with radio frequencies used by Government users for homeland security, defense, and emergency response. In that report, initiated by NTIA in response to the FCC's NOI, the NTIA described federal government usage of the 1.7-80 MHz spectrum, identified associated interference concerns, and outlined the studies it planned to conduct to address those concerns. The report (1) contains findings on interference risks to radio reception in the immediate vicinity of overhead power lines used by BPL systems (Access BPL only); (2) suggests means for reducing these risks, and (3) identifies techniques for mitigating interference should it occur. One of the most important findings of the report was that existing Part 15 compliance measurement procedures for BPL tended to significantly underestimate BPL peak field strength. Such underestimation increases the risk of interference. According the report, as currently applied to BPL systems, Part 15 measurement guidelines do not address the unique characteristics of BPL emissions. Overall, the report concludes that BPL could interfere with licensed radio spectrum, even though under the current Part 15 testing parameters, emission levels would be within the limits. Therefore, it was recommended that the compliance measurement procedures be refined. The NTIA stated, however, that refining the compliance measurement procedures should not impede deployment of BPL because the technology can reportedly be deployed within a more narrow range of frequencies that will not cause interference. For these reasons, the NTIA did not recommend that the FCC relax Part 15 field strength limits for BPL systems. Instead, NTIA recommended new measurement provisions derived from existing guidelines, including using measurement antenna heights near the height of power lines; measuring at a uniform distance of 10 meters from the BPL device and power lines; and measuring using a calibrated rod antenna or a loop antenna in connection with appropriate factors relating magnetic and electric field strength levels at frequencies below 30 MHz. Overall, NTIA supported the continued development and deployment of BPL and suggested several means by which BPL interference could be prevented or eliminated. For example, mandatory registration of certain aspects of BPL systems would give radio operators the information needed to advise BPL operators of any anticipated interference problems or suspected actual interference. NTIA also recommended that BPL developers consider, for example, routinely using the minimum output power needed from each BPL device; avoiding locally used radio frequencies; using filters and terminations to extinguish BPL signals on power lines where they are not needed; and carefully selecting BPL signal frequencies to decrease radiation. Issues potentially of interest to Congress may be divided into three categories. Industry and societal issues, such as the impact of BPL on competition in broadband services, and the potential for BPL to reach previously unserved and underserved populations. Larger regulatory and industry governance issues, such as how the regulatory classification of BPL might affect other FCC regulations and proceedings (e.g., the appropriate regulatory classification of IP-based services) and electric utility regulations (e.g., reliability mandates, Federal Energy Regulatory Commission (FERC) regulations, and Public Utility Holding Company Act (PUHCA) exemptions). Technical issues, such as how BPL should be implemented to minimize interference with other services (e.g., amateur radio frequencies) and what effect BPL technology may have on reliability and security of the transmission and distribution systems and homeland security goals (i.e., BPL may result in benefits as well as risks). Each issue is discussed below. Since the passage of the 1996 Telecommunications Act, Congress has sought to increase both competition between broadband service providers, as well as the availability and adoption of broadband services. Although the current competitive environment for broadband service could be considered fairly robust, with significant competition between cable and DSL providers, both policymakers and consumers alike would likely welcome a third wide-spread, facilities-based option for receiving that service (satellite broadband service is not widely available as it usually requires a dial-up "uplink" to the Internet). BPL could provide that opportunity for the "third wire" to the home. While further increasing consumer choice is a goal of both Congress and the FCC, there are still consumers who have no options or perhaps only one option for receiving broadband service. Some of those consumers are likely part of those populations that are traditionally underserved, (e.g., rural residents, low-income consumers) and for them, BPL may also provide at least a partial solution. BPL, not being limited, technically, by distance and not requiring upgrades to the electric lines themselves, is significantly easier to deploy to what might be considered by cable and DSL providers to be "undesirable" areas. Of course, cost and potential profitability are still issues in those areas and there will always be areas where deployment is simply not realistic either technologically or economically, or both. Congress may wish to continue monitoring how the FCC balances ensuring that BPL, as a new technology, is given every opportunity to reach the market, while also ensuring that it is not given an unfair regulatory advantage over other similar services. In the coming months, the electric utilities will roll out their commercial BPL offerings. As electric utilities deploy their commercial systems, the FCC's role in ensuring that the utilities are given incentives for wide BPL deployment, while also considering additional policy questions that arise, will be watched to assess the success of both the FCC and of BPL. Broadband over powerlines is just the latest in a growing list of technologies and services that challenge the current structure of the FCC and the statutory and regulatory "stove pipes" required by current law. While BPL is a technology for the delivery of Internet service, it challenges traditional and embedded thinking and paradigms about telecommunications and information services because it does not fit neatly into an existing category of service. If Congress decides to amend the country's current communications laws, it may consider the impact that such new technologies are having on the way lawmakers and regulators have traditionally looked at underlying transmission technologies. With respect to IP-enabled services that would be provided over BPL, the one with the most legal and regulatory impact may be IP-based voice service (voice over Internet Protocol or VoIP). VoIP is different from traditional telephone service in that it does not employ a single, dedicated path between the calling parties (called circuit switching). Instead, VoIP "translates" analog voice into digital "packets" and transmits those packets along multiple paths (called packet switching) and reassembles the packets at the receiving end. This is the same format, or protocol, used to transmit email, instant messages, video, and other data via the Internet. Thus, voice is no longer a separate service--voice data looks just like every other kind of data. Until recently, VoIP has been provided by companies that are in one way or another "communications providers," whether that be voice, data, or video communication. However, electricity companies have not generally been in the business of providing resale communications. This blurring of lines between voice and other types of data has already raised issues such as law enforcement's ability to conduct wiretaps and state versus federal jurisdiction over such calls (discussed earlier in this report); intercarrier compensation for call termination on the public switched network; and universal service. These issues will likely become even more complex with the entry of electric utilities into the communications business since they will be offering IP-enabled services, both directly to the consumer as well as to third-party vendors (i.e., Internet service providers). As the market develops a tension may develop over whether these new entrants should be required to adhere to existing requirements, or perhaps how existing requirements should be changed to better reflect the current technological and competitive environment. The FCC focused on technical issues in its BPL proceedings. These issues have included how BPL should be implemented to minimize interference with other services (e.g., amateur radio frequencies) and what effect BPL technology could have on reliability and security of the transmission and distribution systems (i.e., BPL may provide benefits as well as potentially create risks). Although the FCC's regulations mandate the technical standards under which BPL will be deployed, those standards will very likely have an impact on the previous two categories of issues and, therefore, Congress may have an interest in monitoring the development of these technical issues as well. Some stakeholders have continued to express varying degrees of concern over the potential of BPL to disrupt licensed radio services, including amateur, public safety, and emergency response frequencies. The FCC continues to address those concerns in its BPL proceedings. Other stakeholders stated during the proceeding that BPL upgrades by the electric utilities have the potential to enhance the security and reliability of the transmission and distribution networks. For example, BPL technology can provide electricity outage detection, home energy management, distribution transformer overload analysis, demand side management, supervisory control and data acquisition (SCADA) data transmission, safety checks for isolated circuits, power quality monitoring, phase loss detection, line testing, and outage localization, among other things. However, while the first four functions simply provide additional operational monitoring and control abilities, the fact that enhanced data may be supplied to the SCADA system via BPL could be of concern to electric utility companies and homeland/infrastructure security officials. The FCC did not address this issue in its rulemaking proceeding. However, some parties that did not participate in the rulemaking have expressed concern that BPL would make the transmission and distribution system vulnerable to individuals or groups trying to steal or corrupt consumers' Internet data or the utilities' monitoring data, or even to terrorists trying to cause a large-scale disruption of the nation's electricity supply. If sensitive operational information, as well as consumers' personal data, is being sent over the lines the physical security of those lines and the integrity of the data on them become a serious concern. Although BPL may offer significant social and competitive benefits, the possible negative impact that BPL may have on reliability and security may be a more important factor in BPL deployment. In January 2007, Representative Mike Ross introduced H.R. 462 , the Emergency Amateur Radio Interference Protection Act. This bill would require that within 90 days after the date of enactment, the FCC would be required to conduct "a study of the interference potential of systems for the transmission of broadband Internet services over power lines." The study would examine-- the variation of field strength of BPL service signals with distance from overhead power lines, and a technical justification for the use of any particular distance extrapolation factor; the depth of adaptive, or 'notch', filtering for attenuating normally permitted BPL service radiated emission levels that would be necessary and sufficient to protect the reliability of mobile radio communications; a technical justification for the permitted, radiated emission levels of BPL signals relative to ambient levels of man-made noise from other sources; and options for new or improved rules related to the transmission of BPL service that, if implemented, may prevent harmful interference to public safety and other radio communications systems. Upon completion, the FCC would be required to submit the study report to the House Committee on Energy and Commerce and the Senate Committee on Commerce, Science, and Transportation. This bill was referred to the House Committee on Energy and Commerce. No further action has been taken. In June 2007, Senator Mark Pryor introduced S. 1629 , which contains the same study requirements as H.R. 462 . That bill was referred to the Senate Committee on Commerce, Science, and Transportation. On August 4, 2007, the House of Representatives passed H.R. 3221 , the New Direction for Energy Independence, National Security, and Consumer Protection Act. If signed into law, Section 9113(a)(8) would require an assessment by a newly established Grid Modernization Commission to determine, biannually, the progress being made toward modernizing the electric system, including an "assessment of ancillary benefits to other economic sectors or activities beyond the electricity sector, such as potential broadband service over power lines." CRS Report RL33542, Broadband Internet Regulation and Access: Background and Issues , by [author name scrubbed] and [author name scrubbed]. CRS Report RL32728, Electric Utility Regulatory Reform: Issues for the 109 th Congress , by [author name scrubbed]. American Public Power Association, http://www.appanet.org American Radio Relay League, http://www.arrl.org Edison Electric Institute, http://www.eei.org Federal Communications Commission, http://www.fcc.gov/ FCC NOI: http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-03-100A1.pdf FCC NPRM: http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-04-29A1.pdf National Telecommunications and Information Administration, http://www.ntia.doc.gov/ United Power Line Council, http://www.uplc.org United Telecom Council, http://www.utc.org "How Broadband over Powerlines Works," Robert Valdes, http://computer.howstuffworks.com/bpl.htm/printable (undated).

Congress has expressed significant interest in increasing the availability of broadband services throughout the nation. Broadband over powerlines (BPL) has the potential to play a significant role in increasing the competitive landscape of the communications industry as well as extend the reach of broadband to a greater number of Americans. BPL, like any technology, has its advantages and disadvantages. Proponents state that BPL is less expensive to deploy than the cable and telephone companies' broadband offerings; it does not require upgrades to the actual electric grid; and, it is not limited by some technical constraints of its competitors. However, critics are concerned that BPL interferes with licensed radio frequencies used for amateur radio, government, and emergency response. In October 2004 and October 2006, the Federal Communications Commission (FCC) adopted a Report and Order (R&O) (FCC 04-245) and a Memorandum Opinion and Order (MO&O) (FCC 06-113) on BPL issues. In May 2007, the American Radio Relay League (ARRL) petitioned the U.S. Court of Appeals for the DC Circuit to review the FCC's October 2004 R&O and 2006 MO&O. In its brief, the ARRL contends, among other things, that the FCC's actions in adopting rules to govern unlicensed BPL systems fundamentally alter the longstanding rights of radio spectrum licensees, including amateur radio operators. In April 2008, the court remanded the rules to the Commission. In January 2007, Representative Mike Ross introduced H.R. 462, the Emergency Amateur Radio Interference Protection Act, which would require the FCC to conduct a study on the "interference caused by broadband Internet transmission over powerlines." The bill was referred to the Committee on Energy and Commerce Subcommittee on Telecommunications and the Internet on February 2, 2007; no further action has been taken. In June 2007, Senator Mark Pryor introduced S. 1629, which contains the same study requirements as H.R. 462. That bill was referred to the Senate Committee on Commerce, Science, and Transportation. In August 2007, the House of Representatives passed H.R. 3221, the New Direction for Energy Independence, National Security, and Consumer Protection Act. If signed into law, Section 9113(a)(8) would require an assessment by a newly established Grid Modernization Commission to determine, biannually, the progress being made toward modernizing the electric system, including an "assessment of ancillary benefits to other economic sectors or activities beyond the electricity sector, such as potential broadband service over power lines." In October 2007, the National Telecommunications and Information Administration (NTIA) published its Phase II BPL Study Report. The NTIA concluded that the FCC's BPL rules, measurement guidelines, and special protection provisions will limit the interference risks for federal radiocommunication systems.

The average spot market price for West Texas Intermediate (WTI), a reference grade of U.S. crude oil, was up 9.5% in 2007 compared to 2006, while the New York Mercantile Exchange (NYMEX) futures price for WTI approached $100 per barrel (p/b) in December 2007. Refinery capacity utilization rates approached 90% or more for much of the year, while oil supply disruptions from Nigeria, Venezuela, and the Persian Gulf remained both a threat and a sometime reality. As the strength of product demand began to weaken in the latter stages of the year, responding to high petroleum product prices as well as a possible slow down of economic growth, refinery margins began to narrow, suggesting that the companies were less able to pass through the increased cost of crude oil to consumers. However, even in the face of uncertainty and weakening markets, the oil industry enjoyed record revenues and profits in 2007. In 2007, the oil industry recorded revenues of approximately $1.9 trillion, of which 78% was accounted for by the five major integrated oil companies. Profits for the industry totaled over $155 billion, 75% of which were earned by the five major oil companies, with the largest, ExxonMobil, earning over 25% of the total profit. Although the financial results for the industry were at record levels, the performance of different sectors of the industry varied, as did the performance of individual companies within those sectors, leaving some firms as relative under-performers compared to the industry leaders. This report analyzes the industry's profit performance in 2007. While recent profit levels in the oil industry are of interest to policy makers, investors, and analysts, among others, the financial results of 2007 should be put in a longer term perspective to understand the performance of the industry. For example, as recently as 2002, the financial picture in the oil industry was far different, with declining earnings in key sectors, such as refining. The oil industry historically has been cyclic, with periods of high earnings often followed by sharp declines, driven by movements in the world price of crude oil. For this reason, projections of future industry performance, based on current performance, are unlikely to be reliable. Integrated oil companies operate in both the upstream (exploration and production) and the downstream (refining and marketing) segments of the industry. Among the integrated oil companies listed in Table 1 , the five largest companies are usually identified as the major oil companies, or the super-majors. ExxonMobil is the largest such company; its profits in 2007 were over 90% of the profits earned by both of its largest international competitors, Royal Dutch Shell and BP. Revenue growth among the integrated oil companies in 2007 was driven by increases in the price of crude oil, especially in the last two quarters of the year. Even though five of the nine companies experienced a decline in oil production, and one of the nine experienced a decline in natural gas production, as shown in Table 2 , their revenues increased on average by 7.1% in 2007. With output declining, it is likely that revenue growth was based on increasing prices. Two profit rates, return on sales and return on equity, are presented in Table 1 . In a report that appears periodically, most recently after the oil companies announced their third quarter earnings in 2007, the American Petroleum Institute (API) compared the returns earned in the oil industry to other American industries. The API comparisons are based on returns on revenue. They found that the oil and natural gas industries earned 7.6 percent on revenues, compared to 5.8 percent for all U.S. manufacturing industries. Although this result implies a 31 percent margin over the returns earned by all U.S. manufacturing industries, it is less than the 9.2 percent earned by all U.S. manufacturing industries excluding the automobile and auto parts industries, that had a negative 26 percent return for the third quarter of 2007. Calculating return on revenues dilutes the effect of growing total profits of the oil industry due to higher prices and growing revenues, another standard percentage measure of profitability, return on equity, is presented in Table 1 . This measure indicates the success of the companies, and industry, in earning profit by utilizing the invested capital of the owners, i.e., the shareholders of the company. This measure is widely used by investors and financial analysts in evaluating the performance of firms seeking access to capital markets. By this measure, the integrated oil companies returned 22.7% in 2007, over twice the return on revenue. The industry leader, ExxonMobil, earned 33.4%. These rates of return are likely to assure these firms', and the industry's, position as a desirable investment as long as the price of oil remains high. Table 2 and Table 3 separate the upstream and downstream performance of the integrated oil companies in 2007. Table 1 and Table 2 show that upstream net income growth led overall corporate net income growth for most of the companies, and they earned almost 80% of their total net income from upstream activities. Oil and gas production declined for each product, almost 3% in oil, and less than one half of one percent in natural gas. Four of the five largest oil producers had declining output. In natural gas, only BP and Shell experienced declining output in 2007. Table 3 presents financial results for the downstream activities of the integrated oil companies for 2007. Net incomes declined by more than twice as much as product sales, suggesting that profit margins per barrel of crude oil refined had declined. In the fourth quarter of 2007, only ExxonMobil and ConocoPhillips were able to produce positive net income growth, with all the other firms showing negative net income growth, or in the case of BP, financial losses from downstream activities. Crude oil prices increased rapidly during the second half of 2007, and reached over $110 per barrel in March 2008. During this period gasoline price increases were thought by many to have lagged behind crude oil price increases. A potential weakening of the demand for gasoline in the United States was thought to be responsible for the lag. With a perception of weakening demand, passing through cost increases to consumers was not thought to be economically feasible. The result was a decline in refining margins. Table 4 presents data for 2007 for the independent oil and gas producers. Although they are large companies, with revenues of more than $10 billion in 2007 for the industry leaders, their total revenues are only about 5% of the integrated oil companies. Their net incomes, however, were approximately 15% of the net incomes of the integrated companies. Although all of the companies in this category experienced increases in revenue, six out of ten experienced negative net income growth. All of the companies, except Andarko and Newfield experienced increases in production of oil and natural gas, or both. With prices for both oil and natural gas rising late in 2007, these companies seemingly should have performed better with respect to net income growth. A possible explanation for the declining net income experienced by some companies might be the large outlays the companies made investing in unconventional oil asset exploration and development. Many of these companies are involved in shale oil work in Texas, Arkansas, and South Dakota. Valero is the leading firm among the group of independent refiners and marketers. Valero accounted for over one half of the sector's revenue, and two thirds of its net income. Valero is the largest refiner in the United States, with a total capacity of over 2.2 million barrels per day, approximately 13% of the total U.S. capacity. Independent refiners experienced the same pressure on refining margins as the integrated oil companies. The difference was that these companies produce no crude oil and therefore were not positioned to take advantage of the increases in the price of crude oil during the second half of 2007. The severity of the economic pressure on refiners in the fourth quarter of 2007 is shown in Table 6 . Although revenues for the group grew by 53.4%, net incomes declined by two thirds. Four of the seven companies in the group not only had negative growth in net income in the fourth quarter of 2007, but generated losses from business operations. Valero, the sector's leading firm, earned 53% of the revenue, but fully 97% of the earned net income. Not only was the cost of crude oil rising for the independent refiners, but relatively weaker demand conditions made it harder for the firms to quickly pass cost increases on to consumers. Valero was able to remain profitable because it was able to purchase and utilize lower cost heavy, sour crude oil at its refineries. Crude oil prices spot prices reached $110 per barrel in the first quarter of 2008. Should the price of crude oil remain at, or above, $100 per barrel for large portions of the year, the profits of oil producing firms should be high. However, the economic conditions will likely be difficult for firms that refine crude oil, but do not have their own supplies. It is likely that a greater effort will be made by refiners to adapt technologies that allow them to use heavy, sour, oil stocks. These lower quality crude oils are more readily available than high quality oils and sell at a price discount relative to the reference oils, West Texas Intermediate, for example. Another key factor in the industry's profitability is whether demand for petroleum products continues to grow in the United States and the rest of the world. U.S. gasoline demand is arguably beginning to weaken as a result of high prices. Some projections see $4 per gallon gasoline in the second and third quarters of 2008. While prices at that level might allow refiners to recover the cost of crude oil, they might also reduce demand, putting downward pressure on price. Demand for petroleum products outside the United States remains strong, and will likely remain strong as consumers in developing nations use their higher incomes to fuel additional consumption. A world-wide economic slowdown is the most likely factor that would lead to slower demand growth. The oil industry, in general, continued to generate high profits, as it has since 2004. However, it might be that the first sign of problems, in at least part of the industry, have arisen. Weakening demand for petroleum products, specifically the U.S. demand for gasoline, has put pressure on the downstream side of the industry. While demand growth, political uncertainty, the weak U.S. dollar, tight spare capacity, and other factors make it likely that the price of crude oil will remain high in 2008, the weakening U.S. economy, coupled with the demand reducing effects of higher prices, may make it more difficult to raise petroleum product prices. New capacity investments in refineries, one possible source of gasoline price relief for consumers, are likely to be slowed by the poor profit performance of the refining sector. If new capacity does not come on line the need for imported gasoline will remain a key factor in avoiding shortages in the U.S. market.

Increases in the price of crude oil that began in 2004 pushed the spot price of West Texas Intermediate (WTI), a key oil in determining market prices, to nearly $100 per barrel in the third quarter of 2007. Tight market conditions persisted through the remainder of 2007, with demand growth in China, India, and other parts of the developing world continuing. Uncertain supply related to political unrest in Nigeria, Venezuela, Iraq, and other places continued to threaten the market and contribute to a psychology that pushed up prices. The decline of the value of the U.S. dollar on world currency markets, as well as the investment strategies of financial firms on the oil futures markets, has also been identified by some as factors in the high price of oil. The profits of the five major integrated oil companies remained high in 2007, as they generally accounted for approximately 75% of both revenues and net incomes. For this group of firms, oil production led the way as the most profitable segment of the market, even though oil and gas production growth was not strong. The refining segment of the market performed relatively poorly. Independent oil and natural gas producers are small relative to the integrated oil companies, and their financial performance was weaker, with more than half of the firms reporting declines in net income. Independent refiners and marketers also experienced a difficult year that was reflected in profits in 2007. The combination of high crude oil prices that raised their costs and the inability to quickly pass cost increases on to consumers lowered refining margins, resulting in generally declining profits. The potential volatility of the world oil and financial markets, coupled with the weakness of the U.S. and other economies, makes any profit forecast for 2008 highly speculative. While continued high oil prices are likely--the price of oil reached $110 per barrel in the first quarter of 2008--the ability of the industry to pass those prices on to consumers of gasoline and other products during 2008 is uncertain due to possibly weakening demand.

Federal law punishes convicted sex offenders for failure to register as the Sex Offender Registration and Notification Act (SORNA) demands. The offense consists of three elements: (1) a continuing obligation to report to the authorities in any jurisdiction in which the individual resides, works, or attends school; (2) the knowing failure to comply with registration requirements; and (3) a jurisdictional element, i.e ., (a) an obligation to register as a consequence of a prior qualifying federal conviction or (b)(i) travel in interstate or foreign commerce, (ii) travel into or out of Indian country; or (iii) residence in Indian country. Violators face imprisonment for not more than 10 years. If an offender also commits a federal crime of violence, the registration transgression carries an additional penalty of imprisonment for not more than 30 years, but not less than 5 years. The Adam Walsh Child Protection and Safety Act created SORNA. SORNA called for a revision of an earlier nationwide sex offender registration system. Its predecessor, the Jacob Wetterling Act, encouraged the states to establish and maintain a registration system. Each of them had done so. Their efforts, however, though often consistent, were hardly uniform. The Walsh Act preserved the basic structure of the Wetterling Act, expanded upon it, and made more specific matters that were previously left to individual state choice. The Walsh Act contemplated a nationwide, state-based, publicly available, contemporaneously accurate, online system. Jurisdictions that failed to meet the Walsh Act's threshold requirements faced the loss of a portion of their federal criminal justice assistance grants. The Walsh Act vested the Attorney General with authority to determine the extent to which SORNA would apply to those with qualifying convictions committed prior to enactment. He promulgated implementing regulations imposing the registration requirements on those with pre-enactment convictions. Conscious of the legal and technical adjustments required of the states, the Walsh Act afforded jurisdictions an extension to make the initial modifications necessary to bring their systems into compliance. Thereafter, states not yet in compliance have been allowed to use the penalty portion of their federal justice assistance funds for that purpose. The Justice Department indicates that 17 states, 3 territories, and numerous tribes are now in substantial compliance with the 2006 legislation. Section 2250 convictions require the government to prove that (1) the defendant had an obligation under SORNA to register and to maintain the currency of his registration information; (2) that the defendant knowingly failed to comply; and (3) that one of the section's jurisdictional prerequisites has been satisfied. Obligation to Register and Maintain Registration : SORNA directs anyone previously convicted of a federal, state, local, tribal, or foreign qualifying offense to register and to keep his registration information current in each jurisdiction in which he resides, or is an employee or student. Initially, he must also register in the jurisdiction in which he was convicted if it is not his residence. Registrants who relocate or who change their names, jobs, or schools have three days to appear and update their registration in at least one of the jurisdictions in which they reside, work, or attend school. SORNA defines broadly the terms "student," "employee," and "resides." For example, "[t]he term 'resides' means, with respect to an individual, the location of the individual's home or other place where the individual habitually lives." SORNA's use of the phrase "resides ... in a [U.S.] jurisdiction," led the Supreme Court to conclude recently in Nichols v. United States that the maintenance requirement of Section 16913(c) does not apply to offenders who relocated abroad, i.e ., outside of any U.S. "jurisdiction." Anticipating the limit identified in Nichols , Congress passed the International Megan's Law to Prevent Child Exploitation and Other Sexual Crimes Through Advanced Notification of Traveling Sex Offenders [Act], which among other things, amends SORNA to compel offenders to supplement their registration statements with information relating to their plans to travel abroad. Qualifying Convictions : Only those who have been convicted of a qualifying sex offense need register. There are five classes of qualifying offenses: (1) designated federal sex offenses; (2) specified military offenses; (3) crimes identified as one of the "special offenses against a minor"; (4) crimes in which some sexual act or sexual conduct is an element; and (5) attempts or conspiracies to commit any offense in one of these other classes of qualifying offenses. (A more specific list is attached). Certain foreign convictions, juvenile adjudications, and offenses involving consensual sexual conduct do not qualify as convictions that require the offender to register under SORNA. Knowing failure to register : Section 2250's second element is a knowing failure to register or to maintain current registration information as required by SORNA. The government must show that the defendant knew of his obligation and failed to honor it; the prosecution need not show that he knew he was bound to do so by federal law generally or by SORNA specifically. Jurisdictional elements : Section 2250 permits conviction on the basis of any three jurisdictional elements: a prior conviction of one of the federal qualifying offenses; residence in, or travel to or from, Indian country; or travel in interstate or foreign commerce. Federal crimes : Interstate travel is not required for a conviction under SS2250. An individual need only have a knowing failure to register and a prior conviction for a qualifying sex offense under federal law or the law of the District of Columbia, the Code of Military Justice, tribal law, or the law of a United States territory or possession. Federal jurisdiction flows from the jurisdictional basis for the underlying qualifying offense. Indian country : Travel to or from Indian country, or living there, will also satisfy Section 2250's jurisdictional requirement. "Indian country" consists primarily of Indian reservations, lands over which the United States enjoys state-like exclusive or concurrent legislative jurisdiction. Interstate travel : Interstate travel is the most commonly invoked of Section 2250's jurisdictional elements. It applies simply to anyone who travels in interstate or foreign commerce with a prior federal or state qualifying offense who fails to register or maintain his registration. In the case of foreign travel it also applies to anyone who fails to supplement his registration with information concerning his intent to travel abroad. The qualifying offense may predate SORNA's enactment; the travel may not. Venue and Bail : Although the question may not be beyond dispute, a Section 2250 prosecution involving interstate travel may be brought either in the state of origin or the state of destination. Federal bail laws permit the prosecution to request a pre-trial detention hearing prior to the pre-trial release of anyone charged with a violation of Section 2250. The individual may only be released prior to trial under condition, among others, that he be electronically monitored; be subject to restrictions on his personal associations, residence, or travel; report regularly to authorities; and be subject to a curfew. Imprisonment : Upon conviction, the individual may be sentenced to imprisonment for a term of not more than 10 years and/or fined not more than $250,000. Section 2250 also sets an additional penalty of not more than 30 years, but not less than 5 years, in prison for the commission of a federal crime of violence when the offender has also violated Section 2250. Supervised release : As a general rule, when a court sentences a defendant to prison, it may also sentence him to a term of supervised release. Supervised release is a parole-like regime under which a defendant is subject to the oversight of a probation officer following his release from prison. In the case of a conviction under Section 2250, the court must order the defendant to serve a life-time term of supervised release or in the alternative a term of 5 years or more. The statute and the Sentencing Guidelines establish an array of mandatory and discretionary conditions for those on supervised release. The mandatory conditions require the defendant to: (1) avoid committing any additional federal, state or local offenses; (2) refrain from the unlawful possession of controlled substances; (3) participate in a domestic violence rehabilitation program, he has been convicted of domestic violence; (4) submit to periodic drug tests, unless the court suspends the condition because the defendant poses a low risk of future substance abuse; (5) pay installments to satisfy any outstanding fines or special assessments; (6) satisfy any outstanding restitution requirements; (7) comply with any SORNA registration demands; and (8) submit to the collection of a DNA sample. A sentencing court may also impose any condition from the statutory inventory of discretionary conditions for probation. In addition, t he Sentencing Guidelines specify thirteen "standard" conditions; eight "special" conditions; and "additional" special conditions. Finally, the district court may impose any "specific" condition that is no greater impairment of liberty than necessary and that is reasonably related to the nature of the offense, the offender's criminal history, and various general statutory sentencing factors. The court may modify the conditions of supervised release at any time. It may also revoke the defendant's supervised release and sentence him to prison for violations of the conditions of supervised release. Much of the litigation relating to Section 2250 relates to constitutional challenges involving either Section 2250 or SORNA. The attacks have taken one of two forms. One argues that SORNA or Section 2250 operates in a manner which the Constitution specifically forbids, for example in its clauses on Ex Post Facto laws, Due Process, and Cruel and Unusual Punishment. The other argues that the Constitution does not grant Congress the legislative authority to enact either Section 2250 or SORNA. These challenges probe the boundaries of the Commerce Clause, the Necessary and Proper Clause, and the Spending Clause, among others. Constitutional prohibitions : The Supreme Court addressed two of the most common constitutional issues associated with sex offender registration before the enactment of SORNA. One addressed the Ex Post Facto Clause implications of sex offender registration, Smith v. Doe ; the other the Due Process Clause implications, Connecticut Department of Public Safety v. Doe . Neither the states nor the federal government may enact laws that operate Ex Post Facto. The prohibition covers both statutes that outlaw conduct that was innocent when it occurred and statutes that authorize imposition of a greater penalty for a crime than applied when the crime occurred. The prohibitions, however, apply only to criminal statutes or to civil statutes whose intent or effect is so punitive as to belie any but a penal characterization. In Smith , the Supreme Court dealt with the Ex Post Facto issue in the context of the Alaska sex offender registration statute. It found the statute civil in nature and effect, not punitive, and consequently its retroactive application did not violate the Ex Post Facto Clause. "Relying on Smith , circuit courts have consistently held that SORNA does not violate the Ex Post Facto Clause," with one apparently limited exception. The Supreme Court's assessment of state sex offender registration statutes has been less dispositive of due process issues because of the variety of circumstances in which may arise. Neither the federal nor state governments may deny a person of "life, liberty, or property, without due process of law." Due process requirements take many forms. They preclude punishment without notice: "[a] conviction fails to comport with due process if the statute under which it is obtained fails to provide a person of ordinary intelligence fair notice of what is prohibited, or is so standardless that it authorizes or encourages seriously discriminatory enforcement." They bar restraint of liberty or the enjoyment of property without an opportunity to be heard: "[a]n essential principle of due process is that a deprivation of life, liberty, or property be preceded by notice and opportunity for hearing appropriate to the nature of the case." They proscribe any punishments or restrictions that are so fundamentally unfair as to constitute a violation of fundamental fairness, that is, substantive due process. In Connecticut Dept. of Public Safety v. Doe , the Court found no due process infirmity in the Connecticut sex offender registration regime in spite of its failure to afford offenders an opportunity to prove they were not dangerous. Doe suffered no injury from the absence of a pre-registration hearing to determine his dangerousness, in the eyes of the Court, because the system required registration of all sex offenders, both those who were dangerous and those who were not. Connecticut Dept. of Public Safety forecloses the assertion that offenders are entitled to a pre-registration "dangerousness" hearing; the relevant question under SORNA is prior conviction not dangerousness. In Lambert v. California , the Court dealt with the issue of sufficiency of notice. There, the Court held invalid a city ordinance that required all felony offenders to register within five days of their arrival in the city. The Court explained that "[w]here a person did not know of the duty to register and where there was no proof of the probability of such knowledge, he may not be convicted consistently with due process." Since "by the time that Congress enacted SORNA, every state had a sex offender registration law in place," attempts to build on Lambert have been rejected, because the courts concluded that offenders knew or should have known of their duty to register. Vagueness challenges have fared no better. To qualify as a violation of substantive due process, a governmental regime must intrude upon a right "deeply rooted in our history and traditions," or "fundamental to our concept of constitutionally ordered liberty." Perhaps because the threshold is so high, Section 2250 and SORNA have only infrequently been questioned on substantive due process grounds. "The right to travel ... embraces at least three different components. It protects the right of a citizen of one State to enter and to leave another State, the right to be treated as a welcome visitor rather than an unfriendly alien when temporarily present in the second State, and, for those travelers who elect to become permanent residents, the right to be treated like other citizens of that State." Section 2250, it has been contended, violates the right to travel because it punishes those who travel from one state to another yet fail to register, but not those who fail to register without leaving the state. The courts have responded, however, that the right must yield to compelling state interest in the prevention of future sex offenses. The Eighth Amendment bars the federal government from inflicting "cruel and unusual punishment." A punishment is cruel and unusual within the meaning of the Eighth Amendment when it is grossly disproportionate to the offense. The courts have refused to say that sentences within Section 2250's 10-year maximum are grossly disproportionate to the crime of failing to maintain current and accurate sex offender registration information. They have also declined to hold that SORNA's registration regime itself violates the Eighth Amendment, either because they do not consider the requirements punitive or because they do not consider them grossly disproportionate. Legislative authority : The most frequent constitutional challenge to SORNA and Section 2250 is that Congress lacked the constitutional authority to enact them. Some of these challenges speak to the breadth of Congress's constitutional powers, such as those vested under the Tax and Spend Clause, the Commerce Clause, or the Necessary and Proper Clause. Others address contextual limitations on the exercise of those of those powers imposed by such things as the non-delegation doctrine or the principles of separation of powers reflected in the Tenth Amendment. The federal government enjoys only such authority as may be traced to the Constitution; the Tenth Amendment reserves to the states and the people powers not vested in federal government. Challengers of Congress's legislative authority to enact SORNA or the Justice Department's authority to prosecute failure to comply with its demands on Tenth Amendment grounds have had to overcome substantial obstacles. First, several of Congress's constitutional powers are far reaching. Among them are the powers to regulate interstate and foreign commerce, to tax and spend for the general welfare, and to enact laws necessary and proper to effectuate the authority the Constitution provides. Second, although a particular statute may implicate the proper exercise of more than one constitutional power, only one is necessary for constitutional purposes. Third, "while SORNA imposes a duty on the sex offender to register, it nowhere imposes a requirement on the State to accept such registration." Finally, until recently some courts have held that the individual defendants had no standing to contest the statutory validity on the basis of constitutional provisions designed to protect the institutional interests of governmental entities rather than to protect private interests. Several earlier courts rejected SORNA challenges under the Tenth Amendment on the grounds that the defendants had no standing. Standing refers to the question of whether a party in litigation is asserting or "standing" on his or her own rights or only upon those of another. At one time, there was no consensus among the lower federal appellate courts over whether individuals had standing to present Tenth Amendment claims. More specifically, at least two circuits had held that defendants convicted under Section 2250 had no standing to challenge their convictions on Tenth Amendment grounds. Those courts, however, did not have the benefit of the Supreme Court's Bond and Reynolds decisions. In Bond , the Court pointed out that a defendant who challenges the Tenth Amendment validity of the statute under which she was convicted "seeks to vindicate her own constitutional rights.... The individual, in a proper case, can assert injury from governmental action taken in excess of the authority that federalism defines. Her rights in this regard do not belong to the State." In Reynolds , the Court implicitly recognized the defendant's standing when at his behest it held that SORNA did not apply to pre-enactment convictions until after the Attorney General had exercised his delegated authority. Yet, the fact a defendant's Tenth Amendment challenge may be heard does not mean it will succeed. The Spending Clause states that "the Congress shall have Power To lay and collect Taxes ... to pay the Debts and provide for the common Defence and general Welfare of the United States.... " "Objectives not thought to be within Article I's enumerated legislative fields, may nevertheless be attained through the use of the spending power and the conditional grant of federal funds." In National Federation of Business v. Sebelius , seven Members of a highly divided Court concluded that the power of the Spending Clause may not be exercised to coerce state participation in a federal program. Congress may use the spending power to induce state participation; it may not present the choice under such circumstances that a state has no realistic alternative but to acquiesce. SORNA establishes minimum standards for the state sex offender registers and authorizes the Attorney General to enforce compliance by reducing by up to 10% the funds a non-complying state would receive in criminal justice assistance funds. Some defendants have suggested that this impermissibly commandeers state officials to administer a federal program and therefore exceeds Congress's authority under the Spending Clause. As a general matter, while Congress may encourage state participation in a federal program, it is not constitutionally free to require state legislators or executive officials to act to enforce or administer a federal regulatory program. To date, the federal appellate courts have held that SORNA's reduction in federal law enforcement assistance grants for a state's failure to comply falls on the encouragement rather than directive side of the constitutional line. The fact that most states do not feel compelled to bring their systems into full SORNA compliance may lend credence to that assessment. The Commerce Clause declares that "the Congress shall have Power ... To regulate Commerce ... among the several States." The Supreme Court explained in Lopez and again in Morrison that Congress's Commerce Clause power is broad but not boundless. Modern Commerce Clause jurisprudence has identified three broad categories of activity that Congress may regulate under its commerce power. First, Congress may regulate the use of the channels of interstate commerce. Second, Congress is empowered to regulate and protect the instrumentalities of interstate commerce, or persons or things in interstate commerce, even though the threat may come only from intrastate activities. Finally, Congress' commerce authority includes the power to regulate those activities having a substantial relation to interstate commerce ... i.e., those activities that substantially affect interstate commerce. The lower federal appellate courts have rejected Commerce Clause attacks on Section 2250 in the interstate travel cases, because there they believe Section 2250 "fits comfortably with the first two Lopez prongs[, i.e. the regulation of (1) the "channels" of interstate commerce and (2) the "instrumentalities" of interstate commerce]." They have also rejected Commerce Clause attacks on SORNA ("SS16913 [SORNA] is an unconstitutional exercise of Congress's Commerce Clause power and because lack of compliance with SS16913 is a necessary element of SS2250, SS2250 is also unconstitutional") based on the Necessary and Proper Clause. The Supreme Court in Comstock described the breadth of Congress's authority under the Necessary and Proper Clause in the context of another Walsh Act provision. The Walsh Act authorizes the Attorney General to hold federal inmates beyond their release date in order to initiate federal civil commitment proceedings for the sexually dangerous. Comstock and others questioned application of the statute on the grounds that it exceeded Congress's legislative authority under the Commerce and Necessary and Proper Clauses. The Court pointed out that the Necessary and Proper Clause has long been understood to empower Congress to enact legislation "rationally related to the implementation of a constitutionally enumerated power." Moreover, be the chain clear and unbroken, the challenged statute need not necessarily be directly linked to a constitutionally enumerated power. The Comstock "statute is a 'necessary and proper' means of exercising the federal authority that permits Congress to create federal criminal laws [(to carry into effect its Commerce Clause power for instance)], to punish their violation, to imprison violators, to provide appropriately for those imprisoned, and to maintain the security of those who are not imprisoned but who may be affected by the federal imprisonment of others." The first section of the first article of the Constitution declares that "[a]ll legislative Powers herein granted shall be vested in Congress of the United States.... " This means that "Congress manifestly is not permitted to abdicate or to transfer to others the essential legislative functions with which it is [constitutionally] vested." This non-delegation doctrine, however, does not prevent Congress from delegating the task of filling in the details of its legislative handiwork, as long as it provides "intelligent principles" to direct the effectuation of its legislative will. The circuit courts have yet to be persuaded that Congress's SORNA delegation to the Attorney General violates the non-delegation doctrine. Federal Qualifying Offenses 18 U.S.C. SS1591 (sex trafficking of children or by force or fraud) 18 U.S.C. SS2241 (aggravated sexual abuse) 18 U.S.C. SS2242 (sexual abuse) 18 U.S.C. SS2243 (sexual abuse of ward or child) 18 U.S.C. SS2244 (abusive sexual contact) 18 U.S.C. SS2245 (sexual abuse resulting in death) 18 U.S.C. SS2251 (sexual exploitation of children) 18 U.S.C. SS2251A (selling or buying children) 18 U.S.C. SS2252 (transporting, distributing or selling child sexually exploitive material) 18 U.S.C. SS2252A (transporting or distributing child pornography) 18 U.S.C. SS2252B (misleading Internet domain names) 18 U.S.C. SS2252C (misleading Internet website source codes) 18 U.S.C. SS2260 (making child sexually exploitative material overseas for export to the U.S.) 18 U.S.C. SS2421 (transportation of illicit sexual purposes) 18 U.S.C. SS2422 (coercing or enticing travel for illicit sexual purposes) 18 U.S.C. SS2423 (travel involving illicit sexual activity with a child) 18 U.S.C. SS2424 (filing false statement concerning an alien for illicit sexual purposes) 18 U.S.C. SS2425 (interstate transmission of information about a child relating to illicit sexual activity). Military Qualifying Offenses Offenses Defined on or after June 28, 2012 UCMJ art. 120: Rape, Sexual Assault, Aggravated Sexual Contact, and Abusive Sexual Contact UCMJ art. 120b: Rape, Sexual Assault, and Sexual Abuse, of a Child UCMJ art. 120c: Pornography and Forcible Pandering. Specified Offenses Against a Child Under 18 An offense against a child (unless committed by a parent or guardian) involving kidnapping. An offense against a child (unless committed by a parent or guardian) involving false imprisonment. Solicitation to engage in sexual conduct with a child. Use of a child in a sexual performance. Solicitation to practice child prostitution. Video voyeurism as described in section 1801 of title 18 committed against a child. Possession, production, or distribution of child pornography. Criminal sexual conduct involving a minor, or the use of the Internet to facilitate or attempt such conduct. Any conduct that by its nature is a sex offense against a minor. Crimes with a Sex Element Any federal, state, local, military, or foreign "criminal offense that has an element involving a sexual act or sexual contact with another" qualifies. Attempt or Conspiracy Any attempt or conspiracy to commit one of the other qualifying offenses also qualifies.

Section 2250 of Title 18 of the United States Code outlaws an individual's failure to comply with federal Sex Offender Registration and Notification Act (SORNA) requirements. SORNA demands that an individual--previously convicted of a qualifying federal, state, or foreign sex offense--register with state, territorial, or tribal authorities. Individuals must register in every jurisdiction in which they reside, work, or attend school. They must also update the information whenever they move, or change their employment or educational status. Section 2250 applies only under one of several jurisdictional circumstances: the individual was previously convicted of a qualifying federal sex offense; the individual travels in interstate or foreign commerce; or the individual enters, leaves, or resides in Indian country. The Supreme Court in Nichols v. United States held that SORNA, as originally written, had limited application to sex offenders in the U.S. who relocated abroad. The International Megan's Law to Prevent Child Exploitation and Other Sexual Crimes Through Advanced Notification of Traveling Sex Offenders [Act], P.L. 114-119 (H.R. 515), however, anticipated and addressed the limit identified in Nichols. Individuals charged with a violation of Section 2250 may be subject to preventive detention or to a series of pre-trial release conditions. If convicted, they face imprisonment for not more than 10 years and/or a fine of not more than $250,000 as well as the prospect of a post-imprisonment term of supervised release of not less than 5 years. An offender guilty of a Section 2250 offense, who also commits a federal crime of violence, is subject to an additional penalty of imprisonment for up to 30 years and not less than 5 years for the violent crime. The Attorney General has exercised his statutory authority to make SORNA applicable to qualifying convictions occurring prior to its enactment. The Supreme Court rejected the suggestion of the United States Court of Appeals for the Fifth Circuit that Congress lacks the constitutional authority to make Section 2250 applicable, on the basis of a prior federal offense and intrastate noncompliance, to individuals who had served their sentence and been released from federal supervision prior to SORNA's enactment, United States v. Kebodeaux, 134 S. Ct. 2496 (2013). The Fifth Circuit's Kebodeaux opinion aside, the lower federal appellate courts have almost uniformly rejected challenges to Section 2250's constitutional validity. Those challenges have included arguments under the Constitution's Ex Post Facto, Due Process, Cruel and Unusual Punishment, Commerce, Necessary and Proper, and Spending Clauses. This report is in an abridged version of CRS Report R42692, SORNA: A Legal Analysis of 18 U.S.C. SS2250 (Failure to Register as a Sex Offender), without the footnotes or the attribution or citations to authority found in the parent report.

C hild welfare services are intended to prevent the abuse or neglect of children; ensure that children have safe, permanent homes; and promote the well-being of children and their families. As the U.S. Constitution has been interpreted, states bear the primary authority for ensuring the welfare of children and their families. At the same time, the federal government has shown long-standing interest in helping states improve their services to children and families and, through the provision of federal funds, compels states to meet certain child welfare requirements. For FY2018, an estimated $9.5 billion in federal support was made available for child welfare purposes. Comparable funding for FY2017 is estimated at $9.3 billion. The increase reflects additional discretionary program funding provided by the Consolidated Appropriations Act of 2018 (FY2018 omnibus, P.L. 115-141 ) to address the impact of parental substance abuse on children and the child welfare system, to help implement the Family First Prevention Services Act (Family First; Div. E., Title VII, of P.L. 115-123 ), and to pay incentives to states that increase the rate at which children leave foster care for permanent adoptive or legal guardianship families. Additionally, mandatory funding made available under the Title IV-E foster care and permanency program is expected to increase in FY2018, primarily for support of adoption assistance. This report begins with an overview of FY2018 federal funding made available for child welfare programs. Next, it shows program-level funding provided in FY2018 and several recent fiscal years in Table 1 . The report then discusses in greater detail the purposes and distribution of the additional FY2018 discretionary funding provided for child welfare programs. Federal child welfare funding for FY2018 is expected to be $9.5 billion. This amount includes $8.3 billion in open-ended mandatory dollars and $1.2 billion in combined capped mandatory and discretionary funding. Most child welfare funding is authorized under Title IV-E of the Social Security Act for support of children in foster care, including ensuring that they are afforded certain protections while in care, and for assistance to children who leave foster care for new permanent families via adoption or legal guardianship. For FY2017, the federal government's budget authority for Title IV-E foster care and permanency totaled $8.2 billion, and for FY2018 may exceed $8.3 billion (+$111 million). All of the increase is tied to expected growth in program spending for adoption assistance and kinship guardianship assistance (+$195 million), while obligations for foster care are projected to decline (-$85 million). Title IV-E funding for these purposes is authorized on a mandatory and "open-ended" basis. Under this kind of authorization, the law stipulates that states, territories, or tribes operating a Title IV-E program are entitled to receive reimbursement for a part of every dollar spent on behalf of an eligible child and for an eligible program purpose. In February 2018, Congress passed Family First. Among other changes to child welfare programs, it authorizes-- as of FY2020 --open-ended and mandatory Title IV-E funding for a part of the cost of providing certain time-limited substance abuse and mental health treatment services and in-home parent skills based programs. These services and programs may be made available to children and their parents or kin caregivers to prevent the need for children to enter foster care. Separately, Family First authorizes-- as of FY2019-- open-ended and mandatory funding for state kinship navigator programs. While none of this Family First-authorized Title IV-E funding is available in FY2018, as is discussed later in this report, some funding provided as part of the FY2018 omnibus is intended to support implementation of Family First. Funding for child welfare services to children and families and for related research and evaluations, demonstration projects, and incentive payments totaled $1.2 billion for FY2018. This funding is authorized primarily in Title IV-B and in certain sections of Title IV-E of the Social Security Act, as well as in the Child Abuse Prevention and Treatment Act (CAPTA). Some additional support is made available through Adoption Opportunities, and the Victims of Child Abuse Act. Most of this funding is counted as discretionary, with the funding level determined each year as part of the appropriations process. Some of this funding is considered as "capped mandatory" because the law entitles states to receive a portion of a total funding level that is specified in the program's authorizing law (and thus that total funding is provided in annual appropriations acts). The $1.2 billion in total capped mandatory and discretionary child welfare funding for FY2018 is $140 million above comparable funding provided in FY2017. This is due to increases in discretionary funding. Specifically, the FY2018 omnibus ( P.L. 115-141 ) provided increased discretionary funding as follows: $60 million in additional CAPTA state grants funding, with instructions for states to "prioritize" development of plans of safe care for infants identified as substance-exposed; $40 million in additional Title IV-B (Promoting Safe and Stable Families) funding to (1) support state and tribal kinship navigator programs, (2) increase support for grants to regional partnerships to improve outcomes for children affected by parental substance abuse, and (3) expand the ability of the U.S. Department of Health and Human Services (HHS) to provide technical assistance to states in implementing the evidence-based requirements included in the Family First Prevention and Services Act (Div. E., Title VII, of P.L. 115-123 ); $37 million in additional funds to make Adoption and Legal Guardianship Incentive Payments (authorized in Title IV-E of the Social Security Act); and $3 million in additional funding for Court Appointed Special Advocates (CASAs) (under the Victims of Child Abuse Act). Table 1 provides a snapshot of child welfare funding provided in each of FY2014-FY2018. Funding is shown by program or program component and within the part of the law where the program is authorized. The amount shown is the level appropriated in the final appropriations bill for the given fiscal year, or, in the case of Title IV-E foster care, adoption assistance, and kinship guardianship, it is based on the budget authority provided in that legislation or the most recent level of funds obligated under the program during that year. At the federal level, nearly all of this funding is administered by the Children's Bureau, which is an agency within HHS's Administration for Children and Families (ACF). The only exception to this concerns the several grant programs authorized under the Victims of Child Abuse Act. Funding for these programs is administered federally by the Office of Justice programs at the Department of Justice. Most of the increase in discretionary funding for child welfare was provided with the opioid crisis in mind. Substance use disorders often impair parenting, and as such are a perennial challenge for child welfare agencies. They may be accompanied by mental health challenges or depression, and can lead to unemployment or otherwise limit the ability of parents to provide for the physical and developmental well-being of their children. The current epidemic of opioid abuse has been accompanied by an increase in the number of infants who, having been exposed to drugs in-utero, experience a set of withdrawal symptoms after birth referred to as neo-natal abstinence syndrome (NAS). Separately, the number of children entering foster care, and for whom parental drug abuse is associated with their entry to care, has been growing. During FY2016, nearly 274,000 children entered foster care (up from 251,000 in FY2012). For more than one-third (92,000) of those children, drug abuse by a parent was associated with their removal from the home. Many child welfare administrators believe the increase in children and families in need of services is a consequence of the opioid crisis, and some research shows a statistical relationship between increased drug overdose rates and drug-related hospitalizations, and higher rates of child abuse and neglect reports, substantiated child abuse, and entry to foster care. As of the last day of FY2016, the number of children remaining in foster care had grown to 437,000 (compared to 397,000 on the last day of FY2012). Traditionally, kin caregivers have helped mitigate the strain on child welfare agencies brought on by a drug epidemic by providing care that enables children to remain outside of foster care or to leave care more quickly. At the same time, studies of kin caregivers have shown that they may have limited income, be older, and may have their own service needs (e.g., health care). In the current opioid epidemic, state child welfare agencies are again seeking help from kin caregivers. Funding for CAPTA state grants was $25.3 million in FY2017 and increased to $85.3 million for FY2018. Generally, states must use CAPTA state grant funds for any of 14 categories of spending intended to improve the way the state receives and responds to reports of child abuse and neglect, and they must provide certain assurances to HHS regarding the policies they have in place to carry out child protection activities. The explanatory statement that accompanied the FY2018 omnibus spending measure ( P.L. 115-141 ) notes that the additional $60 million in FY2018 funding for these grants is to help states "improve their response to infants affected by substance use disorder and their families." While the additional CAPTA state grant funds are not strictly limited to this use, the explanatory statement does direct states to "prioritize" development of plans of safe care for substance-exposed infants. Under current law, as part of receiving CAPTA state grant funds, states are required to have policies in place for the development of a plan of safe care for infants who are identified as affected by "substance abuse or withdrawal symptoms." Under the amendments to CAPTA by the Comprehensive Addiction and Recovery Act of 2016 (CARA, P.L. 114-122 ), these plans are expected to protect the safety and well-being of such infants by addressing the health and substance use disorder treatment needs of the infants and the affected families or caregivers. Additionally, the CARA amendments to CAPTA direct states to develop monitoring systems to determine how local entities are providing services or referrals under such plans and as required by state policy. Close to half of the states (23) were initially unable to provide assurances to HHS of their compliance with the plan of safe care requirements as amended by CARA, thus putting their receipt of CAPTA state grant funds in jeopardy. However, in May 31, 2018, program instruction, HHS's Children's Bureau noted that all states had taken the compliance steps necessary to receive their FY2018 CAPTA funding. Therefore, the only additional step required to receive the full amount of FY2018 funding was for each state to include in their Annual Progress and Services Report (which was due to the HHS-Children's Bureau by June 30, 2018) how they intend to use the increased FY2018 CAPTA funding, with a priority on developing, implementing, or monitoring plans of safe care. States have five years from the first day of the fiscal year in which these CAPTA funds are awarded to use them. This means they have until September 30, 2022, to expend FY2018 CAPTA funds. The explanatory statement also directs HHS to provide "necessary technical assistance, monitoring and oversight to assist and evaluate State's activities on plans of safe care," and it requests that an update on those activities be provided to Congress in early 2019. As noted above, states have met the minimum compliance standards for this CAPTA requirement. However, a Government Accountability Office (GAO) survey conducted last year found that a majority of states agreed that it would be "extremely to very helpful" to receive additional technical assistance regarding developing, implementing, and monitoring plans of safe care for substance-exposed infants. Related topics for which states sought further guidance or information included requirements for health care providers to notify child protective services (CPS) of substance-affected infants; assessing risks and needs of substance-affected infants and their families; specific needs of infants prenatally exposed to opioids or diagnosed with neonatal abstinence syndrome (NAS); interagency collaboration, and services to address the needs of substance-affected infants and their families; and data collection or information sharing. CAPTA state grant funding is awarded to the 50 states, the District of Columbia, Puerto Rico, and four additional territories. Each of these 56 jurisdictions receives a base amount of $50,000 and remaining funds are distributed based on a jurisdiction's share of the national child population. The increased CAPTA state grant funding triggers a modification to this distribution that will ensure that no state (including the 50 states, DC, or Puerto Rico) receives an award of less than $150,000. There is no cost sharing or state match requirement in this grant program. Kinship navigator programs are intended to help kin caregivers identify and access services and supports they need to care for children living with them and themselves. The FY2018 omnibus ( P.L. 115-141 ) included $19 million in discretionary funding to allow states and tribes to develop, enhance, or evaluate kinship navigator programs. This funding was included in the FY2018 discretionary appropriation made for the Promoting Safe and Stable Families (PSSF) program. The explanatory statement notes that "as parents struggle with opioid addiction and substance use disorder, more grandparents and relative caregivers are taking primary responsibility for the care of children." According to the omnibus ( P.L. 115-141 ), the FY2018 funding for kinship navigators is also provided to assist states in developing programs that meet the evidence-based practice standards that are included in the Family First Prevention Services Act (Title VII, Div. E of P.L. 115-123 ), which was enacted in February 2018. Under that law, states will be able to claim federal support for fully 50% of their kinship navigator programs beginning with FY2019. However, they may only claim this funding for kinship navigator programs that have been found to meet "promising," "supported," or "well-supported" evidence standards. Further, beginning with FY2019 the kinship navigator programs supported via Title IV-E dollars must do each of the following: establish information and referral systems that link kinship caregivers to other kin caregivers/support groups, public benefit eligibility and enrollment information, and relevant training and legal services; be planned and operated in consultation with kin caregivers, youth raised by kin, organizations representing kin caregivers, and relevant public and private agencies; provide outreach to kinship care families; and promote public and private partnerships to increase knowledge about the needs of kinship families (including families fostering teen parents) and improve services to them. Jurisdictions seeking to receive these FY2018 funds were instructed to submit documentation indicating this as of July 20, 2018, along with a brief outline describing how they intend to use the funds. Additionally, HHS notes that while all the navigator programs should be planned so they will, in the end, include all of the activities listed above, a jurisdiction does not need to ensure that all of these activities will immediately be a part of their navigator programs. The FY2018 funds may be used to support kinship navigator activities during FY2018 and FY2019 (October 1, 2017-September 30, 2019). The FY2018 omnibus makes any state (including DC), territory, or tribe that has an HHS-approved plan to operate a foster care prevention and permanency program under Title IV-E is eligible to receive some of this funding. Specifically, the law provides that every eligible state (including DC) and territory choosing to participate must receive a minimum grant of $200,000 and every eligible tribe choosing to participate must receive a minimum grant of $25,000. The remaining funds are to be allocated to these participating jurisdictions based on applicable formulas used in the PSSF program. Unlike the kinship navigator funding that will be available under the Title IV-E program (as of FY2019), there is no matching requirement for jurisdictions receiving the FY2018 funding for kinship navigators. Forty-five states, the District of Columbia, two territories, and eight tribes submitted requests for this funding by the July 20 deadline. HHS has determined it may be "more flexible" on the deadline for jurisdictions that did not submit by that date and expects it may still receive a few more applications. P.L. 115-141 also included an additional $19 million to increase support for grants to regional partnerships to improve outcomes for children affected by parental substance abuse. This funding for regional partnership grants (RPGs) was also included in the PSSF discretionary funding account for FY2018 and was provided in addition to the separate $20 million in PSSF mandatory funding reserved annually for the regional partnership grant program. Regional partnerships are collaborations of two or more agencies (one must be the child welfare agency administering the Title IV-E foster care program or a tribal child welfare agency) in a defined region or area. Since the RPG program was launched in September 2006, more than 80 partnerships have been funded in at least 36 states, including some tribal areas. Of those, 21 grantees in 19 states are currently being funded. The additional FY2018 RPG support provided in P.L. 115-141 is expected to enable HHS to award up to 10 additional competitive grants. Each grantee is expected to receive between $1.5 million and $1.9 million in funds to be spent across a 36-month period. Grantees must provide some matching funds. Applications for this competitive grant funding are due August 13, 2018. Strategies used to improve outcomes for children and families affected by substance use disorders in the initial round of RPGs included strengthening or expanding services to families with substance abuse concerns; providing more timely access to treatment services (residential treatment and out-patient/home-based); enhancing or creating court-based drug treatment programs; creating better service integration; and improving knowledge, skills, and collaboration across practice areas. Additionally, grantees quickly learned the importance of strengthening their recovery services, especially through implementing or enhancing peer/parent mentors, recovery coaches, or other substance abuse specialists; providing key supportive services, particularly housing (the lack of which grantees noted directly impacts the ability of families to be reunited) as well as medical and health care services; integrating services to adults and children to serve the family as a whole; better identifying child-specific needs and connecting them to services (e.g., early childhood development); and designing services to identify and address effects of trauma on both the adults and children served. Subsequent RPG awards announced in 2012 and 2014 required grantees to implement evidence-based or evidence-informed programs, including trauma-informed services. An ongoing cross-site evaluation of grantees initially funded in 2012 and 2014 has tracked measures of child and parent well-being as part of assessing program impacts. Of the increased discretionary PSSF funding, $2 million is reserved to HHS for research and evaluation activities. These funds may be used to identify, establish, and disseminate practices that meet the evidence-based standards that will apply to foster care prevention services--including substance abuse and mental health treatment services and in-home parent skills-based programs. Under the recently enacted Family First Prevention Services Act, those services are authorized to be supported under the Title IV-E program beginning with FY2020. States earn Adoption and Legal Guardianship Incentive Payments if they increase the rate at which children who would otherwise remain in foster care are safely placed in new permanent families via adoption or legal guardianship. The FY2018 omnibus roughly doubled funding for these incentive payments--increasing the overall funding from $37 million in FY2017 to $75 million in FY2018. Because the amount of incentive payments earned by states in the most recent award cycle exceeded the amount of funding HHS had on hand to pay those awards, this funding enables HHS to make states whole for awards already earned and will allow some funds on hand to be used to make payments for a new award cycle later this year. Specifically, the most recent awards were announced in September 2017 (for adoptions and legal guardianships completed in FY2016). In that year, 47 states (including DC) earned incentive payments totaling $55 million. However, HHS had just $5 million available to make the incentive awards. Accordingly, $50 million of the FY2018 funding for these incentive payments (provided as part of P.L. 115-141 ) was used by the HHS-Children's Bureau to complete full awards to states for FY2016 performance. The remaining FY2018 appropriated funds (circa $25 million) remain available for awards to states related to increases in adoptions or legal guardianships completed in FY2017. Those performance awards are expected to be announced in August or September 2018. Appendix C provides a funding history for the program, and shows incentives earned by state. Subtitle II of the Victims of Child Abuse Act authorizes funding to strengthen Court Appointed Special Advocates (CASA) programs. Funding for CASA grew to $12 million in FY2018 (the full authorization level for the program) compared to $9 million in FY2017. Appendix A. Distribution of FY2018 PSSF Funding The Promoting Safe and Stable Families (PSSF) program receives some capped mandatory funding and is also authorized to receive funding on a discretionary basis. The bulk of this combined PSSF funding is provided for formula grants to states (including DC), territories, and tribes for provision of four categories of child and family services: family support, family preservation, family reunification, and adoption promotion and support. However, in each year a portion of the funding (mandatory, discretionary, or both) is reserved for the State Court Improvement Program (CIP); tribal court improvement; monthly caseworker visit grants; regional partnership grants (RPGs) to improve outcomes for children affected by parental substance abuse; and program-related research, evaluation, and technical assistance. For FY2018, additional PSSF funding was provided to support kinship navigator programs and to increase funding reserved for RPGs and technical assistance. Separately, existing PSSF funds were tapped to support development of increased electronic interstate case processing capacity. Table A-1 shows FY2018 PSSF funding by activity (including whether the funding was provided on a mandatory or discretionary basis, or both). For FY2018, the total PSSF appropriation was $445 million, including $345 million in mandatory funds and just under $100 million in discretionary funding. However, PSSF mandatory funding is subject to sequestration applied to nonexempt, nondefense accounts (6.6% for FY2018). This reduced mandatory funding available to about $322 million and overall PSSF funding to about $422 million. Appendix B. Currently Funded Regional Partnership Grants (RPGs) HHS expects to award the additional $19 million in RPG funding provided in the FY2018 omnibus ( P.L. 115-141 ) to 10 partnerships before the end of September 2018. (For more information, see the funding opportunity online at https://www.grants.gov/web/grants/view-opportunity.html?oppId=304263 . ) As shown below, there are 21 grantees in 19 states that are currently receiving RPG funding. This funding was initially awarded in September 2014 (4 grantees) or September 2017 (19 grantees) and each grantee is expected to receive funding across a five-year period (based on continued reservation of mandatory PSSF funds). Appendix C. Adoption and Legal Guardianship Incentive Payments Incentive payments for increased permanency via adoption were established by the Adoption and Safe Families Act (ASFA, P.L. 105-89 ). Incentive payments for establishing permanency via legal guardianship were added as of earnings year FY2014 ( P.L. 113-183 ). The law provides that data reported by a state as of August must be used to calculate incentive payments for performance during the previous fiscal year. Accordingly, incentive payments earned in a given fiscal year (e.g., FY2017) are initially announced for award at the end of the succeeding fiscal year (e.g., FY2018). Table C-1 shows the funding and total incentive payments awarded under the Adoption and Legal Guardianship Incentive Program since it was established by ASFA. Incentive payments earned for FY2017 are expected to be announced by September 2018 and, as shown in Table C-1 , about $25 million in FY2018 funding is available to make those payments. (Incentive payments earned for FY2016 were announced in September 2017. See Table C-2 for awards by state.) Awards by State for FY2016 Performance In numerous recent years, not enough funding was available for HHS to make full payment to states at the time the initial award was announced. Accordingly, HHS prorated an initial award amount and used appropriations in a subsequent year to make states whole. For example, in September 2017 HHS had $5.3 million in program funds to award. Accordingly, it provided this amount on a prorated basis to each state that earned an award (for FY2016 performance) and in April 2018, following the appropriation of full-year program funding, it awarded the remaining funds. Table C-2 shows incentive payments awarded for state performance in FY2016 (the most recent year available) by category of awards earned. Those categories, and the measure used to determine whether an increase is achieved, have varied over the years. For more information on the current categories and the categories previously used, see CRS Report R43025, Child Welfare: The Adoption Incentive Program and Its Reauthorization . The incentive structure described in this report (as included in H.R. 4980 (113 th Congress)) was subsequently enacted in the Preventing Sex Trafficking and Strengthening Families Act ( P.L. 113-183 ) and is currently in use.

Child welfare services are intended to prevent the abuse or neglect of children; ensure that children have safe, permanent homes; and promote the well-being of children and their families. For FY2018, an estimated $9.5 billion in federal support was made available for child welfare purposes. Comparable funding for FY2017 is estimated at $9.3 billion. At least $100 million of the FY2018 increase was provided as discretionary appropriations intended to address the impact of parental substance abuse on children and the child welfare system and to help implement the Family First Prevention Services Act (Div. E., Title VII, of P.L. 115-123). About $37 million in additional discretionary funding was provided to enable the U.S. Department of Health and Human Services to provide full incentive payments to states that are increasing the rate at which children who are otherwise expected to remain in temporary foster care are placed in permanent adoptive families or with a legal guardian. Finally, mandatory funding made available under the Title IV-E foster care, prevention, and permanency program is expected to increase by some $111 million in FY2018. The bulk of this increase is expected to provide ongoing assistance to children who leave foster care for permanent adoptive or guardianship families. Spending on foster care is not projected to grow and Title IV-E funding for prevention activities (as provided for by the Family First Prevention Services Act) is not available before FY2020. FY2018 began on October 1, 2017, but full funding levels for it were not determined until enactment, on March 23, 2018, of the Consolidated Appropriations Act, 2018 (P.L. 115-141). In the interim, funding to continue child welfare programs in FY2018 was provided via short-term funding measures, including P.L. 115-56 (through December 8, 2017), P.L. 115-90 (through December 22, 2017), P.L. 115-96 (through January 19, 2018), P.L. 115-120 (through February 8, 2018), and P.L. 115-123 (until March 23, 2018).

This report describes the individual mandate as established under the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended). It also discusses the ACA reporting requirements designed, in part, to assist individuals in providing evidence of having met the mandate. The ACA requires most individuals to have health insurance coverage or potentially to pay a penalty for noncompliance. Individuals are required to maintain minimum essential coverage for themselves and their dependents. Some individuals are exempt from the mandate and the penalty, and others may receive financial assistance to help them pay for the cost of health insurance coverage and the costs associated with using health care services. Calendar year 2014 was the first year in which individuals were expected to comply with the individual mandate requirement. Because the penalties are assessed through the federal tax filing process, calendar year 2015 is the first year in which the penalty is assessed (for calendar year 2014). In general, individuals who are not exempt from the mandate must maintain minimum essential coverage to avoid the penalty. Minimum essential coverage is defined broadly in statute and is defined further in regulations; the definition includes most types of government-sponsored coverage (e.g., Medicare) as well as most types of private insurance (e.g., employer-sponsored insurance, or ESI). Table A-1 in Appendix A lists types of coverage that are and are not considered minimum essential coverage, as identified in statute, regulations, and guidance. With some exceptions, individuals are required to maintain minimum essential coverage for themselves and their dependents. Those who do not meet the mandate may be required to pay a penalty for each month of noncompliance. The penalty is calculated as the greater of either A percentage of applicable income , defined as the amount by which an individual's household income exceeds the applicable tax filing threshold for the tax year; or A flat dollar amount assessed on each taxpayer and any dependents. As shown in Table 1 , both the percentage and the flat dollar amount increase between 2014 and 2016, and the dollar amount is adjusted for inflation thereafter. When calculating the flat dollar amount assessed on a taxpayer and his or her dependents, the flat dollar amount is reduced by one-half for dependents under the age of 18 and the total family penalty is capped at 300% of the annual flat dollar amount. For example, in 2015 the flat dollar amount for a taxpayer and his or her dependents is limited to three times $325, or $975. The total monthly penalty for a taxpayer and his or her dependents cannot be more than the cost of the national average premium for bronze-level health plans offered through health insurance exchanges (for the relevant family size). In other words, the total monthly penalty is capped. In 2015, the average premium is $207 per individual per month. If a taxpayer is liable to pay a penalty for more than one individual, the monthly individual amount ($207) is multiplied by the number of individuals subject to a penalty, up to a maximum of five individuals. So, in 2015 the maximum cap is $1,035 per month for any taxpayers who are liable for penalties for five or more individuals. See Appendix B for penalty examples for 2014, 2015, and 2016. Any penalty that taxpayers are required to pay for themselves or their dependents must be included in their federal income tax return for the taxable year. Those individuals who file joint returns are jointly liable for the penalty. Taxpayers who are required to pay a penalty but fail to do so will receive a notice from the Internal Revenue Service (IRS) stating that they owe the penalty. If they still do not pay the penalty, the IRS can attempt to collect the funds by reducing the amount of their tax refund for that year or future years. However, individuals who fail to pay the penalty will not be subject to any criminal prosecution or penalty for such failure. The Secretary of the Treasury cannot file notice of lien or file a levy on any property for a taxpayer who does not pay the penalty. Certain individuals (and their dependents) are exempt from the individual mandate or its associated penalty. Table 2 describes the various exemptions. Most of the exemptions are outlined in statute and in regulations issued by the IRS. The ACA also gives the Secretary of Health and Human Services (HHS) the authority to determine the circumstances under which an individual may receive a hardship exemption. The following section, " Hardship Exemption " further details the circumstances identified by the HHS Secretary. Any individual whom the HHS Secretary determines has suffered a hardship with respect to the capability to obtain health insurance coverage will receive a hardship exemption. In regulations, HHS has identified a number of circumstances that allow individuals to receive a hardship exemption, including those in which an individual experiences financial, domestic, or other circumstances that prevent him or her from obtaining coverage or the expense of purchasing coverage would cause him or her to experience serious deprivation of food, shelter, clothing, or other necessities; is unable to afford coverage based on projected household income; has income below the filing threshold (and therefore is eligible for the filing threshold exemption), except that he or she claimed a dependent with a filing requirement and had household income exceeding the filing threshold as a result; is ineligible for Medicaid based on a state's decision not to carry out the ACA expansion; is identified as eligible for affordable self-only ESI, but the aggregate cost of the ESI for all the employed members of the individual's family exceeds a certain percentage of household income; and is an Indian eligible for services through an Indian health care provider but is not eligible for an exemption based on being a member of an Indian tribe, or is eligible for services through the Indian Health Service. Individuals can be exempt from the mandate and the penalty based on their characteristics, financial status, or affiliations (e.g., religious affiliations). Some exempt individuals do not have to take any actions to claim the exemption, such as those who live abroad for more than 330 days in a 12-month period and those who are bona fide residents of a U.S. possession. Other individuals must either obtain a certification of exemption from a health insurance exchange or claim the exemption through the tax filing process. Regulations provide that most exemptions be applicable retrospectively (with an exception for a specific hardship definition) and be recertified annually; only the religious and Indian tribe exemptions are eligible for prospective or retrospective applicability and continuous certification. Table 3 outlines the basic features of nine exemption categories. The individual mandate went into effect in 2014. When individuals filed their federal tax returns for that year, they had to report whether they maintained minimum essential coverage for each month in 2014 and whether they were exempt from the mandate for all or part of the year. As of the date of this report, the Department of the Treasury has not released information from 2014 tax filings related to the individual mandate. Information such as the number of individuals who were subject to the penalty in 2014, the amount of any penalties owed, and the number of individuals who were exempt from the mandate is not currently available. Although the ACA requires most individuals to maintain minimum essential coverage, it provides financial assistance to some individuals to help them meet the requirement. Under the ACA Medicaid expansion, some states have expanded their Medicaid programs to include all non-elderly, nonpregnant individuals with income below 133% of the federal poverty level (FPL), which has increased Medicaid enrollment significantly. As of 2014, some individuals who do not qualify for Medicaid coverage, but who meet other ACA requirements, are able to receive subsidies to help pay for the premiums and cost-sharing requirements of health plans offered through an exchange. The ACA requires that certain information be provided to the IRS and to individuals, in part to ensure that both parties have knowledge and proof that an individual is meeting the individual mandate. Every entity (including employers, insurers, and government programs) that provides minimum essential coverage to any individual must present a return to the IRS and a statement to the covered individual. The person required to provide the return and statement is referred to as the reporting entity . In general, insurers are the reporting entities for all fully insured health insurance arrangements and plan sponsors are the reporting entities for all self-insured arrangements. A government agency or unit is the reporting entity for any coverage under a government-sponsored program, including any coverage that is provided through an insurer (e.g., a Medicare Advantage plan). An insurer does not have to provide a return or a statement for any coverage it offers through an individual health insurance exchange, as the exchange is the reporting entity for such coverage; however, insurers that offer small group coverage through a small business health options program (SHOP) exchange are the reporting entities for such coverage. The return provided to the IRS must include the following: the name, address, and employer identification number (EIN) of the reporting entity required to file the return; the name, address, and taxpayer identification number (TIN) of the responsible individual and each other individual covered under the policy or program; the months for which, for at least one day, each individual was covered under the policy or program; for coverage provided through the group plan of an employer-- the name, address, and EIN of the employer sponsoring the plan; whether the coverage is a qualified health plan (QHP) offered through a SHOP exchange and the SHOP's unique identifier; and any other information as specified in forms, instructions, or published guidance issued by the Department of the Treasury. The reporting entity also must provide a statement to each responsible individual covered under the policy or program. The statement must include the contact information for the person designated as the reporting entity's contact person; the policy number of the coverage, if any; and the information included in the return to the IRS for the responsible individual and any individuals listed on the return. Reporting entities were required to begin submitting returns in 2014; however, in July 2013 the Department of the Treasury published a notice that delayed the reporting requirement until 2015. Reporting entities that do not file timely and accurate returns and those that do not provide statements to individuals could be subject to penalties. Appendix A. Minimum Essential Coverage Appendix B. Penalty Examples The following are illustrative penalty examples for single individuals and for families of four (specifically, a married couple with two children under the age of 18). In all of the examples, the individual or individuals are subject to the individual mandate penalty for an entire calendar year. The 2014 and 2015 examples use actual tax filing thresholds and penalty caps for the respective year. The 2014 filing thresholds are $10,150 for a single individual under the age of 65 with no dependents (single filing status) and $20,300 for a married couple filing jointly. The 2014 penalty cap is $204 per month per individual, up to a maximum of five individuals. The 2015 filing thresholds are $10,300 for a single individual under the age of 65 with no dependents (single filing status) and $20,600 for a married couple filing jointly. The 2015 penalty cap is $207 per month per individual, up to a maximum of five individuals. Neither the tax filing thresholds nor the penalty caps for 2016 have been determined. Because the filing thresholds are linked to an inflation adjustment based on the Consumer Price Index for All Urban Consumers (CPI-U), they likely will be higher when implemented in 2016. The examples for 2016 use estimated filing thresholds. The Congressional Research Service does not have the information needed to estimate the 2016 penalty caps; therefore, estimated penalty caps are not used in the 2016 examples. Because the 2016 filing thresholds are estimated and the penalty caps are not used, the numbers for 2016 are meant for illustrative purposes only. These examples are best used to show the relative scope of the penalties and the relationship between the various components of the formulas for calculating the penalty. Penalty Examples: Single Individual Based on the information above, the following are illustrative individual-mandate penalties for a single individual with no dependents who is subject to the penalty for an entire calendar year . In 2014, an individual with income above $10,150 (the tax filing threshold) but at or below $19,650 will pay the $95 flat amount; an individual with income above $19,650 but below $254,950 will pay 1% of applicable income (the difference between the individual's income and $10,150); the penalty cap will apply to an individual with income at or above $254,950, so the individual will pay $2,448. In 2015, an individual with income above $10,300 (the tax filing threshold) but at or below $26,550 will pay the $325 flat amount; an individual with income above $26,550 and below $134,500 will pay 2% of applicable income (the difference between the individual's income and $10,300); the penalty cap will apply to an individual with income at or above $134,500, so the individual will pay $2,484. In 2016, an individual with income above the filing threshold (estimated to be $10,450 in 2016) but at or below an estimated $38,250 will pay the $695 flat amount; an individual with income above an estimated $38,250 and below the amount that will trigger the penalty cap will pay 2.5% of applicable income (the difference between the individual's income and the filing threshold); an individual with income at or above the amount that will trigger the penalty cap will pay the capped amount. Penalty Examples: Family of Four Based on the information above, the following are illustrative individual mandate penalties for a family of four (married couple with two children under the age of 18) who are all subject to the penalty for an entire calendar year . In 2014, those with income above $20,300 (the tax filing threshold) but at or below $48,800 will pay the $285 flat dollar amount; those with income above $48,800 but below $999,500 will pay 1% of applicable income (the difference between the family's household income and the filing threshold); the penalty cap will apply to a family of four with income at or above $999,500, so the family will pay $9,792. In 2015, those with income above $20,600 (the tax filing threshold) but at or below $69,350 will pay the $975 flat dollar amount; those with income above $69,350 and $517,400 will pay 2% of applicable income (the difference between the family's household income and the filing threshold); the penalty cap will apply to a family of four with income at or above $517,400, so the family will pay $9,936. In 2016, those with income above the filing threshold (estimated to be $20,900 in 2016) but at or below an estimated $104,300 will pay the $2,085 flat dollar amount; those with income above an estimated $104,300 and below the amount that will trigger the penalty cap will pay 2.5% of applicable income (the difference between the family's household income and the filing threshold); a family of four with income at or above the amount that will trigger the penalty cap will pay the capped amount.

Since 2014, the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) has required most individuals to maintain health insurance coverage or potentially to pay a penalty for noncompliance. Specifically, most individuals are required to maintain minimum essential coverage for themselves and their dependents. Minimum essential coverage is a term defined in the ACA and its implementing regulations and includes most private and public coverage (e.g., employer-sponsored coverage, individual coverage, Medicare, and Medicaid, among others). Some individuals are exempt from the mandate and the penalty, and others may receive financial assistance to help them pay for the cost of health insurance coverage and the costs associated with using health care services. Individuals who do not maintain minimum essential coverage and are not exempt from the mandate have to pay a penalty for each month of noncompliance with the mandate. The penalty is the greater of a flat dollar amount or a percentage of applicable income. In 2014, the annual penalty was the greater of $95 or 1% of applicable income; the penalty increased to the greater of $325 or 2% of applicable income in 2015. The penalty will increase again in 2016 and will be adjusted for inflation thereafter. The penalty is assessed through the federal tax filing process. The Internal Revenue Service (IRS) can attempt to collect any owed penalties by reducing the amount of an individual's tax refund; however, individuals who fail to pay the penalty will not be subject to any criminal prosecution or penalty for such failure. The Secretary of the Treasury cannot file notice of lien or file a levy on any property for a taxpayer who does not pay the penalty. Certain individuals are exempt from the individual mandate and the penalty. For example, individuals with qualifying religious exemptions and those whose household income is below the filing threshold for federal income taxes are not subject to the penalty. The ACA allows the Secretary of Health and Human Services (HHS) to grant hardship exemptions from the penalty to anyone determined to have suffered a hardship with respect to the capability to obtain coverage. The Secretary of HHS has identified a number of different circumstances that would allow individuals to receive a hardship exemption, including an individual not being eligible for Medicaid based on a state's decision not to carry out the ACA expansion and financial or domestic circumstances that prevent an individual from obtaining coverage (e.g., eviction or recent experience of domestic violence). The ACA includes several reporting requirements designed, in part, to assist individuals in providing evidence of having met the mandate. Every entity (including employers, insurers, and government programs) that provides minimum essential coverage to any individual must present a return to the IRS and a statement to the covered individual that includes information about the individual's health insurance coverage.

A health insurance exchange has been established in every state, as required by the Patient Protection and Affordable Care Act (ACA). Each exchange has two parts, a marketplace where individuals can shop for and enroll in health insurance coverage, and a small business health options program (SHOP) exchange for small employers. Some individuals are eligible to receive financial assistance for their coverage obtained through an exchange, and some small employers can obtain tax credits toward coverage purchased through a SHOP. Exchanges are not intended to supplant the private market outside of exchanges, and the ACA does not require that individuals and small businesses obtain coverage through an exchange. A state can choose to establish its own state-based exchange (SBE). If a state opts not to, or if the Department of Health and Human Services (HHS) determines that the state is not in a position to administer its own exchange, then HHS will establish and administer the exchange in the state as a federally facilitated exchange (FFE). Fourteen states and DC established SBEs in 2014, while the remaining 36 states have FFEs. There are varying levels of state involvement in FFEs. In some cases, a state has partnered with HHS to establish and administer the exchange, and in other cases HHS is administering the individual exchange while the state administers the SHOP exchange. In many states with FFEs, the exchange is wholly operated and administered by HHS. To fund the establishment of exchanges, the ACA authorizes the HHS Secretary to award grants to states through 2014. Each exchange is expected to generate its own funds to sustain its operations beginning January 1, 2015. This report provides a state-by-state breakdown of the grants awarded to date. It then briefly describes the requirement for exchanges to be self-sustaining, and concludes with a discussion of the sources and amounts of funding that HHS has used and plans to use to support FFE operations. Section 1311 of the ACA appropriated indefinite (i.e., unspecified) amounts for planning and establishment grants for health insurance exchanges. For each fiscal year, the HHS Secretary is to determine the total amount that will be made available to each state for exchange grants. Any state that intends to do exchange establishment work can apply for and receive a Section 1311 grant; for instance, a state that is not establishing an SBE may receive a grant provided the state uses the funds for activities related to exchange establishment and implementation. States have had multiple opportunities to apply for Section 1311 grants. One deadline remains for submitting an application this year (i.e., November 14). No grants will be awarded after December 31, 2014. HHS has awarded three different types of exchange grants, which are described below. Figure 1 shows the total amount of funding each state has received from the grants as well as the type of exchange (SBE or FFE) each state has in 2014. Table 1 shows the amount each state has received from the various types of grants. Exchange planning grants were given to 49 states and DC. These grants of about $1 million each were used by states to conduct the research and planning needed to determine how their exchanges would be administered and operated. Three states returned all (Florida and Louisiana) or a portion (New Hampshire) of their exchange planning grants. There are two levels of exchange establishment grants. Level one establishment grants provide up to one year of funding to states that have made some progress under their exchange planning grants. States may seek additional years of level one funding in order to meet the criteria necessary to apply for level two funds. Level two establishment grants are designed to provide funding through December 31, 2014, to states that are farther along in the establishment of an exchange. States applying for level two establishment grants must meet specific eligibility criteria regarding the structure and governance of the exchange they are developing. HHS has announced several rounds of exchange establishment grant awards, the most recent of which was on October 14, 2014. To date, 37 states and DC have received a total of approximately $4.7 billion in exchange establishment grant funding. Within that group, 14 states--California, Colorado, Connecticut, Hawaii, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New York, Oregon, Rhode Island, Vermont, and Washington--and DC have received both level one and level two funds. On February 16, 2011, HHS announced that it was awarding seven grants to help a group of "early innovator" states design and implement the information technology (IT) infrastructure needed to operate health insurance exchanges. The goal is for these states to develop exchange IT models that can be adopted and implemented by other states. Six states and a consortium of New England states received a total of $249 million in early innovator grant funding. Three states--Kansas, Oklahoma, and Wisconsin--have since returned their early innovator grants. Beginning January 1, 2015, the ACA requires that each exchange is self-sustaining. The ACA provides that an exchange may charge an assessment or user fee to participating issuers, but also allows an exchange to find other ways to generate funds to sustain its operations. A description of how each SBE intends to generate funding is currently beyond the scope of this report; however, HHS has described how it intends to generate funding for the 36 FFEs it administers. Beginning in 2014, HHS will charge a monthly user fee to all issuers that sell plans through an FFE. The fee for an issuer is equal to the product of the billable members enrolled in the plan through an FFE and a monthly user fee rate. For benefit years 2014 and 2015, the monthly user fee rate is 3.5% of the plan's monthly premium. CMS is incurring significant administrative costs supporting exchange operations. CMS operates a number of IT systems that control various FFE functions including eligibility and appeals, certification and oversight of qualified health plans, and payment and financial management. It also operates the data services hub, which routes information about exchange applicants to and from trusted data sources at other federal agencies (e.g., Internal Revenue Service) in order to verify eligibility. In addition, CMS provides consumer assistance through a call center and website for the FFEs, and it funds navigators who offer in-person support. Finally, CMS provides technical assistance to states operating SBEs. Table 2 summarizes the sources and amounts of administrative funding for exchange operations to date. This information was included in CMS's FY2015 budget submission. During the period FY2010 through FY2012, a total of $456 million was used to support exchange operations. Of that amount, $331 million came from annual discretionary appropriations that cover the routine costs of running federal agencies, including salaries and expenses: $307 million from CMS's Program Management account, and an additional $24 million from the HHS Departmental Management account. The remaining $125 million came from the Health Insurance Reform and Implementation Fund (HIRIF), a $1 billion fund within HHS that was established and funded to help pay for the administrative costs of ACA implementation. CMS's administrative costs to support exchange operations totaled $1,545 million in FY2013. In the FY2013 budget, CMS requested an increase of $1,001 million for its Program Management account for ACA implementation and other activities. However, Congress did not provide any additional discretionary funds for ACA implementation in FY2013. CMS instead used funds from other sources to help pay for ongoing administrative costs associated with exchange operations. Those funds included (1) discretionary funds transferred from other HHS accounts under the Secretary's transfer authority; (2) expired discretionary funds from the Nonrecurring Expenses Fund (NEF); (3) mandatory funds from the HIRIF; and (4) mandatory funds from the Prevention and Public Health Fund (see Table 2 ). CMS estimated that its FY2014 administrative costs for exchange operations would total $1,390 million. The agency requested an increase of $1,397 million for its Program Management account in the FY2014 budget for ACA implementation and other activities. But, as in FY2013, Congress chose not to give CMS any additional funding. Once again, the agency relied on transferred departmental funds as well as NEF and HIRIF funding to help support exchange operations in FY2014. In addition, CMS projected that it would collect an estimated $200 million in FFE user fees in FY2014 (see Table 2 ). The President's FY2015 budget includes a total of $1,788 for exchange operations. Of that amount, $629 million is from CMS's Program Management account, and the remaining $1,159 million is projected to come from FFE user fees. The FY2015 budget does not identify any other sources of funding to support exchange operations (see Table 2 ). CMS has requested an increase of $227 million for its Program Management account in FY2015 for ACA implementation and other activities. The Center for Consumer Information and Insurance Oversight (CCIIO) at CMS is responsible for implementing ACA's private health insurance reforms and administering the grant programs discussed above. Detailed information on the grants, including funding opportunity announcements, guidance, news releases, and amounts awarded, is available on CCIIO's website.

Pursuant to the Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended), a health insurance exchange has been established in each state and the District of Columbia (DC). Exchanges are marketplaces where individuals and small businesses can "shop" for health insurance coverage. The ACA instructed each state to establish its own state-based exchange (SBE). If a state elected not to create an exchange or if the Secretary of Health and Human Services (HHS) determined a state was not prepared to operate an exchange, the law directed HHS to establish a federally facilitated exchange (FFE) in the state. Fourteen states and DC established SBEs in 2014, while the remaining 36 states have FFEs. In some states that have FFEs, the states carry out certain functions of the exchange; in other states, the exchange is wholly operated and administered by HHS. The ACA provided an indefinite appropriation for HHS grants to states to support the planning and establishment of exchanges. For each fiscal year, the HHS Secretary is to determine the total amount that will be made available to each state for exchange grants. No grant may be awarded after January 1, 2015. There are three different types of exchange grants. First, planning grants were awarded to 49 states and DC. These grants of about $1 million each were intended to provide resources to states to help them plan their health insurance exchanges. Second, there have been multiple rounds of exchange establishment grants. There are two levels of exchange establishment grants: level one establishment grants are awarded to states that have made some progress using their planning funds, and level two establishment grants are designed to provide funding to states that are farther along in the establishment of an exchange. Finally, HHS awarded seven early innovator grants to states (including one award to a consortium of New England states) to support the design and implementation of the information technology systems needed to operate the exchanges. To date, HHS has awarded a total of more than $4.8 billion to states and DC in planning, establishment, and early innovator grants. Under the ACA, each exchange is expected to be self-sustaining beginning January 1, 2015. The law authorizes exchanges to generate funding to sustain their operations, including by assessing fees on participating health insurance issuers. To raise funds for each of the FFEs, beginning in 2014, HHS is assessing a monthly fee on each health insurance issuer that offers plans through an FFE. The Centers for Medicare & Medicaid Services (CMS) is incurring significant administrative costs to support FFE operations. According to CMS, a total of $456 million was used to support exchange operations over the period FY2010-FY2012. CMS spent $1,545 million on exchange operations in FY2013 and an estimated $1,390 million in FY2014. The agency has relied on a mix of annual discretionary appropriations and funding from other sources for these expenditures. Those sources include expired discretionary funds from the Nonrecurring Expenses Fund, mandatory funding from the Health Insurance Reform Implementation Fund and the Prevention and Public Health Fund, and FFE user fees. CMS has budgeted $1.8 billion for exchange operations in FY2015. Most of that funding is projected to come from FFE user fees.

Congress has long recognized the need to protect the legal interests of servicemembers whose service to the nation may compromise their ability to meet certain commercial and financial obligations. During the Civil War, Congress enacted an absolute moratorium on civil actions brought against soldiers and sailors. During World War I, Congress passed the Soldiers' and Sailors' Civil Relief Act of 1918, which did not create a moratorium on legal actions against servicemembers, but instead directed trial courts to apply principles of equity to determine the appropriate action to take whenever a servicemember's rights were involved in a controversy. During World War II, Congress essentially reenacted the expired 1918 statute as the Soldiers' and Sailors' Civil Relief Act of 1940, and then amended it substantially in 1942 to take into account the new economic and legal landscape that had developed between the wars. During consideration of the amendments in the 87 th Congress, Representative Overton Brooks stated, This bill springs from the desire of the people of the United States to make sure as far as possible that men in service are not placed at a civil disadvantage during their absence. It springs from the inability of men who are in service to properly manage their normal business affairs while away. It likewise arises from the differences in pay which a soldier received and what the same man normally earns in civil life. Congress enacted amendments on several occasions during subsequent conflicts, including 2002 when the benefits of the SSCRA were extended to certain members of the National Guard. In 2003, Congress enacted the Servicemembers Civil Relief Act (SCRA) as a modernization and restatement of the SSCRA and its protections. The SCRA is an exercise of Congress's power to raise and support armies (U.S. Const. Art. I, sec. 8, cl. 12) and to declare war (Art. I, sec. 8, cl. 11). The purpose of the act is to provide for, strengthen, and expedite the national defense by protecting servicemembers, enabling them to "devote their entire energy to the defense needs of the Nation" by providing for the temporary suspension of judicial and administrative proceedings and transactions that may adversely affect their legal rights during military service. Forgiving of all debts or the extinguishment of contractual obligations on behalf of servicemembers who have been called up for active duty is not required, nor is absolute immunity from civil lawsuits provided. Instead, the act provides for the suspension of claims and protection from default judgments. In this way, it seeks to balance the interests of servicemembers and their creditors, spreading the burden of national military service to a broader portion of the citizenry. In Engstrom v. National Bank of Eagle Lake , the United States Court of Appeals for the Fifth Circuit acknowledged the balancing required when it stated "[a]lthough the act is to be liberally construed it is not to be used as a sword against persons with legitimate claims." Many of the SCRA provisions are especially beneficial for Reservists activated to respond to a national crisis, but many provisions may be useful for career military personnel. One of the measures that affects many who are called to active duty is the limit on the interest rate that may be charged on debts incurred prior to a person's entry into active duty military service. Other measures protect military families from being evicted from rental or mortgaged property; from cancellation of life insurance; from taxation in multiple jurisdictions; from foreclosure of property to pay taxes that are due; and from losing certain rights to public land. In order to receive protections afforded under the SCRA, servicemembers are generally required to provide notice of their desire to invoke the protection. For example, with respect to the interest rate limitation, the servicemember is required to provide written notification to the creditor with a copy of his/her orders establishing a period of active duty service. The importance of servicemembers knowing and understanding their rights is evidenced by the requirement in the act that all servicemembers be provided written notice of their rights by the Secretary of each of the armed services. In the event that a servicemember feels that he/she is not receiving the statutory protections, the servicemember may request assistance from military legal assistance officers, civilian lawyers, and in some circumstances the United States Department of Justice (DOJ). The DOJ Civil Rights Division will investigate specific complaints and, if necessary, institute legal proceedings to protect the rights of servicemembers. The DOJ Civil Rights Division filed its first lawsuit under the SCRA on December 10, 2008, alleging a towing company in Norfolk, VA, participated in unlawful enforcements of storage liens. Prior to the recent legislation expressly creating a private cause of action, most courts that have considered the issue found that a private cause of action exists under the SCRA. An opinion from the United States District Court for the Western District of Michigan, Hurley v. Deutsche Bank Trust Company , disagreed with decisions from U.S. district courts in Illinois, Louisiana, Oregon, and Texas, and found that a private cause of action did not exist under the act. Upon reconsideration, the court vacated its earlier opinion and held that a private cause of action did exist under various sections of the SCRA. With the enactment of P.L. 111-275 , the Veterans' Benefits Act of 2010, the act now includes explicit language authorizing the U.S. Attorney General to commence civil actions, as well as a private cause of action available to servicemembers and their dependents to enforce protections under the SCRA. In Moll v. Ford Consumer Finance Company, Inc. , the United States District Court for the Northern District of Illinois held that a private cause of action existed under the provision limiting the amount of interest that may be charged on debt incurred prior to service. Moll, a reservist in the United States Air Force, was ordered to active duty in support of the Persian Gulf War in 1991. Upon activation, he contacted Ford and requested that the interest rate on his car loan be reduced from a variable rate of 10.25% to 6% as provided for under the SCRA and provided all documentation requested by Ford. Ford failed to adjust the interest rate and continued to charge 10.25% on the loan. Moll filed an action alleging Ford violated the SCRA and received unlawful interest subject to penalties under the Illinois Interest Act. Ford moved to dismiss the action arguing that Moll failed to state a claim, contending that a private cause of action did not exist under the SCRA, and that because the loan was secured by a mortgage, the loan was exempt from the Illinois Interest Act. The court acknowledged that a private cause of action was not explicit in the act and turned to a four-part test, created by the United States Supreme Court in Cort v. Ash, to determine if a private cause of action existed even though it was not expressly provided for in the statute. The Cort factors are (1) does the statute create a federal right in favor of the plaintiff; (2) is there any indication of legislative intent, explicit or implicit, to create or deny a private remedy; (3) is it consistent with the underlying purposes of the legislative scheme to imply such a remedy; and (4) is the cause of action one traditionally relegated to state law, so that it would be inappropriate to infer a cause of action based solely on federal law. However, the court further stated the Supreme Court has "retreated from this four-factor approach and has focused primarily on the legislative intent of the statute - the second factor." Thus, the court, focusing on the legislative intent of the act, the second Cort factor, stated that the interest limitation was "designed to give relief to military persons called into service." The court determined that the act confers a benefit on a servicemember that is not otherwise available to private citizens and therefore a private cause of action must be intended "because otherwise the relief would [be] of no value at all." Finally, the court addressed the remaining Cort factors and found that the act created a federal right in favor of Moll; the interest rate limitation is consistent with the purpose of the act to provide servicemembers with relief in meeting their financial obligations; and that it is not an area of law traditionally relegated to state law, rather it is grounded in Congress's right to raise and maintain armed forces of the United States. Finding a private cause of action with respect to the interest rate limitation section of the act, the court denied Ford's motion to dismiss. The United States District Court for the Northern District of Texas, in Marin v. Armstrong , found an inferred private cause of action in two separate sections of the SCRA. In Marin , the servicemember claimed that as a result of illness from military service he was unable to fulfill his obligations on debt he owed for the purchase of a car. He alleged that he informed TranSouth, the holder of the loan, of his inability to make payments on the obligation and requested that they toll his obligation until his health allowed him to make payments. Marin further alleged that TranSouth not only failed to toll his obligation, but that it continued to violate the SCRA by harassing him, sending collection letters, and taking adverse credit action against him. TranSouth moved to dismiss the action on the basis that the SCRA did not provide for a private cause of action, rather it provided only defensive relief for servicemembers, and that even if it did, Marin was not entitled to relief because the act does not relieve him of his duty to make payments on the obligation. The court agreed that Marin did not have an automatic right to toll his obligation under the installment contract, but that after receiving notice of his inability to meet his obligation, TranSouth was required to seek a judicial remedy in a court of competent jurisdiction and failed to do so. The court, citing the rationale of Moll , stated that "Congress must have intended a private cause of action to exist" to enforce these two sections of the act. The court questioned TranSouth's assertion that the act be viewed as a defensive measure, stating that if that were the case, a creditor could "simply ignore" provisions of the act and the servicemember would be unable to bring a cause of action. The court acknowledged that a criminal penalty did exist for violations of the act, but that such penalty provided no relief to the servicemember and that a "result that fails to make the servicemember whole defies the purpose of the statute." The court further stated that "without a private cause of action there would be no way for a servicemember to ensure that his rights were protected under the section. Creditors and insurers could simply ignore the provisions of the section without repercussion." In Cathey v. First Republic Bank, the United States District Court for the Western District of Louisiana found an implied private cause of action under the provisions prohibiting a creditor from changing the terms of credit when the act has been invoked by a servicemember and limiting the amount of interest that may be charged on debt incurred prior to service. Cathey, a lieutenant colonel in the United States Army Reserve, alleged that First Republic Bank failed to lower the interest rate on two separate loans after he was ordered to active duty and that the bank modified the terms of the credit agreement after he invoked protections under the act. The loans in question were signed by Cathey and his wife, individually and jointly, to finance the construction of two gasoline/convenience stores. As required by the act, Cathey provided a copy of his military orders to the bank prior to entering active duty. However, the bank continued to charge an interest rate in excess of the 6%. Upon his return from active duty, he demanded a cash refund of the overpaid interest from the bank and alleged that they would only refund the interest with additional concessions on the loans. The bank refused to refund the overpaid interest despite repeated demands by the Catheys, individually and through the armed services, and proceeded to seize and sell both stores. First Republic Bank argued that the Catheys were not entitled to the interest rate reduction because the loans were signed by each of the Catheys, as well as their corporation, and as such are not covered by the SCRA. The court dismissed this argument and stated: "while it is the serviceman who is provided interest rate protection under the [SCRA] and not his co-makers, the result is the same. Interest on that obligation may not be charged in an amount in excess of the statutory rate of 6% per annum." The defendants also claimed that a private cause of action did not exist and that, in effect, the SCRA is a right without a remedy. The court disagreed with this claim and instead agreed with and adopted the reasoning of Moll . The court, quoting the plaintiff, stated: "[It] would lead to an absurd conclusion to say that Congress enacted a fairly elaborate legislative scheme to protect service members in a variety of ways and then throw their claims out of federal court when they sued to enforce their rights and collect damages when violation of their rights cause them damages." The court declined to determine the proper remedy for the plaintiffs, as the issue was not before the court, and limited its finding to the existence of a private cause of action under the SCRA. In Linscott v. Vector Aerospace , the United States District Court for the District of Oregon found an implied private cause of action for a violation of the prohibition against foreclosure or enforcement of liens during any period of military service. Linscott, a major in the Air Force Reserve, alleged that Vector Aerospace, a Canadian company doing business in the United States, violated the SCRA by wrongfully asserting a lien on his property while he was on active duty. Linscott alleged that a helicopter engine overhaul preformed by Vector was defective and refused to pay for the work until it was completed correctly. Vector retook possession of the engine and promised a quick turnaround so that a temporary engine would not be needed. However, once Vector had possession of the engine, it claimed that the work was completed satisfactorily and refused to return the property until the outstanding bills were paid. Linscott provided a copy of his orders to Vector and notified the company that they were in violation of the act by asserting a lien on his property, but Vector stated that it was entitled to a lien under Canada's Repairers Lien Act and that the SCRA did not apply in Canada. The court disagreed and found the act applicable to Vector based on its assertion of a lien on the helicopter engine while doing business in the United States. The court then turned its focus to the question of whether a private cause of action existed under the section prohibiting foreclosure or enforcement of a lien while the servicemember is on active duty. The defendant argued that the section did not provide a private cause of action. Linscott argued that in other cases, courts had found an inferred private cause of action in other sections of the act, and that the court should find a private cause of action in the section in question. The court cited the reasoning under Moll , Marin , and Cathey as being applicable to the current dispute. The court reasoned that under the Cort analysis, "the most important inquiry ... is whether Congress intended to create the private remedy sought by the plaintiffs," and that the "legislative intent factor clearly favors plaintiffs. There is no indication that in enacting and renewing the Act, Congress intended to create rights without remedies." The court concluded, after completing the Cort four-part analysis, that a private cause of action existed for a violation of the prohibition against foreclosure or enforcement of a lien. In Batie v. Subway Real Estate Corp. , a servicemember alleged that Subway Corporation violated the SCRA by evicting him from two commercial spaces while he was deployed to Afghanistan. After obtaining declaratory judgments in the state of Texas courts, Subway evicted the servicemember from the spaces under lease. Batie filed suit in the federal district court seeking relief from the declaratory judgments and for compensatory and punitive damages for the alleged violations of the SCRA. The U.S. district court declined to overturn the state declaratory judgments, stating "Congress envisioned that state courts--not federal district courts--would decide claims involving SCRA's tenant protections during eviction proceedings." The court interpreted the act to mean that jurisdiction is not exclusive in federal court and that the act does not compel federal adjudication of all cases implicating the statute's provisions. Denying the claim for compensatory and punitive damages, the court referred to the failure of the servicemember to cite any provisions in the SCRA authorizing damages. Further, the court found that, even if the servicemember maintains the SCRA as a basis for damages, "there is no provision in SCRA that authorizes a private cause of action to remedy violations of the statute." The servicemember's claims were dismissed by the court. However, Batie filed a Motion for Reconsideration citing cases in which courts have interpreted certain sections of the SCRA to create a private cause of action. In light of the precedent cited by Batie's motion, the court vacated its earlier decision and reinstated the complaint for further adjudication. In contrast, the United States District Court for the Western District of Michigan, in Hurley v. Deutsche Bank Trust Company, stated that "the SCRA affords certain rights to servicemembers, but a private cause of action is not among them." Hurley asserted multiple violations of the SCRA and a separate claim of conversion under state law against Deutsche Bank related to the foreclosure, eviction, and subsequent sale of his primary residence while he was deployed to Iraq. The defendants asserted that the SCRA sections cited by Hurley did not expressly create a private cause of action, nor could one be inferred because the penalty provisions provide an adequate means of enforcement. Additionally, the defendant argued that the SCRA merely preserves private causes of action that exist independent of the act. The court found that none of the sections cited by Hurley expressly provided for a private cause of action, and turned to the question whether the SCRA created an implied private cause of action. Relying on Cort, the court utilized the four-part test for determining whether the statute created an implied private cause of action. The court held that the "plain language of the SCRA, coupled with instructive case law, persuades the Court that the SCRA does not imply a private cause of action for damages for foreclosure, redemption, eviction, or sale to a [bona fide purchaser]." The court dismissed Hurley's claim under the SCRA, but allowed the claim of conversion under Michigan state law to proceed. Shortly after the decision dismissing his claim under the SCRA, Hurley filed a Motion for Reconsideration, citing the decision by the U.S. District Court for the Northern District of Texas to vacate its decision in Batie , thereby allowing a private cause of action under the SCRA to proceed. In denying the motion, the court stated that Batie , as an out-of-circuit case, was only instructive and that it was not required to adhere to it. In order to appeal the decision of the district court, Hurley filed a Motion for Certification of Order and Memorandum Opinion and Order for Interlocutory Appeal Pursuant to 28 U.S.C. SS 1292(b). In considering the motion, the court reexamined its prior ruling "in light of several cases holding that a private cause of action exists under various sections of the SCRA" and concluded that it had been wrong. Discussing the decisions in Batie, Moll, Marin, and Linscott , the court subsequently held that a private cause of action existed under various sections of the SCRA, and proceeded to vacate its earlier opinion concluding that a private cause of action did not exist, as well as an earlier opinion and order denying reconsideration of that decision. The court granted summary judgment on some of the plaintiff's claims, but left the determination of punitive damages for future litigation in the case. While the majority of U.S. district courts ruled on the question found an implicit private cause of action under the SCRA, the protracted litigation in Hurley illustrates the challenges some servicemembers endured to establish a right to sue under the act. The issue has not yet been considered by a U.S. court of appeals and therefore judicial precedent has not been established for the lower courts to follow. However, in light of the legislation discussed below, it appears unlikely that a court will find it necessary to establish such a precedent. In the 111 th Congress, H.R. 2696 , the Servicemembers' Rights Protection Act, was introduced containing language addressing enforcement of provisions of the SCRA. During a hearing before the House Committee on Veterans' Affairs, Subcommittee on Economic Opportunities, Representative Brad Miller testified, citing Batie as an example of confusion in the courts, in favor of explicitly establishing a private cause of action in the SCRA. Although H.R. 2696 was not enacted, the provisions of the bill were incorporated into H.R. 3949 , the Veterans' Small Business Assistance and Servicemembers Protection Act of 2009. The report accompanying H.R. 3949 included the rationale of the House Committee on Veterans' Affairs for including language creating a private cause of action for servicemembers and their dependents aggrieved by violations of the act. Citing the split among U.S. district courts with respect to whether a private cause of action exists under the SCRA (discussed above) and the likelihood of continued ambiguity without further guidance, the committee stated, "Congress seeks to provide guidance to the courts by clarifying the purpose and intent of the Act, and unambiguously state that a private cause of action does exist." Ultimately, the provisions from H.R. 3949 were incorporated into H.R. 3219 , the Veterans' Benefits Act of 2010. On October 13, 2010, P.L. 111-275 , the Veterans' Benefits Act of 2010, was enacted. In addition to clarifying protections under the SCRA, including those related to residential and motor vehicle leases, the act explicitly creates a Title VIII addressing civil liability. Under Title VIII of the SCRA, the U.S. Attorney General is authorized to commence a civil action to enforce provisions of the act. Servicemembers and their dependents have the right to join an action commenced by the U.S. Attorney General, but they may also commence their own civil action (i.e., a private cause of action) to enforce protections afforded them under the SCRA. Finally, Title VIII provides that neither the U.S. Attorney General's authority or the servicemember's right of a private cause of action preclude or limit any other remedies available under the law, including consequential or punitive damages for violations of the SCRA. The U.S. Attorney General is authorized to commence a civil action in U.S. district court for violations of the SCRA by a person who (1) engages in a pattern or practice of violating the act, or (2) engages in a violation that raises an issue of significant public importance. The act authorizes courts to grant any appropriate equitable or declaratory relief, including monetary damages to any person aggrieved by the violation of the act. Courts may also, in order to vindicate the public interest, assess a civil penalty up to $55,000 for a first violation and up to $110,000 for any subsequent violations. Finally, individuals alleging violations of the SCRA, for which the Attorney General has commenced an action, are authorized to intervene in the previously commenced case as a plaintiff. Individuals intervening in a case may obtain the same relief as if they had filed the case on their own, as discussed below. In addition to the right to join a previously commenced case, covered individuals are now permitted to commence a civil action for an alleged violation of the SCRA in their own right. The court is authorized to grant appropriate equitable or declaratory relief, including monetary damages, as well as award costs and reasonable attorney fees to a prevailing servicemember or dependent. Prior to enactment of P.L. 111-275 , individuals and/or entities that violated specified sections of the SCRA may have been subject to penalties. With the exception of the provision related to interest rate limitation in Title II, only the provisions in Title III (addressing rent, installment contracts, mortgages, liens, assignments, and leases) included a penalty provision. However, with enactment of Title VIII, it is explicitly clear that any violation of the SCRA could result in a civil penalty, including, but not limited to, consequential and punitive damages. Additionally, provisions found in Title III include language classifying a violation as a misdemeanor. For example, provisions applicable to evictions state that a "person who knowingly takes part in an eviction or distress ... or attempts to do so, shall be fined as provided in title 18, United States Code, or imprisoned for not more than one year, or both."

Congress has long recognized the need to protect the legal interests of servicemembers whose service to the nation may compromise their ability to meet specified commercial and financial obligations. The purpose of the Servicemembers Civil Relief Act (SCRA) is to provide for, strengthen, and expedite the national defense by protecting servicemembers, enabling them to "devote their entire energy to the defense needs of the Nation." The SCRA protects servicemembers by temporarily suspending certain judicial and administrative proceedings and transactions that may adversely affect their legal rights during military service. Prior to enactment of P.L. 111-275, the SCRA did not explicitly provide for a private cause of action. A private cause of action allows an individual, in a personal capacity, to sue in order to enforce a right or to correct a wrong. In the absence of an explicit right of a private cause of action, the right to enforce afforded rights presumably rests with the government. Most courts that have considered the issue found that a private cause of action exists under the SCRA. An opinion from the United States District Court for the Western District of Michigan, Hurley v. Deutsche Bank Trust Company, disagreed with decisions from U.S. district courts in Illinois, Louisiana, Oregon, and Texas, and found that a private cause of action did not exist under the act. However, upon reconsideration the court vacated its earlier opinion and held that a private cause of action did exist under various sections of the SCRA. On October 13, 2010, P.L. 111-275, the Veterans' Benefits Act of 2010, was enacted. In addition to clarifying protections under the SCRA, including those related to residential and motor vehicle leases, the act explicitly creates a Title VIII addressing civil liability. Under Title VIII of the SCRA, the U.S. Attorney General is authorized to commence a civil action against any person who engages in a pattern or practice of violating the act or engages in a violation of the act that raises an issue of significant public importance. Servicemembers and their dependents have the right to join a case commenced by the U.S. Attorney General, but they may also commence their own civil action (i.e., a private cause of action) to enforce protections afforded them under the SCRA. Finally, Title VIII provides that neither the U.S. Attorney General's authority or the servicemember's right of a private cause of action preclude or limit any other remedies available under the law, including consequential or punitive damages for violations of the SCRA.

RS20553 -- Air Quality and Electricity: Initiatives to Increase Pollution Controls Updated October 25, 2002 Since the mid-1990s, the U.S. Environmental Protection Agency (EPA) has initiated actions that have resulted in regulatorymandates and enforcement actions that would, if implemented, substantially reduce air pollutants (particularlynitrogenoxides - NOx) emitted by some electric generating facilities. An Ozone Transport Assessment Group (OTAG),formed byEPA in May 1995, laid the groundwork for the regulatory initiatives; it directly led to the Ozone Transport Rule(also calledthe NOx SIP Call). In a supplementary action, 12 states petitioned EPA under Section 126 of the CAA, concerninginterstate pollution, alleging that NOx originating in upwind states prevented their attainment of ozone standards. An EPAOffice of Enforcement & Compliance Assurance audit of New Source Review (NSR) applications requiredunderprovisions of the Clean Air Act (CAA) that began in late 1996 was the precursor to the enforcement initiative; itled inNovember 1999 to lawsuits against seven utilities in the Midwest and South and an administrative order against theTennessee Valley Authority alleging violations of NSR requirements of the CAA. (1) The first two initiatives, the Ozone Transport Rule and the Section 126 petitions, are related to each other substantively. (2) These initiatives would further control NOx to assist states in the Northeast in meeting the existing, statutory 1-hourozoneNational Ambient Air Quality Standard (NAAQS). The Ozone Transport Rule includes all or part of 19 easternstates andthe District of Columbia. Based on the eight petitions EPA has ruled on, EPA's Section 126 determinations wouldinvolvea subset of the NOx SIP Call's 19 states - 12 states and the District of Columbia. The enforcement initiative is not legally or procedurally related to the above initiatives; however, the NSR enforcementaction by EPA has substantive associations with them in that NOx is a primary (but not sole) focus, and many oftheutilities named as defendants in these cases would also have to reduce emissions under the NOx SIP Call andSection 126determinations. Unlike the other actions, the NSR action does not involve new regulatory action, but enforcementofexisting law and regulations. As such, it is handled by the EPA's Office of Enforcement & ComplianceAssurance, not aregulatory office, and involves other pollutants electric generators emit besides NOx (specifically sulfur dioxide(SO 2 ) andparticulates). The primary focus of the regulatory initiatives and a primary effect of EPA's enforcement action is to reduce NOxemissions in the eastern part of the United States. The environmental purpose for doing so is to reduce the interstatetransportation of this ozone precursor, thus assisting localities along the eastern seaboard in attaining the ozoneNAAQS. The actions would also mitigate acid rain. The initiatives and enforcement action by EPA focus on coal-firedelectricgenerating facilities both because they are major sources of emissions - in 1997 they emitted 24% of the country'sNOx(and also 62% of its SO 2 , 31% of its carbon dioxide (CO 2 ), and approximately one-thirdof the country's mercury (Hg)) -and because they represent the most cost-effective sources of large emission reductions for NOx andSO 2 . In the case of the Section 126 determinations and the NSR enforcement action, coal-fired powerplants are explicitlytargeted for emissions reductions. In the case of the NOx SIP Call, EPA cannot explicitly target sources (that is theresponsibility of each affected state), but the allocation scheme used by EPA to determine the allowable emissionsbudgetfor individual states is based primarily on substantial reductions from coal-fired powerplants. In general, theinitiativesidentified here would require affected powerplants to reduce their NOx emissions by about 75%-85%. AlthoughtheSection 126 determinations and the NSR enforcement action target individual sources, EPA provides flexibility forutilitiesto achieve the mandated reduction by means other than simply installing NOx control equipment on affected units. Asindicated by EPA's NSR settlement with Tampa Electric discussed later, the consent decree involves severaldifferent NOxcontrol strategies to reduce NOx emissions by over 85%, as well as controls to reduce SO 2 emissionsby almost 80%, by theyear 2010. Figure 1 indicates the states affected by the initiatives identified here. In line with the initiatives' focus on coal-firedelectric generating facilities, the Midwest is the primary location of affected powerplants. Five states - Indiana,Kentucky,North Carolina, Ohio, and West Virginia - would be affected by all three initiatives. In contrast, Mississippi andFloridahave utilities targeted only under the NSR enforcement initiatives; Missouri, Connecticut, Rhode Island, andMassachusettsare targeted only under the Ozone Transport Rule. The other states have utilities targeted under the Ozone TransportRuleand either a Section 126 determination or NSR enforcement. PDF version The costs and benefits of these initiatives could be substantial, as indicated by Table 1. The NOx SIP Call is the most wideranging of the initiatives, with estimated costs of $1.7 billion annually and estimated quantifiable benefits of$1.1-$4.2billion annually. Because EPA's methodology uses cost-effectiveness for determining emission budgets, the lion'sshare ofthe costs would be borne by the utility industry. The smaller scope of the Section 126 determinations reducesemissionsabatement and benefits, but also costs. Of course, this scope could increase if additional petitions submitted to EPAresultin more states being implicated as sources of transported ozone. Finally, the evolving scope of EPA's NSR actionmakesestimates of its costs and benefits difficult, if not impossible, at this time. Table 1. Estimated Costs and Benefits of Initiatives n/a = not available Source: CRS Report 98-236. Since January 2000 significant actions have occurred with all three of the initiatives. The status of these initiatives as ofJanuary 22, 2002, is summarized in Table 2. Perhaps the most significant action has been the decision of a 3-judgepanel ofthe D.C. Circuit Court of Appeals to uphold EPA's Ozone Transport Rule with respect to the 1-hour ozone NAAQS( Michigan v. EPA , No. 98-1497 (D.C. Cir. March 3, 2000)), and to lift the stay on implementation. In upholding EPA'sauthority and methodology in developing the NOx SIP Call, the court did make some modifications; in particular,thatEPA's methodology did not support the inclusion of Wisconsin or all of Missouri and Georgia in the Rule (adecisionreflected in Figure 1). In lifting the stay, the court ordered affected states to submit revised State ImplementationPlans(SIPs) within 4 months of its June 22, 2000, order. In a subsequent ruling issued August 30, 2000, the court orderedEPAto move its original May 2003, compliance deadline to May 31, 2004. In March 2001, the Supreme Court denieda hearingto opponents of the SIP Call, effectively affirming the appeals court decision. In December 2000, EPA declaredthat 11states and the District of Columbia failed to submit revised SIPs by the extended October 30, 2000 deadline. ByNovember2002, all the affected states had submitted revised SIPs except Michigan, which has submitted a draft SIP revision. None of these proceedings, however, affect the indefinite stay of EPA findings with respect to the 8-hour ozone standard. In February 2001, the Supreme Court ruled that although EPA has the authority to set a new 8-hour ozone standard,itsinterpretation of the relationship between the 1-hour standard's statutory implementation strategy and its new 8-hourstandard implementation strategy was unreasonable and unlawful. The Court left it to EPA to "develop a reasonableinterpretation" of the statutory provisions as they relate to the implementing the new 8-hour standard( Whitman v. AmericanTrucking Associations , 531 U.S. 457 (2001) decided February 27, 2001). Table 2. Status of Initiatives With respect to the Section 126 petitions, EPA announced its 1-hour ozone findings on the 8 original petitions on January18, 2000. (3) EPA granted four of the eight petitionsfor the 1-hour ozone standard: Connecticut, Massachusetts, New York,and Pennsylvania. Petitions from four other states were denied as these states no longer had areas that were not inattainment with the 1-hour standard. The rule specifies NOx allocations for 392 facilities in 12 states and theDistrict ofColumbia, and implemented through a cap-and-trade program. The D.C. Circuit Court of Appeals upheld EPA'sauthorityto issue the rule on May 15, 2001, but ordered EPA to reconsider factors used in setting emission limits( AppalachianPower Co. v. EPA ). EPA responded to the court's order on August 3, 2001. On January 15, 2002, the EPAannounced itwould delay the compliance deadline for the Section 126 rule from May 1, 2003, to May 31, 2004, in line with thedeadlinefor the NOx SIP Call. EPA argues that a court order issued August 24, 2001, had already suspended the compliancedeadline for powerplants, and it would be unfair to make other emission sources meet an earlier deadline. In January 2000, EPA decided to indefinitely stay its original final determinations with respect to the 8-hour standard, givenlitigation regarding that standard. It also announced that findings with respect to petitions by the District ofColumbia,Delaware, Maryland, and New Jersey would be determined in the future. Since the filing of the NSR lawsuits in November 1999 (and subsequent lawsuits filed in 2000), several significant actionshave occurred. First, in February 2000, EPA announced that it had come to an agreement with Tampa ElectricCompany ona consent decree that will settle the NSR lawsuit against that utility. The agreement will reduce NOx emissions byover85% (and SO 2 emissions by almost 80%) through a combination of fuel switching to natural gas,pollution controlequipment optimization, and other techniques. The estimated $1 billion program is expected by Tampa Electric tohave a"small" impact on its customers' bills. (4) Second, on November 16, 2000, EPA and Virginia Power announced that an "agreement in principle" had been reach tosettle EPA's NSR suit against Virginia Power. Over 12 years, Virginia will spend $1.2 billion to reduce NOx andSO2emissions by about 70% through a combination of pollution control equipment and fuel switching. Thisannouncement wasfollowed on December 21, 2000 by a similar agreement in principle between EPA and Cinergy involving a $1.4billioninvestment in control technology. Third, on January 24, 2002, EPA and the State of New Jersey announced the filing and settlement of an NSR suit againstPSEG Fossil LLC. PSEG agreed to reduce its SO2 emissions by 90% and its NOx emissions by 83% from 2000levels by2012 at an estimated cost of $337 million. In addition, PSEG agreed to reduce CO2 emissions by 15% from 1990levels. Litigation on these cases has slowed as participants assess the impact of the Bush Administration's June 2002 recommendations to revise the New Source Review process. Of particular interest is an EPA recommendation thata newrulemaking be commenced on the definition of "routine maintenance," a key point of contention in the abovelawsuits. Asof October 2002, no formal rulemaking has been proposed by EPA as the drafting process has not beencompleted. (5) The continuing difficulties in the Northeast both in meeting the ozone NAAQS and in reducing acid precipitation havefocused attention on emissions from fossil fuel-fired utilities, particularly of NOx - and on the potential costs ofreducingthose emissions. Concerned about the piecemeal nature of these initiatives, some in Congress have been workingoncomprehensive, multi-pollutant alternative strategies to reduce emissions. In June 2002, the Senate EnvironmentandPublic Works Committee reported out S. 556 - a comprehensive, multi-pollutant bill that would incorporatemarket-oriented mechanisms to control NOx, SO2, and CO2, and tonnage limitations on Hg. (6) No floor action has beenscheduled.

Since the mid-1990s, EPA has initiated actions resulting in regulatory mandatesand enforcement actions directed primarily at coal-fired electric generating utilities. These actions would, ifimplemented,substantially reduce air pollutants, particularly nitrogen oxides (NOx). These initiatives include the OzoneTransport Rule(also called the NOx SIP Call); a set of "Section 126 petitions" in which 12 states allege under Section 126 of theClean AirAct (CAA) that pollutants originating in upwind states prevent their attainment of clean air standards; and a set ofenforcement actions based on New Source Review (NSR) requirements of the CAA that have resulted in lawsuitsagainstseveral utilities and an administrative order against the Tennessee Valley Authority. Although these are separateinitiatives,they are related in that each ultimately focuses on emissions from utilities in the Midwest and South. As of January22,2001, the EPA has declared 11 states and the District of Columbia as failing to submit revised SIPs required undertheOzone Transport Rule; the EPA has approved four section 126 petitions; and two of the NSR lawsuits have resultedinconsent decrees (Tampa Electric Co. and PSEG), and two others have been settled in principle (Virginia Power andCinergy). In June 2002, the Bush Administration recommended new rulemaking be commenced on the definitionof"routine maintenance": a key point of contention in the lawsuits. Legislative activity focuses on multi-pollutantstrategiesas an alternative to these piecemeal initiatives. In June 2002, the Senate Environment and Public Works Committeereported out S. 556 - a comprehensive, multi-pollutant reduction bill. This report will be updated as eventswarrant.

Some observers asserted that leading up to the financial crisis of 2007-2009 banks did not have sufficient credit loss reserves or capital to absorb the losses and as a consequence supported additional government intervention to stabilize the financ ial system. In an effort to prevent future government intervention and to avoid putting taxpayers at risk, Congress has passed legislation and maintained oversight of rulemaking by regulatory agencies to help mitigate the risk to taxpayers. In its legislative capacity, Congress has devoted attention to strengthening the financial system in an effort to prevent another financial crisis by passing legislation. Congress approved the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act; P.L. 111-203 ) to address some of the weaknesses in regulation that contributed to the financial system's instability. Subsequently, the Economic Growth, Regulatory Relief, and Consumer Protection Act ( P.L. 115-174 ) was enacted in part to provide relief to financial firms from regulations that Congress believed to be excessively burdensome. In its oversight capacity, while maintaining oversight of reforms implemented through the regulatory agencies, Congress has delegated authority to the bank regulators and the Financial Accounting Standards Board (FASB) to determine minimum credit loss reserves and the current expected credit loss (CECL) implementation. Credit loss reserves help mitigate the overstatement of income on loans and other assets by adjusting for potential future losses on related loans and other assets. According to FASB, evidence from historical credit loss experience indicates that credit losses are not realized evenly throughout the life of a loan. Credit losses are often very low shortly after origination; subsequently, they rise in the early years of a loan, and then taper to a lower rate of credit loss until maturity. Consequently, a firm's financial statements might not accurately reflect the potential credit losses at loan inception. U.S. Generally Accepted Accounting Principles (GAAP), currently, require an incurred loss methodology to recognize credit losses on financial statements. Under the incurred loss method, (1) a bank must have a reason to believe that a loss is probable and (2) the bank must be able to reasonably estimate the loss. Any credit loss reserves set aside to absorb loan losses are, generally, estimated based on historical information and current economic events. The loss incurred on a loan cannot be recognized until the loss on a loan is probable, and the amount is estimable. In June 2016, FASB replaced the incurred loss methodology with the more forward-looking CECL methodology to provide more useful information on financial statements. CECL requires "consideration of a broader range of reasonable and supportable information" to determine the expected credit loss, including expected loss over the life of a loan or financial instrument by considering current and future expected economic conditions. The expected losses over the life of the financial instrument are to be recognized at the time the financial instrument is created. In adherence to FASB, banking regulators have begun a rulemaking process on CECL implementation. This report primarily focuses on the effects of CECL on the banking industry, although CECL will also affect other financial institutions and sectors. The report first provides an overview of CECL, including a comparison between the incurred loss model and CECL, and then provides the CECL implementation timeline. The report concludes by discussing various policy issues surrounding CECL implementation and its effects on banks and other financial institutions. Although CECL will affect loans and other types of financial instruments, loans is used as a generic term to refer to all assets affected by CECL. Credit loss estimates based on CECL are projected to result in greater transparency of expected losses earlier in the life of the loan and improve a user's ability to understand changes to expected credit losses at each reporting period. Among other expected changes, FASB amended certain disclosure requirements but retained a significant portion of the previous disclosure requirements. CECL requirements are in effect beginning December 2019 for some companies; see Table 1 for the tiered implementation dates. CECL will affect firms that hold loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets that have a contractual right to receive cash payments. CECL will also apply to certain off-balance-sheet credit exposures. All Securities and Exchange Commission (SEC) filers, such as publicly traded companies and others required to be compliant with GAAP, must adopt the new CECL model for determining credit loss reserves. CECL will apply to all banking organizations, including national banks, state-member banks, state-nonmember banks of the Federal Reserve System, savings associations, foreign banking organizations, and top-tier banking holding companies, including U.S.-based savings and loan holding companies. The proposed changes are significant enough to affect the regulatory capital rules that the federal banking regulators--the Office of the Comptroller of the Currency (OCC), the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC), collectively, the regulators--have initiated a "notice of proposed rulemaking," to address bank capital requirements. The National Credit Union Administration (NCUA) did not join in the joint rulemaking proposal with other financial regulators, but NCUA was part of the joint frequently asked questions issued by the other financial regulators. In their October 2017 press release, the regulators referred to a December 2006 policy statement that provides examples as the source document for factors that could be considered for determining CECL. Because CECL-based credit loss estimates require consideration of the potential loss over the life of an asset, credit losses on all existing loans and certain other assets are likely to be reevaluated. Upon initial adoption of CECL, the earlier recognition of losses might cause a onetime reduction in earnings. CECL will likely affect banks in various ways depending on how they currently model the allowance for loan and lease losses and other offset accounts. Each bank may apply different estimation methods to different pools of financial assets, but only one estimation method needs to be applied to each pool of financial assets. Although the regulators provide guidance on how CECL is to be implemented, they do not provide specific forecasts or models. Currently, credit losses in the banking industry are referred to, generally, as Allowance for Loan and Lease Losses (ALLL), or sometimes referred to as allowance for loans. Although ALLL is reflected on the balance sheet as an offset (a contra-asset) to the underlying asset and reduces the asset's value, the related credit losses are first expensed on the income statement. As previously discussed, incurred loss methodology is currently based on the probable threshold and incurred loss, which delays the recognition of credit losses. Changing the probable threshold and incurred loss requirements is not expected to change how much the credit loss is actually recognized, but only the timing of credit loss recognition. CECL requires the potential losses to be recorded at the time a bank recognizes the assets on its balance sheet. There will be a onetime adjustment to banks' earnings for existing loan portfolios to recognize the potential additional credit loss reserves under CECL. Current U.S. GAAP is considered complex because it encompasses multiple credit impairment models. In contrast, CECL uses a single impairment measurement objective to be applied to all financial assets subject to credit loss estimates. Further, CECL does not specify a single method for measuring expected credit loss; instead, it allows any reasonable approach as long as it achieves the new GAAP objectives for credit loss estimates. As part of developing a CECL model, a firm is to consider reasonable and supportable forecasts to develop the lifetime expected credit losses while considering past events and current conditions. Early adopters of CECL may start issuing CECL-based financial statements for financial reporting periods after December 15, 2018. All public companies are required to issue financial statements that incorporate CECL for reporting periods after December 15, 2019. Table 1 lists the effective dates for CECL implementation. The regulators are not only proposing new rules; they have previously issued both a joint statement in support of CECL and a "Frequently Asked Questions on the New Accounting Standard on Financial Instruments - Credit Losses." This section discusses, specific policy issues related to the CECL implementation and how it affects the banking industry; how CECL compares with IFRS 9 (the international version of CECL); and the potential effects of CECL on government entities. In support of CECL, former Comptroller of the Currency, Thomas J. Curry, stated the current credit loss model (incurred loss model) used to make loss provisions for assets forces firms to make large loss provisions in the midst of a credit downturn when the earnings and lending capacity are already stressed. He also noted the current accounting standards preclude banks from recording the anticipated losses until incurred. A FASB board member also raised similar concerns stating that the loans in the U.S. commercial banking system increased by 85% in the seven years leading up to the financial crisis whereas the reserves to cover the losses increased by 21%. Since FASB's announcement of CECL, banking industry professionals have raised concerns about implementing CECL, including during congressional testimonies. One such congressional witness testified that CECL creates a "redundant regulatory environment," especially when risk-based capital requirements were designed to address similar concerns. Risk-based capital establishes minimum regulatory capital based on a bank's activity. Another witness stated that implementing CECL would be costly, and it will make credit loss calculations more complicated and potentially reduce the amount of credit available to borrowers. Director of the Federal Housing Finance Agency, Melvin L. Watt, stated that regulatory changes such as CECL will have an initial and ongoing impact on reported net income. Others have described the change in how credit losses are determined by adopting CECL "as the biggest bank accounting change in 40 years." FASB officials acknowledged concerns similar to the ones raised during congressional testimonies. One such acknowledged concern is that to comply with CECL, it "may require significant effort for many entities to gather the necessary data for estimating expected credit losses." FASB also acknowledged concerns surrounding limited credit availability, especially to less creditworthy borrowers or during an economically stressed environment. In response to these various concerns, FASB stated that CECL does not make a change to the economics of lending, but rather to the timing of when the losses are recorded. Despite FASB's acknowledgments, changing the timing of when losses are recorded does require developing new credit loss models to address the new standard and can lead to increased costs for banks and affect capital requirements. Under CECL, banks are required to take into consideration many unknowns that, in the case of some residential mortgages, may extend 30 years. A CECL model is supposed to take into consideration future economic conditions in determining potential losses on financial assets. For example, for a 30-year loan originated in 1988 it would be difficult to predict the appropriate amount to reserve for potential credit loss, as well as the timing and duration of each of the three recessions identified by the shaded bars in Figure 1 . Increases in the delinquency rate also varied during each of the three recessions. Similarly, the post-recession economic recovery would have been difficult to predict. Figure 1 illustrates the delinquency rates on all loans made by commercial banks in the United States from January 1988 to December 2017. The incurred loss methodology did not consider the substantial decreases in delinquency rates from more than 6% in early 1991 to less than 3% in early 1994 and the increase again in delinquency rates of more than 7% in late 2009 and subsequent decline. Although 30-year projections of credit losses might not be precise, banks can adjust the credit loss models periodically to capture credit deteriorations and recovery. Adjustments to credit losses that consider long-term and short-term trends might prevent banks from increasing credit loss reserves during economic downturns or limiting credit availability to borrowers. One the one hand, because CECL incorporates forward-looking information, it is possible that during economic downturns, banks might limit credit availability, especially if they have forecast a prolonged downturn and thus must maintain sufficient capital levels. Although the profit or repayment of principal on a loan is recognized over the life of a loan, CECL requires recognition of the possible loss on a loan at its inception, which could result in lower earnings than under incurred loss methodology (ALLL) at loan inception because it could lead to some lenders to increase their reserves. An increase in reserves is an expense that reduces the profitability of the bank. Reduced profitability for banks or limited credit availability could negatively affect businesses and consumers alike. On the other hand, setting aside sufficient credit loss reserves may enhance a bank's ability to absorb future loan losses and thus continue to lend at a higher rate than if it had not done so. If CECL better matches actual credit losses, then banks might be less likely to become distressed and ultimately fail. As a consequence of CECL's changes, the banking regulators are proposing to replace ALLL with a newly defined term in the capital rules--allowance for credit losses (ACL). If the proposed rules are adopted, ACL would be eligible for inclusion in a bank's tier 2 capital; subject to the current limits that include ALLL in tier 2 capital. Banks are required to maintain a certain level of capital (identified as tier 1, tier 2, and tier 3) based on the riskiness of the assets a bank holds. ALLL includes asset valuation allowances that have been established through a charge against earnings to cover estimated credit losses on loans or other extensions of credit. Credit loss allowances under CECL cover a broader range of financial assets than ALLL. However, not every loss in the value of an asset would be included in the definition of ACL. This section discusses some of the challenges and risks banks can expect to face to implement, including post-implementation challenges--costs, data retention, and training. Banks will incur onetime transition costs and ongoing costs to develop and implement the new standard. Regulators are encouraging banks to capture and maintain relevant historical data to model CECL, but they are not requiring banks to obtain or reconstruct data from previous periods at unreasonable costs. The additional data retention requirements may increase ongoing operating expenses for banks. It is, generally, not cost effective for smaller banks to periodically purchase hardware and software to stay current with emerging technology and changing regulatory requirements. Instead, to lower costs, smaller banks typically use a third-party vendor that provides service to multiple banks for a monthly or annual fee. To facilitate the data retention requirements, banks and third-party service providers might incur a onetime upgrade costs to purchase additional hardware and software. Some of the implementation costs might be offset as CECL uses a single impairment measurement objective as compared with U.S. GAAP, which requires multiple credit impairment models for different asset types. To determine credit losses, banks rely on qualitative and quantitative factors, including historical data. Under CECL, banks might need to capture additional data and retain that data longer than they might have in the past to determine loss reserves. To facilitate the additional data requirements, some banks might need to migrate to a newer system. Migrating to a new system could result in possible loss of some historical data due to system incompatibilities. Despite using third-party vendors for other data processing services, some smaller banks, currently, rely on legacy systems or even spreadsheets for determining credit losses. Banks that use spreadsheets or other internal models to determine credit losses might need to migrate to third-party vendor systems for CECL. To facilitate the additional data retention requirements, third-party vendors might also need to upgrade their systems. If smaller banks migrate from their own internal models to a vendor-based CECL model, similar CECL models across multiple banks could potentially either overestimate or underestimate the amount of credit loss reserves in aggregate, which could create systemic risks among smaller banks. Also, additional data retention requirements could increase cybersecurity risks for banks and third-party service providers. In addition to any technology upgrades, there might be additional training costs for stakeholders to implement CECL. All stakeholders including bank employees, financial regulator employees (bank examiners), public auditors, and vendors, must develop sufficient knowledge and train their workforce to transition from incurred loss methodology to CECL. To reflect the changes from ALLL to ACL, the regulators also plan to propose changes to the regulatory reporting forms and instructions, which will likely require additional training. Banks are to record a onetime adjustment to credit loss allowance when CECL is implemented to reflect the difference between the current incurred loss method and the amount of credit loss allowance required under CECL, with exceptions for certain types of assets. The onetime adjustment is to be recorded at the beginning of the year that CECL is implemented. Upon initial adoption, the recognition of lifetime credit losses for existing loans will likely reduce the income earned during the reporting period. An increase in credit loss reserves is an expense that reduces a bank's profitability. If a bank does not earn sufficient income to offset the increased credit loss reserves, then retained earnings will be declined. Retained earnings are part of bank's required Tier 1 capital. The primary function of bank capital is to act as a cushion to absorb unanticipated losses and declines in asset values that could otherwise cause a bank to fail. If retained earnings are affected, then banks might need to reduce their planned capital distributions if the decline caused their capital levels to be too close to the minimum requirements. Furthermore, because CECL is principles-based, neither FASB nor the financial regulators have prescribed a specific credit loss model; therefore, the effect on each bank will vary. According to one estimate, the transition to CECL will likely result in an upfront increase in ACL of between $50 billion and $100 billion. The increased reserves are expected to affect common equity ratios across the banking system by 25-50 basis points (.25%-.50%). The expected cost for loss reserves over the life of loans is not expected to change. As these projected adjustments are in aggregate across the banking industry, some banks might need to increase their reserves significantly more than the projected 25-50 basis points whereas others might need to adjust less. Some banks have begun to disclose the preliminary impact of implementing CECL. In one instance, the bank indicated it would need to increase its credit reserves by 10% to 20% based on 2017 preliminary analysis. Because CECL requires banks to consider current and future expected economic conditions to estimate credit losses, some banking organizations have expressed concerns about the difficulty in planning CECL's adoption due to uncertainty about the future economic conditions when CECL is adopted. Unexpected economic conditions could result in a higher than anticipated increase in credit loss recognition. In response to this uncertainty, the banking regulators are proposing to allow banks the option to phase in over a three-year period any adverse effects the adjustments would have on regulatory capital requirements. Banks that elect to phase in the regulatory capital requirements over three years would be required to disclose their three-year election. A bank cannot retrospectively elect the three-year phase-in option. The Regulatory Flexibility Act requires the regulators to consider the impact of proposed rules on small commercial banks and savings institutions with total assets of $550 million or less and trust companies with total revenues of $38.5 million or less. The regulators follow an established criterion on whether a new proposed rule would have a significant effect on these small banks. They estimated the proposed CECL rule would not generate any significant costs for the small banks. The Federal Reserve conducts annual stress tests of the largest U.S. bank holding companies and U.S. intermediate holding companies of foreign banking organizations. Stress tests are qualitative and quantitative assessments of banks' capital plans to determine whether a bank will pass or fail. Simply put, a stress test is an analysis of banks viability during a financial crisis. The Federal Reserve requires banks to have sufficient capital to withstand a severe adverse operating environment. Even under such conditions, banks are expected to continue lending, maintain normal operations and ready access to funding, and meet obligations to creditors and counterparties. For the 2018 and 2019 stress test cycles, the regulators propose that banking organizations continue to use ALLL as calculated under the incurred loss methodology. Using ALLL instead of ACL is expected to promote the comparability of stress tests results across banks even if banks adopt CECL in 2019. In 2021, not only will all banking organizations be required to adopt CECL, but also stress tests are to use ACL. Banks that adopt CECL before the 2021 reporting period will be required to calculate credit losses based on the incurred loss methodology and CECL, potentially increasing these banks' operational costs in the short run. Differences in the way that U.S. GAAP and international accounting standards treat credit loss estimates and credit loss reserves could potentially disadvantage U.S. banks. Some in the banking industry have suggested capital requirements and stress tests can be modified to alleviate some of these concerns. A future recession or banking crisis will likely determine any positive or negative effect of changing to CECL. Any future refinements to CECL are likely to depend on whether CECL helped determine the appropriate amount of credit loss reserves even during worsening economic conditions. FASB periodically updates the accounting standards in response to the capital markets. The International Accounting Standards Board (IASB) promulgates International Financial Reporting Standards (IFRS) that countries can adopt or modify to suit their needs. However, the United States has chosen to remain with U.S. GAAP. FASB created CECL and issued an Accounting Standards Update 326 (ASU 326) for financial instruments--credit losses. IASB independently issued IFRS 9, the international version of CECL. FASB and IASB jointly established a Financial Crisis Advisory Group to advise each respective board about the global regulatory environment after the financial crisis. They also jointly deliberated revisions to credit loss models through 2012. Initially, the boards intended to create a converged credit loss model, but based on separate stakeholder feedback, FASB and IASB created different credit loss models. Foreign banking organizations (FBOs) that operate in the United States will need to estimate credit losses under IFRS and U.S. GAAP. In addition to FBOs issuing their annual reports and domestic regulatory reports based on IFRS for their U.S. operations, they are required to prepare quarterly financial statements and regulatory reports based on U.S. GAAP. The multiple filing requirements mandate that FBOs create different credit loss estimates. Lastly, some experts in the financial industry believe that under similar circumstances, IASB's credit loss model is operationally more complex and might result in lower reserves than FASB's CECL model. IASB stakeholders showed a preference for a loss impairment model that uses a dual measurement approach. U.S. stakeholders showed a strong preference for more of a holistic lifetime credit loss measurement that, unlike IFRS 9, is dependent on credit deterioration factors. FASB concluded that convergence was unachievable between the two accounting standards for some key reasons Even before the new models were developed, the existing practice of accounting for credit losses was different between U.S. GAAP and IFRS preparers. The interaction between the roles of the prudential regulators in determining loss allowances is historically stronger in the United States. The users of financial statement prepared in accordance with U.S. GAAP places greater weight on the loss allowances reported on the balance sheet than the IFRS counterparts. As a consequence of the issues discussed above as to why the two regime's credit loss models could not be converged, certain similarities and differences between the CECL model and IFRS 9 became clear. Some selected ones are discussed below Both the CECL model and IFRS 9 are expected credit loss models. CECL requires that the full amount of the expected credit losses be recorded for all financial assets at amortized cost. IFRS 9 requires recognition of credit losses for a 12-month period. If there is a significant increase in credit risk, then lifetime expected credit losses are recognized. The amount of expected credit losses for assets with significantly increased credit risk might be similar under CECL and IFRS 9, because they both require credit losses over the life of the loan. FASB considers the time value of money to be implicit in CECL methodologies, whereas IFRS 9 requires explicit consideration of the time value of money. When similar characteristics exist among assets, CECL model requires the collective evaluation of credit losses. IFRS 9 allows collective evaluation of credit losses based on shared-risk characteristics, but IFRS 9 does not require a collective evaluation of credit losses. It requires that only the probability-weighted outcomes are given consideration. IFRS 9 has been effective for annual periods beginning on or after January 1, 2018, with earlier implementation allowed. The housing finance system has two major components, a primary market and a secondary market. Lenders make new loans in the primary market, and banks and other financial institutions buy and sell loans in the secondary market. The government-sponsored enterprises Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home loan Mortgage Association) play an active role in the secondary market. Both entities are in conservatorship, with the Federal Housing Finance Agency (FHFA) acting as the conservator. Both entities are still publicly listed and subject to GAAP as promulgated by FASB. Similar to banks, Fannie Mae and Freddie Mac are required to implement CECL. As a consequence of implementing CECL, their earnings and asset valuations are likely to be affected. By one estimate, Fannie Mae and Freddie Mac may each need an additional $7.5 billion and $5 billion credit loss reserves, respectively. Currently, they each have $3 billion in capital reserves. To facilitate the additional reserves both entities might need to borrow from the U.S. Treasury. Similar to certain banks being allowed to phase in the increased credit reserves over three years, Congress and FHFA can choose to allow Fannie Mae and Freddie Mac to accumulate the additional reserves over three years, potentially avoiding additional draws from the Treasury. Currently, federal government entities that lend or provide loan guarantees are not subject to CECL. The Federal Accounting Standards Advisory Board (FASAB) promulgates the accounting standards for federal government agencies. If FASAB adopts CECL, the credit loss reserves on certain assets held by the federal government, including outstanding loans of $1.3 trillion and loan guarantees of $3.9 trillion, could potentially increase. Currently, state and local governments that lend or provide loan guarantees are not subject to CECL. The Government Accounting Standards Board (GASB) promulgates the accounting standards for state and local governments. If GASB adopts CECL, the credit loss reserves on certain assets held by state and local governments could potentially increase. Each state and local government can choose to follow accounting standards promulgated by GASB. Some states have enacted laws that require the state and the local government to follow accounting standards issued by GASB.

Some observers asserted that leading up to the financial crisis of 2007-2009 banks did not have sufficient credit loss reserves or capital to absorb the resulting losses and as a consequence supported additional government intervention to stabilize the financial system. In its legislative oversight capacity, Congress has devoted attention to strengthening the financial system in an effort to prevent another financial crisis and avoid putting taxpayers at risk. However, some Members of Congress have expressed concern that financial reforms have been unduly burdensome, reducing the availability and affordability of credit. Congress has delegated authority to the bank regulators and the Financial Accounting Standards Board (FASB) to address credit loss reserves. FASB promulgates the U.S. Generally Accepted Accounting Principles (U.S. GAAP), which provides the framework for financial reporting by banks and other entities. Credit loss reserves help mitigate the overstatement of income on loans and other assets by accounting for future losses. Credit losses are often very low shortly after loan origination, subsequently rising in the early years of the loan, and then tapering to a lower rate of credit loss until maturity. Consequently, a firm's financial statements might not accurately reflect potential credit losses at loan inception. During the seven years leading up to the 2007-2009 financial crisis, the loan values held by the U.S. commercial banking system increased by 85%, whereas the credit loss reserves increased by only 21%. The ratio of loss reserves prior to the financial crisis was as low as 1.16% in 2006 and was more than 3.70% near the end of the crisis in early 2010. In response to banks' challenges during and after the crisis, in June 2016, FASB promulgated a new credit loss standard--Current Expected Credit Loss (CECL). The new standard is expected to result in greater transparency of expected losses at an earlier date during the life of a loan. Early recognition of expected losses might not only help investors, but might also create a more stable banking system. CECL requires consideration of a broader range of reasonable and supportable information in determining the expected credit loss, including current and future economic conditions. In addition to loans, CECL also applies to a broad range of other financial products. The expected lifetime losses of loans and certain other financial instruments are to be recognized at the time a loan or financial instrument is recorded. All public companies are required to issue financial statements that incorporate CECL for reporting periods beginning after December 15, 2019. Although adherence to CECL is required for all public companies, it is expected to have a more significant effect on the banking industry. The change to credit loss estimates under CECL is considered by some to be the most significant accounting change in the banking industry in 40 years. The banking regulators (Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency) have issued preliminary guidance on CECL implementation. Banking regulators have also proposed changing the Allowance for Loan and Lease Losses (ALLL) to Allowance for Credit Loss (ACL) as a newly defined term. The change to ACL is to reflect the broader range of financial products that will be subject to credit loss estimates under CECL. During congressional hearings, banking industry professionals have raised several concerns about CECL. According to one estimate, the transition to CECL will likely result in an increase in loan loss reserves of between $50 billion and $100 billion for banks. As these projections are in aggregate across the banking industry, some banks might need to significantly increase their credit reserves whereas others might need to adjust less. To mitigate the effect of CECL, regulators have given banks the option of phasing in the increased credit reserves over three years. In addition, the Federal Reserve has delayed stress tests that incorporate CECL for the largest banking organizations until 2021. Banks are expected to incur additional costs of developing new credit loss models and costs of implementation. Banks may need to retain historical information on more financial products to estimate credit losses under CECL. Adopting CECL may require upgrading existing hardware and software or paying higher fees to third-party vendors for such services. Participants in recent congressional hearings have raised concerns about CECL implementation issues. The difference in how credit loss estimates are calculated based on CECL and international accounting standards could potentially disadvantage U.S. banks, but CECL is considered less complex to implement. Fannie Mae and Freddie Mac, the government-sponsored enterprises, are also to be subject to CECL credit loss estimates as they are subject to private-sector GAAP requirements even though they are currently in conservatorship under the Federal Housing Financing Agency.

The first version of the Energy Savings and Industrial Competitiveness Act was introduced as S. 1000 in the 112 th Congress. It had three energy efficiency titles, which addressed buildings, industry, and federal agencies. Title IV provided a budgetary offset for bill authorizations. The bill was reported by the Senate Committee on Energy and Natural Resources (SENR), but received no further action. Early in the 113 th Congress, S. 761 was introduced as a revised version of S. 1000 . S. 761 was then revised and introduced as S. 1392 . Floor action on S. 1392 was halted in September 2013. S. 1392 --the Energy Savings and Industrial Competitiveness Act of 2013--was introduced on July 30, 2013. Often referred to as the Shaheen-Portman bill 2013, it was a trimmed-down version of S. 761 from the 112 th Congress. It contained provisions for building energy codes, industrial energy efficiency, federal agencies, and budget offsets. The bill contained voluntary provisions and was designed to be deficit-neutral. Virtually all debate on the bill was focused on floor amendments. The bill was reported by the Senate Committee on Energy and Natural Resources (SENR) on a 19-3 vote. On August 1, 2013, a motion to proceed was introduced and amendments began to be filed. On September 11, 2013, a unanimous consent agreement on the motion launched floor action. By September 19, 2013, 125 amendments had been proposed. Of that total, 75 directly addressed energy efficiency policy, 23 addressed "other" energy and carbon emissions policy areas, and 27 addressed non-energy policy areas. Amendments subject to controversy addressed five policy areas: fossil fuel use by federal buildings, carbon emissions regulation, regional haze regulation, Keystone XL Pipeline, and the Affordable Care Act (ACA, P.L. 111-148 as amended). Only the Keystone XL Pipeline amendment and one ACA amendment were the subject of major floor debate on S. 1392 . S.Amdt. 1908 on the Keystone XL Pipeline called for a Sense of Congress resolution that would encourage the President to issue a permit needed to begin construction. In floor debate, proponents argued that the project would create thousands of jobs; generate tax revenues for federal, state, and local governments; reduce dependence on oil imports from Venezuela; and gain an "environmental advantage" from using high-tech refineries on the Gulf Coast. Opponents contended that there would be fewer than 100 permanent jobs, most of the oil would be exported, and there would be a "tangible risk" of a spill that could have severe environmental impacts. S.Amdt. 1866 would have amended Section 1312(d)(3)(D) of ACA and would affect how Members of Congress, congressional staff, the President, the Vice President, and many executive branch political appointees can obtain health insurance coverage through their federal employment. The sponsor of S.Amdt. 1866 requested a vote on the amendment and objected to further consideration of other amendments, which blocked voting on all other amendments. Shortly after floor debate began, the sponsor introduced a stand-alone bill ( S. 1497 ) with similar content and expressed a willingness to drop the objection, if a vote could be "locked down" for S.Amdt. 1866 --or if a vote on the proposal ( S. 1497 ) could be guaranteed for any other active legislation. Despite a tentative agreement to take votes on S.Amdt. 1908 and S.Amdt. 1866 , supporters of non-energy amendments increased their requests to include four additional non-energy amendments. The resulting impasse led to a suspension of action on September 19, 2013, with no fixed date to resume action. For more details on the legislative history of S. 1392 , see CRS Report R43259, S. 1392, Shaheen-Portman Bill: Energy Savings and Industrial Competitiveness Act of 2013 , by [author name scrubbed]. The bill was introduced on February 27, 2014, and referred to the Senate Committee on Energy and Natural Resources. As introduced, S. 2074 comprised all the core provisions of S. 1392 , with the addition of the text from 10 floor amendments proposed for S. 1392 . Those amendments added new sections to the bill and increased the number of bill titles from four to five. On March 5, 2014, the House passed H.R. 2126 , the Energy Efficiency Improvement Act of 2014. The bill has four provisions, which line up closely with Sections 133, 141, 303, and 421 of S. 2262 . Introduced on April 28, 2014, the text of S. 2262 is identical to that of S. 2074 , except that the amount of budget offsets in section 501 was increased from $638 million to $720 million (for FY2014 through FY2018). Table 1 , below, provides an overview of the bill provisions. S. 2262 includes core provisions from S. 1392 , and the text of 10 proposed amendments to S. 1392 that were incorporated into S. 2074 . The bill has five titles. Title I has six provisions that address energy efficiency in buildings. Title II has five key sections that address energy efficiency in industry. Title III would establish four provisions to improve energy efficiency at federal agencies. Title IV would create seven provisions for federal agencies. Title V would provide a budgetary offset for bill authorizations. The following table summarizes the key provisions of S. 2262 . The Appendix provides a more detailed list of provisions in the bill. So far, only one provision of S. 2262 has been a major focus of controversy. Section 431 would repeal section 433 of the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140 ). The EISA provision set a timetable to cut fossil energy use in new federal buildings (and major federal building renovations)--with a target to eliminate fossil energy use in new buildings by 2030. The provision has proven difficult to implement, and DOE has not yet issued a rule to enforce it. Section 431 would also modify other EISA requirements. First, the existing EISA goal for a 36% federal energy reduction by 2015 (relative to the 2003 level) would be pushed back to 2017. Also, section 431 would direct DOE to review the results of the requirements to date and analyze the feasibility and cost-effectiveness of further postponing energy savings targets. Section 431 would still tighten some energy efficiency guidelines and building codes for new federal buildings. The environmental and energy efficiency communities have split on this provision, with some in support and some in opposition. Supporters of Section 431 claim that the existing prohibition is unworkable, citing DOE's inability to develop a regulation to implement the law. Opponents to Section 431 say that the amendment would undermine federal leadership-by-example on net-zero energy buildings and on the effort to reduce federal greenhouse gas emissions. The American Council for an Energy-Efficient Economy (ACEEE), which has publicly stated support for the bill, used a bottom-up analysis to estimate the energy-saving potential for each provision of S. 2074 . Combining those estimates yielded a total estimate for the whole bill. Then, a 5% real discount rate was applied to estimate the present value of potential energy cost savings. ACEEE's projections are summarized in Table 2 . The Congressional Budget Office (CBO) estimates that S. 2262 would provide a net decrease in the deficit of $12 million over the period from FY2014 through FY2024. In deriving this estimate, CBO noted that some parts of the bill would increase direct spending by requiring Fannie Mae and Freddie Mac to revise certain standards related to underwriting mortgages. However, other parts of the bill would reduce direct spending by modifying existing requirements to reduce consumption of energy generated from fossil fuels at certain federal buildings. Bill sponsors report that over 270 businesses, associations, and trade groups--from the National Association of Manufacturers to the Chamber of Commerce--support S. 2262 . During the 2013 debate, the bill sponsors of S. 1392 cited support from 260 business, environmental, and other organizations. Business supporters included the U.S. Chamber of Commerce, Business Roundtable, and the National Association of Manufacturers. Environmental and energy supporters included the Sierra Club, Natural Resources Defense Council (NRDC), Alliance to Save Energy, and American Council for an Energy-Efficient Economy (ACEEE). Other organizations in support included the Christian Coalition. The Obama Administration has not yet issued a Statement of Administration Policy on S. 2262 . However, it did issue one for S. 1392 , which expressed support for that bill. The Statement noted that S. 1392 would: (1) complement key energy efficiency dimensions of the President's Climate Action Plan; (2) support the President's goal to cut in half the energy wasted by U.S. homes and businesses by 2030; and (3) support the Administration's efforts to strengthen U.S. competitiveness through research and development investments in manufacturing innovation and productivity, such as the Department of Energy's (DOE's) Clean Energy Manufacturing Initiative. In opposition to S. 2262 , Heritage Action--an advocacy group affiliated with the Heritage Foundation--argues that the incentives in the bill would burden taxpayers and consumers alike while producing no tangible benefits. They are also duplicative of federal and state efforts... Heritage explains that since the efficiency gains do not have market value (or industries would already have adopted them), "the government must artificially create both the demand and the supply." Further, Heritage Action concluded that As Heritage notes, only the free-market has been proven to decrease costs and increase efficiency in energy production. The federal government's role in energy efficiency should be limited to providing information to [help] consumers make well-informed decisions. This legislation allows the government to overstep its boundaries. Heritage Action also came out strongly against S. 1392 during floor action in 2013. S. 2262 was introduced on April 28, 2014. On May 1, 2014, the Majority Leader filed a motion to limit debate (invoke cloture) on the motion to proceed to S. 2262 . The motion to proceed was approved (79-20) on May 6, 2014. Floor debate continued through May 7, 2014, and was then suspended until May 12, 2014. Prior to floor action, press reports indicated that one non-energy amendment on the Affordable Care Act and at least five energy-related amendments could possibly be offered. Included among those five potential energy-related amendments were proposals to: (1) approve the Keystone XL pipeline, (2) facilitate approval of liquefied natural gas (LNG) exports, (3) prohibit EPA from requiring carbon capture technology on coal-fired power plants, (4) reduce the value of the social cost of carbon, and (5) prevent the establishment of a carbon tax. As of May 7, 2014, a total of 71 amendments to S. 2262 had been introduced. The amendments span a broad range of energy and environmental issues. Some address the energy topics noted above. During debate over the bill, the Majority Leader emphasized a willingness to hold a separate vote on the Keystone XL pipeline--but only after floor action was completed on S. 2262 . The Minority Leader noted that the possibility of an amendment to the Affordable Care Act had been dropped and stressed an interest in having four or five votes on energy-related amendments. Some see the anticipated floor action on the energy efficiency provisions of S. 2262 as an opportunity to create a broader energy debate. One Senator has indicated the intent to again offer an amendment that would modify the Affordable Care Act provision for Members of Congress and congressional staff and top level officials and staff of the Executive Branch. Such a request could lead to a replay of a similar amendment that halted action on S. 1392 . A detailed description of that topic is beyond the scope of this report. A press report indicates that, on May 1, 2014, that Senator indicated that he would temporarily sideline that effort in return for votes on five energy proposals, including a vote to approve the Keystone XL pipeline. During floor action, however, the Minority Leader noted that the possibility of an amendment to the Affordable Care Act had been dropped. Senate party leaders and bill sponsors are working to negotiate an agreement to limit floor action to no more than five amendments. Various press reports have suggested that the leading contenders for those five spots may include Keystone XL pipeline, LNG exports, power plant carbon capture requirement, social cost of carbon, and carbon tax. S. 2280 was introduced on May 1, 2014, to establish legislative approval for the Keystone XL pipeline. In the negotiation process, some have expressed preference that S. 2280 come to the floor for a separate stand-alone vote--before action is taken on S. 2262 . Others apparently prefer to offer S. 2280 as an amendment to S. 2262 . A third view suggests that a vote on Keystone XL may be taken after work is completed on S. 2262 . For details about the debate over the Keystone XL pipeline, see CRS Report R41668, Keystone XL Pipeline Project: Key Issues , by [author name scrubbed] et al. During floor action, one amendment was offered that would set policy for the Keystone XL pipeline: S.Amdt. 2991 (Hoeven). One Senator has announced plans to introduce an amendment to S. 2262 that would require DOE to approve liquefied natural gas exports (LNG) to all World Trade Organization member countries, including Ukraine. The amendment would apply to pending and future applications to export LNG. Additionally, press reports indicate that another Senator has announced plans to offer an amendment that would accelerate LNG exports. That amendment would be based on the provisions of H.R. 6 . During floor action, three amendments were offered that would affect natural gas exports: S.Amdt. 2981 (Barrasso), S.Amdt. 3038 (M. Udall), and S.Amdt. 3040 (M. Udall). The Electricity Security and Affordability Act, S. 1905 , aims to block the Environmental Protection Agency's (EPA's) proposed rule that would effectively require new coal-fired power plants to install carbon capture and sequestration technology--unless certain benchmarks are met. A press report indicates that there is an effort underway to attach the bill as an amendment to S. 2262 . Further discussion of the details of S. 1905 is beyond the scope of this report. During floor action, one amendment was offered that would affect power plant carbon capture: S.Amdt. 3013 (McConnell). The social cost of carbon is a quantitative measure used in cost-benefit analyses of climate change policies and energy efficiency rules. One press report suggests that there is an effort to craft an amendment to S. 2262 that would undo a recent increase in the value of the social cost of carbon established by the Administration for use in rulemaking decisions. A related provision was proposed for S. 1392 . There is a continuing debate over the potential to establish a carbon tax as a key policy for curbing emissions of carbon dioxide, the main greenhouse gas. One press report suggests that there is an effort to devise an amendment that would establish a point of order to prevent Congress from imposing a carbon tax. During floor action, two amendments were offered that would establish a policy involving a carbon tax: S.Amdt. 2982 (McConnell) and S.Amdt. 2986 (Blunt). The bill sponsors--together with leadership from both parties--worked to establish an agreement that would limit the number and type of amendments that would be considered for a vote. That effort was apparently unsuccessful. In floor action on May 12, 2014, the bill was called up for a cloture vote to close debate. The initial tally (56-35) failed to reach the required 60-vote threshold, whereupon the Majority Leader changed his vote in order to reserve the right to move for reconsideration. Thus, the final vote tally was 55-36, and the Majority leader entered a motion to reconsider the vote by which cloture was not invoked on S. 2262 . Title I: Buildings Subtitle A: Building Energy Codes Section 101. Greater Energy Efficiency in Building Codes Strengthens national model building codes for new homes and commercial buildings by requiring the Department of Energy (DOE) to support their development, including the setting of energy savings targets and providing of technical assistance to the code-setting and standard development organizations. DOE, in consultation with building science experts and institutions of higher learning, will produce a report on the feasibility, impact, economics and value of code improvements. Section 304 of the Energy Conservation and Policy Act (ECPA, P.L. 94-163 ) is amended to change the State certification process so that within two years after model building codes are updated, States are to certify whether or not they have updated their building codes, and demonstrate if the building codes have met or exceeded energy savings targets. The legislation reserves adoption and enforcement of model building codes to the states, but empowers DOE to offer technical assistance. Section 307 of ECPA is amended to direct DOE to support the updating of model building energy codes by independent codes and standards developers, and to utilize the 2009 International Energy Conservation Code (IECC) for residences and the ASHRAE 90.1-2010 for commercial buildings as the baseline. Authorizes $200 million in funding to incentivize and assist states to meet the goals and requirements of the bill through the use of model codes. Subtitle B: Worker Training and Capacity Building Section 111. Building Training and Assessment Centers Establishes a DOE program for university-based Building Training and Assessment Centers, modeled after the existing Industrial Assessment Centers (IACs). Authorizes $10 million in programmatic funding to train engineers, architects and workers in energy-efficient commercial building design and operations. Section 112. Career Skills Training Creates a DOE career skills program to provide grants to nonprofit partnerships for worker training in for the construction and installation of energy-efficient building technologies. Authorizes $10 million in funding to carry out this section, and establishes a 50 percent federal cost share. Subtitle C: School Buildings Section 121. Coordination of Energy Retrofitting Assistance for Schools Requires DOE's Office of Energy Efficiency and Renewable Energy (EERE) to review all relevant standing energy efficiency programs and financing mechanisms currently available to schools by federal agencies, and to coordinate educational and outreach efforts to promote federal opportunities for assistance to schools. Authorizes EERE to provide technical assistance to states, local educational agencies, and schools to help develop and finance energy efficiency projects. Requires EERE to cultivate and maintain an online database for relevant technical assistance and support staff. Directs EERE to recognize schools that successfully implement energy retrofit projects. Subtitle D: Better Buildings Section 131. Energy Efficiency in Federal and Other Buildings Requires the Administrator of General Services (GSA) to develop and publish model leasing provisions for use in federal leasing documents to encourage building owners and tenants to invest in cost-effective energy efficiency measures. Requires the GSA to develop policies and best practices to implement such measures for the realty services provided by GSA to federal agencies, including periodic training of federal employees and contractors, and to make such available to state, county, and municipal governments that manage owned and leased building space. Section 132. Separate Spaces with High-Performance Energy Efficiency Measures Requires EERE to study the feasibility of significantly improving energy efficiency in commercial buildings through the design and construction of separate spaces with high-performance energy efficiency measures, and through encouraging owners and tenants to implement such measures in separate spaces. Requires the Secretary to publish such study on DOE's website. Section 133. Tenant Star Program Requires EPA and DOE to develop a voluntary Tenant Star program within the ENERGY STAR program to recognize tenants in commercial buildings that voluntarily achieve high levels of energy efficiency in separate spaces. Requires DOE and the Energy Information Administration (EIA) to collect data on categories of building occupancy that consume significant quantities of energy and on other aspects of the property, building operation, or building occupancy determined to be relevant to lowering energy consumption. Subtitle E: Energy Information for Commercial Buildings Section 141. Energy Information for Commercial Buildings Requires a space leased by a federal agency in a building that has not earned the ENERGY STAR label to be benchmarked under an online, free benchmarking program, with public disclosure. Requires an agency that is a tenant of a space that has not earned the ENERGY STAR label to provide to a building owner the energy consumption information of the space for use in meeting the benchmarking and disclosure requirements. Requires the DOE to conduct a study on the impact of and best practices regarding state and local performance benchmarking and disclosure policies for commercial and multifamily buildings and the impact of utility policies for providing aggregated information to owners of multitenant buidlings to assist with benchmarking programs. Authorizes the Secretary to make awards to utilities, utility regulators, and utility partners to develop and implement programs to provide aggregated whole building energy consumption information to multitenant building owners. Such information is needed for benchmarking multi-tenant buildings. Authorizes $12.5 million in programmatic funding for FY2014 through FY2018. Title II: Industrial Efficiency and Competitiveness Subtitle A: Manufacturing Energy Efficiency Section 201. Purposes Identifies the purpose of this section, including reforming and reorienting DOE's industrial efficiency programs; establishing consistent regulatory authority; accelerating the deployment of more efficient industrial technologies and practices; and strengthening public-private partnerships. Section 202. Future of Industry Program Streamlines efforts by directing Industrial Assessment Centers (IACs) to coordinate with the Manufacturing Extension Partnership Centers of the National Institute of Standards and Technology and DOE's Building Technologies Program, and increases partnerships with the national laboratories and energy service and technology providers to leverage private sector expertise. Section 203. Sustainable Manufacturing Initiative Requires EERE to provide onsite technical assessments to manufacturers seeking efficiency opportunities. Subtitle B: Supply Star Section 211. Supply Star Establishes a DOE pilot program modeled on and in coordination with ENERGY STAR to identify examples and opportunities and promote practices for highly efficient supply chains. Allows DOE to award companies financing (competitive grants/other incentives), technical support and training to improve supply side efficiency. Authorizes $10 million in programmatic funding for FY2014 through FY2023. Subtitle C: Electric Motor Rebate Program Section 221. Energy Saving Motor Control, Electric Motor, and Advanced Motor Systems Rebate Program Creates a DOE rebate program to incentivize purchases of new, high efficiency motor systems that reduce motor energy use by no less than 5%. Authorizes $5 million in programmatic funding for each of FY2014 and FY2015. Subtitle D: Transformer Rebate Program Section 231. Energy Efficient Transformer Rebate Program Directs DOE to launch an incentive rebate for the purchase of energy efficient transformers for industrial/manufacturing facilities or commercial/multifamily residential buildings. Authorizes $5 million for each of FY2014 and FY2015. Title III: Federal Agency Energy Efficiency Section 301. Energy-Efficient and Energy-Saving Information Technologies Requires the DOE, in consultation with other federal agencies, to issue recommendations to employ energy efficiency through the use of information and communications technologies - including computer hardware, operation and maintenance processes, energy efficiency software, and power management tools. Section 302. Availability of Funds for Design Updates Allows the General Services Administration to utilize funding to update the project design of approved building construction to meet efficiency standards. Section 303. Energy-Efficient Data Centers Requires federal agencies to coordinate with the Office of Management and Budget (OMB) to develop a strategy for implementing energy efficient and energy saving technologies and practices, along with annual evaluation of federal data centers for energy efficiency. Directs DOE and Office of E-Government and Information Technology to maintain a data center energy practitioner program that leads to the certification of practitioners qualified to evaluate energy usage and efficiency opportunities at federal data centers. Establishes an open data initiative for federal data center energy usage data to facilitate data center optimization and consolidation. Section 304. Budget-Neutral Demonstration Program for Energy and Water Conservation Improvements at Multifamily Residential Units Authorizes a demonstration program to allow the Secretary of Housing and Urban Development (HUD) to use budget-neutral performance-based contracts to conduct energy and water efficiency upgrades to HUD-assisted multifamily housing units. Under the structure, private investors would fund the upfront costs of retrofits, and HUD would reimburse them with the related savings from reduced utility bills. The Secretary is authorized to issue contracts under the demonstration run until September 30, 2016. Contracts issued under this program may last no longer than 12 years. Payments will not be paid by the Secretary until utility savings have been validated by a third-party. The program will be targeted towards residential units in multifamily buildings participating in rental assistance programs under section 8 of the U.S. Housing Act of 1937, the supportive housing for the elderly program under section 202 of the Housing Act of 1959, or the supportive housing for persons with disabilities program under section 811(d)(2) of the Cranston-Gonzalez National Housing Act. Title IV: Regulatory Provisions Subtitle A: Third-party Certification Under Energy Star Program Section 401. Third-Party Certification under Energy Star Program Directs DOE and EPA to revise the Energy Star certification and verification requirements for electronic products to reflect that third party testing shall not be required for program partners that have complied with Energy Star regulations for at least 18 months. Any exceptions granted that allow product developers to forgo third party testing would be terminated if the partner violates the exemption rules twice during a two-year period. The exemption would be reinstated if developers subsequently followed Energy Star regulations for a period of three years. The cost of this amendment would be covered by the current EPA and DOE Energy Star budget. Subtitle B: Federal Green Buildings Section 411. High-Performance Green Federal Buildings Requires DOE to conduct an ongoing review into private sector green building certification systems and to work with other agencies to determine which certification system would encourage the most comprehensive and environmentally sound approach to certifying federal buildings. Also, requires DOE to allow--in its review of green building certification systems--the inclusion of any developer or administrator of a rating system or certification system and allows the inclusion of responsible domestic sourcing credits and life-cycle assessment as a credit pathway in such certification systems. Subtitle C: Water Heaters Section 421. Grid-Enabled Water Heaters Allows the continued manufacture of large-capacity, grid-enabled, electric-resistance water heaters, provided the water heaters include capabilities that intend for them to be used only in electric thermal storage or demand response programs. Provides additional energy conservation standards applicable to grid-enabled water heaters, and includes data reporting requirements for manufacturers and utilities to report to DOE the number of units enrolled in electric thermal storage or demand response programs. Subtitle D: Energy Performance Requirement for Federal Buildings Section 431. Energy Performance Requirement for Federal Buildings Extends existing federal building energy efficiency improvement targets. Requires DOE to review the results of the implementation of the energy performance requirements and to analyze the cost-effectiveness and feasibility of extending the energy savings targets. Requires federal energy managers to complete comprehensive energy and water evaluations every four years, to ensure that federal buildings are performing at their optimal level of energy efficiency, and to explain why agencies did not implement any energy- or water-saving measures that were deemed life-cycle cost effective. Repeals the provision of Section 433 of EISA that established a requirement that federal buildings be designed so that the fossil fuel-generated energy consumption of each building be reduced on a timetable to 0% in 2030. Section 432. Federal Building Energy Efficiency Performance Standards: Certification System and Level for Green Buildings Expands the scope of existing energy standards for new federal buildings to cover major renovations. Requires future rulemakings on federal building energy efficiency standards to include the existing administrative requirements of the "Guiding Principles for Sustainable New Construction and Major Renovations" for all new buildings of at least 5,000 sq. ft., unless found not to be life-cycle cost effective. Section 433. Enhanced Energy Efficiency Underwriting Requires HUD to develop and issue updated underwriting and appraisal guidelines for borrowers who voluntarily submit a qualified home energy report. The provision would cover any loan issued, insured, purchased, or securitized by the Federal Housing Administration (FHA) and other federal agencies, or their successors. The updated guidelines would adjust underwriting criteria and valuation guidelines to account for expected energy cost savings as an offset to other expenses and to account for present value of expected energy savings. If no qualified energy report is provided, no adjustment would be made. Lenders would be required to inform loan applicants of the costs and benefits of improving the energy efficiency of a home. Subtitle E: Third Party Testing Section 441. Voluntary Certification Programs for Air Conditioning, Furnace, Boiler, Heat Pump, and Water Heater Products Requires DOE to recognize voluntary, independent certification programs for air conditioning, furnace, boiler, heat pump, and water heater products. Requires DOE to rely on qualified voluntary certification programs to verify the performance rating of these products, provide annual reports of all test results, and maintain a publicly available list of all certified models, among other criteria. Title V: Miscellaneous Section 501. Offset Amends funding authorizations for FY2013-2018. Section 502. Budgetary Effects States that for the purpose of complying with the Statutory Pay-As-You-Go Act of 2010, the budgetary effect of this legislation shall be determined by reference to the latest statement titled ''Budgetary Effects of PAYGO Legislation'' for this act. Section 503. Advance Appropriations Required Provides that authorization of amounts under this act and the amendments made by this act shall be effective for any fiscal year only to the extent and in the amount provided in advance in appropriations acts.

S. 2262 has four energy efficiency titles, which address buildings, industry, federal agencies, and certain regulatory measures. Title V would provide a budgetary offset for bill authorizations. The bill was derived directly from S. 1392, often referred to as the Shaheen-Portman bill of 2013. During the first session, floor action on S. 1392 was halted by a push for votes on controversial non-energy amendments. Many energy amendments were also prepared for S. 1392, but floor action stopped before formal consideration. In the second session, anticipating the potential for further procedural battles, bill sponsors sought to expand the S. 1392 framework. The aim of expanding the bill was to secure enough additional votes to address the potential for a filibuster by ensuring sufficient votes for cloture on debate. The expanded bill was introduced as S. 2074. It contains all the core provisions of S. 1392, and the text of 10 bipartisan amendments that had been proposed for S. 1392 in floor action during 2013. The text of S. 2262 is identical to that of S. 2074, except that the amount of budget offsets in section 501 was increased from $638 million to $720 million (for FY2014 through FY2018). This report reviews the provisions of S. 2262, highlights the most controversial bill provision, and identifies potential amendments to the bill. The most controversial provision in S. 2262 is section 431. That section is an updated version of S.Amdt. 1917 to S. 1392 (Hoeven-Manchin amendment). Section 431 would repeal an existing requirement to eliminate fossil energy use in new federal buildings by 2030. DOE has found the provision difficult to implement, and has not yet issued a rule to enforce it. In place of that requirement, section 431 would tighten energy efficiency guidelines and building codes for new federal buildings--but to a lesser degree. Supporters assert that the existing prohibition is unworkable, citing DOE's inability to implement it and the "more feasible" goals in section 431. Opponents claim that the amendment would undermine federal leadership-by-example on net-zero energy buildings and on the effort to reduce federal greenhouse gas emissions. The American Council for an Energy-Efficient Economy (ACEEE), which has publicly stated support for the bill, estimates an energy-saving potential of 1.8 quadrillion Btu (quads) by 2030, with an associated cost-saving potential of $16.2 billion. S. 2262 was designed to be deficit neutral. The Congressional Budget Office (CBO) estimates that it would provide a net decrease in the federal budget deficit of $12 million over the period from FY2014 through FY2024. Bill sponsors reported that over 270 businesses, associations, and trade groups--from the National Association of Manufacturers to the Chamber of Commerce--support S. 2262. The Obama Administration expressed support for S. 1392, but it has not yet issued a Statement of Administration Policy on S. 2262. In opposition to S. 2262, Heritage Action--an advocacy group affiliated with the Heritage Foundation--argues that the incentives in the bill "would burden taxpayers and consumers alike while producing no tangible benefits." A cloture vote brought S. 2262 up for Senate floor action on May 6, 2014. Floor debate focused on the potential for action on five energy-related amendments, covering the issues of Keystone XL pipeline, liquefied natural gas (LNG) exports, power plant carbon capture technology, social cost of carbon, and carbon tax. An effort to forge an agreement to limit amendments did not succeed. On May 12, 2014, a cloture vote to close debate failed (55-36), whereupon the Majority Leader entered a motion to reconsider the vote.

Conflict of interest regulations and restrictions on certain private employment opportunities for a federal officer or employee do not necessarily end with the termination of the officer's or employee's federal service. This report is intended to provide a brief history and description of the provisions of federal law restricting employment opportunities and activities of federal employees after they leave the service of the executive or legislative branches of the federal government. The conflict of interest provisions applicable after one leaves government service to enter private employment are often referred to as "revolving door" laws. Post-employment, "revolving door" statutes restricting certain subsequent private employment activities of former federal officers and employees were enacted as early as 1872, and again in 1944. A portion of the current statutory provision, at 18 U.S.C. Section 207, was enacted in 1962 as part of a major revision and recodification of the federal bribery and conflict of interest laws. That post-employment conflict of interest law was then amended and broadened by the Ethics in Government Act of 1978, which added certain one-year "cooling-off" periods for high-level executive branch personnel, limiting their post-employment advocacy activities before the federal government for one year after leaving office. After President Reagan vetoed a major congressional revision of the post-employment law which had been passed by Congress in 1988, Congress adopted as part of the Ethics Reform Act of 1989 most of the changes in the vetoed legislation. The statute has been amended several times since 1989, including extensive technical amendments in 1990. In 2007, as part of legislation dealing with lobbying laws and internal congressional rules on gifts, changes were made to the revolving door statute increasing the one-year "cooling off" period for "very senior" executive officials and for U.S. Senators to two years, and broadening the one-year "cooling off" restrictions for covered senior Senate staff. One of the initial and earliest purposes of enacting the "revolving door" laws was to protect the government against the use of proprietary information by former employees who might use that information on behalf of a private party in an adversarial type of proceeding or matter against the government, to the potential detriment of the public interest. As noted by the United States Court of Appeals in upholding the constitutionality of the "switching sides" prohibition of 18 U.S.C. Section 207(a), "the purpose of protecting the government, which can act only through agents, from the use against it by former agents of information gained in the course of their agency, is clearly a proper one." Another interest of the government in revolving door restrictions was to limit the potential influence and allure that a lucrative private arrangement, or the prospect of such an arrangement, may have on a current federal official when dealing with prospective private clients or future employers while still with the government, that is, "that the government employee not be influenced in the performance of public duties by the thought of later reaping a benefit from a private individual." In a case dealing with another federal statute which relates in part to potential future private employment of a current federal official, the court noted that the statutory scheme was intended to deal with the "nagging and persistent conflicting interests of the government official who has his eye cocked toward subsequent private employment." Additional interests asserted in the proposed amendments to 18 U.S.C. Section 207 in the 99 th and 100 th Congresses were to prevent the corrupting influence on the governmental processes of both legislating and administering the law that may occur, and the appearances of such influences, when a federal official leaves his government post to "cash in" on his "inside" knowledge and personal influence with those persons remaining in the government. As noted in the post-employment regulations promulgated under the statute by the Office of Government Ethics, the provisions of the law and regulation are directed at prohibiting "certain acts by former Government employees which may reasonably give the appearance of making unfair use of prior Government employment and affiliations" These purposes in adopting limitations on former employees' private employment opportunities must, however, also be balanced against the deterrent effect that overly restrictive provisions on career movement and advancement will have upon recruiting qualified and competent persons to government service. Furthermore, unduly restrictive provisions on the "revolving door" (that is, movement of government personnel into the private sector, and private sector employees into the government) may tend to isolate, or at least insulate government employees from private sector concerns, considerations, and experiences of the general public to a degree not desirable for public policy reasons. A criminal statute, codified at 18 U.S.C. Section 207, applies in some respects to all employees in the executive branch after they leave government service. It restricts or regulates private "representational," lobbying, and other advocacy type activities. Some parts of the statute also apply to legislative branch officials, and those are discussed in more detail later in this report in the part dealing with legislative branch restrictions. Section 207 of title 18 provides a series of post-employment restrictions on "representational" activities for executive branch personnel when they leave government service, including (1) a lifetime ban on "switching sides" on a matter involving specific parties on which any executive branch employee had worked personally and substantially while with the government; (2) a two-year ban on "switching sides" on a somewhat broader range of matters which were under the employee's official responsibility; (3) a one-year restriction on assisting others on certain trade or treaty negotiations; (4) a one-year "cooling off" period for certain "senior" officials barring representational communications before their former departments or agencies; (5) a two-year "cooling" period for "very senior" officials barring representational communications to and attempts to influence certain other high ranking officials in the entire executive branch of government; and (6) a one-year ban on certain officials in performing some representational or advisory activities for foreign governments or foreign political parties. Additionally, certain presidential and vice-presidential appointees in the Obama Administration are required to sign an ethics agreement which will further limit their post-government-employment lobbying and advocacy activities during the entire tenure of the Obama Administration and, for certain "senior" appointees, for one more year after leaving government service. Section 207(a)(1) of title 18 of the United States Code provides a lifetime ban on every employee of the executive branch of the federal government "switching sides," that is, representing a private party before or against the United States government in relation to a "particular matter" involving "specific parties," when that employee had worked on that same matter involving those parties "personally and substantially" for the government while in its employ. This lifetime ban is a fairly narrow and case-specific restriction which in practice would apply to one who, after working substantially on a particular governmental matter such as a specific contract, a particular investigation, or a certain legal action involving specifically identified private parties, then leaves the government and attempts to represent those private parties before the government on that same, specific matter. The "switching sides" prohibition does not generally apply to broad policy making matters, including rulemaking of an agency, but rather, as noted by the Office of Government Ethics, "typically involves a specific proceeding affecting the legal rights of the parties or an isolatable transaction or related set of transactions between identifiable parties." This provision does not prohibit a former government official from doing all work for a private company or firm merely because the firm had done business with or had been regulated by the official's agency, or even had been directly affected by the former official's duties or responsibilities on a particular matter such as a contract. Rather, this particular prohibition is upon subsequent representational or professional advocacy types of activities, that is, where the former official makes "any communication or ... appearance" to or before the government "with the intent to influence" the government on the same matter on which the former official had personally and substantially worked while with the government. Section 207(a)(2) provides a two-year ban on all federal employees in the executive branch on the same types of representational, post-employment conduct involved in the lifetime ban, except that it extends to matters which were merely under the "official responsibility" of the federal official while he or she was with the government. This two-year restriction, while more limited in time than the previous ban discussed, is potentially broader in matters covered, as it does not require that the former government employee had personal and substantial involvement in the matter when that individual worked for the government, but rather merely that it was under his or her official responsibility. Section 207(b)(1) of title 18 applies to all officers and employees of the executive branch (as well as Members of Congress and employees in the legislative branch) who had personally and substantially participated in ongoing trade or treaty negotiations on behalf of the United States within the last year of their employment and had access to certain non-public information. The law prohibits such former federal officers or employees, for one year after leaving the government, from representing, aiding, or advising anyone, on the basis of such information, concerning United States trade or treaty negotiations. Section 207(c)(1) provides a one-year "no contact" or "cooling off" period for "senior" level employees in the executive branch, whereby such former employees may not make advocacy contacts or representations to (that is, communications with "intent to influence"), or any appearance before officers or employees of their former departments or agencies, for one year after such senior level employees leave those departments or agencies. "Senior" level officers or employees of the executive branch include persons paid on the Executive Schedule, and those who are paid at a rate under other authority which is equal to or greater than 86.5% of the basic rate of pay for level II of the Executive Schedule; military officers in a pay grade of 0-7 or above; and certain staff of the President and Vice President. This one-year ban applies to any matter on which one seeks official action by the employee's former department or agency, regardless of whether or not the former official had worked on the matter while with the government. As discussed in more detail below, "senior" executive officials who are also covered full-time presidential or vice-presidential "appointees" in the Obama Administration will be covered by this restriction, under required ethics agreements, for an additional one year. Since this "cooling off" ban applies to communications to one's former agency or department in the executive branch, it does not restrict former executive branch officials from leaving the government and then immediately "lobbying" the United States Congress, its Members, or its employees. The restrictions of 18 U.S.C. Section 207(d) apply to "very senior" officials of the executive branch, including the Vice President, officials compensated at level I of the Executive Schedule (Cabinet officers and certain other high-ranking officials), and employees of the Executive Office of the President and certain White House employees compensated at level II of the Executive Schedule. These officials, under amendments made to the law in 2007, may not for two years after leaving the government make representations or advocacy contacts on any matter before their former agencies, or to any person in an executive level position I through V in any department or agency of the entire executive branch of the federal government. Similar to the cooling off period for "senior" level employees, these restrictions on "very senior" officials do not prohibit any former executive branch official from leaving the federal government and immediately lobbying Congress. 18 U.S.C. Section 207(f) bars, for one year after leaving the government, all "senior" or "very senior" employees of the executive branch (as well as Members of Congress and senior legislative staff) from performing certain duties in the area of representational or advocacy activities for or on behalf of a foreign government or a foreign political party, before any agency, department, or official in the entire U.S. government. This provision prohibits, for one year after leaving the government, those covered former officials from representing an official foreign entity "before any officer or employee of any department or agency of the United States" with intent to influence such United States official in his or her official duties, and prohibits for one year, as well, a former senior or very senior official (including Members of Congress and senior legislative staff) from even aiding or advising a foreign entity "with the intent to influence a decision of any officer or employee of any department or agency of the United States." The definitions within this law expressly indicate that those officers and employees to whom such communications on behalf of foreign governments may not be made during this one-year period include Members of Congress. This one-year ban on representing or aiding or assisting in representations of foreign governments becomes a lifetime ban in the case of the United States Trade Representative or the Deputy United States Trade Representative. The Office of Government Ethics has explained that the prohibition involves employment activities with a foreign government that bear upon attempts to influence an official of the U.S. government. Employment generally with a foreign government is not prohibited by this law, and general public relations or commercial activities for or on behalf of a foreign government might not involve the types of conduct prohibited unless they also involved attempts to influence United States government officials: A former senior or very senior employee "represents" a foreign entity when he acts as an agent or attorney for or otherwise communicates or makes an appearance on behalf of that entity to or before any employee of a department or agency. He "aids or advises" a foreign entity when he assists the entity other than by making such a communication or appearance. Such "behind the scenes" assistance to a foreign entity could, for example, include drafting a proposed communication to an agency, advising on an appearance before a department, or consulting on other strategies designed to persuade departmental or agency decisionmakers to take certain action. A former senior or very senior employee's representation, aid, or advice is only prohibited if made or rendered with the intent to influence an official discretionary decision of a current departmental or agency employee. President Obama issued an executive order on January 21, 2009, which places two additional post-employment, "revolving door" restrictions on all full-time, non-career presidential or vice presidential appointees in the executive branch, including non-career SES appointees and appointees to positions in the excepted service which are of a confidential and policy-making nature (such as Schedule C appointees). These "appointees" must agree to a binding "ethics pledge" which will prohibit them, after leaving government service, from lobbying (that is, acting as a registered lobbyist under the Lobbying Disclosure Act of 1995, as amended [hereinafter LDA]) any executive branch official "covered" under the LDA (2 U.S.C. SS1602(3)), or any non-career SES appointee, for the remainder of the entire Obama Administration. Additionally, all such "appointees" who are also "senior" executive branch officials covered by the one-year "cooling off" period of 18 U.S.C. Section 207(c)(1), whereby such former officials may not lobby or make advocacy communications to certain officials in their former agencies and departments, must now abide by such "cooling off" period for two years. Under amendments to the Federal Deposit Insurance Act, certain officers and employees of a "Federal banking agency or a Federal reserve bank," who are involved in bank examinations or inspections, are restricted from any compensated employment with those private depository institutions for a period of one year after leaving federal service. This restriction applies to employees who served for at least two months during their last year of federal service as "the senior examiner (or a functionally equivalent position)," and who exercised "continuing, broad responsibility for the examination (or inspection)" of a depository institution or depository institution holding company. These former employees are barred for one year from receiving any compensation as an "employee, officer, director, or consultant" from the depository institution, the depository institution holding company that controls such depository institution, or any other company that controls the depository institution, or from the depository institution holding company or any depository institution that is controlled by that the depository institution holding company. Further limitations upon the post-government employment activities of certain officials exist under so-called "procurement integrity" provisions of federal law for those former federal officials who had acted as contracting officers or who had other specified contracting or procurement functions for an agency. These additional restrictions go beyond the prohibitions on merely "representational," lobbying, or advocacy activities on behalf of private entities before the government, and extend also to any compensated activity for or on behalf of certain private contractors for a period of time after a former procurement official had worked on certain contracts for the government. The current post-employment restrictions within the procurement integrity provisions of federal law are codified at 41 U.S.C. Sections 2103 and 2104. Under such provisions, former federal officials who were involved in certain contracting and procurement duties for the government concerning contracts in excess of $10 million may generally not receive any compensation from the private contractor involved, as an employee, officer, consultant, or director of that contractor, for one year after performing those procurement duties for the government. The types of contracting duties and decisions for the government which would trigger coverage under these provisions include acting as the "procuring contracting officer, the source selection authority, a member of the source selection evaluation board, or the chief of a financial or technical evaluation team in a procurement" in excess of $10 million; serving as the program manager, deputy program manager, or administrative contracting officer for covered contracts; or being an officer who personally made decisions awarding a contract, subcontract, modification of a contract, or task order or delivery order in excess of $10 million, establishing overhead or other rates valued in excess of $10 million, or approving payments or settlement of claims for a contract in excess of the covered amount. Officials of the Department of Defense who are involved personally and substantially in procurements of over $10 million, are leaving the department, and know that they will be receiving compensation from a defense contractor within the next two years must request, within 30 days before their departure, an ethics opinion about what they can and cannot do for the defense contractor under current ethics laws and rules. Under legislation adopted in 2012, all "senior" officers and employees in the federal government will now have to report to their ethics offices negotiations that they are having for subsequent private employment. The "STOCK Act," enacted in April of 2012, requires all of those federal officials who are required to file public financial disclosure reports (that is, generally, those earning a rate of salary equal to or more than 120% of the base salary for a GS-15) to notify their ethics office in writing within three business days of the commencement of such "negotiations," and then to recuse themselves from any governmental matter for which such negotiations may create a conflict of interest. In addition to the general reporting of negotiations under the STOCK Act by certain high-level officials, all federal employees in the executive branch who are seeking private employment may also incur restrictions on the performance of their current duties for the government under other provisions of federal law. The principal federal conflict of interest law, which is a criminal provision at 18 U.S.C. Section 208, states, among other restrictions, that once any federal employee or officer in the executive branch begins "negotiating" subsequent employment with a private employer, that employee must disqualify (recuse) himself or herself from any official governmental duties, such as recommendations, advice, or decision making, on any particular matter which has a direct and predictable effect on the financial interests of that potential private employer. The Office of Government Ethics has issued regulations concerning this potential conflict of interest, and has expanded by regulation certain disqualification requirements beyond bilateral "negotiations," applying such requirements where the employee has even merely "begun seeking employment." The regulations note that a federal employee has "begun seeking employment" not only if the employee is involved in a "discussion or communication" that is "mutually conducted" (even if the specifics of a job or employment are not discussed), but also if the employee has made an unsolicited communication regarding employment (other than merely asking for an application or sending a resume to someone who is affected by the employee's duties "only as part of an industry or other discrete class"), or if the employee has made a response other than a rejection to an unsolicited communication from a private source concerning employment. This status of "seeking employment" will continue until all possibilities of employment are rejected, and discussion ended, or two months have passed after an unsolicited communication had been made by the employee and no indication or interest or postponement of consideration was indicated. During the time one is within this status of "seeking employment," the employee "should notify the person responsible for his assignment," or if the individual is responsible for his or her own assignments, then the employee must take "whatever steps are necessary" to ensure compliance. Appropriate oral or written communication to one's coworkers and supervisors concerning a required disqualification is suggested in the regulations, although written documentation of a recusal is not required in the regulations except to conform to a previous ethics agreement with the Office of Government Ethics. Waivers from the disqualification requirements may be obtained in writing from the official responsible for the employee's appointment. In the area of procurement, even if no actual negotiations with a potential private employer are involved or have begun, certain "contacts" about prospective private employment between certain private contractors and federal procurement personnel may trigger reporting and recusal requirements. Agency officials who are "participating personally and substantially" in a federal procurement for a contract in excess of $100,000 must report all contacts from or to a bidder or offeror on that contract, when those contacts are about the possibility for non-federal employment for that official. This includes even "unsolicited communications from offerors regarding possible employment.... " In addition to reporting the contacts made or received, the official must then either reject the possibility of future employment, or must disqualify himself or herself from further participation in the procurement until all discussions have ended without an employment agreement, or until the business is no longer a bidder or offeror in that procurement. Reports from procurement personnel on contacts and recusals are retained by the agency for two years, and "shall be made available to the public upon request." As noted in the previous section, procurement officials in the Department of Defense who are involved personally and substantially in procurements of over $10 million, are leaving the department, and know that they will be receiving compensation from a defense contractor within the next two years must request, within 30 days before their departure, an ethics opinion about what they can and can not do for the defense contractor under current ethics laws and rules. Changes in the rules of the House and Senate were adopted in 2007 regarding negotiations for future private employment by Members and certain staff. In the Senate, the general rule is that Senators may not begin private employment negotiations, or have arrangements for subsequent private employment, until their successors have been elected. In the House, the general rule is that Members may not begin private employment negotiations, or have arrangements for subsequent private employment, while still serving in the House. The exception to both the House and Senate rules allows for such negotiations to begin earlier, before a successor is elected in the Senate or one's term is over in the House, if the Senator or Representative makes a disclosure statement within three business days concerning the commencement of such negotiations or agreements. However, in the Senate, this exception will not apply to, and thus will not allow, such negotiations or arrangements for future private employment which involves "lobbying activities" until the Senator's successor has been elected. The congressional rules further provide that a Member of the House of Representative who is negotiating or has an arrangement for future employment prior to the expiration of his or her term of office must "recuse" or disqualify himself or herself from participating in any matter that may raise a conflict of interest, or the appearance of a conflict of interest, because of such negotiations or employment arrangements, and must notify the House Committee on Standards of Official Conduct of such recusal. In the Senate, the original disclosure statement of negotiations or arrangements is to be made public at the time it is made to the Secretary of the Senate; while in the House, the original notification of private employment negotiations or arrangements is not made public until and unless the Member must recuse himself or herself for conflict of interest purposes, and then the recusal notification as well as the original disclosure statement are made public. "Senior" staff in both the House and Senate (i.e., those employees who are compensated in excess of 75% of a Member's salary) must notify the appropriate ethics committee within three business days that the staffer is negotiating or has any agreement concerning future private employment. Covered Senate and House employees must then recuse themselves from official legislative matters that raise conflicts of interest because of their prospective private employment interests, and notify the appropriate ethics committees of such recusal. Covered Senate staffers must specifically recuse themselves from making any contact or communications with the prospective employer on issues of legislative interest to that employer. The new provisions enacted under the STOCK Act in April of 2012 may affect staff who are not necessarily covered by the House or Senate Rule provisions, since the salary threshold is lower under the statutory provisions. As noted above, any staff person who is required to file public financial disclosure reports is required to notify his or her ethics office in writing within three business days of the commencement of any private employment "negotiations," and then to recuse himself or herself from any governmental matter for which such negotiations may create a conflict of interest. The Ethics Reform Act of 1989 added post-employment restrictions for Members and certain senior congressional staffers, effective January 1, 1991, and these were amended by the lobbying and ethics reform legislation, titled the "Honest Leadership and Open Government Act of 2007." Under the criminal provisions of this statute, individuals who were Members of the House are prohibited from "lobbying" or making advocacy communications on behalf of any other person to current Members of either house of Congress, or to any legislative branch employee, for one year after the individual leaves Congress. For a period of two years after leaving the Senate, Senators are prohibited from similar post-employment advocacy. Additionally, senior staff employees are subject to certain one-year "cooling off" periods regarding their advocacy contacts with their former offices; and both former Members and former senior staff are limited in representing official foreign interests before the U.S. government, and in taking part in certain trade and treaty negotiations, for one year after leaving congressional service. There are now so-called "cooling off" periods of two different durations applicable in the legislative branch that restrict post-employment "lobbying" and advocacy activities. United States Senators are subject to a two-year post-employment advocacy ban, which restricts their lobbying anyone in Congress, or any employee of a legislative office, for two years after leaving the Senate. Members of the House of Representatives, as well as "senior" legislative branch employees, are now subject to a one-year "cooling off" or "no contact" period after they leave congressional office or employment. Members of the House of Representatives are prohibited for one year after leaving office from lobbying or making other advocacy contacts with any Member, officer, or employee of either house of Congress, or to any employee of a legislative office. "Senior" legislative branch employees are subject to the post-employment restrictions if they are compensated at a rate equal to or above 75% of the rate of pay of a Member of the House or Senate, and are employed for more than 60 days. "Senior" Senate staff covered by these statutory provisions are prohibited for one year after leaving Senate employment from making advocacy communications to any officer, employee, or Member of the entire Senate. "Senior" House staff are barred for one year after leaving House employment from making advocacy communications only to their former employing office; that is, former "senior" employees of a Member of the House may not, for one year after they leave congressional employment, make advocacy or representational contacts to that Member or any of the Member's employees. House committee staffers covered by these provisions are barred for one year after leaving office from making such advocacy contacts and representations to any Member or employee of their former committees, or to any Member who was on the committee during the last year of the staffer's employment; and "senior" employees in House leadership offices are prohibited for one year after leaving employment from making advocacy communications to anyone in that leadership office. Not all contacts or communications by former Members or employees with current Members or employees within the one-year period are barred, however. The prohibition goes only to advocacy-type communications, that is, communications "with the intent to influence" a Member or officer or employee of the legislative branch concerning "any matter on which such person seeks official action" by that Member, officer, or employee, or by either house of Congress. There are also several specific exceptions to the general prohibition, including, for example, exceptions for lobbying and advocacy work for state or local governments, testifying on matters under oath, and generally for representations or communications on behalf of political candidates, parties, and political organizations. All officers and employees of the government, including Members of Congress and congressional staff, who worked personally and substantially on a treaty or trade negotiation and who had access to information not subject to disclosure under the Freedom of Information Act, may not use such information for one year after leaving the government for the purpose of aiding, assisting, advising, or representing anyone other than the United States regarding such treaty or trade negotiation. Members of Congress, and those "senior" legislative branch employees who are covered by the one-year "cooling off" periods, are also prohibited for a year after leaving office or employment from representing an official foreign entity before the United States, or aiding or advising such entity with intent to influence any decision of an agency or employee of any agency or department of the U.S. government. All employees of the Senate remain subject to the Senate Rule governing lobbying after they leave Senate employment. Senate Rule XXXVII, clause 9, applies to all former staffers who have become registered lobbyists, or are employed by a registered lobbyist or by an entity that retains lobbyists if the former staffer is to influence legislation. Such former staffers are prohibited for one year after leaving the Senate from lobbying the Senator for whom they used to work or the Senator's staff. Former committee staff are prohibited from lobbying the Members or the staff of that committee for one year. If the staffer is a "senior" employee, then the former staffer, in accordance with the statutory restriction, will be barred from lobbying any Member, officer, or employee of the entire Senate for one year. Under congressional rules and practice, former Members are generally granted the privilege of admission to the floor of the Senate or House, respectively. However, under the Rules of the House of Representatives, former Members of the House are not to be entitled to floor privileges if they have any "direct or pecuniary interest in any legislative measure pending before the House or reported by any committee," and are not entitled to admission if they are registered lobbyists or agents of a foreign principal, or employed by or otherwise represent "any party or organization for the purpose of influencing, directly or indirectly, the passage, defeat or amendment of any legislative measure pending before the House, reported by any committee" or under consideration of a committee. The Senate rules have also been changed to withdraw floor privileges from a former Member or officer who is a registered lobbyist or agent of a foreign principal, or is in the employ of an organization for the purpose of influencing, directly or indirectly, the passage or defeat of legislation or any legislative proposal. The House and Senate have both limited the access of such former Members, if those former Members are registered lobbyists or foreign agents, to the athletic and exercise facilities in the House and Senate. A Member of Congress may not, before the expiration of his or her term, accept a civil office in the U.S. government if that office was created, or the salary for the office had been increased during the Member's current term. This constitutional provision would by its terms prevent a Member of Congress from retiring from Congress before his or her current term has expired, and accepting such a civil position with the federal government. It may be noted that the disqualification has on many occasions been avoided in regard to an office for which the salary was increased during the Member's term, by enacting legislation lowering the salary of that particular office back to its previous level.

Federal personnel may be subject to certain conflict of interest restrictions on private employment activities even after they leave service for the United States government. These restrictions--applicable when one enters private employment after having left federal government service--are often referred to as "revolving door" laws. For the most part, other than the narrow restrictions specific to procurement officials or bank examiners, these laws restrict only certain representational types of activities for private employers, such as lobbying or advocacy directed to, and which attempt to influence, current federal officials. Under federal conflict of interest law, at 18 U.S.C. Section 207, federal employees in the executive branch of government are restricted in performing certain post-employment "representational" activities for private parties, including (1) a lifetime ban on "switching sides," that is, representing a private party on the same "particular matter" involving identified parties on which the former executive branch employee had worked personally and substantially for the government; (2) a two-year ban on "switching sides" on a somewhat broader range of matters which were under the employee's official responsibility; (3) a one-year restriction on assisting others on certain trade or treaty negotiations; (4) a one-year "cooling off" period for certain "senior" officials barring representational communications to and attempts to influence persons in their former departments or agencies; (5) a new two-year "cooling off" period for "very senior" officials barring representational communications to and attempts to influence certain other high-ranking officials in the entire executive branch of government; and (6) a one-year ban on certain former high-level officials performing certain representational or advisory activities for foreign governments or foreign political parties. In the legislative branch, this law applies the one-year "cooling off" period, as well as the restrictions on representations on behalf of official foreign entities and assistance in trade negotiations, to Members of the House and to senior legislative staff. United States Senators are subject to a two-year "cooling off" period in which they may not lobby Congress after leaving the Senate. "Procurement personnel" in federal agencies are not only limited in their post-employment representational, lobbying, or advocacy activities on behalf of private entities after leaving government service, but they are also prohibited from receiving compensation from certain private contractors for a period of time after being responsible for procurement action on certain large contracts as government officials. Procurement personnel also have additional rules on reporting "contacts" from prospective employers who are government contractors. The provisions of an executive order issued by President Obama on January 21, 2009, impose stricter limits on certain executive branch personnel. Full time, non-career presidential and vice-presidential appointees, including non-career appointees in the Senior Executive Service, and excepted service confidential, policy-making appointees, are barred after leaving the Administration from "lobbying" any executive branch official "covered" by the Lobbying Disclosure Act (2 U.S.C. SS1602(3)), or any non-career SES appointee, for the remainder of the Administration. Additionally, all appointees who are "senior" officials subject to the statutory one-year "cooling off" period on lobbying and advocacy communications to their former agencies must now abide by such "cooling off" period for two years.

The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) provides funding for various education programs. Among these programs, ARRA includes the State Fiscal Stabilization Fund, which provides federal funding to states to support elementary, secondary, and postsecondary education. Funds for modernization are available to public and private institutions of higher education in ARRA and the use of these funds is limited in order to comport with the requirements of the Establishment Clause of the First Amendment. Because the Establishment Clause prohibits the government from providing direct aid to religious activities, these institutions are prohibited from using funds received to modernize facilities that have religious uses or purposes. This report will provide a brief overview of ARRA's limitations on funding to religious schools, including proposals in the House and Senate versions of the bill. It will also analyze the constitutionality of the distribution of federal money to religious schools in the context of common questions raised by these provisions. ARRA provided that school modernization was an allowable use of funds under the SFSF, indicating a compromise resulting from the different versions of the bill passed by the House and Senate. Prior to enactment, the House passed its version of H.R. 1 (the House bill) and the Senate passed S.Amdt. 570 , an amendment in the nature of a substitute to H.R. 1 (the Senate bill). The House bill, but not the Senate bill, would have specifically created new programs to support school modernization, renovation, and repair at the elementary, secondary, and postsecondary education levels. Both the House bill and the Senate bill would have provided general funds for education to support state fiscal stabilization. This section will provide an overview of the relevant programs and corresponding prohibitions on the use of funds. Because questions have been raised regarding the previous versions and actions taken by the House and Senate, the proposed provisions of the House and Senate bills follow the enacted provisions in ARRA. As passed by the House and Senate, ARRA includes a prohibition on the use of funds provided under Title XIV, the State Fiscal Stabilization Fund (SFSF). The SFSF allocates federal funds to states to support elementary, secondary, and postsecondary education. The SFSF authorizes state governors to use a portion of the state's allocation "for modernization, renovation, or repair of public school facilities and institutions of higher education facilities." This authorization is available to only public elementary and secondary schools, but is available to both public and private (including private religious) institutions of higher education. ARRA limits the use of money received under the SFSF to comport with the Establishment Clause of the First Amendment. In addition to making the funds available only to public elementary and secondary schools, the SFSF provides that money provided by the Fund to institutions of higher education may not be used for: modernization, renovation, or repair of facilities - (A) used for sectarian instruction or religious worship; or (B) in which a substantial portion of the functions of the facilities are subsumed in a religious mission. The House bill proposed a new program to support school modernization, renovation, and repair of facilities at institutions of higher education. The funds provided under this program would have been available to public and private (including private religious) institutions of higher education, but the use of the funds would have been restricted. Specifically, the House bill would have prohibited money provided under the modernization program from being used for: modernization, renovation, or repair of facilities - (i) used for sectarian instruction, religious worship, or a school or department of divinity; or (ii) in which a substantial portion of the functions of the facilities are subsumed in a religious mission. The Senate bill did not include the specific modernization program proposed by the House bill, nor did it include modernization funding under the state fiscal stabilization fund. Before the Senate passed S.Amdt. 570 , the Senate debated S.Amdt. 98 , an amendment in the nature of a substitute for H.R. 1 . S.Amdt. 98 would have created a modernization program for institutions of higher education and included the same prohibition on the use of funds as was provided in the House bill. During debate of S.Amdt. 98 , the so-called DeMint amendment was proposed and later failed. The DeMint amendment would have invalidated the prohibition on the use of funds included in S.Amdt. 98 . The Establishment Clause of the First Amendment provides that "Congress shall make no law respecting an establishment of religion.... " The U.S. Supreme Court has construed the Establishment Clause, in general, to mean that government is prohibited from sponsoring or financing religious instruction or indoctrination. The Court has interpreted the Establishment Clause in numerous lines of decisions (e.g., government aid to religious organizations, access to public facilities for religious purposes, etc.). The Court has drawn a constitutional distinction between aid that flows directly to sectarian schools and aid that benefits such schools indirectly as a result of a voucher or tax benefit program. Generally, restrictions on direct aid are greater than restrictions on indirect aid. In direct aid programs, such as the funding provided for modernization in ARRA, a government program provides aid directly to a religious organization or program. The Court requires that direct aid serve a secular purpose and not lead to excessive entanglement with religion. It also requires that the aid be secular in nature, that its distribution be based on religiously neutral criteria, and that it not be used for religious indoctrination. In a series of cases in the 1970s, the Court limited the use of public funds for the construction and maintenance of religious schools under the Establishment Clause. In 1971, the Court upheld as constitutional a federal program that provided grants to colleges, including religiously affiliated colleges, for the construction of needed facilities, so long as the facilities were not used for religious worship or sectarian instruction. In 1973, the Court upheld a program in which a state issued revenue bonds to finance the construction of facilities at institutions of higher education, including those with a religious affiliation. The program met constitutional requirements because it barred the use of the funds for any facility used for sectarian instruction or religious worship. Also in 1973, although the Court had just upheld aid for construction and repairs to religious institutions of higher education, the Court held that public funds could not subsidize maintenance and repair of sectarian elementary and secondary school facilities, including costs for heating, lighting, renovation, and cleaning. Because Establishment Clause restrictions are heightened in elementary and secondary school settings due to the impressionable nature of those students, the Court imposes greater restrictions on aid provided to elementary and secondary schools. Previous legislation has included provisions that are similar to the prohibition on the use of funds included in the SFSF. The following examples of legislation impose limitations on the use of funds for sectarian instruction or religious worship. No Child Left Behind Act of 2002, P.L. 107-110 Workforce Investment Act of 1998, P.L. 105-220 Higher Education Amendments of 1992, P.L. 102-325 National and Community Service Act of 1990, P.L. 101-610 Higher Education Amendments of 1986, P.L. 99-498 Nurse Education Amendments of 1985, P.L. 99-92 Job Training Partnership Act of 1982, P.L. 97-300 Omnibus Budget Reconciliation Act of 1981, P.L. 97-35 Education Amendments of 1980, P.L. 96-374 Comprehensive Older Americans Act Amendments of 1978, P.L. 95-478 Comprehensive Employment and Training Act of 1973, P.L. 93-203 These examples are not an exhaustive list, but rather, represent a sample of legislation that has restricted the use of funds based on religion. Other legislation has also included slightly different restrictions on the use of funds based on religion. For example, the Higher Education Amendments of 1998 also included a prohibition on the use of funds for religion. The provision stated that no project using public funds "shall ever be used for religious worship or a sectarian activity or for a school or department of divinity." In comparison, the Higher Education Amendments of 1986 stated that "no grant may be made under this Act for any educational program, activity, or service related to sectarian instruction or religious worship, or provided by a school or department of divinity." Although the language in these two provisions appears similar, there is a difference in the limitations imposed on sectarian activity versus sectarian instruction. Instruction may be seen as a specific type of activity. Thus, the provision from the 1998 amendments may be read more broadly than the provision included in the 1986 amendments. A prohibition on the use of funds for projects that involve "sectarian activity," like the 1998 amendments, may be interpreted to include any religious activity, whether that activity be an individual private activity such as prayer, an official group activity such as a faith-sharing group meeting, or religious instruction. A prohibition like in the 1986 amendments that relates only to programs, activities, or services involving religious instruction or worship would provide a more specific restriction on the types of activities included under the provision and appears to eliminate an interpretation that would limit individuals' independent religious activities. Religious institutions of higher education are eligible to receive funds provided under the SFSF. ARRA specifically provides that the receipt of public funds authorized as part of SFSF is not dependent on "the type or mission of [the] institution of higher education." No institution of higher education, regardless of religious affiliation, may use the funds for facilities that either: (a) are used for sectarian instruction or religious worship, or (b) are substantially subsumed in a religious mission. A school is not prohibited from receiving funds if it holds religious ceremonies on campus or if other buildings are used for religious purposes. Rather, the school is prohibited from using funds it receives for the particular facilities in which these activities occur. For example, this prohibition would forbid a college from using funds received from the SFSF to repair a chapel or synagogue. The prohibition would also forbid a university from using funds to modernize a faith-based student center (e.g., the Baptist Student Center or the Muslim Student Association House), because even if such a facility may not be used for instruction or worship, a substantial portion of activities of such a facility would likely be considered to have a religious mission. On the other hand, a general student center, not dedicated to the use of a particular group, but generally available to many activities and groups, would not fit within this prohibition, even if it was occasionally used by religious groups for religious purposes. Some have argued that the first element of the prohibition on the use of funds under the SFSF broadens the general prohibition traditionally used to limit public funding to religious organizations. According to this argument, the prohibition of the use of funds for facilities " used for sectarian instruction or religious worship" (emphasis added) might be construed to prohibit colleges and universities from using SFSF money for student dormitories because some students may use their dorm rooms for religious prayer or small faith group sessions which may include instruction or worship. This argument suggests that the standard by which funds will be limited is unclear under the statutory language. ARRA imposes no specific standard regarding the degree to which a facility must be used for religious purposes. Rather, it provides a broad prohibition that appears to restrict the provision of funds if the facility that would benefit from the funds is ever used for religious purpose. Therefore, a literal reading of the provision may prohibit the use of funds under the SFSF from being used for a building in which a religious student group convenes for private worship or a dormitory in which students exercise religious prayer. However, Supreme Court decisions and the typical administration of such a program through the agency regulation process would indicate such a broad reading is inappropriate and unlikely to be applied by courts. Current Supreme Court precedent prohibits the government from directly funding religious activities, which may include religious instruction or worship, but under a line of decisions separate from the direct funding cases, the Supreme Court has held that the Establishment Clause does not forbid religious groups from using or having access to public facilities. The Court has held that it is unconstitutional to deny religious groups access to public facilities, including public schools, if the same facilities are made available to nonreligious groups. Restrictions that forbid religious groups from using public facilities while allowing nonreligious groups to have access treat religious groups differently in a manner that suggests disapproval of religion, in violation of the Establishment Clause. The Court interpreted the First Amendment's requirement of equal access to include access to benefits offered by public institutions when it required a public university to provide student activity funds to student groups regardless of the religious content of the group's activities. These decisions indicate a requirement of neutrality in the treatment of religious groups and activities and nonreligious groups and activities when dealing with public resources. If an institution of higher education applies the prohibition on the use of funds literally (i.e., prohibiting student religious groups from meeting in any facility modernized, renovated, or repaired by SFSF funds), that institution's action likely would be considered a violation of the First Amendment only if it allows nonreligious groups to meet in the same facility. The Court's rulings indicate that facilities funded by public money are required to comply with restrictions imposed on public buildings. These restrictions prohibit discrimination against groups allowed access or use of the facility based on the group's religious affiliation if the facility is used by others for similar, but nonreligious, purposes. For instance, if an institution of higher education uses public funds under the SFSF to renovate a student center and makes it available to student groups for meetings, the First Amendment mandates that religious student groups also be allowed to hold meetings in the facility, despite public funds being used in its renovation. On the other hand, if a university uses the SFSF funds for an academic building that it allows to be used only for classroom instruction and does not allow any group meetings, it may also prohibit religious groups from meeting in the facility. Furthermore, because the government is not responsible for private individual choices to exercise religion in public facilities, the prohibition on the use of funds for facilities used for religious activity could not be read to prohibit individual religious exercise in a dormitory, as such actions are also protected by the Free Exercise Clause of the First Amendment. It is significant to note that programs that distribute public funds are typically administered by government agencies. These agencies, having specialized knowledge and experience in the program's field, often address the limitations of the funding more specifically through program regulations. Therefore, although the proposed statutory language may be written broadly, Supreme Court precedent and agency regulations implementing similar provisions indicate that the program likely would not be administered under such a broad interpretation. In each of the Court's previous construction and repair cases, the Court refused to allow public aid for religious schools if that aid would be used for facilities used for sectarian instruction or religious worship. Although the Court's interpretation of the Establishment Clause's requirements for direct funding cases has evolved since the 1970s cases in which the Court addressed this issue specifically, the later decisions that revisited the requirements of direct aid programs likely would not alter the outcome of the school construction and maintenance cases that might arise under this legislation. The use of SFSF funds for educational facilities' modernization and repair serves a secular purpose of supporting education and public safety. Because ARRA requires funds to be used for certain purposes, which generally address building safety and efficiency issues, courts are unlikely to conclude there is excessive entanglement with religion as a result of government-funded repairs on facilities. Furthermore, the aid provided would be secular in nature and would be distributed on a religiously neutral basis. That is, colleges would be eligible to receive the aid, regardless of their public status or religious affiliation. Finally, the prohibition on the use of funds for certain religiously related purposes limits the aid from being used for religious purposes. The prohibition, therefore, is likely constitutionally required under current Supreme Court precedent. If the prohibition had not been included explicitly in the statutory language, the restrictions would still apply as a matter of constitutional law. Including the provision in the law would explicitly clarify that the restrictions required by the First Amendment apply to this aid program.

The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) provides funding for various educational programs, including a State Fiscal Stabilization Fund. The State Fiscal Stabilization Fund (SFSF) provides federal funding to states to support elementary, secondary, and postsecondary education. Although federal money provided by the SFSF is available only to public elementary and secondary schools, public and private institutions of higher education are eligible to receive federal money from the SFSF. Because the Establishment Clause of the First Amendment limits the extent to which the government may provide funds to religious organizations, the SFSF also includes a provision that prohibits funds from being used for facilities with religious uses or purposes. This report will provide a brief overview of the prohibition on the use of funds by institutions of higher education, including proposals considered by the House and Senate before ARRA was enacted. It will also analyze the constitutionality of the distribution of federal money to religious schools in the context of common questions raised by these provisions.

The General Services Administration (GSA) manages the federal government's charge card program, known as SmartPay. Through SmartPay, agencies are able to select charge card products and services from contracts that GSA has negotiated with major banks. The contracts allow agencies to select different types of charge cards, depending on their needs. SmartPay charge card options include purchase cards (for supplies and services), travel cards (for airline, hotel, and related expenses), and fleet cards (for fuel and supplies of government vehicles.) This report focuses on purchase cards. The use of purchase cards has expanded at a rapid rate since the mid-1990s. Spurred by legislative and regulatory reforms designed to increase purchase card use for small acquisitions, the dollar volume of federal government purchase card transactions grew from $527 million in FY1993, to $19.3 billion in FY2009. While the use of purchase cards has been credited with reducing administrative costs, audits of agency purchase card programs have found varying degrees of waste, fraud, and abuse. One of the most common risk factors cited by auditors is a weak internal control environment: many agencies have failed to implement adequate safeguards against card misuse, even as their purchase card programs grew. In response to these findings, Congress has held hearings and introduced legislation that would enhance the management and oversight of agency purchase card programs. In addition, the Office of Management and Budget (OMB) has issued guidance that requires agencies to implement internal controls that are designed to minimize the risk of purchase card abuse. This report begins by providing background on agency purchase card programs. It then discusses identified weaknesses in agency purchase card controls that have contributed to card misuse, and examines legislation introduced in the 111 th Congress that would address these weaknesses. The government's purchase card program has its origins in Executive Order 12352, issued by President Reagan in 1982. E.O. 12352 directed agencies to develop programs that simplified procedures and reduced the administrative costs of procurement, particularly with regard to "small" purchases ($25,000 or less). Several agencies subsequently participated in a pilot program that evaluated the use of a commercial credit card, called a purchase card, as an acquisition tool. At the time, even a routine order for widely available items, such as office supplies, typically required agency program staff to submit a written procurement request to a contracting officer, who reviewed it, obtained the necessary authorizing signatures, made the actual purchase, and processed the associated paperwork. To critics, this process was inefficient, especially for small purchases. Not only was it time-consuming for both program and procurement personnel, but it also prevented program offices from quickly filling immediate needs. Under the pilot program, non-procurement staff used purchase cards to conduct small-dollar transactions directly with local suppliers, thus bypassing procurement officers entirely. A report on the pilot program concluded that purchase cards could reduce administrative costs and improve delivery time, and in 1989 the Office of Management and Budget (OMB) tasked GSA with making purchase cards available government-wide. Participation in GSA's purchase card program was not mandatory, and card use did not initially grow as rapidly as some had expected. In 1993, however, a report issued by the National Performance Review (NPR) sparked a number of legislative and regulatory reforms intended to increase purchase card use. The NPR was a Clinton Administration initiative, headed by Vice President Al Gore, that sought to "reinvent" the federal government by making government operations both less expensive and more effective. One of the NPR's objectives was to identify opportunities to streamline a number of government-wide processes, including procurement. Drawing on input from experts in the public and private sectors, the initial report of the NPR recommended expanding the use of purchase cards across the government, a step it said would "lower costs and reduce bureaucracy in small purchases." In a separate report that focused solely on procurement, the NPR estimated that if half of all small acquisitions were made using purchase cards, the government would realize $180 million in savings annually. The report further recommended amending the Federal Acquisition Regulation (FAR)--the government's primary source of procurement guidance--to promote the use of purchase cards for small purchases. Building on the NPR's recommendations, Congress passed the Federal Acquisition Streamlining Act (FASA; P.L. 103-355 ) in 1994. FASA introduced several reforms that increased the use of purchase cards. Among these, Title IV of FASA established a simplified acquisition threshold of $100,000. Purchases at or below the threshold were exempted from the provisions of a number of procurement laws. This reform significantly reduced the administrative burden and procurement expertise needed to make small purchases. To further streamline procedures for the smallest acquisitions, Title IV also established a "micro-purchase" threshold of $2,500 (which was increased to $3,000 in 2006). FASA further exempted micro-purchases from sections of the Buy American Act and the Small Business Act, and they could be made without obtaining a competitive bid, if the cost was deemed reasonable by the cardholder. At the same time, the Clinton Administration took steps to increase the use of purchase cards. Citing the need to make agency procurement procedures "more consistent with recommendations of the National Performance Review," President Clinton issued Executive Order 12931 on October 13, 1994. E.O. 12931 directed agency heads to (1) expand purchase card use; and (2) delegate the micro-purchasing authority provided in FASA to program offices, which would enable them to make such purchases directly. E.O. 12931 also directed agency heads to streamline procurement policies and practices that were not mandated by statute, and to ensure that their agencies were maximizing their use of the new simplified acquisition procedures. In addition, the FAR was amended in 1994 to designate the purchase card as the "preferred method" for making micro-purchases, and to encourage agencies to use the card for purchases of greater dollar amounts. Card use increased sharply as agencies implemented these reforms. The dollar value of goods and services acquired with purchase cards increased from $527 million in FY1993 to $19.3 billion in FY2009. During that same time span, the number of cardholders nearly tripled to 270,000, and the number of purchase card transactions increased from 1.5 million to just under 21.8 million in FY2009. The flexibility of the purchase card may have contributed to its growth: it could be used for in-store purchases, which allowed the cardholder to take immediate possession of needed goods, or it could be used to place orders by phone or over the internet and have goods delivered. According to GSA, the use of purchase cards now saves the government $1.7 billion a year in administrative costs. The federal purchase card program is implemented by individual agencies, with the involvement of GSA and OMB. In broad terms, agencies establish and maintain their own programs, but they select purchase card services from contracts that GSA negotiates with selected banks, and their programs must conform to the government-wide guidance issued by OMB. Each agency is responsible for establishing its own purchase card program. The agency, within the framework of OMB guidance, establishes internal rules and regulations for purchase card use and management, decides which of its employees are to receive purchase cards, and handles billing and payment issues for agency purchase card accounts. Two levels of supervision generally exist within an agency's purchase card program. Individual cardholders are assigned to an Approving Official (AO). The AO is considered the "first line of defense" against card misuse, and agency policies often require the AO to ensure that all purchases comply with statutes, regulations, and agency policies. To that end, the AO may be responsible for authorizing cardholder purchases, either by approving purchases before they are made or by verifying their legitimacy through reviews of cardholder statements and supporting documentation, such as receipts. The AO may also be required to ensure that statements are reconciled and submitted to the billing office in a timely manner. Each agency also appoints an Agency Program Coordinator (APC) to serve as the agency's liaison to the bank and to GSA. At some agencies, each major component has an APC, one of whom is chosen to serve as the agency's liaison. The APCs are also usually responsible for agency-wide activities, such as developing internal program guidelines and procedures, sampling cardholder transactions to identify fraudulent or abusive purchases, setting up and deactivating accounts, and ensuring that officials and cardholders receive proper training. GSA's primary responsibility is to negotiate and administer contracts with card vendors on behalf of the government. In June 1998, agency purchase card programs began operating under GSA's SmartPay initiative. SmartPay permitted agencies to select a range of credit card products from five banks with which GSA had negotiated contracts. The SmartPay contracts established prices, terms, and conditions for credit card products and services from five banks. Purchase cards were established as centrally billed accounts under the contracts, which meant that agencies, and not individual cardholders, were billed for purchases. The contracts required agencies to make payment in full at the end of each billing cycle. New purchase card contracts--known collectively as SmartPay2--were negotiated between GSA and four banks in June 2007. Most agencies completed the transition to the new contracts by November 2008. SmartPay2 operates in largely the same manner as SmartPay, although some new products and services are available under the SmartPay2 contracts. OMB issues charge card management guidance that all agencies must follow. This guidance, located in Appendix B of OMB Circular A-123, establishes agencies' responsibilities for implementing their purchase, travel, and fleet card programs. Chapter 4 of Appendix B identifies the responsibilities of charge card managers in developing and implementing risk management controls, policies, and practices (often referred to collectively as "internal controls") that mitigate the potential for charge card misuse. Agency charge card managers must ensure that cardholder statements, supporting documentation, and other data are reviewed to monitor delinquency and misuse; key duties are separated, such as making purchases, authorizing purchases, and reviewing and auditing purchase documentation; records are maintained for training, appointment of cardholders and authorizing officials, cardholder purchase limits, and related information; disciplinary actions are initiated when cardholders or other program participants misuse their cards; appropriate training is provided for cardholders, approving officials, and other relevant staff; employees are asked about questionable or suspicious transactions; and charge card statement reconciliation occurs in a timely manner. Chapter 4 also identifies administrative and disciplinary actions that may be imposed for charge card misuse, such as deactivation of employee accounts, and it requires managers to refer suspected cases of fraud to the agency's Office of Inspector General or the Department of Justice. Circular A-123 provides OMB with oversight tools by requiring agencies to submit each year a charge card management plan that details their efforts to implement and maintain effective internal controls and minimize the risk of card misuse and payment delinquency. It also requires agencies to report the number of AOs it has appointed, the average number of monthly purchase card transactions each AO reviews, the number of reported cases of misuse, and the number of disciplinary actions taken in response to misuse. Audits of agency purchase card programs conducted by the Government Accountability Office (GAO) and agency inspectors general (IGs) have attracted congressional attention with their revelations of abusive purchases made by government employees. Among the many cases of abuse cited by auditors are a Department of Agriculture employee who, over a period of six years, used her purchase card to funnel $642,000 to her boyfriend; a Forest Service employee who charged $31,342 to his purchase card for personal items, including Sony Playstations, cameras, and jewelry; and a Coast Guard cardholder who used his purchase card to buy a beer brewing kit--and then brewed alcohol while on duty. Congress has held several hearings to address purchase card misuse and the underlying internal control weaknesses that auditors say allowed it to occur. The following paragraphs discuss these weaknesses identified in audit reports published between 2002 and 2008. One of the primary safeguards against improper use of government purchase cards is the review and approval of cardholder transactions by someone other than the cardholder. As noted, purchase card AOs are usually responsible for reviewing the cardholder's monthly statement. Given that the AO is often the only person other than the cardholder to assess the validity of a purchase before payment is made to the purchase card vendor, the review and approval process is considered one of the most critical components of an agency's purchase card control environment. Steven Kutz, GAO's Managing Director of Forensic Audits and Special Investigations, stated in testimony before the Senate, Basic fraud prevention concepts and our previous audits of purchase card programs have shown that opportunities for fraud and abuse arise if cardholders know that their purchases are not being properly reviewed. Despite the importance of the AO's role in preventing and detecting improper purchases, some agencies have failed to ensure that cardholder statements were carefully reviewed prior to their approval. At the Department of Education, auditors estimated that 37% of monthly cardholder statements they reviewed had not been approved by the AO. Most recently, GAO reported that nearly one of every six purchase card transactions government-wide had not been properly authorized. Even when AOs did conduct reviews, they often failed to meet government standards. Agencies are required by OMB to ensure that cardholder statements are compared with supporting documentation, such as invoices and receipts, as part of the review process. This is necessary because purchase card statements are rarely itemized; they usually provide only the store or contractor name and the amount charged. For AOs, receipts and invoices are the principal means of verifying what items were purchased and determining whether those items were for legitimate program purposes. Many agencies have not ensured that supporting documentation is available and examined as part of the review and approval process, according to GAO. An audit of HUD's purchase card program found that the agency did not have adequate documentation for 47% of transactions auditors deemed questionable--purchases from merchants that are not normally expected to do business with HUD--which meant auditors "were unable to determine what was purchased, for whom, and why." Similarly, a 2004 audit of the Veterans Health Administration's (VHA's) purchase card program estimated that $313 million of its transactions lacked key supporting documentation. One consequence of these weaknesses is that fraudulent and abusive transactions may slip through the review process unnoticed. For instance, GAO found that AOs at agencies across the government have approved cardholder statements that included transactions that should have been questioned, such as purchases of jewelry, home furnishings, cruise tickets, electronics, and other consumer goods. At the Forest Service, one employee used her purchase card over a period of years to accumulate more than $31,000 in jewelry and electronics. Similarly, HUD cardholders spent $27,000 at department stores like Macy's and JCPenney in a single year. In one egregious case, an FAA employee had his statement approved even though it showed he violated agency policy by charging cash advances to his purchase card--while at a casino. The want of adequate oversight is also evident where AOs have approved duplicate transactions--vendors charging the government twice for the same goods or services--and purchases made by someone other than the cardholder. One audit identified an estimated $177,187 in duplicate charges at one agency. An audit at the Federal Aviation Administration (FAA) discovered that a cardholder had allowed unauthorized individuals to charge over $160,000 to her purchase card account. When unauthorized and duplicate transactions are identified by the AO, they should be disputed under the process described in the SmartPay master contract. When AOs fail to identify and dispute fraudulent charges, the government often pays them in full or fails to obtain a refund from the purchase card vendor. GAO further found that many agencies fail to monitor and evaluate the effectiveness of their purchase card controls, a responsibility that is often assigned to the APC. Monitoring and evaluation may include sampling purchase card transactions for potentially improper purchases, ensuring purchase card policies are being properly implemented across the agency or component, and assessing program results. These duties are often unfulfilled. At FAA, for example, an audit found that APCs "generally were not" utilizing available reports to detect misuse and fraud, nor was the headquarters APC taking steps to assess the overall program. Similarly, an audit of the Forest Service purchase card program found that the agency's APCs failed to review sampled transactions for erroneous or abusive purchases, as required by U.S. Department of Agriculture regulations. Agencies are required to ensure that key procurement functions are handled by different individuals. When having goods shipped, for example, the same person should not both approve and place the order, or both place the order and receive the goods. At many agencies, however, the cardholder may perform two functions that should be separated, which increases the possibility that items may be purchased for personal use, lost, or stolen. In March 2008, GAO estimated that agencies were unable to document separation of duties for one of every three purchase card transactions. Three Navy cardholders ordered and received $500,000 of goods for themselves with their purchase cards before getting caught. In this way, inadequate separation of duties may contribute to millions of dollars of items that agencies have purchased which cannot be located. Items that are easily converted to personal use--commonly referred to as "pilferable property"--are particularly vulnerable to loss and theft. The Department of Education, for example, could not account for 241 personal computers bought with purchase cards at a cost of $261,500. An audit of FEMA's spending on items related to hurricane recovery found that $170,000 worth of electronics equipment acquired with purchase cards had not been recorded in FEMA's property records and could not be found. Given the complexities of federal procurement policies and procedures, training on the proper use and management of purchase cards is considered an important component of an agency's internal control environment. It is through this training that cardholders, approving officials, and program managers learn their roles in ensuring compliance with applicable regulations and statutes, and in reducing the risk of improper card use. To that end, OMB requires all agencies to train everyone who participates in a purchase card program. Cardholders are to be trained on federal procurement laws and regulations, agency policies, and proper card use. Approving officials are required to receive the same training as cardholders, in addition to training in their duties as AOs. Program managers are required to be trained in cardholder and AO responsibilities, as well as management, control, and oversight tools and techniques. In addition, all purchase card program participants are supposed to take their initial training prior to appointment (e.g., becoming a cardholder, or being designated as an AO or program manager) and receive refresher training at least every three years. A number of agencies have not fully implemented OMB's training requirements. A report by the inspector general at the Department of the Interior, for example, noted that the Department of the Interior had not provided any training to its AOs, and concluded that many of those officials were not performing adequate reviews. The AOs themselves reportedly said that they did not know how to conduct a proper review of purchase card transactions, or how and why to review supporting documentation--both subjects that are normally included in AO training. Similarly, an audit at FAA concluded that the agency's failure to provide refresher training for cardholders and AOs may have contributed to violations of statutory sourcing requirements. The failure to comply with sourcing statutes, which require agencies to purchase certain goods and services from specified vendor categories, may undermine congressional procurement objectives. The Javits-Wagner-O'Day Act (JWOD), for example, requires the government to buy office supplies and services from non-profits that employ blind and disabled Americans. Cardholder failure to comply with the provisions of JWOD and other sourcing statutes is widespread enough that GAO has estimated that tens of millions of dollars of purchase card transactions may have been conducted with vendors other than the ones Congress intended. The number of cardholders grew from under 100,000 in FY1993 to 680,000 in FY2000. After auditors expressed concerns that the government had issued too many credit cards and provided excessive credit limits--factors that raised the risk of card misuse--OMB issued a memorandum in April 2002, that required agencies to examine the number of purchase cards they issued and to consider deactivating all cards that were not a "demonstrated necessity." That same year, provisions in the Bob Stump National Defense Authorization Act for FY2003 ( P.L. 107-314 ) required the Department of Defense (DOD) to establish policies limiting both the number of purchase cards it issued and the credit available to cardholders. These reforms contributed to a net decrease of 410,000 government purchase cards between FY2000 and FY2009. Despite this decrease in the total number of purchase card users, audits indicate that a number of agencies, including some with relatively large purchase card programs, have yet to establish appropriate controls over card issuance and credit limits. A 2006 GAO report on purchase cards at the Department of Homeland Security (DHS), for example, identified 2,468 cardholders--about 20% of all DHS cardholders--who had not made any purchases in over a year. Similarly, a congressionally directed audit of the Veterans Health Administration's (VHA's) $1.4 billion purchase card program found that VHA had issued cards with credit limits up to 11 times greater than the cardholders' historical spending levels, thereby exposing its program to unnecessary risk. It is not known how many other agencies have not developed and implemented appropriate internal controls over card issuance and credit limits, so the extent of the government's financial exposure is also unknown. Former OMB Director Jim Nussle, in response to a March 2008 audit report that detailed incidences of purchase card abuse at several agencies, issued a memorandum on April 15, 2008, that outlined steps agencies must take to strengthen their internal controls. The requirements included developing more specific guidelines for (1) documenting independent receipt of items obtained with purchase cards, (2) inventorying items bought with purchase cards that are easily stolen, and (3) imposing disciplinary actions for purchase card misuse. Agencies also had to develop policies that require cardholders to obtain approval or subsequent review of purchase card activity below the micro-purchase threshold. On January 15, 2009, OMB issued revisions to its charge card guidance, which is contained in Appendix B of Circular A-123. The updated guidance included a requirement for cardholders, approving officials, or both to reimburse the government for unauthorized transactions or erroneous transactions that were not disputed. The updated guidance also required agencies to issue policies and procedures that would reduce the likelihood of loss or theft of property acquired with a purchase card. The Government Credit Card Abuse Prevention Act was introduced in both the Senate ( S. 942 ) and the House ( H.R. 2189 ) on April 30, 2009. The bill was based largely on GAO's recommendations for strengthening agency internal controls over purchase and travel card programs. The bill would require all federal agencies, except the Department of Defense, to implement more than a dozen internal controls over their purchase card programs. Specifically, the bill would require agencies to ensure that cardholder statements and supporting documentation are regularly reviewed and reconciled; cardholders and officials are provided with proper training; each cardholder is assigned an approving official other than the cardholder; agencies use available technology to monitor activity and identify fraud; the number of cards issued and their credit limits are appropriate; and payment, dispute, and cost recovery procedures are effective. The bill would also mandate that non-DOD agencies develop penalties for card misuse and report on agency employees that violate purchase card policies, and require agency IGs to conduct periodic risk assessments and audits of agency purchase card programs to identify waste, fraud, and abuse. Provisions specific to DOD would require increased use of technology to prevent and identify fraudulent purchases, expanded risk assessment and audit practices, and development of more specific rules regarding card deactivation of former DOD employees. Few agencies are able to dedicate employees to work full-time as AOs; rather, AO duties, which include time-intensive activities such as reviewing cardholder statements, often fall to staff who already have full workloads. Not surprisingly, some AOs have said it is difficult to find the time to carefully review purchase card statements because of the demands of their other responsibilities. This problem may be compounded if the number of cardholders assigned to an AO--referred to as the span of control--increases. There is no government-wide span of control policy, but GAO has recommended that agencies assign no more than seven cardholders to each AO; beyond that 7:1 ratio, the ability of the AO to conduct effective oversight may be diminished, particularly when the AO has other, significant duties. Although data are limited, audits have found that, at some agencies, the span of control exceeds GAO's recommendation. In 2006, according to GAO, 2,150 purchase card holders at the Department of Homeland Security--nearly 20% of DHS's total number of cardholders--were managed by AOs with a span of control in excess of 7:1. Additional research might be useful for determining whether AOs are hindered in their ability to provide effective oversight due to either the number of accounts they are expected to monitor, or to the demands of their other duties, or both.

Since the mid-1990s, the use of government purchase cards has expanded at a rapid rate. Spurred by legislative and regulatory reforms designed to increase the use of purchase cards for small acquisitions, the dollar volume of government purchase card transactions grew from $527 million in FY1993, to $19.3 billion in FY2009. While the use of purchase cards has been credited with reducing administrative costs, audits of agency purchase card programs have found varying degrees of waste, fraud, and abuse. One of the most common risk factors cited by auditors is a weak internal control environment: many agencies have failed to implement adequate safeguards against card misuse, even as their purchase card programs grew. In response to these findings, Congress has held hearings and introduced legislation that would enhance the management and oversight of agency purchase card programs. One of the most comprehensive proposals in recent years is the Government Credit Card Abuse Prevention Act of 2009. Drawing on GAO recommendations, the bill would require agencies, other than the Department of Defense (DOD), to implement a specific set of internal controls, establish penalties for employees who misuse agency purchase cards, and conduct periodic risk assessments and audits of agency purchase card programs. DOD would be required to expand its use of technology to prevent and identify fraudulent purchases, conduct periodic risk assessments and audits, and develop more specific rules regarding card deactivation of former DOD employees. This report begins by providing background on agency purchase card programs. It then discusses identified weaknesses in agency purchase card controls that have contributed to card misuse, and examines legislation introduced in the 111th Congress that would address these weaknesses. The report will be updated as events warrant.

This report answers several common questions regarding the London Interbank Offer Rate (LIBOR), an index representing prevailing interest rates in London money markets. Recently, the Commodity Futures Trading Commission (CFTC) and the U.S. Department of Justice (DOJ) reached settlements with Barclays, in which the British bank admitted submitting false responses to the survey used to calculate LIBOR and the Euro Interbank Offer Rate (EURIBOR) to manipulate the indexes. American policymakers have a number of concerns, including the possibility that American banks that participate in the LIBOR survey may also have attempted to manipulate the index, the effect that changes in LIBOR can have on borrowers and lenders whose contracts reference LIBOR to determine the interest rate of a loan, and the reliance of policymakers on LIBOR as one of the indicators of the stability of the financial system. For brevity and ease of exposition, this report focuses on LIBOR, although the manipulation and policy issues regarding EURIBOR are similar. LIBOR is an index that measures the cost of funds to large global banks operating in London financial markets or with London-based counterparties. The British Bankers' Association (BBA), a private trade association, constructs LIBOR, and Thomson Reuters publishes it worldwide. Each day, the BBA surveys a panel of banks, asking the question, "At what rate could you borrow funds, were you to do so by asking for and then accepting inter-bank offers in a reasonable market size just prior to 11 am?" The BBA throws out the highest and lowest portion of the responses, and averages the remaining middle. The average is reported at 11:30 a.m. LIBOR is actually a set of indexes. There are separate LIBOR rates reported for 15 different maturities (length of time to repay a debt) for each of 10 currencies. The shortest maturity is overnight, the longest is one year. In the United States, many private contracts reference the three-month dollar LIBOR, which is the index resulting from asking the panel what rate they would pay to borrow dollars for three months. The panel surveyed to construct the dollar LIBOR is made up of the 18 banks listed in Table 1 . The U.S. banks on the dollar panel include Bank of America, Citibank, and JPMorgan Chase, although all of the listed banks have significant U.S. activities. For the dollar LIBOR, the highest 4 and lowest 4 responses of the 18 banks on the panel are thrown out, and the middle 10 are averaged. The panel of banks for the LIBOR for each currency is chosen according to a published set of criteria. Market share in London and in transactions of various maturities for the currency are important factors. The committee also considers a firm's reputation and expertise in transactions in a currency. Banks can apply to be participants in the LIBOR survey, and the number of reporting banks has changed occasionally. Similar indexes are reported for other locations by other banking associations. For example, there is a EURIBOR for Europe, and a TIBOR for Tokyo. A primary difference between these other indexes and LIBOR is that they measure the cost of borrowing funds in these other locations, for various maturities, in various currencies. The sponsoring organizations and the methodologies may vary slightly from place to place, but the public reporting and the ability of third parties to reference the indexes are similar. The LIBOR index is used in many ways. Many private loan contracts use LIBOR as a benchmark; for example, the interest rate on a mortgage, student loan, or car loan may be set to LIBOR plus a few percentage points. Many financial derivatives, such as an interest rate swap, compare a fixed interest rate to LIBOR (because LIBOR is capable of varying from day to day). Futures exchanges use LIBOR for contracts traded in the market. Policymakers use LIBOR as one element in even more complex indexes, such as the TED spread (Treasury-Eurodollar), used to assess the level of stress in financial markets. Private parties are not legally required to use LIBOR (or any other index) as a benchmark; instead, they choose to do so voluntarily. Conceptually, a lender setting the interest rate for a future loan might try to take into account what its cost of funds will be when the loan actually has to be issued. A lender knows that permanent surveys like LIBOR will be published on the future date on which a loan is to be offered. The contract could specify that on the future date, the borrower will be given the loan with an interest rate based on the index value of LIBOR reported on that day. Because LIBOR is meant to represent the cost of borrowing dollars by the largest banks in global financial markets, other lenders may choose LIBOR if they believe that their own cost of funds is likely to follow a similar pattern over time. Alternatives to LIBOR for private contracts exist, but may have shortcomings. Differences in the type of borrower or the maturity of the loan may make other benchmarks less suitable for some purposes. For example, lenders could choose to use the yield on U.S. Treasury securities as a benchmark. However, the recent financial crisis served as a reminder that the borrowing costs of banks do not always trend in the same direction as the borrowing costs of the U.S. government. Or, banks could use the Federal Funds Rate as a benchmark, but that rate is subject to changes for policy reasons, not just market conditions. The rate charged on interbank repurchase agreements in New York money markets could be an alternative, although repurchase agreements may be more analogous to collateralized debt under some circumstances. The appropriate alternative is likely to vary with the types of loans or the types of financial derivatives being benchmarked. The value of loans, derivatives, and other financial instruments that reference LIBOR is very large. One estimate by staff of the Federal Reserve Bank of Cleveland found that 45% of prime adjustable rate mortgages (ARMs) and 80% of subprime ARMs used LIBOR as the benchmark. A financial adviser to municipalities stated that about 75% of municipalities have some contracts tied to the index. Because the BBA throws out the highest and lowest survey responses, some people may think that a single bank on a LIBOR reporting panel cannot affect the final index. A single bank can affect the index, but will not always be able to move the index in the direction it wants, or may not be able to move the index at all, under some circumstances. It is possible for a single bank on the panel to affect the dollar LIBOR if the bank's response would have been within the middle of the responses, or if it can change which responses are the middle responses. An illustrative example follows. Recall that the dollar LIBOR panel is made up of 18 banks, with only the responses of the middle 10 being averaged. Suppose that 4 banks report an interest rate of 3%, the next 10 banks report an interest rate of 8%, and 4 banks report an interest rate of 10%. The dollar LIBOR would be calculated by throwing out all of the 3% and 10% responses because the calculation throws out the highest and lowest 4 responses. In this example, the remaining 10 responses are all 8%, so the average would be 80/10 = 8%. LIBOR would be reported at 8%. However, if a bank that would have reported 10% wants to lower the LIBOR, and the bank lowers its bid from 10% to below 8% (for the sake of this example, assume the response is changed to 2%), the average will change, even though the bank's response is still thrown out. Why? Because one of the 8% responses is now among the highest 4 responses, and one of the 3% responses is in the middle 10. The average is now 75/10=7.5%. In this example, a single bank could move the index from 8% to 7.5%. If the bank exaggerates its lie, perhaps by reporting 1% instead of 2%, the LIBOR remains 7.5% in this example. Thus, it is possible for a single bank to affect LIBOR under some circumstances, but there is a limit on the magnitude of the effect. In some cases, the actions of a single bank will not move the index. In the above example, if the bank that would honestly report a 10% response wanted to increase the LIBOR index instead of lowering it, a change in the bank's own response would not achieve the desired manipulation because it would not change the value of any of the middle responses, nor would it change the responses comprising the middle. Why? Because reporting 12% instead of 10% still leaves the same 10 responses in the middle to be averaged. In this example, LIBOR remains 8%. Barclays has admitted submitting false survey responses to manipulate LIBOR. Because LIBOR is used in U.S. derivatives markets participated in by Barclays, an attempt to manipulate LIBOR is an attempt to manipulate U.S. derivatives markets, and thus a violation of U.S. law. Barclays has settled separately with United Kingdom officials for violating UK law. Focusing on U.S. issues, the following describes Barclays' admissions with the CFTC and DOJ. The material in this section is drawn from the Statement of Facts in Appendix A of the settlement documents. The settlement documents signed by Barclays with the CFTC and DOJ include employee emails that can be divided into three categories documenting manipulation: (1) changing the survey response for the benefit of Barclays' derivatives trade positions, (2) changing the survey response to protect Barclays' reputation, and (3) attempting to induce other banks to change their survey responses. The first two categories, Barclays acting alone, can affect LIBOR under some circumstances, but the methodology of LIBOR's calculation limits the magnitude of any impact of a single bank submitting a false bid. The third category, collusion, can have an impact of greater magnitude, but the settlement documents report only Barclays' attempts to reach out to other panel responders. Like any large and complex global bank, derivatives trades make up only one part of Barclays' balance sheet. LIBOR survey responders are supposed to be from the firm's treasury office, or other general office, and kept separate from derivatives traders. During 2005-2007, Barclays' internal emails reveal derivatives traders asking other employees to submit false survey responses to benefit their trading positions. In one particularly telling email exchange, a survey responder says that he or she was happy to help, and the trader thanks the individual. Unlike many other divisions within Barclays, the derivatives traders' preferred LIBOR outcome changes direction from day to day; that is, on some days the derivatives traders prefer LIBOR to be high to benefit their position while on other days the traders prefer LIBOR to be low. Many other lines of business have only one preferred direction; for example, units of Barclays that pay interest will consistently prefer the LIBOR index to be low. In the settlement, Barclays admits that it submitted false survey responses (both too high and too low) during the 2005-2007 period. When global financial markets came under increasing stress during 2008, Barclays' management preferred that Barclays lower its responses to protect the firm's reputation. Barclay's managers said that they did not want Barclays' "head to be above the parapet," lest it be shot at. As financial turmoil increased throughout that year, large complex banks like Barclays were having increasing difficulty in raising funds. At times, Barclays' responses tended to be higher than other responders, drawing the attention of UK officials. UK financial regulators raised concerns with Barclays. If Barclays' LIBOR survey responses were significantly higher than those of other LIBOR panel responders, then global investors might take that as a sign of weakness at Barclays. Individual submissions are made public in part to promote transparency of the index. Upon hearing that UK officials raised concerns with Barclays' management that the firm's responses were high, some Barclays employees concluded that UK officials wanted Barclays to submit lower LIBOR responses, a conclusion that the managers who met with UK officials have said was not warranted. Unlike the 2005-2007 period during which Barclays submitted false responses in both directions, Barclays consistently under-reported its cost of funds in 2008. The Federal Reserve Bank of New York (FRBNY) reportedly raised concerns with Barclays about its LIBOR responses. Reportedly, the FRBNY also raised concerns with UK regulators and the BBA about the methodology for the LIBOR index. In response to congressional inquiries, FRBNY has posted several documents that reveal its concerns with LIBOR as it was being calculated and reported in 2008. Included among the documents are Explanatory Note; April 11, 2008: MarketSOURCE Weekly Market Review; May 6, 2008: Slide Deck of Presentation to U.S. Treasury, "Recent Developments in Short-Term Funding Markets"; May 20, 2008: MarketSOURCE report "Recent Concerns Regarding LIBOR's Credibility"; June 1, 2008: Timothy F. Geithner e-mail to Mervyn King, copying Paul Tucker, with attached "Recommendations for Enhancing the Credibility of LIBOR"; June 3, 2008: Mervyn King e-mail to Timothy F. Geithner; and June 5, 2008: Slide Deck of Presentation to the Interagency Financial Markets Group Meeting, "Market Concerns Regarding LIBOR."

The London Interbank Offer Rate (LIBOR) is an estimate of prevailing interest rates in London money markets. Barclays, a British bank that serves on the panel responding to the LIBOR survey, recently admitted submitting false responses to manipulate the index (and attempting to manipulate a similar index, the Euro Interbank Offer Rate [EURIBOR]). The Commodity Futures Trading Commission (CFTC) and the U.S. Department of Justice (DOJ) reached settlements with Barclays in which the bank agreed to admit fault and pay a large fine. This report answers several frequently asked questions. How is LIBOR calculated? Which banks serve on the dollar LIBOR panel? How can a single bank manipulate LIBOR? How did Barclays manipulate LIBOR? How is LIBOR used in the U.S. financial systems? Are there alternatives to LIBOR? Were U.S. policymakers, such as the Federal Reserve Bank of New York, aware of problems with LIBOR?

Since 1995, Congress has on three occasions approved legislation to regulate lobbyists' contacts with executive branch officials. Prior to 1995, lobbying laws only required that lobbyists contacting Members of Congress register with the Clerk of the House of Representatives and the Secretary of the Senate. Under current lobbying laws, individuals are required to register with the Clerk and the Secretary when lobbying either legislative or executive branch officials. Federally registered lobbyists who wish to lobby executive branch departments and agencies regarding funds provided by the Emergency Economic Stabilization Act and the American Recovery and Reinvestment Act of 2009 are subject to additional restrictions pursuant to a series of memoranda and guidelines issued between January and July 2009. This report outlines the development of registration requirements for lobbyists engaging executive branch officials since 1995. It also summarizes steps taken by the Obama Administration to limit and monitor lobbying of the executive branch; discusses the development and implementation of restrictions placed on lobbying for Recovery Act and EESA funds; examines the Obama Administration's decision to stop appointing lobbyists to federal advisory bodies and committees; considers third-party criticism of current executive branch lobbying policies; and evaluates options for possible modifications in current lobbying laws and practices. In 1995, the Lobbying Disclosure Act (LDA) repealed the Lobbying Act portion of the Legislative Reorganization Act of 1946 and created a system of detailed registration and reporting requirements for lobbyists. It included a provision requiring lobbyists to register with Congress and the disclosure of lobbying contacts with certain "covered" executive branch employees. The LDA was amended in 1998 to make technical corrections, including altering the definition of executive branch officials covered by the act. In 2007, the Honest Leadership and Open Government Act further amended LDA definitions on covered officials. The Lobbying Act of 1946 focused on lobbyists' interactions with Congress, and was silent on lobbying the executive branch. The LDA, for the first time, included executive branch officers and certain employees by defining them as "covered officials." Section 3 of LDA defines a covered executive branch official as (A) the President; (B) the Vice-President; (C) any officer or employee, or any individual functioning in the capacity of such an officer or employee, in the Executive Office of the President; (D) any officer or employee serving in a position in level I, II, III, IV, or V of the Executive Schedule, as designated by statute or Executive order; (E) any member of the uniformed services whose pay grade is at or above O-7 under section 201 of title 37, United States Code ; and (F) any officer or employee serving in a position of a confidential policy-determining, policy-making, or policy-advocating character described in section 7511(b)(2) of title 5, United States Code . Under the LDA, lobbyists who contact these executive branch officials are now required to register with the Clerk of the House and the Secretary of the Senate, and to disclose lobbying contacts and activities. The LDA made these requirements identical for covered legislative and executive branch officials and assigned to the Clerk of the House and the Secretary of the Senate the responsibility of collecting registration and disclosure statements. In April 1998, the LDA was amended to make technical corrections. Part of the technical corrections was a minor change in the U.S. Code section cited by the LDA defining covered officials. The amendment changed the reference in the LDA from 5 U.S.C. Section 7511 (b)(2) to 5 U.S.C. Section 7511 (b)(2)(B) to reflect the ability to the Office of Personnel Management to exempt a position from the competitive service. The Honest Leadership and Open Government Act (HLOGA) of 2007 also amended the LDA. HLOGA did not further alter the definition of a covered executive branch official but did refine thresholds and definitions of lobbying activities, change the frequency of reporting for registered lobbyists and lobbying firms, require additional disclosures, create new semi-annual reports on campaign contributions, and add disclosure requirements for coalitions and associations. Since its inception, the Obama Administration has focused on ethics and the potential influence of lobbyists on executive branch personnel. One of President Barack Obama's first actions was to issue ethics and lobbying guidelines for executive branch employees. These guidelines laid the foundation for formal lobbying restrictions issued in July 2009. On January 21, 2009, President Obama issued Executive Order 13490, "Ethics Commitments by Executive Branch Personnel." The executive order created an ethics pledge for all executive branch appointments made on or after January 20, 2009; defined terms included in the pledge; allowed the Director of the Office of Management and Budget (OMB), in consultation with the counsel to the President, to issue ethics pledge waivers; instructed the heads of executive agencies to consult with the Director of the Office of Government Ethics to establish rules of procedure for the administration of the ethics pledge; and authorized the Attorney General to enforce the executive order. In a press release summarizing the executive order, the White House explained the ethics pledge and the importance of following ethics and lobbying rules: The American people ... deserve more than simply an assurance that those coming to Washington will serve their interests. They deserve to know that there are rules on the books to keep it that way. In the Executive Order on Ethics Commitments by Executive Branch Personnel , the President, first, prohibits executive branch employees from accepting gifts from lobbyists. Second, he closes the revolving door that allows government officials to move to and from private sector jobs in ways that give that sector undue influence over government. Third, he requires that government hiring be based upon qualifications, competence and experience, not political connections. He has ordered every one of his appointees to sign a pledge abiding by these tough new rules as a downpayment on the change he has promised to bring to Washington. Requirement of an ethics pledge above and beyond the general oath of office administered to all government employees reinstates a similar requirement instituted by President William Jefferson Clinton in 1993. The effect of such a policy is undetermined for the recruitment and retention of governmental employees or for the barring of federally registered lobbyists from serving in executive branch positions. On January 27, 2009, just a week after Barack Obama became President, Secretary of the Treasury Timothy Geithner announced restrictions on lobbying, by individuals registered as lobbyists, to obtain Emergency Economic Stabilization Act (EESA) funds. The guidance was designed to combat potential lobbyist influence on the disbursement of EESA funds, to remove politics from funding decisions, to offer certification to Congress that each investment decision was based "only on investment criteria and the facts of the case," and to provide transparency to the investment process. The guidance classified contacts between federally registered lobbyists and executive branch officials into two broad categories: (1) unrestricted oral communications on logistical questions and at widely attended gatherings and (2) oral communications during the period following submission of a formal application for federal assistance under EESA until preliminary approval of EESA funds. The guidance also covers oral and written communication about EESA policy or applications for funding or pending applications. Restrictions on lobbyist communication with executive branch officials are mirrored in the updated guidelines issued by OMB for the Recovery Act lobbying discussed below. As with the Recovery Act restrictions, federally registered lobbyists may ask logistical questions of executive branch officials responsible for disbursing EESA funds and speak with those officials at widely attended gatherings. All other contacts between federally registered lobbyists and executive branch officials must be documented if they concern EESA policy, applications for funding, or pending applications. In contrast to the Recovery Act guidelines, which restrict contact by all non-governmental persons, the EESA guidelines continue to apply only to federally registered lobbyists. Following the passage of the American Recovery and Reinvestment Act of 2009, the White House was concerned about the potential ability of lobbyists to influence stimulus funds that would be allocated by the executive branch. On March 20, 2009, the White House issued a memorandum outlining proposed restrictions on federally registered lobbyists' contacts with executive department and agency officials on stimulus funds. Following a 60-day review and comment period, updated guidance was issued by the Office of Management and Budget (OMB) for communication with federally registered lobbyists regarding stimulus funds in July 2009. To ensure the responsible and transparent distribution of funds pursuant to the American Recovery and Reinvestment Act of 2009 (Recovery Act), President Obama, on March 20, 2009, issued a memorandum to the heads of the executive departments and agencies prescribing restrictions on oral communications with lobbyists on Recovery Act funds. In the memorandum's introductory remarks, President Obama stated that, In implementing the Recovery Act, we have undertaken unprecedented efforts to ensure the responsible distribution of funds for the Act's purposes and to provide public transparency and accountability of expenditures. We must not allow Recovery Act funds to be distributed on the basis of factors other than the merits of proposed projects or in response to improper influence or pressure. We must also empower executive department and agency officials to exercise their available discretion and judgment to help ensure that Recovery Act funds are expended for projects that further the job creation, economic recovery, and other purposes of the Recovery Act and are not used for imprudent projects. The President's memorandum outlined four policies for executive branch departments and agencies handing out Recovery Act funds: (1) ensuring that decision making is merit based for grants and other forms of federal financial assistance, (2) avoiding the funding of "imprudent" projects, (3) ensuring transparency for communications with registered lobbyists, and (4) providing OMB assistance to departments and agencies for implementation of the memorandum. To ensure transparency when executive department or agency officials are contacted by federally registered lobbyists for Recovery Act projects, Section 3 of the memorandum provides five guidelines for interaction with lobbyists: 1. Executive departments and agencies cannot consider the views of lobbyists concerning projects, applications, or applicants for funding. 2. Agency officials cannot communicate orally (in-person or by telephone) with registered lobbyists about Recovery Act projects, applications, or funding applications and must inquire that the individuals or entities are not lobbyists under the Lobbying Disclosure Act of 1995. 3. Written communication from a registered lobbyist must be publicly posted by the receiving agency or governmental entity on its recovery website within three business days of receipt. 4. Executive departments and agencies can communicate orally with registered lobbyists if particular projects, applications, or applicants for funding are not discussed, and if that government official documents in writing and posts to the department or agency's Recovery Act website "(i) the date and time of the contact on policy issues; (ii) the names of the registered lobbyists and the official(s) between whom the contact took place; and (iii) a short description of the substance of the communication." 5. Agency officials must reconfirm, when scheduling and prior to communications, that any individuals or parties participating in the communication are not registered lobbyists. On April 7, 2009, pursuant to President Obama's earlier memorandum, OMB Director Peter Orszag issued "sample interim guidance" for departments and agencies which "outlines the actions employees are required to take ... whenever they receive or participate in oral communications with any outside persons or entities regarding Recovery Act funds." The interim guidance was not designed as a ban on communications with federally registered lobbyists. Instead, "communications with Federally registered lobbyists should proceed, but in compliance with the [outlined] ... protocol." The interim guidance divided communications between executive branch employees and registered lobbyists into three categories: unrestricted oral communications, restricted oral communications, and written communications. The Orszag memorandum does not place restrictions on employees' contact with federally registered lobbyists "concerning general questions about the logistics of the Recovery Act funding or implementation" including administrative requests. Instead, the interim guidance document outlines four general topics of discussion which are not covered by the President's memorandum: (1) how to apply for funding under the Recovery Act; (2) how to conform to deadlines; (3) to which agencies or officials applications or questions should be directed, [and] (4) requests for information about program requirements and agency practices under the Recovery Act. In addition, the Orszag memorandum does not restrict communications or interactions with registered lobbyists at "widely attended" public gatherings. Restrictions, however, "do apply to private (non-public) oral communications between Federal officials and federally registered lobbyists that may happen to occur at, or on the heals of, a widely attended gathering." For oral communication between executive branch employees and federally registered lobbyists on policy matters or in support of specific Recovery Act projects or applications for funding, the contact must be documented. While executive branch employees "should ask if any person participating in the oral communication is a Federally registered lobbyist," if the contact is a federally registered lobbyist, the employee must initiate a four-step process to document the communication. If, at any point in the process, the communication ceases, the employee can suspend the collection of data. The four-step process is as follows: 1. Inform the person(s) of applicable restrictions through the use of two sample templates that can be read or provided to the federally registered lobbyist. These state: Under the President's Memorandum, we cannot engage in any oral communications with Federally registered lobbyists about the use of Recovery Act funds in support of particular projects, applications, or applicants. All such communications by Federal lobbyists must be submitted in writing, and will be posted publicly on our agency's recovery website within 3 days. If the oral communication is about general policy issues concerning the Recovery Act and does not touch upon particular projects, applications or applicants for funding, a Federally registered lobbyist may participate in the conversation. We will document the fact of the policy conversation in writing, including the name of the lobbyist and other participants, together with a brief description of the conversation, for public posting on our agency's recovery website within 3 days. 2. If the oral communications proceeds, only logistical questions or general information about Recovery Act programs should be discussed. No discussion of particular projects, applications, or applicants for funding is permitted. 3. Each in-person or telephone conversation on Recovery Act policy matters should be documented with the date of contact, the names of the parties to the conversation, the name of the lobbyist's client(s), and a one-sentence description of the substance of the conversation. 4. Information about the contact should be submitted to the appropriate person in the employee's agency. "That official should review the form for completeness and forward it for posting on [the] agency's website within 3 business days of the communication." If executive branch employees receive written communication about Recovery Act projects, applications, or applicants from federally registered lobbyists, such communication must be forwarded to a designated agency official by e-mail. The designated agency official must then forward the communication for posting to the agency's Recovery Act website. On July 24, 2009, OMB Director Orszag released updated guidance on communications with registered lobbyists Recovery Act funds. Changes made to the interim guidance document include expansion of restrictions to "all persons outside the Federal Government (not just federally registered lobbyists) who initiate oral communications concerning pending competitive applications under the Recovery Act." Restrictions for oral communication of logistical questions and oral communications at widely attended gatherings did not change from the policies established by the interim guidance document. The updated guidance document, however, differentiates between oral communications between the submission of a formal application and the award of a grant, and oral and written communication concerning policy and projects for funding. Communication between interested parties and executive branch employees "[d]uring the period of time commencing with the submission of a formal application by an individual or entity for a competitive grant or other competitive form of Federal financial assistance under the Recovery Act, and ending with the award of the competitive funds" is restricted. Federal employees "may not participate in oral communications initiated by any person or entity concerning a pending application for a Recovery Act competitive grant or other competitive form of Federal financial assistance, whether or not the initiating party is a federally registered lobbyist." These restrictions apply unless (i) the communication is purely logistical; (ii) the communication is made at a widely attended gathering; (iii) the communication is to or from a Federal agency official and another Federal Government Employee; (iv) the communication is to or from a Federal agency official or an elected chief executive of a state, local or tribal government, or to or from a Federal agency official and the Presiding Office or Majority Leader in each chamber of a state legislature; or (v) the communication is initiated by a Federal agency official. If communication concerns a pending application and is not exempted, the employee is directed to terminate the conversation. Restrictions on other oral and written communication with federally registered lobbyists about pending applications use the same thresholds for reporting as provided in the interim guidance document for " Restricted Oral Communication ." This includes informing the contact that the conversation will be documented; documenting the contact by recording the contact date, names of parties to the conversation, the name of the lobbyist's client, a one-sentence description of the conversation, and attachments of any written materials provided by outside participants during the meeting; and submitting of the forms to the agency for posting on the Recovery Act website. Further broadening the restrictions on lobbyists, the White House, on September 23, 2009, announced a new policy to restrict the number of federally registered lobbyists serving on agency advisory boards and commissions in an effort to "reduce the influence of special interests in Washington." In October 2009, Norm L. Eisen, special counsel to the President for ethics and government reform, issued two blog posts to clarify the White House position on federally registered lobbyists serving on federal advisory committees and to respond to criticism leveled by the American League of Lobbyists and the chairs of the Industry Trade Advisory Committees (ITAC). In his response, Mr. Eisen stated the following: While we recognize the contributions some of those who will be affected have made to these committees, it is an indisputable fact that in recent years, lobbyists for major special interests have wielded extraordinary power in Washington, DC, resulting in a national agenda too often skewed in favor of the interests that can afford their services. It is that problem that the President has promised to change, and this is a major step in implementing that change. Implementation of these recommendations was initially made by individual agencies and departments during the recertification and reappointment process for each advisory committee. Additionally, the White House stated that they were not attempting to stifle lobbyists' ability to advocate on behalf of their clients, just that "industry representatives shouldn't be given government positions from which to make their case." On June 18, 2010, the White House issued a memorandum announcing a formal policy of not making "any new appointments or reappointments of federally registered lobbyists to advisory committees and other boards and commissions." In a blog post accompanying the presidential memorandum, the White House reiterated why the President believes that prohibiting lobbyists from serving on federal advisory committees is a prudent course of action: For too long, lobbyists have wielded disproportionate influence in Washington. It's one thing for lobbyists to represent their clients' interests in petitions to the government, but it's quite another, and not appropriate, for lobbyists to hold privileged positions [that] could enable them to advocate for their clients from within the government. It was for this reason that the President took steps on his first day in office to close the revolving door through which lobbyists rotated between private industry and full-time executive branch positions. Today's step goes further by barring lobbyist appointments to part-time agency advisory positions. The memorandum further directed the Office of Management and Budget (OMB) to "issue proposed guidance designed to implement this policy to the full extent permitted by law" within 90 days, and to issue final guidance following a public comment period. On November 2, 2010, OMB issued proposed guidance and invited comments from interested parties. Included in the guidance were proposed rules to apply the federally registered lobbying ban to all boards and commissions regardless of Federal Advisory Committee Act (FACA) status or whether the committee was created by statute, executive order, or agency authority. On October 5, 2011, OMB issued final guidance for the appointment of federally registered lobbyists. As initially provided for in the presidential memorandum and the proposed guidance, the final guidance provides that after June 18, 2010, federally registered lobbyists (as defined by 2 U.S.C. Section 1605) are not to be appointed to advisory committees, boards, commissions, councils, delegations, conferences, panels, task forces, or other similar groups (or sub-groups) regardless of whether the entity was created by the President, Congress, or an executive branch agency or official, and regardless of whether FACA applies to the entity. Additionally, only former federally registered lobbyists who have "filed a bona fide de-registration or has been de-listed by his or her employer as an active lobbyist reflecting the actual cessation of lobbying activities or if they have not appeared on a quarterly lobbying report for three consecutive quarters as a result of their actual cessation of lobbying activities" are eligible for appointment. Critiques of the Obama Administration's policy toward federally registered lobbyists have focused on Recovery Act restrictions and lobbyists serving as members of federal advisory committees. In each instance, the American League of Lobbyists has written to the White House critiquing the programs and suggesting policy modifications. Criticism of executive branch policies on interactions between federally registered lobbyists and executive branch officials developed shortly after the President's March 20, 2009, memorandum outlining Recovery Act lobbying restrictions. On March 31, 2009, the American Civil Liberties Union (ACLU), Citizens for Responsibility and Ethics in Washington (CREW), and the American League of Lobbyists (ALL) sent a letter to White House Counsel Gregory Craig and, at the same time, issued a press release asking the White House to rescind the restrictions. In its letter, the groups stated their support for "efforts to ensure all American Recovery and Reinvestment Act of 2009 ('Recovery Act') funds are expended in a transparent and responsible manner," but felt that "[s]ection 3 [of the President's Memorandum], 'Ensuring Transparency of Registered Lobbyists Communications,' [was] an ill-advised restriction on speech and not narrowly tailored to achieve the intended purpose." The groups' press release emphasized that the directive was both too narrow and too broad, and it encroached on individuals' right to petition the government. The press release stated the following: In their letter, the groups said the directive was both too narrow--because it did not apply to non-registered lobbyists such as bank vice presidents or corporate directors--and also too broad, because it incorrectly assumed that all registered lobbyists may exert improper pressure for clients seeking funding for Recovery Act projects. Additionally, the right to petition the government is one of the main tenets of our country's founding principles. To state that one class of individuals may not participate in the same manner as all others is clearly a violation of this principle. The updated guidance document issued by the White House on July 24, 2009, included some of the changes that CREW, ACLU, and ALL had requested. The updated guidance included the expansion of restrictions to cover "all persons outside the Federal Government (not just federally registered lobbyists) who initiate oral communications concerning pending competitive applications under the Recovery Act." Following the September 23, 2009, White House blog post outlining future restrictions on the appointment of federally registered lobbyists to executive branch agency boards and commissions, both the lobbying community and members of the Industry Trade Advisory Committees criticized the White House's position. On October 19, 2009, the 16 chairs of the Industry Trade Advisory Committees wrote a letter to the Secretary of Commerce, Gary Locke, and the U.S. Trade Representative, Ron Kirk, outlining their concerns over the new policy of prohibiting federally registered lobbyists from serving on federal advisory committees. The three substantive and procedural concerns outlined in the letter are: that banning federally registered lobbyists from serving on federal advisory committees will "undermine the utility of the advisory committee process, the level of advice that the advisory committees provide, and, consequently, the ability of the United States to achieve balanced and effective trade policies"; that the "new policy will undermine the broader goals of transparency with respect to lobbying which are the hallmarks of the Advisory Committee process." In addition, "because the policy focuses on registered lobbyists, it actually incentivizes individuals who desire to remain on the Committee to de-register as a registered lobbyist under the LDA"; and that the illegal actions of a few individuals are being used to prejudge all federally registered lobbyists. The White House, in a letter from Norm L. Eisen, special counsel to the President, responded to the Industry Trade Advisory Committee's letter on October 21, 2009, and stated that Your arguments that only lobbyists can bring the requisite experience to provide wise counsel, or that reaching beyond the roster of industry lobbyists for appointees will result in a "lack of diversity," are unconvincing on their face. We believe the committees will benefit from an influx of businesspeople, consumers and other concerned Americans who can bring fresh perspectives and new insights to the work of government. Following the issuance of draft guidance in November 2010, OMB solicited public opinions on banning federally registered lobbyists from serving on advisory committees. Among the opinions submitted to OMB were critiques provided by 10 individuals and organizations and generally restated themes present in earlier American League of Lobbyists correspondence. In some instances, however, organizations highlighted new reasons for opposing the ban. For example, the AFL-CIO stated that the Administration was drawing arbitrary lines between federally registered lobbyists and other employees who work for the same company or organization. In their letter to White House General Counsel Preeta D. Bansal, the AFL-CIO stated the following: The Administration's policy also embraces a flawed and arbitrary distinction between lobbyists another who serve the same organizations--including, of course, those who, unlike lobbyists, actually lead and set policy for them. Self-evidently, it is not the commercial interest or public policy preferences of "lobbyists" themselves that the Administration is concerned may be implicated by their service on advisory committees. Rather, it is the interests and preferences of their employers or clients, which direct them and for which they serve as advocates and experts.... If the Administration seeks to constrain and expose private influence in the advisory committees program, then its polices should be directed at the actual private decision-makers and beneficiaries of government spending, not their subordinate advisers and representatives. Creation of restrictions on federally registered lobbyists' access to executive branch departments and agencies has already changed the relationship between lobbyists and covered executive branch officials. If desired, there are additional options which might further clarify lobbyists' relationships with executive branch officials. These options each have advantages and disadvantages for the future relationships between lobbyists and governmental decision-makers. CRS takes no position on any of the options identified in this report. If current disclosure requirements are not determined to be sufficient to capture program level lobbying activity, or if current executive branch restrictions were made permanent, the Lobbying Disclosure Act could be amended to institute provisions similar to current executive branch lobbying restrictions. Currently, lobbyists must file quarterly disclosure reports with information on their activities and covered officials contacted. In addition, the LDA, as amended by the Honest Leadership and Open Government Act of 2007, requires federally registered lobbyists to file semi-annual reports on certain campaign and presidential library contributions. The disclosure requirements might be further amended to cover program specific disbursement information. Changes to the LDA would require the introduction and passage of a bill by Congress, as well as the President's signature. The White House or the Recovery Accountability and Transparency Board could create a central database to collect all Recovery Act projects and contacts by federally registered lobbyists in a single, searchable location. Creating a central, searchable portal might allow for department and agencies to see which lobbyists, if any, are involved in a given project and allow individuals and groups to better understand which departments and agencies are responsible for projects of interest. A similar website has been established for stimulus fund recipients to register and disclose how funds are being spent. Congress or the President might determine that the current lobbying registration and disclosure provisions, executive orders, and executive branch memoranda on Recovery Act lobbying restrictions are effective. Instead of amending the LDA, issuing additional executive orders, or issuing additional memoranda, Congress or the President could continue to utilize existing law to provide lobbyists access to covered governmental officials. Changes to the LDA or executive branch policy could be made on an as-needed basis through changes to LDA guidance documents issued by the Clerk of the House and Secretary of the Senate, through executive order, or through the issuance of new memoranda by the President.

Under the Lobbying Disclosure Act (LDA) of 1995, as amended, individuals are required to register with the Clerk of the House of Representatives and the Secretary of the Senate if they lobby either legislative or executive branch officials. In January 2009, Secretary of the Treasury Timothy Geithner placed further restrictions on the ability of lobbyists to contact executive branch officials responsible for dispersing Emergency Economic Stabilization Act (EESA, P.L. 110-343) funds. Subsequently, President Barack Obama and Peter Orszag, Director of the Office of Management and Budget (OMB), issued a series of memoranda between March and July 2009 that govern communication between federally registered lobbyists and executive branch employees administering American Recovery and Reinvestment Act of 2009 (P.L. 111-5) funds. Most recently, in October 2011, OMB published final guidance on the appointment of federally registered lobbyists to federal advisory bodies and committees. The guidance stipulates that federally registered lobbyists be prohibited from serving on advisory committees governed by the Federal Advisory Committee Act (FACA). The Recovery and Reinvestment Act lobbying restrictions focus on both written and oral communications between lobbyists and executive branch officials. Pursuant to the President's memoranda, restrictions have been placed on certain kinds of oral and written interactions between "outside persons and entities" and executive branch officials responsible for Recovery Act fund disbursement. The President's memoranda require each agency to post summaries of oral and written contacts with lobbyists on dedicated agency websites. EESA regulations are virtually identical, but only apply to federally registered lobbyists. This report outlines the development of registration requirements for lobbyists engaging executive branch officials since 1995. It also summarizes steps taken by the Obama Administration to limit and monitor lobbying of the executive branch; discusses the development and implementation of restrictions placed on lobbying for Recovery Act and EESA funds; examines the Obama Administration's decision to stop appointing lobbyists to federal advisory bodies and committees; considers third-party criticism of current executive branch lobbying policies; and provides options for possible modifications in current lobbying laws and practices. For further analysis on lobbying registration and disclosure, see CRS Report RL34377, Honest Leadership and Open Government Act of 2007: The Role of the Clerk of the House and the Secretary of the Senate, by [author name scrubbed]; CRS Report RL34725, "Political" Activities of Private Recipients of Federal Grants or Contracts, by [author name scrubbed]; and CRS Report R40245, Lobbying Registration and Disclosure: Before and After the Enactment of the Honest Leadership and Open Government Act of 2007, by [author name scrubbed].

There has been a great deal of concern over the effect of the current economic downturn on retirement plans. One company recently reported that at the end of 2008, the "chaos" in the financial markets led to a $409 billion deficit in defined benefit pension plan funding for the plans of S&P 1500 companies. The report indicated that this deficit will negatively affect corporate earnings in 2009. Due in part to the large investment losses in pension plans and other retirement accounts, in December of 2008, Congress unanimously enacted H.R. 7327 , the Worker, Retiree, and Employer Recovery Act of 2008 ("WRERA" or "the Act"). While several provisions of WRERA make technical corrections to the Pension Protection Act of 2006 ("PPA"), the Act also provides some temporary relief from certain requirements that may be difficult for pension plans to meet due to current economic conditions. This report provides an overview of some of the key provisions of WRERA, in particular, the provisions relating to the funding of single and multiemployer plans, the temporary waiver for required minimum distributions, as well as certain technical corrections and other provisions that affect the two primary types of pension plans, defined benefit and defined contribution plans, as well as individual retirement accounts and annuities (IRAs). Title II of WRERA contains provisions designed to protect both individuals and retirement plans from the potentially large losses of plan amounts due to the decline of the stock market and the current economic climate. These provisions include a temporary waiver of the required minimum distributions, and temporary relief from funding rules created by the PPA that apply to single and multi-employer plans. In essence, these provisions permit a delay in taking required distributions and meeting pension funding obligations, in an effort to give retirement plans and accounts more time for economic conditions to improve and for the losses in investments to be recovered. Under section 401(a)(9) of the Internal Revenue Code, employer-sponsored retirement plans, such as 401(k), 403(b) and 457 plans, and individual retirement accounts and annuities ("IRAs") must make certain annual required minimum distributions in order to maintain their "qualified" (i.e., tax-favorable) status. The theory behind these required distributions is to ensure that tax-deferred retirement accounts that have been established to provide income during retirement are not used as permanent tax shelters or as vehicles for transmitting wealth to heirs. For employer-sponsored plans, required minimum distributions to participants must start no later than April 1 of the year after the year in which the participant either attains age 70 1/2,or retires, whichever is later. For traditional IRAs, required minimum distributions must commence by April 1 following the year the IRA owner reaches age 70 1/2. Alternative minimum distribution requirements apply to beneficiaries in the event that the participant dies before the entire amount in the participant's account is distributed. Failure to make a required distribution results in an excise tax equal to 50 percent of the required minimum distribution amount that was not distributed for the year, which is imposed on the participant or beneficiary. Following the decline in the stock market, there was concern about individuals taking these required distributions when there has not been enough time to recover losses. Section 201 of WRERA suspends the minimum distribution requirements, both initial and annual required distributions, for defined contribution arrangements, including IRAs, for calendar year 2009. Thus, plan participants and beneficiaries are allowed, but are not required, to take required minimum distributions for 2009. However, it should be noted that the required distributions for 2008, or for years after 2009, are not waived by the new law. The Internal Revenue Code sets out certain minimum funding standards that apply to defined benefit plans. The funding standards for single-employer plans were completely revamped by the PPA, which created more stringent standards than under prior law. When fully phased in, the new funding requirements established by the PPA will generally require plan assets to be equal to 100 percent of plan liabilities on a present value basis. Under these standards, when the value of a plan's assets is less than the plan's "funding target," a plan's minimum required contribution for a plan year is comprised of the plan's " target normal cost," (i.e. , the present value of the benefits expected to be accrued or earned during the year, minus certain plan expenses), plus a "shortfall amortization base," an amount which is established if the plan has a funding shortfall. However, under a special exemption, if the value of the plan's assets is equal to or greater than the funding target, then the shortfall amortization amount will be zero. The PPA also created a transition rule, under which a shortfall amortization base does not have to be established if, for plan years beginning in 2008 and ending in 2010, the plan's assets are equal to a certain percentage of the plan's funding target for that year. The percentage of the funding target is 92 percent for 2008, 94 percent for 2009, and 96 percent for 2010. In other words, the PPA, through this transition rule, gave pension plans a three year period to ease into the new plan funding requirements, in which plans could gradually increase the value of the plan assets, thus relieving them from the burden of having to contribute a large part of the funding shortfall in one year. The PPA placed a limitation on the transition rule, under which the rule will not apply with respect to any plan year after 2008 unless the shortfall amortization base was zero (e.g., the plan failed to meet the transition rule, or be 92 percent funded in 2008). Section 202 of WRERA allows plans to follow the transition rule even if the plan's shortfall amortization base was not zero in the preceding year. Thus, a plan that was not 92 percent funded in 2008 would only be required to be 94 percent funded in 2009, instead of 100 percent. This provision gives plans some additional time to be 100 percent funded, a requirement that may have become more difficult to fulfill because of the decline in the financial markets and the resulting loss of value of plan assets. As provided by the PPA, underfunded single-employer defined benefit plans may be subject to certain restrictions on benefits and benefit accruals. Under one of these restrictions, if a plan's "adjusted funding target attainment percentage" (AFTAP) is less than 60 percent (i.e., generally speaking, if a plan is less than 60 percent funded) for a plan year, a plan must stop providing future benefit accruals. Section 203 of WRERA provides that for the first plan year beginning during the period of October 1, 2008 through September 30, 2009, this restriction on benefit accruals is determined using the AFTAP from the preceding year, instead of the current year, if the AFTAP for the preceding year is greater. Thus, this provision allows a plan to look to the previous year's funding levels in order to determine whether there must be a restriction of benefit accruals. For plans that have lost a lot in the value of plan assets, looking to the AFTAP for the previous year may allow some plans to continue providing future benefit accruals that would otherwise have to cease them. However, plans that have higher funding levels for the current year will not be affected by this provision. Under section 432 of the Internal Revenue Code as created by the PPA, multiemployer plans failing to meet certain funding levels may be subject to certain additional funding obligations and benefit restrictions. These additional requirements depend on whether the plan is in "endangered" or "critical" status. A multiemployer plan is considered to be endangered if it is less than 80 percent funded or if the plan has an accumulated funding deficiency for the plan year, or is projected to have a deficiency within the next six years. A plan that is less than 80 percent funded and is projected to have an accumulated funding deficiency is considered to be "seriously endangered." Endangered plans must adopt a funding improvement plan, which contains options for a plan to attain a certain increase in the plan's funding percentage, while avoiding accumulated funding deficiencies. A multiemployer plan is considered to be in critical status if, for example, the plan is less than 65 percent funded and the sum of the fair market value of plan assets, plus the present value of reasonably anticipated employer and employee contributions for the current plan year and each of the next six plan years is less than the present value of all benefits projected to be payable under the plan during the current plan year and each of the next six years (plus administrative expenses). Plans in critical status must develop a rehabilitation plan containing options to enable the plan to cease being in critical status by the end of the rehabilitation period, generally 10 years. The rehabilitation plan may include reductions in plan expenditures and future benefit accruals. Employers may also have to pay a surcharge in addition to other plan contributions. Each year, a plan's actuary must certify whether or not the plan is in endangered or critical status. Under section 204 of WRERA a sponsor of a multiemployer defined benefit pension plan may elect for the status of the plan year that begins during the period between October 1, 2008 and September 30, 2009, to be the same as the plan's certified status for the previous year. Accordingly, if a plan was not in endangered or critical status for the prior year, the sponsor may elect to retain this status and may avoid additional plan funding requirements. A plan that was in endangered or critical status during the preceding year does not have to update its funding improvement plan, rehabilitation plan, or schedule information until the plan year following the year that the plan's status remained the same. However, for plans that are in critical status, the Act clarifies that the freezing of the certification status does not relieve the plan from certain requirements. Section 432 of the Internal Revenue Code provides that a multiemployer plan that is in endangered or critical status must meet certain additional funding requirements. In general, endangered plans must adopt a funding improvement plan, and critical plans must adopt a rehabilitation plan. Under both a funding improvement and a rehabilitation plan, there is a 10-year period under which a plan must meet a certain funding percentage. Seriously endangered plans have 15 years to improve their funding percentage. Section 205 of WRERA provides that a plan sponsor of a plan in endangered or critical status may elect, for a plan year beginning in 2008 or 2009, to extend the funding improvement period or the rehabilitation period by three years, to 13 years instead of 10 years. Plans in seriously endangered status have a funding improvement period of 18 years, rather than 15 years. The provision gives plans more time to meet their funding obligations. An election must be made by the plan in order to take advantage of this relaxed funding requirement. WRERA made several technical corrections to the Pension Protection Act of 2006 (PPA). Some of the corrections are effective as if they were enacted as part of the PPA, while other provisions are to be applied prospectively. The technical corrections include the following: In general, distributions from retirement plans or accounts are subject to tax in the year they are distributed. Prior to the PPA, in the event that a participant died, distributions from the retirement plan of a participant could transfer (or "rollover") into a surviving spouse's IRA tax-free. This rollover scheme was not available to non-spouse beneficiaries. Under section 402(c)(11) of the Internal Revenue Code, as created by the PPA, certain tax-qualified plans (e.g., a 401(k)) could offer a direct rollover of a distribution to a nonspouse beneficiary (e.g., a sibling, parent, or a domestic partner). The direct rollover must be made to an individual retirement account or annuity (IRA) established on behalf of the designated beneficiary that will be treated as an inherited IRA. As a result, the rollover amounts would not be included in the beneficiary's income in the year of the rollover. The Internal Revenue Service had previously taken the position that section 402(c)(11) permitted, but did not require, plans to provide this type of rollover option. Section 108(f) of the WRERA clarifies that distributions to a nonspouse beneficiary's inherited IRA are to be considered "eligible rollover distributions," and plans are thus required to allow these beneficiaries to make these direct rollovers. Plans must also provide direct rollover notices in order to maintain plan qualification. This provision is effective for plan years beginning on January 1, 2010. In general, an employer that chooses to terminate a fully funded defined benefit plan must comply with certain requirements with regard to participants or beneficiaries whom the plan administrator cannot locate after a diligent search. For these individuals, a plan administrator may either purchase an annuity from an insurer or transfer the missing participant's benefits to the PBGC. Prior to the PPA, the missing participant requirements only applied to single-employer plans. The PPA amended these requirements to apply to multiemployer plans, defined contribution plans, and other plans that do not have termination insurance through the PBGC. Section 104(e) of WRERA specifies that the missing participant requirements apply to plans that at no time provided for employer contributions. WRERA also narrows the missing participant requirements to defined contribution plans (and other pension plans not covered by PBGC's termination insurance) that are qualified plans. The requirements of this section take effect as if they were included in the PPA. Under the funding rules created by the PPA, single-employer defined benefit plans that fall below certain funding levels are subject to several additional requirements. One of these requirements prevents plans that have a funding percentage of less than 60 percent from making "prohibited payments," (i.e., certain accelerated forms of distribution, such as a lump sum payment) to plan participants. Current law also specifies that if the present value of a participant's vested benefit exceeds $5,000, the benefit may not be immediately distributed without the participant's consent. Accordingly, if the vested benefit is less than or equal to $5,000 this consent requirement does not apply. Section 101 of WRERA amends the definition of "prohibited payment" to exclude benefits which may be distributed without the consent of the participant. As a result, lump sum payments of $5,000 or less may be paid by an underfunded plan that is otherwise precluded from paying larger lump sum distributions. This amendment applies to plan years beginning in 2008. Under ERISA, pension plans must meet extensive notice and reporting requirements that disclose information about the plan to participants and beneficiaries as well as government agencies. Among these disclosures is a requirement that a terminating single-employer defined benefit plan provide "affected parties" with certain information required to be submitted to the Pension Benefit Guaranty Corporation (PBGC). Section 105 of WRERA clarifies that in order for a plan to terminate in a distress termination, a plan administrator must not only provide affected parties with information that the administrator had to disclose to the PBGC along with the written notice of intent to terminate, but also certain information that was provided to the PBGC after the notice was given. This information may include a certification by an enrolled actuary regarding the amount of the current value of the assets of the plan, the actuarial present value of the benefit liabilities under the plan, and whether the plan's assets are sufficient to pay benefit liabilities. Further, in an involuntary termination, certain confidentiality provisions exist that prevent the plan administrator or sponsor from providing information about the termination in a form which includes any information that may be associated with, or identify affected parties. Section 105 of WRERA extends this confidentiality protection disclosure of this information by the PBGC. Other notable provisions included in WRERA are the following: Roth IRAs, a type of individual retirement arrangement, are a popular retirement savings vehicle. While contributions to a Roth IRA are not deductible, qualified distributions from a Roth IRA are not included in an individual's gross income. Roth IRAs are subject to certain contribution limitations, however, these limitations do not apply to qualified rollover contributions. Section 125 of the WRERA permits a "qualified airline employee" who receives an "airline payment amount" to transfer any portion of this amount to a Roth IRA as a qualified rollover contribution. This transfer must occur within 180 days of receipt of the amount (or, if later, within 180 days of the enactment of WRERA). Thus, if such amounts are transferred to the former employee's Roth IRA, the employee may benefit, as qualified distributions from Roth IRAs are tax free. This section also provides that certain income limitations placed upon Roth IRA qualified rollover contributions should not apply to this transfer. In order to determine the minimum required contribution that must be made to a single-employer defined benefit plan, and the extent (if any) to which a plan is underfunded, the value of plan assets must be determined. For purposes of the minimum funding rules, the value of the plan's assets is, in general, the fair market value of the assets. However, the Internal Revenue Code, as amended by the PPA, permits plans to calculate the value of the assets by averaging fair market values, but only if (1) the averaging method is permitted under regulations, (2) the calculation is not over a period of more than 24 months, and (3) the averaged amount cannot result in a determination that is at any time less than 90 percent or more than 110 percent of fair market value. This averaging method may be more beneficial for plan sponsors in an economic downturn, as an averaging approach can produce lower asset values when asset values are rising, and higher asset values when asset values are decreasing. Section 121 of WRERA provides that plans using the averaging method must adjust such averaging to account not only for the amount of contributions and distributions to the plan, but also for expected investment earnings, subject to a cap. It has been noted that this provision could result in smaller underfunded amounts and, therefore, smaller required contributions. The PPA created certain relaxed funding requirements for defined benefit plans maintained by a commercial airline or an airline catering service. Under the PPA, plan sponsors of these plans could elect to amortize unfunded plan liabilities over an extended period of 10 years, or may instead follow special rules that permit these plan sponsors to amortize unfunded liabilities over 17 years. Plan sponsors selecting the17-year amortization period, referred to by the Act as an "alternative funding schedule," had to comply with certain benefit accrual requirements, which included freezing some of the benefits offered under the plan and eliminating others. In determining the minimum required contribution to the plan each year for purposes of these special rules, the PPA provided that the value of plan assets generally is the fair market value of the assets. Section 126 of WRERA provides that plans following the alternative funding schedule may determine the value of plan assets in the same manner as other single-employer plans. Thus, plans can use a fair market value determination, or they may use the averaging method as laid out in Section 430(g)(3) of the Internal Revenue Code.

In December of 2008, Congress unanimously enacted the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) (P.L. 110-458), which makes several technical corrections to the Pension Protection Act of 2006 (P.L. 109-280) and contains provisions designed to help pension plans and plan participants weather the current economic downturn. This report highlights the provisions of WRERA relating to the economic crisis, such as the temporary waiver of required minimum distributions and provisions that temporarily relax certain pension plan funding requirements. This report also discusses certain technical corrections to the Pension Protection Act made by WRERA, and certain other notable provisions of the Act affecting retirement plans and benefits.

Late on September 30, 2013, the Office of Management and Budget (OMB) gave notice to federal agencies that an emergency shutdown furlough would be put in place as a result of the impending lapse in annual appropriations for FY2014. Federal agencies had been directed to develop contingency plans in preparation for this eventuality. On the previous Friday, the Department of Homeland Security (DHS) released its "Procedures Relating to a Federal Funding Hiatus." This document included details on how DHS planned to determine who was required to report to work, cease unexempted government operations, recall certain workers in the event of an emergency, and restart operations once an accord was reached on funding issues. On October 17, 2013, the President signed into law legislation which carries a short-term continuing resolution (CR) funding government operations at a rate generally equivalent to FY2013 post-sequestration levels through January 15, 2014. This act resolves the lapse in funding that began October 1, 2013, returns federal employees to work, and retroactively authorizes pay for both furloughed and exempted employees for the duration of the funding lapse. This report discusses the DHS contingency plan and the potential impacts of a lapse in annual appropriations on DHS operations, and then it discusses several legislative vehicles that mitigated or had the potential to mitigate those impacts. For a broader discussion of a federal government shutdown, please see CRS Report RL34680, Shutdown of the Federal Government: Causes, Processes, and Effects , coordinated by [author name scrubbed]. Lapses in annual appropriations result in a partial shutdown of government operations and emergency furlough of employees--however, they do not result in the complete shutdown of operations. DHS personnel who continue to work without passage of annual appropriations or a continuing resolution generally fall into two categories: those whose activities are not funded through one-year appropriations and those whose work is necessary for the preservation of the safety of human life or the protection of property. The former generally continue to be paid as scheduled, contingent on the availability of funds, whereas the latter are not paid while the lapse in annual appropriations continues. Of DHS's estimated 231,117 civilian and military employees, nearly 200,000 were projected to be exempted from the emergency furlough, according to the department. Most of these employees relied on annual appropriations for their salaries, and therefore were not paid during the funding lapse. Further information about exemptions from operational shutdown and emergency furlough due to a lapse in annual appropriations is outlined below. DHS has a number of functions that are paid for by fee revenues and multi-year appropriations. According to DHS, in the event of a funding lapse, these activities would continue and employees of these programs would continue to work and be paid as long as those revenues and multi-year appropriations were available, because emergency furlough and shutdown of these activities would occur only if resources were depleted. DHS noted several specific activities that would continue to be funded through fee revenues and multi-year appropriations. Under the National Protection and Programs Directorate (NPPD) Office of Biometric Identity Management Federal Protective Service Under the Federal Emergency Management Agency (FEMA) Radiological Emergency Preparedness Program Chemical Stockpile Emergency Preparedness Program Disaster Relief Operations National Flood Insurance Program Under U.S. Citizenship and Immigration Services (USCIS) All programs except for E-Verify In addition to these programs, a survey of the procedures document reveals that some exempt employees at U.S. Customs and Border Protection (CBP), Immigration and Customs Enforcement (ICE), the Transportation Security Administration (TSA), and the Federal Law Enforcement Training Center (FLETC) may have continued to receive pay despite the lapse in appropriations for FY2014. Fees and multi-year funding must continue to be used for the purposes for which they were collected or provided--they cannot be used to fund broader component or departmental activity (such as salaries) than originally envisioned. In the event of a lapse in annual appropriations, some activities continue if they directly relate to preserving the safety of human life or the protection of property. According to the DHS plan, for an activity to continue under this exception, "there must be some reasonable likelihood that the safety of human life or protection of property would be compromised in some significant degree by the delay in the performance of the function in question. Specifically the risk should be real... and must be sufficiently imminent that delay is not permissible." The DHS procedures go on to note that support functions related to an exempt activity should continue "only to the extent that they are essential to maintain the effectiveness of those activities." Employees who work under this exemption are constrained in their activities--limited to performing activities that are exempted (those that relate to the protection of life and property). At DHS, this work includes the following functions, broken down by component. Under Customs and Border Protection (CBP) Border Security Programs Ports of Entry Operations Under Immigration and Customs Enforcement (ICE) Immigration Enforcement and Removal Operations Immigration and Customs Enforcement Homeland Security Investigations Under Transportation Security Administration (TSA) Transportation Security (including passenger screening) Federal Air Marshal Service Under U.S. Coast Guard (USCG) Military/Defense Operations Maritime Security Maritime Safety Under Secret Service (USSS) Protection of Persons and Facilities Under National Protection and Programs Directorate Cyber Security Under Analysis & Operations (A&O) State and Local Fusion Centers National Operations Center Watch Operations DHS Intelligence Operations Under the Office of Health Affairs BioWatch While a large percentage of DHS employees were still working under this exemption, only those who were exempt from furlough on the basis of funds to pay their salaries being available continued to receive pay for the duration of the funding gap. OMB provides the following guidance regarding pay for exempted employees who are reliant on one-year annual appropriations for their salaries: Without further specific direction or enactment by Congress, all excepted employees are entitled to receive payment for obligations incurred by their agencies for their performance of excepted work during the period of the appropriations lapse. After appropriations are enacted, payroll centers will pay all excepted employees for time worked. Work that is needed for an orderly shutdown : This is a narrow exception that allows for work to shut down non-exempt operations in an orderly fashion when a funding lapse occurs. OMB has determined that this should cover no more than four hours of work completely dedicated to de-activating a function, such as securing documents, completing payroll, etc. Presidential appointees : Presidential appointees who are not covered by a formal leave system--who are entitled to their pay because of their duties rather than the hours worked--cannot be put in "nonduty status" and therefore cannot be subject to furlough. DHS reports that it has 28 such personnel. The terms "exempted employee" and "essential employee" are not interchangeable when discussing federal employees. This is a common misunderstanding, even among members of the media that focus on the federal government on a regular basis. Exemption or exception is determined based on definitions of the Anti-Deficiency Act and the structure of funding that supports various operations. "Essential employees" and "essential functions" are labeled as such because of their roles in providing continuity of government operations (COOP). By DHS's standards, "essential personnel" include "mission critical" and "mission essential" personnel, as well as personnel identified for possible activation depending on the nature of the emergency, emergency personnel, and exempted employees not otherwise covered by the foregoing categories. Therefore, at DHS, one can be considered essential, but not exempt, but not vice versa. Section IV of the DHS procedures document explores these distinctions in more detail. DHS's contingency plan for the October 1, 2013, funding lapse was detailed enough to outline the impact of a shutdown by component using the number of staff in the component as a metric. Staffing impacts of a shutdown are relatively easy to quantify, but should carry a caveat. The number of initially furloughed employees does not tell the entire story of the impact of a government shutdown. In this situation, the government likely draws back significantly from its contracting activities overall, as it cannot spend monies normally provided through the appropriations process. In addition, hiring, procurement, and other projects in process are often stalled, and research efforts could be disrupted. Many excepted personnel are not paid during the lapse in appropriations, and their economic activities are curtailed as well as a result. Therefore, the following numbers only provide a limited perspective on the impact of the funding lapse. Figure 1 shows a graphic representation of the impact of the lapse in appropriations on the department's workforce as outlined in the DHS emergency furlough procedures document. The table immediately following provides the detailed data upon which the graphic is based. As of July 31, 2013, the five largest components by number of staff comprised 87% of total DHS personnel. These components carried the largest share of the projected furlough for DHS as a whole--Customs and Border Protection, Coast Guard, Transportation Security Administration, Immigration and Customs Enforcement, and the Federal Emergency Management Agency bore 77% of the projected furlough total. The remaining 13% of departmental manpower therefore bore 23% of the furlough burden--management, research and development, training, and some operations functions were projected to furlough more than 90% of their personnel. The impact of a shutdown on these functions over the long term, as well as the impact of the projected more than 50% reduction in the staffing for the DHS Office of Inspector General, is unknown, and analysis of those impacts is beyond the scope of this report. While DHS did not associate numbers of furloughed employees with specific programs, the department identified several activities that would be subject to furloughs and curtailment of activities: all non-disaster grant programs; NPPD's Critical Infrastructure Protective Security Advisor Program; Federal Law Enforcement Training Center activities; law enforcement civil rights and civil liberties training; FEMA Flood Risk Mapping program; chemical site security regulatory program; and research and development activities. The DHS plan envisioned situations where a DHS office might need to recall a non-exempt employee to duty to perform an exempt function, such as an unplanned project or activity that qualified as an exempt function, a need to supplement staffing for an existing exempt function, or replacing an exempt employee who was unable to work. Staff who were recalled for a specific project were only to work on that project. As an example, on October 2, 2013, FEMA Administrator Craig Fugate posted on FEMA's website a memorandum to FEMA employees that noted, "Beginning shortly, we will be recalling some employees who were furloughed earlier this week to be able to prepare for a possible emergency response operation to protect life and property." FEMA's Daily Operations Briefing noted the activation of resources in FEMA Regions IV and VI, as well as at the federal level. In a speech at FEMA headquarters on October 7, President Obama noted that 200 furloughed employees had been recalled, and over half of those would be re-furloughed. H.R. 3210 , the Pay Our Military Act, was introduced on September 28, 2013, and signed into law on September 30, 2013, as P.L. 113-39 . This legislation provides FY2014 continuing appropriations during a funding gap for pay and allowances for members of the armed forces on active duty and civilian personnel and contractors providing support for them. The Coast Guard is considered part of the armed forces, and the act provides pay for Coast Guard uniformed personnel on active service and the civilian Coast Guard personnel and contractors in support of them. The Department of Defense (DOD) and DHS did not initially avoid furlough for any of its employees under the provisions of the act, as the Department of Justice had cautioned that the law did not allow them to end furlough for all civilian employees, or allow all contractors to be paid, because of language in the act specifying funding civilian employees and contractors who provide "support" for military personnel in active service. On October 5, 2013, DHS and DOD announced the parameters under which they would be bringing employees back to work and paying contractors beginning the week of October 7. Under Secretary of Defense (Comptroller) Robert Hale described the executive branch's interpretation thusly: "Under our current reading of the law, the standard for civilians who provide support to members of the Armed Forces requires that qualifying civilians focus on the morale, well-being, capabilities and readiness of military members that occurs during a lapse of appropriations." The Administration indicated that salaries would be paid for civilians already working under exemptions, and civilians who provide support to military members on an ongoing basis would be recalled, as well as those civilians "[whose] work, if interrupted by the lapse for a substantial period would cause future problems for military members." Acting Secretary of DHS Rand Beers sent a memorandum to the Commandant of the Coast Guard, outlining the implementation of P.L. 113-39 for the Coast Guard. Several Coast Guard activities were specifically listed in the memorandum that were not to be restored under the act: the National Vessel Documentation Center; the National Maritime Center; Congressional Affairs; and work done in support of non-USCG agencies and activities with the exception of work done in support of DOD. According to the Coast Guard, after implementing P.L. 113-39 , 475 Coast Guard civilian personnel remained furloughed. With the passage of P.L. 113-46 , the lapse in annual appropriations that began October 1, 2013, was resolved. Should those temporary appropriations expire without additional appropriations being enacted for DHS, another shutdown furlough would take effect, but the provisions of P.L. 113-39 would again provide funding for the Coast Guard to continue paying all of its personnel except for these same 475 civilians. Both Under Secretary Hale's conference call and Acting Secretary Beers's guidance memorandum note an important continuing impact of the funding hiatus, even with P.L. 113-39 in place and its implementation clarified. The act only provides for pay and allowances--no other expenses. Hale noted: [W]e have authority to recall most of our civilians and provide them pay and allowances. We don't have authority to enter into obligations for supplies, parts, fuel, et cetera unless it is for an excepted activity, again, one tied to a military operation or safety of life and property. So as our people come back to work, they'll need to be careful that they do not order supplies and material for non-excepted activities. Beers echoes Hale's note of caution: The Act provides appropriations for personnel; it does not provide appropriations for equipment, supplies, materiel, and all the other things that the Department needs to keep operating efficiently, except as provided by the provision relating to contractors. While the Act permits the U.S. Coast Guard to bring many of its civilian employees back to work, and to pay them, if Congress continues to fail to enact an appropriation, many of these workers will cease to be able to do their jobs. Critical parts, or supplies, will run out, and there will be limited authority for the Coast Guard to purchase more. If there comes a time that workers are unable to do their work, the Department will be forced once again to send them home. Estimates of the cost to the economy and the cost to the government of the October 1, 2013, lapse in annual appropriation vary. As noted above, the disruption of DHS activities likely has had some economic impact, even if the total number of employees furloughed was relatively small compared with the overall size of the department. Procurement activities were disrupted to some extent, and DHS is the sixth largest federal agency in terms of procurement spending. Separating the specific economic costs of the shutdown of DHS operations from the shutdown of other governmental elements and the costs incurred by other factors in the economic environment--including the potential for the U.S. to reach its debt limit--is a highly complex task and beyond the scope of this report. DHS required its components to report all costs incurred due to the lapse in appropriations. These are expected to include, but not be limited to: interest incurred for late payments; discounts lost due to late payments; unplanned travel expenses to terminate and restart temporary duty; and direct costs of shutdown of operations (such as IT systems). Multiple press reports have focused on the negative impact of the shutdown on federal employee morale, both exempted and furloughed, and possible impacts on workforce retention. Given that a large ratio of exempt DHS employees worked during the shutdown without a date certain for the receipt of pay, parallel impacts are possible at the department, which already suffers among the worst morale in the federal government, according to third-party research. One impact concurrent with the expiration of the FY2013 funding was the expiration of three authorities that have regularly been extended by legislation in the DHS appropriations bill: the authority of the Secret Service to use funds derived from its investigative activities to support its operation without separate appropriation; the authority for DHS to enter into research and development contracts that do not conform to the Federal Acquisition Regulations; and the authority to regulate high-risk chemical facilities. The third of these was arguably the most significant lapse of authority for those working with DHS. With the expiration of this authority on October 4, 2013, the Chemical Facilities Anti-Terrorism Standards (CFATS) were no longer in effect. On October 17, 2013, P.L. 113-46 reinstated the authority of the DHS to regulate these facilities through January 15, 2014. While no major incidents occurred over the course of the funding lapse, DHS might not have been able to undertake or enforce regulatory action related to these facilities during this time period. DHS indicated that impacts the public would see in the short term would include E-Verify would not be accessible for businesses to determine work eligibility of new employees; FEMA would stop providing flood-risk data for local planners and insurance determinations; and civil rights and civil liberties complaint lines and investigations would shut down. The plan also noted that Coast Guard would stop issuing licenses and seaman documentation, stop doing routine maintenance on aids to navigation, and curtail its fisheries enforcement patrols. Given the continuing appropriation provided by P.L. 113-39 , however, these Coast Guard-specific impacts may have been somewhat mitigated. Several pieces of legislation were introduced that would have impacted the funding status of the Department, allowing it to either pay employees or restore operations to varying degrees during the October 1, 2013, lapse in appropriations. This section of the report focuses on the status and general impact of eight such pieces of legislation on DHS and DHS components alone. Annual Appropriations H.R. 2217 --the Homeland Security Appropriations Act, 2014 Automatic Continuing Resolution H.R. 3210 ( P.L. 113-39 )--the Pay Our Military Act Continuing Resolutions H.J.Res. 59 --the Continuing Appropriations Resolution, 2014 H.J.Res. 79 --the Border Security and Enforcement Continuing Appropriations Resolution, 2014 H.J.Res. 85 --the Federal Emergency Management Agency Continuing Appropriations Resolution, 2014 H.J.Res. 89 --the Excepted Employees' Pay Continuing Appropriations Resolution, 2014 P.L. 113-46 --the Continuing Appropriations Act, 2014 Authorizing Legislation H.R. 3223 --the Federal Employee Retroactive Pay Fairness Act This is the annual appropriations bill for the Department of Homeland Security. The Administration requested $39.0 billion in adjusted net discretionary budget authority for DHS for FY2014. H.R. 2217 as passed by the House would provide $39.0 billion in adjusted net discretionary budget authority. The Senate Appropriations Committee amendment to the bill would provide $39.1 billion in adjusted net discretionary budget authority. Both bills would also provide the $5.6 billion in disaster relief requested by the Administration. The House passed H.R. 2217 on June 6, 2013. The Senate Appropriations Committee reported its proposal for H.R. 2217 on July 18, 2013, but it has not received floor consideration in the Senate. Enactment of this measure would have ended the emergency furlough for the department by providing full-year funding by account for DHS, as well as providing the potential additional detailed direction and context for the department's actions through a conference report joint explanatory statement, such as a conference report. This automatic continuing resolution was introduced on September 28, 2013, and enacted two days later as P.L. 113-39 . It provides "such sums as are necessary" to provide pay and allowances for FY2014 to members of the armed forces on active duty, and to the civilians and contractors employed by DOD and DHS in support of them. It appears that it is intended to provide such funds during any period in FY2014 when full-year or part-year appropriations are not in effect, hence the term "automatic." As noted above, although this legislation could have been interpreted to provide relief to Coast Guard military and civilian personnel and partially end the funding hiatus for part of the government, DOD and DHS did not end furloughs for any of its employees under the provisions of the act until the week of October 7, 2013. The Department of Justice had cautioned that the law did not allow the departments to end furlough for all civilian employees, or allow all contractors to be paid. As noted above, after implementing P.L. 113-39 , 475 Coast Guard personnel remained furloughed until the enactment of P.L. 113-46 , which became the operative appropriations measure for the Department of Defense and DHS. For a more detailed discussion, see " Restoration of Coast Guard Employee Pay Under P.L. 113-39 ," above. The next five pieces of legislation are continuing resolutions with differing scopes. The fifth measure is the continuing resolution enacted as a part of P.L. 113-46 , which ended the lapse in annual appropriations. With its enactment, further action on the other measures in this section in their current form is unlikely. This short-term continuing resolution was introduced September 10, 2013. As introduced, this measure would have provided temporary appropriations for DHS, funding the department at same rate it was for FY2013 (post-sequester) through December 15, 2013, or until it was replaced by another appropriations law. There are four sections in H.J.Res. 59 that contain legislative language that applies to DHS. Generally speaking, the sections carry authority and direction given to DHS and its components in both annual appropriations legislation and CRs covering the department in recent years. Section 122 extends the authority for chemical facility anti-terrorism standards. Section 123 extends the ability of the Secret Service to expend resources gained in the process of their investigations. Section 124 maintains the ability of DHS Science and Technology to use Other Transaction Authority to get R&D services and prototypes without being constrained by Federal Acquisition Regulations. Section 125 allows Customs and Border Protection to apportion its funding to maintain 21,370 border patrol agents and sustain border operations, including the new tethered aerostat program, and allows Immigration and Customs Enforcement to apportion funds to keep 34,000 detention beds. According to the Congressional Budget Office (CBO), the annualized cost of the DHS-related provisions in the continuing resolution as introduced in the House would be $37.7 billion, not including $236 million for overseas contingency operations funding for the Coast Guard, or $6.1 billion for disaster relief funding. None of the proposed amendments to this measure altered provisions directly impacting DHS, except for a Senate change shortening the maximum duration of the bill to November 15, 2013. On October 1, 2013, the House requested a conference with the Senate. The Senate voted to table that request later that same day, and thereby returned H.J.Res. 59 to the House. Enactment of this measure would have ended the emergency furlough for the entire government, at least until its date of expiration. As the measure currently stands, as is usually the case with CRs, account-level direction for funding is not provided, and no explanatory statement of congressional intent (such as a committee report) exists. Figure 2 , at the end of this section, shows a graphical representation of the relative size of DHS annualized appropriations that would be restored under a continuing resolution for the entire department at a rate equivalent to post-sequester resources provided under P.L. 113-6 --the same rate and coverage provided in H.J.Res. 59 and P.L. 113-46 . It compares that annualized appropriation to the resources that would be provided through H.J.Res. 79 , H.J.Res. 85 , and the actions taken in P.L. 113-39 . This continuing resolution was introduced on October 3, 2013. It is a temporary appropriations measure that would provide funding for several DHS components, including U.S. Customs and Border Protection (CBP), U.S. Immigration and Customs Enforcement (ICE), U.S. Coast Guard (USCG), U.S. Citizenship and Immigration Services, and part of the National Protection and Programs Directorate (NPPD)--the Office of Biometric Identity Management. These entities would be funded at the same rate as was provided in P.L. 113-6 , taking into account sequestration, through December 15, 2013, or until it was replaced by another applicable appropriations law. H.J.Res. 79 passed the House on October 10, 2013, by a vote of 249-175. According to CBO, the annualized cost of the measure would be $18.8 billion, not including $236 million for overseas contingency operations funding for the Coast Guard. CBO's scoring assumes that $5 billion in costs for the Coast Guard would have been paid already under H.R. 3210 . Enactment of this measure would have ended the emergency furlough for the five DHS entities listed in the bill, at least until its date of expiration. As the measure currently stands, as is usually the case with continuing resolutions, account-level direction for funding is not provided, and no explanatory statement of congressional intent (such as a committee report) exists. It would also not provide the four legislative extensions of authority for DHS as envisioned under H.J.Res. 59 . The components included in this measure include three of the five largest discretionary budgets at DHS--CBP, ICE, and USCG. These components also represent three of the four largest groups of employees furloughed at DHS, totaling 16,866 employees--54% of DHS's total initial projected furlough. Figure 2 , at the end of this section, shows a graphical representation of the relative size of the DHS appropriations that would be restored under the bill, relative to the resources that would be provided through H.J.Res. 85 and the actions taken in P.L. 113-39 and P.L. 113-46 . As Figure 1 and Figure 2 show, removing the funding hiatus impact on CBP, ICE, Coast Guard, and USCIS would have represented a significant restoration of funding to the department. As noted below, a separate piece of legislation had been passed in the House to fund FEMA over a similar time period. Had these two pieces of legislation been enacted, many other complementary components of DHS would have remained affected by the funding hiatus: the management and intelligence functions of the department, the Office of the Inspector General, the Transportation Security Administration (TSA), the Secret Service, the Office of Health Affairs, the Science and Technology Directorate of the department, the Domestic Nuclear Detection Office, and most of the National Protection and Programs Directorate would have remained unfunded. With the exception of the TSA and the Secret Service, all of these functions were projected to furlough more than 40% of their employees, with most of them projected to furlough over 90%. This CR was introduced October 3, 2013. It would provide temporary funding for the Federal Emergency Management Agency (FEMA) at the same rate as was provided in P.L. 113-6 , taking into account sequestration, through December 15, 2013, or until other appropriations legislation replaces the direction in the bill. H.J.Res. 85 passed the House on October 4, 2013, by a vote of 247-164. According to CBO, the annualized cost of the bill would be $4.1 billion in discretionary budget authority for the department, plus $6.1 billion in disaster relief funding--a total of $10.2 billion. Enactment of this legislation would have ended the emergency furlough for FEMA, at least until its date of expiration. As the measure currently stands, as is usually the case with continuing resolutions, account-level direction for funding is not provided, and no explanatory statement of congressional intent (such as a committee report) exists. It would also not provide the four legislative extensions of authority for DHS as envisioned under H.J.Res. 59 . This bill provides temporary funding to FEMA, leaving the coordinating, managing and oversight functions of the overall department unfunded. It is unclear whether passage of this legislation would provide for a transfer of funds to the DHS OIG to pay for oversight of disaster relief operations, as has occurred in recent years, and whether such a transfer would allow the OIG to conduct those activities. Figure 2 , below, shows a graphical representation of the relative size of the DHS appropriations that would be restored under the bill, relative to the resources that would be provided through H.J.Res. 85 and the actions taken in P.L. 113-39 and P.L. 113-46 . Figure 2 compares the CBO-estimated impact of the two enacted and two proposed temporary appropriations measures affecting DHS. The underlying circle of the pie chart reflects the annualized discretionary budget authority that is provided for DHS through P.L. 113-46 --essentially, the equivalent of the post-sequester appropriated budget for DHS for FY2013. This is the same as the annualized discretionary budget authority that would have been provided to DHS through H.J.Res. 59 . The sections in blue are regular discretionary appropriations, while the tan sections are covered by adjustments for disaster relief and costs of overseas military operations that are provided for under the Budget Control Act. The crosshatched section of the pie represents the annualized budget authority provided under P.L. 113-39 --appropriations that will not lapse for FY2014. The two pieces "lifted" from the circle reflect what continuing appropriations would have been provided under H.J.Res. 79 and H.J.Res. 85 . All of these continuing resolutions, proposed and enacted, had the same rate--the FY2013 post-sequester level of funding provided under P.L. 113-6 . Their coverage differed, however, with only H.J.Res. 59 and P.L. 113-46 covering the entire department (in fact, the entire government), and H.J.Res. 79 , H.J.Res. 85 , and P.L. 113-39 covering appropriations for portions of DHS. As the figure shows, roughly 22% of the DHS budget would not have been covered by the three measures that addressed DHS in part, but not the entire federal government. This continuing resolution was introduced and passed the House on October 8, 2013. It would provide temporary funding to pay the salaries of all federal employees working during the lapse in appropriations who are not paid by other means, through December 15, 2013, or until other appropriations legislation replaces the direction in the bill. H.J.Res. 89 passed the House on October 8, 2013, by a vote of 420-0. At the time the bill passed the House, there was no CBO estimate of the annualized cost of the bill. Enactment of this legislation would not end the emergency furlough for any government component, although it would reduce the economic impact of the shutdown by maintaining the flow of compensation to "excepted" or "exempted" federal workers, including many at DHS. The resolution is drafted to pay "salaries and related expenses" only, so the limitations noted in the analysis of P.L. 113-39 would apply in the case of enactment of this measure as well. As the measure currently stands, as is usually the case with continuing resolutions, account-level direction for funding is not provided, and no explanatory statement of congressional intent (such as a committee report) exists. H.R. 2775 was amended by the Senate on October 16, 2013, to include the Continuing Appropriations Act, 2014 as Division A. The amended measure provides temporary appropriations for the federal government, including DHS, funding the department at same rate it was for FY2013 (post-sequester) through January 15, 2013, or until it is replaced by another appropriations law. H.R. 2775 , as amended, passed the Senate by a vote of 81-18 on October 16, 2013, and several hours later, passed the House of Representatives by a vote of 285-144. The bill was signed into law shortly after midnight on October 17, 2013, and the federal government resumed operations that same day. There are five sections in P.L. 113-46 that contain legislative language that specifically apply to DHS. Four of these sections have the same essential impact as those that were highlighted above as part of H.J.Res. 59 . The fifth, Section 157, mirrors a general provision from P.L. 113-6 , requiring DHS to share reports it provides to the appropriations committees to the House Committee on Homeland Security and the Senate Committee on Homeland Security and Governmental Affairs. Generally speaking, the sections carry authority and direction given to DHS and its components in both annual appropriations legislation and CRs covering the department in recent years. Division A also includes legislative language similar to that of H.R. 3223 (discussed below), which authorizes back pay for all furloughed and exempted federal employees for the period of the October 1, 2013, funding lapse. As with H.J.Res. 59 , according to CBO, the annualized cost of the DHS-related provisions in the act as introduced in the Senate would be $37.7 billion, not including $236 million for overseas contingency operations funding for the Coast Guard, and $6.1 billion for disaster relief funding. These numbers are a projection of what could be spent if the resolution were extended to the end of the fiscal year--the act is currently set to expire on January 15, or when it is replaced by relevant appropriations legislation. Enactment of this measure ended the emergency furlough resulting from the lapse in appropriations on October 1, 2013. As is usually the case with continuing resolutions, account-level direction for funding is not provided, and no explanatory statement of congressional intent (such as a committee report) exists. This is authorizing legislation that states that all employees furloughed as a result of the funding lapse at the beginning of FY2014 shall be paid for that time after the lapse in appropriations ends. The House passed H.R. 3223 by a vote of 407-0 on October 5, 2013. Its stated intent was accomplished through Section 115 of P.L. 113-46 . This would apply to all furloughed employees of DHS, but it would not end the funding lapse or change the operations of DHS directly. Establishment of this obligation could have significant implications for departments' budgeting and performance metrics. Resources budgeted in the expectation of performance of regular departmental duties would instead be expended to compensate staff for conforming to shutdown procedures.

Absent legislation providing appropriations for the Department of Homeland Security (DHS) for FY2014, the Department implemented a shutdown furlough on October 1, 2013. Operations of different components were affected to varying degrees by the shutdown. While an estimated 31,295 employees were furloughed, roughly 85% of the department's workforce continued with their duties that day, due to exceptions identified in current interpretations of law. Some DHS employees were recalled to work after the furloughs began on the basis of unanticipated needs (such as disaster preparedness activities) or the enactment of appropriations legislation that temporarily covered personnel costs. While the DHS shutdown contingency plan's data on staffing and exemptions from furloughs is not a perfect metric for the broad impacts of the lapse in annual appropriations, some of the data provided by DHS lend a perspective on some of the effects on the department's staffing and operations during the funding gap until fuller post-shutdown reviews are completed. Even though most of DHS continued to work through the shutdown, most of the department's civilian employees were not being paid until the lapse was resolved. A handful of activities were paid for through multi-year appropriations or other revenues, however, and employees working in those programs continued to be paid on schedule. During the funding lapse, several pieces of legislation were introduced that would have impacted the funding status of the department, allowing it to either pay employees or restore operations to varying degrees. Two of these were enacted. The Pay Our Military Act (P.L. 113-39) returned almost 5,800 furloughed Coast Guard civilian employees to work and restored pay for active military personnel and the civilian federal employees and the contractors that support them. On October 17, 2013, the President signed into law a Senate-amended version of H.R. 2775 which carried a short term continuing resolution (CR) which funds government operations at a rate generally equivalent to FY2013 post-sequestration levels through January 15, 2014. This act resolves the lapse in funding, returns federal employees to work, and retroactively authorizes pay for both furloughed and exempt (or "excepted") employees for the duration of the funding lapse. This report examines the DHS contingency plan for the funding lapse that began October 1, 2013, and the potential impacts of a lapse in annual appropriations on DHS operations, focusing primarily on the emergency furlough of personnel, and then discusses the legislative vehicles that had the potential to mitigate those same impacts. CRS is continuing to gather information on the actual impact of the shutdown on DHS operations now that the October 1, 2013, lapse has been resolved, and will update this report as warranted.

Each year, the Senate and House Armed Services Committees report their respective versions of the National Defense Authorization Act (NDAA). These bills contain numerous provisions that affect military personnel, retirees and their family members. Provisions in one version are often not included in another; are treated differently; or, in certain cases, are identical. Following passage of these bills by the respective legislative bodies, a Conference Committee is usually convened to resolve the various differences between the House and Senate versions. In the course of a typical authorization cycle, congressional staffs receive many constituent requests for information on provisions contained in the annual NDAA. This report highlights those personnel-related issues that seem to generate the most intense congressional and constituent interest, and tracks their status in the FY2011 House and Senate versions of the NDAA. The House version of the National Defense Authorization Act for Fiscal Year 2011, H.R. 5136 , was introduced in the House on April 26, 2010, reported by the House Committee on Armed Services on May 21, 2010 ( H.Rept. 111-491 ), and passed by the House on May 28, 2010. The Senate version of the NDAA, S. 3454 , was introduced in the Senate on June 4, 2010 and reported by the Senate Committee on Armed Services on June 4, 2010 ( S.Rept. 111-201 ). However, S. 3454 was never passed by the Senate. Instead of a Conference Committee to resolve differences, a new bill ( H.R. 6523 ) was introduced in the House of Representatives on December 15, 2010. It was passed by the House on December 17, 2010 and passed by the Senate on December 22, 2010. The bill, the Ike Skelton National Defense Authorization Act for Fiscal Year 2011, was signed by the President on January 7, 2010 and became P.L. 111-383 . The entries under the headings "House-passed", "Senate-reported", and "House and Senate-passed " in the tables on the following pages are based on language in these bills, unless otherwise indicated. Where appropriate, related CRS products are identified to provide more detailed background information and analysis of the issue. For each issue, a CRS analyst is identified and contact information is provided. Some issues were addressed in the FY2010 National Defense Authorization Act and discussed in CRS Report R40711, FY2010 National Defense Authorization Act: Selected Military Personnel Policy Issues , coordinated by [author name scrubbed]. Those issues that were previously considered are designated with a " * " in the relevant section titles of this report. Background: The National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ) authorized the Army to grow by 65,000 and the Marine Corps by 27,000, to respective end strengths of 547,400 and 202,000 by FY2012. In both FY2009 and FY2010, the Army was authorized additional, but smaller, increases to an FY2010 end strength of 562,400. Even with these increases, the nation's armed forces, especially the Army and Marine Corps, continue to experience high deployment rates and abbreviated "dwell time" at home station. With a significant increase in the number of servicemembers deployed to Afghanistan during 2009 and 2010, some observers have recommended further increases in end strength, especially for the Army. Others, pointing to the potential Army drawdown beginning in 2012 and the high cost of military personnel, have advocated reducing end strength. Discussion: With ongoing operations in both Iraq and Afghanistan, service end strengths remain a high visibility issue because of the impact on dwell time, readiness and unit manning concerns. The House-passed version authorizes an increase of 7,000 for the Army, an increase of 500 for the Air Force, a decrease of 100 for the Navy, and no change for the Marine Corps (see table below). References : Previously discussed in CRS Report RL34590, FY2009 National Defense Authorization Act: Selected Military Personnel Policy Issues , coordinated by [author name scrubbed] and CRS Report R40711, FY2010 National Defense Authorization Act: Selected Military Personnel Policy Issues , coordinated by [author name scrubbed]. CRS Point of Contact: Charles Henning, x[phone number scrubbed]. Background: Although the Reserves have been used extensively in support of operations since September 11, 2001, the overall authorized end-strength of the Selected Reserves has declined by about 2 1/2% over the past nine years (874,664 in FY2001 versus 854,500 in FY2010). Much of this can be attributed to the reduction in Navy Reserve strength during this period. There were also modest shifts in strength for some other components of the Selected Reserve. For comparative purposes, the authorized end-strengths for the Selected Reserves for FY2001 were as follows: Army National Guard (350,526), Army Reserve (205,300), Navy Reserve (88,900), Marine Corps Reserve (39,558), Air National Guard (108,022), Air Force Reserve (74,358), Coast Guard Reserve (8,000). Between FY2001 and FY2010, the largest shifts in authorized end-strength have occurred in the Army National Guard (+7,674 or +2%), Coast Guard Reserve (+2,000 or +25%), Air Force Reserve (-4,858 or -7%), and Navy Reserve (-23,400 or -26%). A smaller change occurred in the Air National Guard (-1,322 or -1.2%), while the authorized end-strength of the Army Reserve (-300 or -0.15%) and the Marine Corps Reserve (+42 or +0.11%) have been essentially unchanged during this period. Discussion: The authorized Selected Reserve end-strengths for FY2011 are the same as those for FY2010 with the exception of the Air Force Reserve. The Air Force Reserve's authorized end-strength in FY2010 was 69,500, but the administration requested an increase to 71,200 (+1,700), noting that "The Fiscal Year 2011 end strength amount includes the increase associated with the Department of Defense decision to halt the drawdown of active duty Air Force end strength at 330,000 personnel." Reference(s): None. CRS Point of Contact: [author name scrubbed], x[phone number scrubbed] Background: Ongoing military operations in Iraq and Afghanistan, highlighted by the significant increase in the number of servicemembers deployed to Afghanistan, continue to focus interest on the military pay raise. Title 37 U.S.C. SS1009 provides a permanent formula for an automatic annual military pay raise that indexes the raise to the annual increase in the Employment Cost Index (ECI). The FY2011 President's Budget request for a 1.4%% military pay raise was consistent with this formula. However, Congress, in FYs 2004, 2005, 2006, 2008, 2009 and 2010 approved the pay raise as the ECI increase plus 0.5%. The FY2007 pay raise was equal to the ECI. Discussion: A military pay raise larger than the permanent formula is not uncommon. In addition to "across-the-board" pay raises for all military personnel, mid-year and "targeted" pay raises (targeted at specific grades and longevity) have also been authorized over the past several years. While the House-passed version of the NDAA recommended a 1.9% across the board pay raise, both the Senate-reported bill and H.R. 6523 were silent on the pay raise issue. As a result , the Title 37 provision (37 U.S.C. 1009) became operative with an automatic January 1, 2011 across-the-board raise of 1.4% (equal to the ECI). Reference : Previously discussed in CRS Report RL34590, FY2009 National Defense Authorization Act: Selected Military Personnel Policy Issues , coordinated by [author name scrubbed], page 6 and CRS Report R40711, FY2010 National Defense Authorization Act: Selected Military Personnel Policy Issues , coordinated by [author name scrubbed]. See also CRS Report RL33446, Military Pay and Benefits: Key Questions and Answers , by [author name scrubbed]. CRS Point of Contact: Charles Henning, x[phone number scrubbed]. Background: Hostile Fire or Imminent Danger Pay (HP/IDP) is a special pay that is paid to servicemembers who are exposed to hostile fire or the explosion of hostile mines (such as Improvised Explosive Devices or IEDs); serve in an area where other servicemembers were subject to such hazards or are: killed, wounded, or injured by any hostile action; or are on duty in a foreign area where the servicemember is in imminent danger due to insurrection, civil war, terrorism, or war. This pay was temporarily increased from $100 to $225/month by the FY2004 National Defense Authorization Act (NDAA) and this increase was then made permanent by the FY2005 NDAA. The Family Separation Allowance (FSA) is paid to servicemembers with dependents when the servicemember is deployed to a dependent-restricted area, serves on board ship for more than 30 days or when the member is on temporary duty (TDY) for more than 30 days. This allowance was temporarily increased from $100 to $250/month by the FY2004 NDAA and then made permanent by the FY2005 NDAA. Discussion: Increasing these two types of pay is intended to compensate for the erosion in compensation due to inflation since the last increase. The Congressional Budget Office (CBO) estimates that the House-approved increase to the Family Separation Allowance would cost $288 million over the 2011-2015 period and the increase to the Hostile Fire Pay would cost $188 million over the same period. Reference : Previously discussed in CRS Report RL31334, Operations Noble Eagle, Enduring Freedom, and Iraqi Freedom: Questions and Answers About U.S. Military Personnel, Compensation, and Force Structure , by [author name scrubbed] and [author name scrubbed]. CRS Point of Contact: Charles Henning, x[phone number scrubbed]. Background: The 109 th Congress enacted a provision, codified at 37 U.S.C. SS910, that provides a special payment of up to $3,000 to reservists who experience income loss due to frequent or extended involuntary mobilizations. Subsequently, the first session of the111 th Congress enacted a provision, codified at 5 U.S.C. SS5538, to minimize the income loss of civilian employees of the federal government who are involuntarily ordered to active duty or involuntarily retained on active duty. It does so by providing "differential pay" - a payment equal to the amount by which a reservist's military pay and allowances are lower than his or her civilian basic pay. This latter provision only applies to federal government employees, but it is not limited to cases of extended or frequent activations like the earlier provision. Discussion: Section 601 would prevent civilian employees of the federal government from claiming benefits under 37 U.S.C. SS910 if they are eligible for "pay differential" benefits under 5 U.S.C. 5538 or a similar program. Reference(s): 37 U.S.C. SS910, "Replacement of lost income: involuntarily mobilized reserve component members subject to extended and frequent active duty service." 5 U.S.C. 5538, "Nonreduction in pay while serving in the uniformed services or National Guard." Office of Personnel Management, Reservist Differential Agency Implementation Guidance, available at http://www.opm.gov/ reservist/ ReservistDiffImplementationGuidance.pdf . CRS Point of Contact: [author name scrubbed], x[phone number scrubbed] Background: The National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ) established the Yellow Ribbon Reintegration Program, "a national combat veteran reintegration program to provide National Guard and Reserve members and their families with sufficient information, services, referral, and proactive outreach opportunities throughout the entire deployment cycle." Yellow Ribbon events may include information, services, referral and outreach related to marriage counseling, suicide prevention, mental health awareness and treatment, post-traumatic stress disorder, financial counseling, veterans' benefits, employment workshops, and other topics. Discussion: The adopted provision makes several changes to the Yellow Ribbon program in an effort to broaden access to the program, enhance its effectiveness, and refine its scope. Reference(s): The Yellow Ribbon Reintegration Program website is http://www.yellowribbon.mil/ index.html . Directive Type Memorandum 08-029 "Implementation of the Yellow Ribbon Reintegration Program" is available at http://www.dtic.mil/ whs/ directives/ corres/ pdf/ DTM-08-029.pdf . CRS Point of Contact: [author name scrubbed], x[phone number scrubbed] or Don Jansen at x[phone number scrubbed]. Background : The law authorizing the TRICARE program includes provisions requiring program beneficiaries to share in the cost of their health care. However, legislative measures to prevent increases in some of these cost-share provisions have regularly been enacted. Section 1086(b)(3) of title 10, United States Code, requires a copayment rate of 25% of the cost of inpatient care for retirees, "except that in no case may the charges for inpatient care for a patient exceed $535 per day during the period beginning on April 1, 2006, and ending on September 30, 2010." Section 1074g(a) of title 10, United States Code, authorizes charges for retirees and certain other beneficiaries in TRICARE Prime for pharmaceutical agents available through retail. In the absence of legislation prohibiting increases, DOD can increase these cost shares. For example, when the previous prohibition on inpatient copayments under TRICARE Standard expired on September 30, 2009, DOD announced that the per diem rate would increase to a rate equal to 25% of the cost of inpatient care. This would have increased the inpatient cost share for retirees younger than 65 and their family members to $645 a day, or 25% of total hospital charges, whichever was less. However, subsequent enactment of section 709 of the National Defense Authorization Act for Fiscal Year 2010 ( P.L. 111-84 ), which extended the prohibition until September 30, 2010, prevented the announced inpatient care copayment increase under TRICARE Standard from taking place. Discussion: Sections 701 and 705 of the enacted bill prohibit DOD from increasing any fees or copayments under the TRICARE Standard, Extra, and Prime plans during FY2011. Reference(s) : None. CRS Point of Contact: Don Jansen, x[phone number scrubbed]. Background: Under the military health system's current structure, the Assistant Secretary of Defense (Health Affairs) is responsible for executing the overall military health care mission. The military health system delivers care through military hospitals and clinics, commonly referred to as military treatment facilities (MTFs) as well as civilian providers. MTFs comprise DOD's direct care system for providing health care to beneficiaries. Each military service, under its surgeon general, is responsible for managing its MTFs. Each service, other than the Marine Corps, also programs and deploys its own medical personnel. The service surgeons general report upward through the service chain of command to their respective service secretaries. The TRICARE Management Activity, under the Assistant Secretary of Defense (Health Affairs), is responsible for awarding, administering, and overseeing contracts for civilian managed care support contractors to develop networks of civilian primary and specialty care providers to augment the MTFs. Some observers believe that this command structure is fragmented and would be improved by unifying the command elements of the military health system in a "Unified Medical Command." There is a long history of debate and analysis of the concept of a Unified Medical Command (UMC). This debate is summarized in chapter 12 of the December 2007 Final Report of the Task Force on the Future of Military Health Care. Typically, plans for a unified medical command would have each service's medical component report to a departmental medical command outside of the service rather than to the service secretary, and the medical command would report directly to the Secretary of Defense. According to the Task Force report, proponents of a unified medical command say potential benefits include elimination of command fragmentation, a single point of accountability, increased integration for all elements of the medical command and control, better integrated health care delivery, enhanced peacetime effectiveness and ability to quickly transition to a rapidly deployable and flexible medical capability in a war scenario. Opponents say that the "unified" objectives are unclear; that execution of service specific doctrine and inculcation of service culture among medical personnel might be weakened under a "unified" command; and that service accountability for the health and welfare of forces would be better maintained through direct control. Congress has previously tasked DOD with examining various unified medical command options in the past. The Government Accountability Office, however, reviewed DOD's most recent efforts and found that DOD did not perform a comprehensive cost-benefit analysis of all potential options and did not provide any evidence of analysis to justify its decisions. Discussion: Section 903 would authorize the Secretary of Defense to establish a unified medical command to provide medical services to the armed forces and other DOD health care beneficiaries. This section also would require the Secretary to develop a comprehensive plan to establish a unified medical command. The Obama Administration's statement of administration policy on H.R. 5136 strongly opposes section 903: The Administration strongly objects to the provision in the bill to authorize the President to create a new military medical command. The proposed delegation of responsibilities to a unified medical command would render hollow the role of the Assistant Secretary of Defense for Health Affairs (ASD(HA)) to serve as the principal Departmental official for health and medical matters. The imposition of additional organizational structure with the attendant personnel and operational costs it would require could directly conflict with the effort by the Administration to eliminate unnecessary bureaucratic layers, headquarters and defense organizations. Reference(s) : None. CRS Point of Contact: Don Jansen, x[phone number scrubbed]. Background : In general, eligibility for TRICARE is lost when either a dependent child turns 23 (if enrolled in an accredited school as a full-time student) or 21 if not enrolled. Section 1001 of the Patient Protection and Affordable Care Act ( P.L. 111-148 , PPACA) amends Part A of Title XXVII of the Public Health Service Act (PHSA) to add a new Section 2714 specifying that a group health plan and a health insurance issuer offering group or individual health insurance coverage that provides dependent coverage of children shall continue to make such coverage available until the dependent child turns 26 years of age. However, the provisions of title XXVII of the PHSA do not appear to apply to TRICARE. Discussion: Section 702 of the enacted bill amends chapter 55 of title 10, United States Code, to insert a new section (1110b) establishing a new TRICARE program offering premium-based dependent coverage until age 26. The premium feature makes the TRICARE program dissimilar from the coverage mandated by PPACA which prohibits separate premiums. The PPACA provision provides that A group health plan and a health insurance issuer offering group or individual health insurance coverage that provides dependent coverage of children shall continue to make such coverage available for an adult child (who is not married) until the child turns 26 years of age. Department of Health and Human Services regulations have interpreted PPACA to extend dependent coverage, not create a new policy for which a separate premium would be charged. Organizations representing military constituencies have expressed concern about the potential amount of the premiums that might be charged under the new TRICARE program. Reference(s) : CRS Report R41198, TRICARE and VA Health Care: Impact of the Patient Protection and Affordable Care Act (PPACA) , by [author name scrubbed] and [author name scrubbed]. CRS Point of Contact: Don Jansen, x[phone number scrubbed]. Background : Under current law, reserve component members who have retired with 20 or more years of qualifying service but have not yet reached the age of 60 (so called "grey-area" retirees), are not eligible for space-available care at military treatment facilities. This has traditionally been the policy because the individuals in this category were "working-age" and were assumed to be able to obtain health from other providers. Last year, however, TRICARE Standard coverage was made available to gray area reservists by section 705 of the National Defense Authorization Act for Fiscal Year 2010 ( P.L. 111-84 ). Grey-area retirees are now able to purchase TRICARE Standard coverage under a new program known as TRICARE Retired Reserve for an unsubsidized premium, which enables the individual to access private sector care. Discussion: Section 643 would amend 10 U.S.C. SS1074 to eliminate the restriction on space- available care at military treatment facilities for retired reservists. The section does not require the purchase of the pending TRICARE Standard insurance for grey-area retirees to receive the space available-care. The Congressional Budget Office estimates that section 643 would require appropriations of $125 million over the FY2011-FY2015 period. Reference(s) : Reserve retirement is discussed in CRS Report RL30802, Reserve Component Personnel Issues: Questions and Answers , by [author name scrubbed]. CRS Point of Contact: Don Jansen, x[phone number scrubbed]. Background: On November 30, 1993, Congress enacted P.L. 103-160 , the National Defense Authorization Act for Fiscal Year 1994. Section 571 of the law, codified at 10 United States Code 654, describes homosexuality in the ranks as an "unacceptable risk ... to morale, good order, and discipline." The law stated the grounds for discharge as follows: (1) the member has engaged in, attempted to engage in, or solicited another to engage in a homosexual act or acts; (2) the member states that he or she is a homosexual or bisexual; or (3) the member has married or attempted to marry someone of the same sex. The law also stated that DOD would brief new entrants (accessions) and members about the law and policy on a regular basis. Finally, legislative language instructed that asking questions of new recruits concerning sexuality could be resumed--having been halted in January, 1993--on a discretionary basis. As such, this law represented a discretionary "don't ask, definitely don't tell" policy. Notably, the law contained no mention of "orientation." In many ways, this law contained a reiteration of the basic thrust of the pre-1993 policy. As implemented by the Clinton Administration, new recruits would not be asked about their sexuality. The policy became known as "Don't Ask, Don't Tell" (DADT). Discussion: Following the release of the Working Group's Review, the Senate held two hearings. After certification by the Chairman of the Joint Chiefs of Staff, the Secretary of Defense and the President, there remains a 60-day waiting period before repealing the current DADT policy and the law it is based upon. Until that time, DADT is still in effect. The 112 th Congress may be interested in several issues related to repeal of the ban and its implementation. The Comprehensive Review Working Group (CRWG) that studied implementing the repeal proposed changes to articles of the Uniformed Code of Military Justice dealing with sodomy, rape and carnal knowledge. Issues pertaining to the "Defense of Marriage Act" may also be raised, particularly as they affect certain military family and other benefits. Contentious issues regarding morality and religious practices may surface--particularly as they affect military chaplains and religious practices among service members--as might issues related to personal privacy. Congress may also exercise its oversight role to review the certifications submitted as part of the repeal process, to examine the modifications which the military makes to its regulations, and to assess the Services' plans for training their forces on the integration of openly gay and lesbian servicemembers. Reference(s) : See CRS Report R40782, "Don't Ask, Don't Tell": Military Policy and the Law on Same-Sex Behavior , by [author name scrubbed], and CRS Report R40795, "Don't Ask, Don't Tell": A Legal Analysis , by [author name scrubbed]. CRS Point of Contact: [author name scrubbed], x[phone number scrubbed]. Background: There are no laws concerning the recruitment, training and deployment of women in the Armed Forces. The last law barring women from serving on board combat ships was repealed in 1993. Under then-DOD policy (labeled the "risk rule"), women were excluded from all combat units, non-combat units and missions if the risk of exposure to direct combat, hostile fire, or capture was equal to or greater than the combat units they supported. In 1994, the risk rule was replaced by a new policy which excludes women if the following three criteria are all met. Women may not serve in units that (1) engage an enemy on the ground with weapons, (2) are exposed to hostile fire, and (3) have a high probability of direct physical contact with personnel of a hostile force. In Operation Iraqi Freedom and Operation Enduring Freedom, female troops have been deployed at check points searching other females for weapons and bombs, and have been forward deployed in support of combat units and patrols. Women have been attacked, taken prisoner, and, in some cases, killed by the enemy. The non-linear battlefield and insurgent nature of these operations makes it extremely difficult to determine safe or hostile areas. Discussion: Although most observers believe that the service of women in the armed forces has been commendable, there have been complaints that DOD is violating the spirit of its existing rules by collocating women with forward units or deploying them in situations that put them in direct contact with the enemy. Some have argued that women have proven themselves and that such restrictions should be removed. Although women can serve in nearly every military occupational specialty, the combat arms (such as infantry), special forces and submarines remain off limits. However, the Army is studying whether to open combat arms unit to women and the Navy has already announced plans in integrate women into submarine crews in the next year or so. Reference(s) : None. CRS Point of Contact: [author name scrubbed], x[phone number scrubbed]. Background: Since the end of the draft in the early 1970s, the number of women in the military, the number of military families, the number of divorces, and the number of overseas deployments to combat theaters, have increased. What has also increased is the number of single military parents with custody of a child or children. Some observers believe that custody issues should be held in abeyance while servicemembers are deployed, except in instances where the best interests of the child requires a court order. Discussion: The objective of Section 544 of the House bill is to protect the best interest of the child while assuring the military personnel who face the possibility of or actual deployment are not subjected to adverse or prejudicial court orders concerning child custody during the time they are deployed. This provision was not enacted. Reference : None. CRS Point of Contact: [author name scrubbed], x[phone number scrubbed]. Background: As part of the National Defense Authorization Act of FY2000, Congress required DOD to "(1) establish a central database of information on domestic violence incidents involving members of the armed forces and (2) establish the Department of Defense Task Force on Domestic Violence. The law charged the task force with establishing a strategic plan that would allow DOD to more effectively address domestic violence matters within the military." The task force submitted three reports with over 200 recommendations during the 2001 to 2003 timeframe. In 2003, DOD created the Family Violence Policy Office to oversee the services in implementing the recommendations. In 2006, GAO reviewed DOD progress in this area and determined that DOD had taken action on most of the task force's recommendations but did not have accurate or complete data from all law enforcement and clinical records. GAO made a number of recommendations, among them to get better data, to develop an oversight framework and to develop a plan to ensure adequate personnel are available. In 2010, GAO stated "DOD has addressed one of the recommendations in our 2006 report to improve its domestic violence program and taken steps toward implementing two more, but has not taken any actions on four of the recommendations." Discussion: According to GAO, the services are not providing accurate and complete data. GAO notes in its 2010 report that DOD does not have a plan to ensure that adequate personnel are available to implement the recommendations of the task force. In one instance, DOD did not concur with GAO's recommendation of collecting chaplain training data, taking issue, in part, based on the principle of privileged communication. In addition, GAO recommends that DOD develop an oversight framework for implementation of the recommendations made by the task force. Reference(s) : See language on "Protective Orders," CRS Report RL34590, FY2009 National Defense Authorization Act: Selected Military Personnel Policy Issues , coordinated by [author name scrubbed]. CRS Point of Contact: [author name scrubbed], x[phone number scrubbed]. Background: On May 12, 1975, in the aftermath of the Vietnam War (approximately two weeks after the fall of Saigon), a U.S. merchant ship, S.S. Mayaguez, was seized by the Khmer Rouge Navy. Thirty-nine sailors were captured and taken to the island of Koh Tang. The U.S. mounted a rescue operation on May 15. By most accounts, the result was deemed a failure with four U.S. helicopters shot down or disabled, and 41 Marines killed. The number killed outnumbered the number of sailors captured by the Khmer Rouge. Shortly after the rescue attempt, all 39 U.S. sailors were released. Discussion: The House-passed language would authorize the Vietnam Service Medal for participants in the Mayaguez rescue. It is not clear what other benefits, if any, would accrue from recognizing these individuals in this manner. Reference(s) : See CRS Report RL34590, FY2009 National Defense Authorization Act: Selected Military Personnel Policy Issues , coordinated by [author name scrubbed]. CRS Point of Contact: [author name scrubbed], x[phone number scrubbed]. Background: Military families are relocated quite frequently during a military career. Non-military spouses seeking employment at a new duty location are often frustrated because many of the skills they have may not be transferable to a new location. Often, new work skills must be learned. It has been reported that local employers prefer a more stable workforce with less turnover and less training needed. In 2008, Congress expanded training opportunities (10 USC 1784a) for military spouses by enacting "Education and Training Opportunities for Military Spouses to Expand Employment and Portable Career Opportunities," a program that assists spouses to receive training and/or educational opportunities, including possible tuition assistance. Discussion: The proposed pilot program in the House passed bill would have further expanded the existing program (10 U.S.C. SS1784a) by assisting and encouraging a limited number of military spouses to receive education and training in portable counseling skills particularly in the areas of social services. Instead, the enacted law seeks a review of available programs. Reference(s) : See CRS Report RL34590, FY2009 National Defense Authorization Act: Selected Military Personnel Policy Issues , coordinated by [author name scrubbed]. CRS Point of Contact: [author name scrubbed], x[phone number scrubbed]. Background: The Junior Reserve Officers' Training Corps or JROTC was established by the National Defense Act of 1916. According to Title 10 U.S.C. SS2031, the purpose of JROTC is "to instill in students in United States secondary educational institutions the value of citizenship, service to the United States, and personal responsibility and a sense of accomplishment." Under current law, JROTC is offered only to those above the eighth grade level. Discussion: Currently, hundreds of thousands of high school students participate in JROTC. Allowing those in 7 th and 8 th grades to participate could lead to a significant expansion of the program. Schools that have JROTC units are generally supportive of the program but it does have detractors because some parents object to the perceived "militarization" of youth. Reference(s) : None. CRS Point of Contact: [author name scrubbed], x[phone number scrubbed].

Military personnel issues typically generate significant interest from many Members of Congress and their staffs. Ongoing military operations in Iraq and Afghanistan, along with the emerging operational role of the Reserve Components, further heighten interest in a wide range of military personnel policies and issues. The Congressional Research Service (CRS) has selected a number of the military personnel issues considered in deliberations on the House-passed and Senate versions of the National Defense Authorization Act for FY2011. This report provides a brief synopsis of sections that pertain to personnel policy. The House version of the National Defense Authorization Act for Fiscal Year 2011, H.R. 5136, was introduced in the House on April 26, 2010, reported by the House Committee on Armed Services on May 21, 2010 (H.Rept. 111-491), and passed by the House on May 28, 2010. The Senate version of the NDAA, S. 3454, was introduced in the Senate on June 4, 2010 and reported by the Senate Committee on Armed Services on June 4, 2010 (S.Rept. 111-201). However, S. 3454 was never passed by the Senate. Instead of a Conference Committee to resolve differences, a new bill (H.R. 6523) was introduced in the House of Representatives on December 15, 2010. It was passed by the House on December 17, 2010 and passed by the Senate on December 22, 2010. The bill, the Ike Skelton National Defense Authorization Act for Fiscal Year 2011, was signed by the President on January 7, 2010 and became P.L. 111-383. Where appropriate, related CRS products are identified to provide more detailed background information and analysis of the issue. For each issue, a CRS analyst is identified and contact information is provided. Some issues were addressed in the FY2010 National Defense Authorization Act and discussed in CRS Report R40711, FY2010 National Defense Authorization Act: Selected Military Personnel Policy Issues, coordinated by [author name scrubbed]. Those issues that were previously considered in CRS Report R40711, FY2010 National Defense Authorization Act: Selected Military Personnel Policy Issues are designated with a "*" in the relevant section titles of this report. This report focuses exclusively on the annual defense authorization process. It does not include appropriations, veterans' affairs, tax implications of policy choices or any discussion of separately introduced legislation.

On March 23, 2010, the President signed into law H.R. 3590 , the Patient Protection and Affordable Care Act (PPACA; P.L. 111-148 ), as passed by the Senate on December 24, 2009, and the House on March 21, 2010. PPACA, among other changes, modified Medicaid and the Children's Health Insurance Program (CHIP) statutes. On March 21, 2010, the House passed an amendment in the nature of a substitute to H.R. 4872 , the Health Care and Education Reconciliation Act of 2010 (HCERA, P.L. 111-152 ). After being passed by the House, HCERA was subsequently amended and passed by the Senate before being approved again by the House on March 25, 2010. HCERA was signed by the President on March 30, 2010. HCERA, which amends PPACA, combined with PPACA to form the health care reform law. HCERA includes the following two titles: (1) Coverage, Medicare, Medicaid, and Revenues, and (2) Education and Health. Title I contains provisions related to health care and revenues, including modifications made to PPACA. Title II includes amendments to the Higher Education Act of 1965, which authorizes most of the federal programs involving postsecondary education, and other health amendments, which include other changes to PPACA. The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JTC) issued a revised cost estimate on March 20, 2010, for enacting both H.R. 3590 (now PPACA) and HCERA with a manager's amendment. CBO estimated that PPACA and HCERA together will reduce federal budgets deficits by $143 billion over the 2010-2019 period as a result of changes in direct spending and revenue. CBO's $143 billion estimate is composed of $124 billion in expenditure reductions and revenue from health care provisions and $19 billion in spending reductions from education. CBO previously had issued a preliminary cost estimate for PPACA and HCERA. In CBO's preliminary estimate, PPACA and HCERA would have reduced federal deficits by $138 billion (for health care and education) over the 2010-2019 period. CBO and JTC previously estimated that H.R. 3590 by itself would yield a net reduction in federal deficits of $118 billion over the 2010-2019 period. This report provides a brief summary of PPACA followed by a discussion of the modifications made by HCERA to the Medicaid and CHIP provisions in PPACA. PPACA consists of 10 titles that cover a variety of topics. In general, this law extends health insurance coverage to many currently uninsured Americans. It also has provisions to reduce expenditures, increase care coordination, encourage more use of health prevention, and improve quality of care. PPACA will reform the private health insurance market, impose a mandate for most legal U.S. residents to obtain health insurance, establish health insurance "Exchanges" that will subsidize health insurance coverage for eligible individuals; expand Medicaid eligibility; address healthcare workforce issues; and implement a number of other Medicaid and Medicare program and federal tax code changes. Key Medicaid and CHIP provisions in PPACA are summarized below. E ligibility-related reforms. PPACA will require states to expand Medicaid to certain individuals who are under age 65 with income up to 133% of the federal poverty level (FPL). This reform not only expands eligibility to a group who is not currently eligible for Medicaid (low income childless adults), but also raises Medicaid's mandatory income eligibility level for certain existing groups from 100% to 133% of the FPL. M aintenance of effort provisions . PPACA will require states to maintain current Medicaid and CHIP coverage levels--through 2013 for adults and 2019 for children. O utreach and enrollment provisions. PPACA includes provisions to encourage states to improve outreach, streamline enrollment, and coordinate with the proposed American Health Benefit Exchanges (Exchange). B enefit reforms . PPACA will add new mandatory and optional benefits to Medicaid. Such mandatory benefits include premium assistance for employer-sponsored health insurance, coverage of free-standing birth clinics, and tobacco cessation services for pregnant woman. The law also authorizes states to offer new optional benefits such as preventive services for adults, health homes for persons with chronic conditions, and additional options for states to expand home- and community-based services as an alternative to institutional care. F inancing reforms . PPACA introduces measures to reduce the growth of Medicaid expenditures and increases federal matching payments for the eligibility expansions. C ost control reforms . Some of the PPACA's cost control measures include (1) proposed reductions in Medicaid disproportionate share hospital (DSH) payments, (2) expenditure reductions for prescription drugs, and (3) payment reforms to reduce inappropriate hospital expenditures for health care-acquired conditions. P rogram integrity reforms. PPACA creates enforcement and monitoring tools and imposes new data reporting and oversight requirements on states and providers. States will also be required to implement initiatives used by the Medicare program, such as a national correct coding initiative and a recovery audit contract program for their Medicaid programs. N ursing home accountability . PPACA adds a number of requirements to improve the transparency of information within facilities and chains, as well as provides long-term care (LTC) consumers with information on the quality and performance of nursing homes. D emonstrations, pilot programs, and grants. PPACA will provide the Secretary of the Department of Health and Human Services (the Secretary) and state Medicaid and CHIP programs with opportunities to test models for improving the delivery, quality, and payment of services. CHI P - related provisions . PPACA requires states to maintain the current CHIP structure through FY2019, but does not provide federal CHIP appropriations beyond FY2013. M iscellaneous Medicaid and CHIP reforms. PPACA adds several offices within the Centers for Medicare and Medicaid Services (CMS) to better coordinate care across the Medicare and Medicaid/CHIP programs. One of these offices will be dedicated to improving coordination for beneficiaries eligible for both Medicare and Medicaid (dual eligibles). Another will add a Medicare and Medicaid Innovation Center to develop and test new payment and service delivery models to reduce Medicare, Medicaid, and CHIP expenditures, while preserving and enhancing quality of care for beneficiaries. The health care-related provisions in Title I of the HCERA modifies selected provisions in PPACA. What follows is a brief discussion of these Medicaid and CHIP-related changes. Each section contains a brief description of existing Medicaid law and related background, an explanation of the provision in PPACA, and a discussion of the changes enacted under HCERA. To qualify for Medicaid, an individual must meet both categorical (i.e., must be a member of a covered group such as children, pregnant women, families with dependent children, the elderly, or the disabled) and financial eligibility requirements. Generally, Medicaid's financial requirements place limits on the maximum amount of income, and also sometimes, assets, that individuals may possess to participate. Additional guidelines specify how states should calculate these amounts. The specific income and asset limitations that apply to each eligibility group are set through a combination of federal parameters and state definitions. Consequently, these standards vary across states, and different standards apply to different population groups within states. Of the approximately 50 different eligibility "pathways" into Medicaid, some are mandatory while others may be covered at state option. The federal government's share of Medicaid costs is determined by a formula in statute. This formula, referred to as the federal medical assistance percentage (FMAP), provides higher reimbursement to states with lower per capita income relative to the national average (and vice versa). FMAPs have a statutory minimum of 50% and a maximum of 83%, although some Medicaid services receive a higher federal match rate. In February 2009, with the passage of the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ), states received temporary enhanced FMAP rates for nine fiscal quarters beginning with the first quarter of FY2009 and running through the first quarter of FY2011 (December 31, 2010). Subject to specified requirements, PPACA requires states to make eligible for Medicaid qualifying individuals with income up to 133% of the FPL beginning in 2014, among other mandatory expansions. Under this law, "newly eligible" individuals will be defined as non-elderly, non-pregnant individuals (e.g., childless adults, and certain parents), who are otherwise ineligible for Medicaid under prior law. As a conforming measure, PPACA also will change the mandatory Medicaid income eligibility level for children age 6 to 19 from 100% FPL to 133% FPL (as previously applied to children under age 6). Income eligibility for individuals in the "newly eligible" population, other non-elderly individuals eligible under prior law (subject to certain exceptions), and certain CHIP eligible individuals will be based on modified gross income (MGI), or in the case of families, the household income. "Newly eligible" individuals will receive either benchmark or benchmark-equivalent coverage consistent with the requirements of Section 1937 of the Social Security Act (SSA)--excluding the "newly eligible" who meet the definition of exempted populations under this section, such as blind or disabled persons, and hospice patients, for example. Under PPACA, states will receive 100% FMAP for the cost of care provided to "newly eligible" populations, from 2014 through 2016. Beginning in 2017, all states except Nebraska will have an FMAP lower than 100% for "newly eligibles'' and will be grouped in the following two categories: (1) expansion states (those that, as of December 1, 2009, had statewide Medicaid coverage for parents and childless adults up to 100% FPL); and (2) non-expansion states. Subject to a ceiling of 95%, for "newly eligible beneficiaries," expansion states will receive a 30.3 percentage point increase over their regular FMAP for 2017, a 31.3 percentage point increase over their regular FMAP for 2018, and a 32.3 percentage point increase for 2019, and thereafter. (See Table 1 for a summary of these annual federal financial participation rates for new eligibles under PPACA and HCERA.) Expansion states that do not get any additional FMAP (because no individuals qualified as "newly eligible" due to the states' prior Medicaid expansions), and that had not been granted a Secretary-approved diversion of DSH payments toward Medicaid coverage (effective in July 2009) will receive a 2.2 percentage point increase to their regular FMAP for existing Medicaid eligibility groups, between January 1, 2014, and September 30, 2019. Finally, under PPACA, between January 1, 2014, and December 31, 2016, a state can receive a 0.5 percentage point increase to its regular FMAP rate for existing Medicaid eligibility groups if the following two conditions are met: (1) it is a state that did not get any additional FMAP (because no individuals qualify as "newly eligible" due to the state's prior Medicaid expansions); and (2) it ranked as the state with the highest percentage of insured individuals in 2008 based on the Current Population Survey (CPS) (i.e., Massachusetts). HCERA (Sec. 1201-1202) makes the following modifications to the financing portion of the eligibility provisions in PPACA: FMAP rates for the cost of care provided to "newly eligible" populations for all states (i.e., expansion and non-expansion states) would be equal to 100% in 2014-2016, 95% in 2017, 94% in 2018, 93% in 2019, and 90% in 2020 and beyond (see Table 1 ). The provision in PPACA that provides the state of Nebraska with a permanent FMAP rate of 100% for "newly eligibles'' was repealed. The length of time that specified expansion states would receive a 2.2 percentage point increase to their regular FMAP for existing Medicaid eligibility groups, was shortened from January 1, 2014, through September 30, 2019, to January 1, 2014, through December 31, 2015. The Massachusetts-specific 0.5 percentage point increase in FMAP for the period between January 1, 2014, and December 31, 2016, was repealed. Expansion states will receive an increase above their regular FMAP rate for the cost of care provided to currently eligible childless adults. The amount of the increase will be a certain percentage (i.e., a transition percentage) of the difference between the state's regular FMAP and the FMAP it received for "newly eligibles" (see Table 1 ). Generally, Medicaid's financial requirements place limits on the maximum amount of income, and also sometimes, assets, that individuals may possess to participate. Additional guidelines specify how states should calculate these amounts. The specific income and asset limitations that apply to each eligibility group are set through a combination of federal parameters and state definitions. Consequently, these standards vary across states, and different standards apply to different population groups within states. Under PPACA, certain income disregards (i.e., expenses such as child care costs or block of income disregards where a specified portion of family income is not counted), and assets or resource tests will no longer apply when assessing an individual's income to determine financial eligibility for Medicaid. Instead, income eligibility for newly eligible individuals, non-elderly individuals eligible under prior law (subject to certain exceptions), as well as certain CHIP eligible individuals will be based on Modified Gross Income (MGI), or in the case of an individual in a family greater than one, the household income of such family. MGI and household income will also be used to determine applicable premium and cost-sharing amounts under the state plan or waiver. MGI is defined as gross income decreased by trade and business deductions, losses from sale of property, and alimony payments, but including tax-exempt interest and income earned in the territories and by U.S. citizens or residents living abroad. Medicaid enrollees who otherwise would lose coverage because of the change in income-counting will be able to maintain eligibility. Under HCERA (Sec. 1004), income eligibility for newly eligible individuals, non-elderly individuals eligible under prior law (subject to certain exceptions), as well as certain CHIP eligible individuals will be based on modified adjusted gross income (MAGI), or in the case of an individual in a family greater than one, the household income of such family. MAGI and household income will also be used to determine applicable premium and cost-sharing amounts under the state plan or waiver. MAGI is defined as the Internal Revenue Code's (IRC'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 by tax-exempt interest and income earned by U.S. citizens or residents living abroad. Although PPACA prohibits any continued use of income disregards under Medicaid once the new income definitions are in place, the reconciliation bill (Sec. 1004(e)) will require states determining individuals' Medicaid eligibility under MAGI to reduce their countable income by a certain amount. That amount will be 5% of the upper income limit for that Medicaid eligibility pathway. State Medicaid plans must provide methods and procedures to assure that payments are consistent with efficiency, economy, and quality of care, and are sufficient to enlist enough providers so that care and services are available at least to the extent that such care is available to the general population in the geographic area. Additional requirements regarding payment rates under Medicaid apply to inpatient hospital and long-term care facility services. However, within these guidelines, states have considerable flexibility to set provider reimbursement rates independent of any national baseline or reference. PPACA did not have a provision addressing payments to primary care providers. However, there was a provision in the Affordable Health Care for America Act ( H.R. 3962 ), the health reform bill passed by the House. HCERA (Sec. 1202) will add similar language to PPACA. States will be required to set Medicaid payments for primary care services (i.e., evaluation and management or E&M services defined by Medicare as of December 31, 2009, and as subsequently modified by the Secretary, and services related to immunization administration for vaccines and toxoids) relative to Medicare payment rates. Primary care services furnished in 2013 and 2014 by a physician with a primary specialty designation of family medicine, general internal medicine, or pediatric medicine will be paid at the Medicare rate for these services or higher (or if greater, the Medicare 2009 payment rate that will be applicable). With respect to Medicaid managed care, the bill also will require that, in the case of E&M services, these new payment rates will apply, regardless of the manner in which such payments are made, including in the form of capitation or partial capitation (e.g., payments made on a "per member per month" basis, rather than for each specific unit of service delivered). For services furnished in 2013 and 2014, the federal government will fully finance the portion of primary care service payments by which the new minimum payment rates exceed the state's existing payment rates as of July 1, 2009. That is the federal FMAP percentage for the additional costs born by a state will equal 100%. Under Medicaid, states are required to make disproportionate share hospital (DSH) adjustments to the payment rates of hospitals treating large numbers of low-income and Medicaid patients. The DSH provision is intended to recognize the disadvantaged situation of those hospitals. In claiming federal matching dollars, states cannot exceed their state-specific allotment amounts, calculated for each state based on a statutory formula. States must define, in their state Medicaid plans, hospitals that qualify as DSH hospitals and their DSH payment formulas. DSH hospitals must include at least all hospitals meeting minimum criteria and may not include hospitals that have a Medicaid utilization rate below 1%. The DSH payment formula also must meet minimum criteria, and DSH payments for any specific hospital cannot exceed a hospital-specific cap based on the unreimbursed costs of providing hospital services to Medicaid and uninsured patients. In determining federal DSH allotments for states, special rules apply to "low DSH states" (those in which total DSH payments for FY2000 were less than 3% of the state's total Medicaid spending on benefits). For low DSH states for FY2004 through FY2008, the allotment for each of these years was equal to 16% more than the prior year's amount. For years beginning in FY2009, DSH allotments for all states are equal to the prior year amount increased by the change in the consumer price index for all urban consumers (CPI-U). For FY2009, federal DSH allotments across states and the District of Columbia totaled to nearly $10.6 billion. Provisions under ARRA provided additional temporary DSH funding for states that increases total federal DSH allotments to nearly $10.9 billion. PPACA reduces federal DSH allotments to states based on changes (reductions) in state-specific uninsurance rates over time. State DSH allotments will remain intact as under current law until a state uninsurance level is reached. This level will be initially reached the first fiscal year after FY2012 for which a state's uninsured rate, as measured by the Census Bureau's American Community Survey, decreases by at least 45%, compared to an initial baseline uninsured rate for FY2009. Once this level is reached, reductions in DSH allotments will depend on a state's status as a low DSH state and spending patterns in comparison to a benchmark (over or under 99.90% of the state's average DSH allotments) during a base five-year period (FY2004 through FY2008). These reductions will be 17.5% (over the spending benchmark) or 25% (under the spending benchmark) for low DSH states versus 35% (over the spending benchmark) or 50% (under the spending benchmark) for all other states. For subsequent years, if a state's uninsurance rate decreases further, the state's DSH allotment will be further reduced, again depending on a state's status as a low DSH state and its spending patterns during the base five-year period. In general, these reductions will be equal to the product of the percentage reduction in uncovered individuals and 20% (over the spending benchmark) or 27.5% (under the spending benchmark) for low DSH states versus 40% (over the spending benchmark) or 55% (under the spending benchmark) for all other states. For FY2013 forward, in no case will a state's DSH allotment be less than 50% of the state's FY2012 allotment, increased by the percentage change in the CPI-U for each previous year occurring before the fiscal year. Table 2 summarizes the DSH provisions in PPACA. Under HCERA, the provision (Sec. 1203) strikes the language in PPACA and requires the Secretary to make aggregate reductions in Medicaid DSH allotments that would equal $500 million in FY2014, $600 million in FY2015, $600 million in FY2016, $1.8 billion in FY2017, $5.0 billion in FY2018, $5.6 billion in FY2019, and $4.0 billion in FY2020. To achieve these aggregate reductions, the Secretary will be required to: (1) impose the largest percentage reduction on states that have the lowest percentage of uninsured individuals (determined on the basis of data from the Bureau of the Census, audited hospital cost reports, and other information likely to yield accurate data) during the most recent fiscal year with available data, or do not target their DSH payments to hospitals with high volumes of Medicaid patients, and hospitals that have high levels of uncompensated care (excluding bad debt); (2) impose a smaller percentage reduction on low DSH states; and (3) take into account the extent to which the DSH allotment for a State was included in the budget neutrality calculation for a coverage expansion approved under Section 1115 as of July 31, 2009. For each fiscal year, these reductions in DSH allotments will be applied on a quarterly basis. For a state with a DSH allotment of $0 in the second, third and fourth quarters of FY2012, the provision will set that state's DSH allotments at $47.2 million, and for a state with a DSH allotment of $0 in FY2013, the provision will set that state's DSH allotment at $53.1 million. The federal share for most Medicaid service costs is determined by the FMAP, which is based on a formula that provides higher reimbursement to states with lower per capita income relative to the national average (and vice versa). FMAPs have a statutory minimum of 50% and maximum of 83%. In the territories, the FMAP is typically set at 50%. Medicaid programs in the five territories (American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the Virgin Islands) are subject to annual federal spending caps that are set in statute. The Congress has increased the levels of federal Medicaid funding in the territories in recent years. For FY2008 and subsequent fiscal years, the total annual cap on federal funding for the Medicaid programs in the territories is calculated by increasing the FY2007 ceiling for inflation. The territories also benefited from a temporary 30% increase in their Medicaid spending caps as a result of the FMAP assistance provided under ARRA. The territories also have access to other sources of federal matching funds; for example, they may be eligible for enhanced federal match (90% or 75%) that is available under Medicaid for improvements in data reporting systems. Beginning with FY2009, funds spent on specified administrative activities will not count against the Medicaid caps. PPACA increases the spending caps for the territories by 30% for the second, third, and fourth quarters of FY2011, and for each full fiscal year thereafter. The law also increases the applicable FMAP by five percentage points--to 55%--beginning January 1, 2011, and for each full fiscal year thereafter. Beginning in fiscal year 2014, payments made to the territories for medical assistance for "newly eligible" individuals will not count towards territories' applicable Medicaid spending caps. In the case of the territories, the provision defines "newly eligible" individuals as non-pregnant childless adults who are eligible under the new Medicaid mandatory eligibility group and whose modified gross income or household income does not exceed the income eligibility level in effect for parents under each such commonwealth or territory's state plan or waiver as of the date of enactment of the bill. HCERA (Sec. 1204) strikes the Medicaid provisions related to payment of the territories in PPACA, and permits territories to establish an Exchange (in accordance with the Exchange-related provisions also included in PPACA), not later than October 13, 2013. Out of funds not otherwise appropriated, $1.0 billion is appropriated for the period between 2014 and 2019 for the purpose of providing premium and cost-sharing assistance to residents of the territory to obtain health insurance coverage through the Exchange. Of this amount, the Secretary is to allocate $925 million for Puerto Rico, and a portion (as specified by the Secretary) of the remaining $75 million for any other territory that chooses establish an Exchange. Under this provision, territories are to be treated as states and required to structure their Exchanges in a manner so there is no gap in assistance between individuals eligible for Medicaid and those eligible for premium and cost-sharing assistance. Also under HCERA, territories that do not elect to establish an Exchange as of the specified date are entitled to an increase in their existing Medicaid funding caps. For the period between July 1, 2011, and September 30, 2019, $6.3 billion dollars in total additional payments are available for distribution among each territory across each such year in an amount that is proportional to the capped amounts available to the territories under current law. Current law rules regarding funds spent on specified administrative activities will apply, and the provision is effective July 1, 2011. A personal care attendant provides assistance with activities of daily living (ADLs) and instrumental activities of daily living (IADLs) to persons with a significant disability. ADLs and IADLs include activities such as eating, bathing and showering, using the toilet, preparing meals, managing money, and shopping for groceries, among others. States have the option to cover personal care services, including personal care attendant services, under a variety of optional state plan benefits. Under PPACA, states can offer home and community-based attendant services as an optional state plan benefit to Medicaid beneficiaries whose income does not exceed 150% of poverty, or if greater, the income level applicable for an individual who has been determined to require the level-of-care offered in an institution. This provision would be effective beginning October 1, 2010. However, under HCERA (Sec. 1205), this provision becomes effective on October 1, 2011. Outpatient prescription drugs are an optional Medicaid benefit, but all states cover prescription drugs for most beneficiary groups. Medicaid law requires prescription drug manufacturers who wish to sell their products to Medicaid agencies to agree to pay rebates to states for outpatient drugs purchased on behalf of Medicaid beneficiaries. Medicaid differentiates between the following two types of drugs when determining rebates: 1. single source innovator drugs (generally, those still under patent) and innovator multiple source drugs (originally marketed under a patent or an original new drug application, but for which there now are therapeutically or pharmaceutically equivalent products); and 2. all other, non-innovator, multiple source drugs. Rebates for drugs still under patent or those once covered by patents have two components: a basic rebate and an additional rebate. Medicaid's basic rebate is determined by the larger of a drug's quarterly Average Manufacturer Price (AMP) compared to the best price for the same period, or a percentage (15.1%) of the drug's quarterly AMP. Drug manufacturers owe an additional rebate on single source innovator drugs (the first drug category mentioned above) when their unit prices for individual products increase faster than inflation. PPACA requires manufacturers to pay additional rebates to Medicaid for certain new formulations of existing single source or innovator multiple source drugs. For these new drug formulations, referred to as line extensions, drug manufacturers will pay the additional rebate based on a new formula. Similar to the House health reform bill, H.R. 3962 , HCERA (Sec. 1206) will limit the definition of line extension drugs to oral solid dosage forms of single source or innovator multiple source drugs. PPACA also modifies the definition of Average Manufacturer Price (AMP). Among other changes to AMP, this law specifically excludes a wide range of rebates, discounts, price concessions, and service fees extended by manufacturers to wholesalers, retail community pharmacies, and other large volume purchasers. Under the reconciliation bill, the definition of AMP will be further modified to exclude discounts paid by manufacturers to Medicare Part D plans. The effect of excluding the Medicare Part D discounts, as well as other price concessions will be make the calculation of AMP more closely reflect the actual real average cost of outpatient prescription drugs. HCERA did not amend the Medicaid prescription drug provisions. Program integrity (PI) initiatives are designed to combat waste, fraud, and abuse. This includes processes directed at reducing improper payments, as well as activities to prevent, detect, investigate, and ultimately prosecute health care fraud and abuse. More specifically, PI ensures that correct payments are made to legitimate providers for appropriate and reasonable services for eligible beneficiaries. Congress provided additional dedicated funding for Medicaid program integrity activities in the Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ). Under DRA, among many other changes, Congress established a Medicaid Integrity Program (MIP) that included annual appropriations reaching $75 million. This MIP funding was to support and enhance state PI efforts by expanding and sustaining national PI activities in the areas of provider audits, overpayment identification, and payment integrity and quality of care education. PPACA increased funding to the Health Care Fraud and Abuse Control (HCFAC) account. HCFAC funds are used for a number of health care fraud and abuse activities, but the majority of the funding goes to Medicare activities. HCERA (Sec. 1304) further increases those HCFAC account funds, bringing them up to the levels proposed in the House health care reform bill ( H.R. 3962 ). In addition, HCERA increases Medicaid Program Integrity funds by indexing MIP funds to annual changes in the consumer price index, beginning with fiscal year 2010.

On March 23, 2010, the President signed into law H.R. 3590, the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148), as passed by the Senate on December 24, 2009, and the House on March 21, 2010. PPACA will, among other changes, modify Medicaid and the Children's Health Insurance Program (CHIP) statutes. In addition, on March 21, 2010, the House passed an amendment in the nature of a substitute to H.R. 4872, the Health Care and Education Reconciliation Act of 2010 (HCERA, P.L. 111-152). After being passed by the House, HCERA was subsequently amended and passed by the Senate before being approved again by the House on March 25, 2010. HCERA was signed by the President on March 30, 2010. HCERA, which amends PPACA, combined with PPACA form the health care reform law. HCERA includes the following two titles: (1) Coverage, Medicare, Medicaid, and Revenues, and (2) Education and Health. Title I contains provisions related to health care and revenues, including modifications made by HCERA to PPACA. Title II includes amendments to the Higher Education Act of 1965, which authorizes most of the federal programs involving postsecondary education, and other health amendments, which include other changes to PPACA. This report provides a brief summary of PPACA followed by a discussion of the modifications made to the Medicaid and CHIP provisions by HCERA. This report reflects legislative language in HCERA as passed by the House on March 25, 2010. Selected highlights of the Medicaid and CHIP amendments made by HCERA to PPACA include the following: primary care physician payment rates for selected patient treatments were increased; the definition of the average manufacturer price (AMP) was revised to help make AMP more closely reflect manufacturers' average prices; the effective date of the Community First Choice Option was delayed; state FMAP rates for newly eligible populations were changed, as were income counting rules for certain populations; the territories' spending rate caps were increased beginning with the second quarter of FY2011; additional program integrity funding was provided through indexing of the Medicaid Integrity Program for fiscal years beginning with FY2010; and Medicaid Disproportionate Share Hospital (DSH) payment reductions were modified.

International medical graduates (IMGs) are foreign nationals or U.S. citizens who graduate froma medical school outside of the United States. In 2002, the most recent year for which data areavailable, there were 853,187 practicing physicians in the United States. IMGs accounted for 24.7%(210,355) of these, and 27.4% (26,588) of physicians in residency and fellowship programs. (1) Theuse of foreign IMGs in many rural communities of the United States areas has allowed states toensure the availability of medical care to their residents. This report focuses on those IMGs who are foreign nationals, hereafter referred to as foreign medical graduates (FMGs). Many FMGs first entered the United States to receive graduate medicaleducation and training as cultural exchange visitors through the J-1 cultural exchange program. Other ways for FMGs to enter the United States include other temporary visa programs as well aspermanent immigration avenues such as family- or employment-based immigration, the diversitylottery, and humanitarian relief provisions. (2) Thisreport focuses on FMGs entering through the J-1program. Many FMGs enter the United States under the current Educational and Cultural ExchangeVisitor Program on a J-1 nonimmigrant visa. (3) Nonimmigrants are admitted for a specific purposeand a temporary period of time. Most nonimmigrant visa categories are defined in 101(a)(15) ofthe Immigration and Nationality Act (INA). These visa categories are commonly referred to by theletter and numeral that denotes their subsection in 101(a)(15), e.g., B-2 tourists, E-2 treatyinvestors, F-1 foreign students, H-1B temporary professional workers, or J-1 cultural exchangeparticipants. (4) The J-1 visa includes nonimmigrantssuch as professors, students, au pairs, researchscholars, camp counselors, and foreign medical graduates. Table 1 provides data on the number of physicians in residency programs as of August 2003. As the table indicates, J visa holders make up 15.8% of IMGs in residency programs. Table 1. Citizenship/Visa Status of Physicians and International Medical Graduates in Residency Programs, August 1, 2003 Source: CRS presentation of data presented in S. Brotherton, P. Rockey, and S. Etzel, "U.S. Graduate Medical Education, 2003-2004," JAMA , vol. 292, no. 9, Sept. 1, 2004. a. A J-2 nonimmigrant is the spouse or child of a J-1 nonimmigrant. As exchange visitors, FMGs can remain in the United States on a J visa until the completion of their training, typically for a maximum of seven years. After that time, they are required to returnhome for at least two years before they can apply to change to another nonimmigrant status or legalpermanent resident (LPR) status. Under current law, a J-1 physician can receive a waiver of thetwo-year home residency requirement in several ways: the waiver is requested by an interested government agency (IGA); the FMG's return would cause extreme hardship to a U.S. citizen or LPRspouse or child; or the FMG fears persecution in the home country based on race, religion, orpolitical opinion. Most J-1 waiver requests are submitted by an IGA and forwarded to the Department of State for a recommendation. If the Department of State recommends the waiver, it is forwarded to U.S.Citizenship and Immigration Service (USCIS) in the Department of Homeland Security (DHS)forfinal approval. (5) Upon final approval by USCIS, thephysician's status is converted to that of anH-1B professional specialty worker, and the individual is counted against the annual H-1B cap of65,000. In instances where the H-1B cap has been met, the physician's J visa status may beextended, and the physician would be granted H-1B status in the following year. An IGA may request a waiver of the two-year foreign residency requirement for an FMG by showing that his or her departure would be detrimental to a program or activity of official interestto the agency. In return for sponsorship, the FMG must submit a statement of "no objection" fromhis or her home country, have an offer of full-time employment, and agree to work in a healthprofessional shortage area or medically underserved area for at least three years. According toUSCIS regulations, the FMG must be in H-1B status while completing the three-year term and mustagree to begin work within 90 days of receipt of the waiver. If an FMG fails to fulfill the three-yearcommitment, he or she becomes subject to the two-year home residency requirement and may notapply for a change to another nonimmigrant, or LPR status until meeting that requirement. Althoughany federal government agency can act as an IGA, the main federal agencies that have been involvedin sponsoring FMGs are the Department of Veterans Affairs (VA), the Department of Health andHuman Services (HHS), the Appalachian Regional Commission (ARC), and the United StatesDepartment of Agriculture (USDA). (6) State healthdepartments may also act as IGAs. Department of Veterans Affairs (VA). The Department of Veterans Affairs allows facility directors to request J-1 waivers in instances whereit is in the interest of the Department and its programs, and efforts to recruit a qualified U.S. citizenor LPR have failed. The facility director must supply documentation of recruitment efforts anddetailed information on applicants who did not qualify for the position. In order for the VA toconsider a waiver application, the applicant must submit copies of his or her medical license, visa,test results, proposed and current clinical privileges, references, curriculum vitae, and current addressand phone numbers. Once a waiver has been approved, the physician must serve for at least threeyears in a VA facility. The facility does not have to be in a designated shortage area. Department of Health and Human Services (HHS). Historically, the Department of Health and Human Services had been veryrestrictive in its sponsorship of J-1 waiver requests. HHS emphasized that the exchange visitorprogram was a way to pass advanced medical knowledge to foreign countries, and that it should notbe used to address medical underservice in the United States. (7) HHS' position was that medicalunderservice should be addressed by programs such as the National Health Service Corps. Prior toDecember 2002, HHS only sponsored waivers for physicians or scientists involved in biomedicalresearch of national or international significance. In December 2002, HHS announced that it wouldbegin sponsoring J-1 waiver requests for primary care physicians and psychiatrists in order toincrease access to healthcare services for those in underserved areas. (8) HHS began accepting waiverapplications on June 12, 2003, but suspended its program shortly after for reevaluation. OnDecember 10, 2003, HHS released new program guidelines, which many maintain are morerestrictive and have limited the states' access to physicians. Appalachian Regional Commission (ARC). Established by Congress in 1965, ARC is a joint federal and state entity charged with, among otherthings, ensuring that all residents of Appalachia have access to quality, affordable health care. Theregion covered by ARC consists of all of West Virginia and parts of Alabama, Georgia, Kentucky,Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee,and Virginia. ARC submits a request for a waiver at the request of a state in its jurisdiction. The waiver must be recommended by the governor of the sponsoring state. In return, the FMG must agree to provideprimary care for at least 40 hours a week for three years at a health professional shortage area facility. The facility must be a Medicare or Medicaid-certified hospital or clinic that also accepts medicallyindigent patients. The facility must prove that it has made a good faith effort to recruit a U.S.physician in the six months preceding the waiver application, and the J-1 physician may not havebeen out of status for more than six months after receiving the J-1 visa. In addition, the physicianmust be licensed by the state in which he or she will be practicing, and must have completed aresidency in family medicine, general pediatrics, obstetrics, general internal medicine, generalsurgery, or psychiatry. The physician must sign an agreement stating that he or she will comply withthe terms and conditions of the waiver, and will pay the employer $250,000 if he or she does notpractice in the designated facility for three years. United States Department of Agriculture (USDA). To help medically underserved rural areas, USDA became a participant in the J-1 waiver programin 1994. It ceased its participation in 2002. While participating in the J-1 waiver program, USDAsponsored over 3,000 waivers for J-1 physicians. As a participant it required that all applicationssubmitted be initiated by a health care facility or state department of health. To qualify for aUSDA-sponsored waiver, the physician was required to have an employment offer of no less thanthree years from a health care facility in a designated medically underserved rural area, and wasrequired to work at least 40 hours a week as a primary care physician. Following the September 11, 2001 terrorist attacks, the USDA Office of the Inspector General recommended that USDA review its participation in the J-1 waiver program. On September 26,2001, the processing of waiver applications was suspended pending the outcome of the review. Asa part of this review, USDA forwarded seven pending applications to the Department of State forscreening. Three of the applicants turned up on government watch lists. On February 28, 2002, USDA officially announced it would no longer participate in the J-1 visa waiver program citingsecurity concerns and the inability to conduct adequate background and site checks. (9) In March 2002, the USDA returned 86 waiver applications to 25 states. (10) On April 16, 2002,USDA announced it would act as a temporary IGA to process the 86 pending waiver applicationsit had returned and ceased its participation in the program. "Conrad 20" Program for States. In 1994, Congress established a J-1 visa waiver provision commonly referred to as the "Conrad 20" programafter its sponsor Senator Kent Conrad. Under this program, participating states were allowed tosponsor up to 20 waiver applications annually. In 2001, 45 states and the District of Columbia participated in "Conrad 20" programs. Of the states participating in "Conrad 20" programs at the time, 22 sponsored specialists in addition toprimary care physicians. (11) Administration of theprogram varied by state, with three states chargingapplication fees and one state requiring a commitment of at least four years. In addition to meetingthe general requirements for medical licensing in the United States, participants were also requiredto meet state-specified licensing criteria before beginning work. HHS Policy Change. On December 17, 2002,HHS announced it would be broadening its J-1 waiver program. HHS would assume the former roleof USDA by acting as an IGA sponsor for waivers for primary care physicians and psychiatrists. These physicians would be required to practice in designated shortage areas for a minimum of threeyears in return for HHS sponsorship. Eligibility to apply for HHS wavier requests is limited toprimary care physicians and general psychiatrists who have completed their primary care orpsychiatric residency training programs no more than 12 months prior to the commencement ofemployment. (12) This eligibility limitation wasinstituted to ensure that the physicians' training iscurrent and that they are not engaged in sub-specialty care. Under the new program, HHS also allows physicians who have departed from the United States to apply for waivers while abroad. This must be done within the 12-month period following thecompletion of their residency training program. Other requirements include the following: astatement from the applicant that he or she does not have pending and will not submit other IGArequests while HHS processes the waiver request; the head of the petitioning facility must confirmthat the facility is located in a designated shortage area; and the employment contract must requirethe physician to practice a specific primary care discipline for a minimum of three years for 40 hoursa week. (13) On June 12, 2003, HHS began accepting applications for J-1 waivers, for primary care physicians to practice in Health Professional Shortage Areas (HPSA) or Medically UnderservedAreas (MUA). (14) However, on December 10,2003, HHS issued more restrictive guidelines, requiringphysicians to work in either Federally Qualified Health Centers, Rural Health Clinics or IndianHealth Service Clinics. In addition to these requirements, the clinics had to be in areas with HPSAscores of 14 or above. According to many states, this new policy drastically reduced the number of communities that qualified for J-1 physicians. Texas reported that under these new guidelines, the number of wholeor partial counties that once qualified for J-1 physicians was reduced from 225 to 30. Other statesthat were adversely impacted include Iowa, which dropped from 82 previously eligible counties to2, Wyoming, which dropped from 21 to 4, Kansas, which dropped from 97 to 15, and Florida, whichdropped from 63 to 30. (15) Bills introduced in the108th Congress have focused on this issue and haveincluded language that would allow states to place up to five physicians in facilities that may not bein HHS-designated shortage areas if they are serving patients from designated shortage areas. Thesebills also allow states to recruit speciality care physicians if they can demonstrate a shortage ofhealthcare professionals to provide services in the requested medical specialty. Delta Regional Authority. On May 17, 2004, the Delta Regional Authority (DRA) officially began accepting applications for its new J-1 visa waiverprogram. The DRA includes 240 county or parish areas in Alabama, Arkansas, Illinois, Kentucky,Louisiana, Mississippi, Missouri and Tennessee. The goal of the Authority is to stimulate economicdevelopment and foster partnerships that will have a positive impact on the economy of the eightstates that make up the Authority. Under the DRA's waiver program, physicians must submit anapplication processing fee; agree to practice in designated shortage areas for a period of at least threeyears; and sign an agreement agreeing to pay $250,000 to the sponsoring facility if they do not fulfillany portion of their commitment, or $6,945 per month for each month they fail to fulfill theirrequirement. Expiration of "Conrad 30" Program. On May 31,2004, the "Conrad 30" provisions in the INA expired. The expiration of this program means thatstate-sponsored waivers can only be granted to J-1 physicians who were admitted to the UnitedStates, or who had acquired J-1 status, prior to June 1, 2004. (16) The expiration of these J-1 waiverprovisions, along with the changes in HHS's program have many in rural medical communitiesconcerned. Many states continue to argue that the J-1 waiver program is the only way theircommunities can recruit physicians, because many U.S. medical graduates uninterested in workingin these areas. (17) As discussed below, several billshave been introduced in the 108th Congress toaddress the concerns of medically underserved areas that rely on J-1 physicians. State Surveys. In May 2001, the Texas Primary Care Office of the Department of Health conducted a nationwide survey of state health departmentsutilizing J-1 waiver programs. (18) The survey posedspecific questions regarding the administrationof the programs in the states and asked for recommendations on the programs. The responsesindicated that many of the states with "Conrad 20" programs also requested waivers through USDAand ARC, and that those without "Conrad 20" programs utilized the USDA waiver program. Recommendations from the states for the J-1 visa waiver program included the following: allow states to determine the appropriate use of the program; allow states to determine the number of waivers needed based on the needs ofthe states; allow fees to support the program; have HHS coordinate ongoing support and technical assistance;and have the Department of State and USCIS provide information and technicalassistance to the states. Other suggestions included allowing states to share unused waivers, having more interaction with USDA, and having an annual conference involving both federal and state agencies. When USDA announced it would no longer participate in the J-1 waiver program in February 2002, the Texas Primary Care Office conducted a second survey, on the impact of the agency'swithdrawal on states and their use of "Conrad 20." The survey also solicited furtherrecommendations for the program. (19) Of the 49states that responded, 26 indicated that their stateswould be impacted by USDA's decision. Of the 23 states reporting no impact, 17 placed less than20 physicians annually through "Conrad 20," or had no involvement with USDA. In the survey 25states indicated they could place more than 20 physicians, with seven implying they could placemore than 51 physicians. (20) Several statesindicated that they may have to use all 20 availablepositions, but that termination of the USDA program would not change their programs. In July 2003, the Texas Department of Health conducted a review of the "Conrad" programs from 2000-2003 (21) as well as a survey on theeffects of HHS's policy change on the states. (22) Thereview showed that 49 states and the District of Columbia had some sort of "Conrad" program in2003. Idaho was the only state without a program, but was in process of developing one. Thereview also showed that over the four-year period, the "Conrad" programs had requested a total of2,949 waivers, with 758 of those being for sub-specialists. Recommendations for sub-specialistsincreased from 14% of all waiver requests in 2000 to 33.5% in 2003. It should be noted that the"Conrad" programs are the only J-1 vias waiver programs, other than the VA that recommendnon-primary care physicians. Currently, only six states with "Conrad" programs limit theirrecommendations to primary care physicians. The 2003 survey found that of the 45 states that were participating in the program in 2001 and 2002, 22 states had filled all of their 20 slots, and 21 states had requested the additional 10 slotsmade available in early 2003. These additional slots were counted as part of the 2002 totals. In2003, 18 states filled all of their slots, and 15 of the states responded that they could fill anywherefrom 5 to 50 additional slots. (23) When asked to suggest changes to the program, states continued to express an interest in: the re-distribution of unused slots; possibly increasing the number of waivers available to states to 40;making the program permanent; and allowing the state departments of health or programadministrators decide where the physicians would be placed. Several bills have been introduced to address the May 2004 expiration of the "Conrad 30"program. The companion bills H.R. 4156 / S. 2302 , introduced byRepresentative Jerry Moran and Senator Kent Conrad would extend the "Conrad 30" program until2009; allow state public health departments to identify shortage areas; and make physicians whoobtain waivers from the states exempt from the H-1B numerical limit. Both bills were referred totheir respective Judiciary committees in April 2004. On October 11, 2004, the amended version of S. 2302 passed the Senate. The amended bill extends the program until June 1, 2006;exempts waiver recipients from the H-1B cap; allows recruiting of primary and speciality carephysicians; and allows placement of up to five physicians in shortage areas designated by the states. H.R. 4453 was introduced by Representative Jerry Moran on May 4, 2004. The bill as originally introduced would have extended the program for one year and exempted waiverrecipients from the H-1B cap. It passed the House Judiciary Subcommittee on Immigration, BorderSecurity, and Claims on June 3, 2004, and was referred to the full Judiciary committee. On September 30, 2004, Representatives Sheila Jackson-Lee and John Hostettler offered an amendment in the nature of a substitute to H.R. 4453 . The new bill would extend theprogram until June 1, 2006; allow states to recruit specialist as well as primary care physicians;exempt waiver recipients from the H-1B cap; and allow the placement of five physicians instate-designated shortage areas. Historically, some have argued that the J-1 visa waiver program should be made permanent or extended for a number of years to allow an investigation into the use of foreign physicians to meethealthcare shortages and their impact on American physicians. During the committee markup ofH.R. 4453, it was expressed that the purpose of the two-year extension was to allow thesubcommittee time to look into this matter, as well as receive input from HHS regarding theplacement of physicians outside of HHS-designated physician shortage areas. (24) The compromise onthis issue was to allow each state to place 5 of their 30 physicians allowed under the Conrad programin shortage areas determined by the state before making it a permanent provision of the program. On October 6, 2004, H.R. 4453 was debated on the House floor. Several members, including Representatives Sensenbrenner and Moran, urged passage of the bill, citing the program'ssuccess in serving underserved populations in their states. The bill passed the House and wasreferred to the Senate on October 6, 2004. No further action has taken place. On November 17, 2004, S. 2302 was debated and passed by the House. When originally introduced by Senator Kent Conrad on April 7, 2004, the bill would have extended the"Conrad 30" program through June 1, 2009; exempted waiver recipients from the H-1B numericallimit; allowed states to recruit primary and specialty care physicians; and place up to five physiciansin shortage areas determined by the states. In a bipartisan compromise, the Senate-passed versionof S. 2302 would extend the program expiration date to June 1, 2006; exempt recipientsfrom the H-1B numerical limit; allow states to recruit primary as well as specialty care physicians;and allow the placement of up to five physicians in areas that serve populations from HHSdesignated shortage areas without regard to the facility's location. S. 2302 was presentedto the White House on November 22, 2004; and signed into law on December 3, 2004. (25) During the life of the J-1 program, there have been several changes to the home residencyrequirement and the rules regarding the adjustment of status of J-1 participants. When the culturalexchange program was originally established in 1948 by the Smith-Mundt Act, exchange visitorsentered the country as "B" nonimmigrant visitors for business. The program required theparticipants to return to their home country or country of last residence upon completing theireducation and training, did not allow participants to apply for a change of status, and did not providefor waivers. (26) To get around these restrictions,many participants would leave the country only toquickly return to the United States under another nonimmigrant visa or as an immigrant. To addressthese concerns, Congress amended the Smith-Mundt Act in 1956. (27) The 1956 amendments prohibited participants from applying for H nonimmigrant or immigrant status until it had been established that the alien had been present in a cooperating country orcountries for at least two years. The amendments also added a provision for waiving the residencyrequirement when an interested government agency (IGA) and the Secretary of State requested it inthe public interest. In 1961, the Mutual Education and Cultural Exchange Act established the J-1 exchange program as we now know it and further amended the foreign residency requirement of the program. (28) It prevented participants from applying for legal permanent resident (LPR) or H nonimmigrant statusuntil they had resided and been physically present in their home country, their country of lastresidence, or another foreign country for at least two years. The act also added the provision forwaivers to be granted in cases of extreme hardship to a U.S. citizen or LPR spouse or child. In 1970, Congress amended the INA and limited the two-year residency requirement to those J-1 visitors whose participation was financed by their home country, the United States, or aninternational organization of which the United States was a member, or whose skills weredetermined to be lacking in their home country. (29) The 1970 Act further amended the INA to allowwaivers for those J-1s who feared persecution in their home countries based on race, religion, orpolitical opinion, or in cases where it was found to be in the public interest that the alien remain inthe United States. In 1976 Congress imposed restrictions on FMGs in the J-1 program, stating that there was no longer a shortage of physicians in the United States and that there was no longer any need to affordadmission preference under the INA. (30) FMGswere made subject to the two-year home residencyrequirement regardless of who financed their program, their initial J-1 length of stay in the UnitedStates was limited to a maximum of three years, and they were ineligible to receive waivers basedsolely on "no objection" statements from their home country. They were required to make acommitment to return home upon completing training, and the home country was required to providewritten assurance that FMGs would return after completing training and would be put in positionsto fully use the skills acquired during their training. (31) In an effort to encourage physicians to study in the United States instead of Communist countries, the Department of State requested that Congress extend the three-year limit to seven yearsfor FMGs. (32) Congress responded to the StateDepartment request in the Immigration and NationalityAct Amendments of 1981. (33) While extendingthe stay for FMGs, this law also required FMGs toprovide affidavits annually to INS attesting that they would return home upon completing theirprograms, and required U.S. officials to submit annual reports on the status of FMGs who submittedaffidavits. In 1994, Congress passed the Immigration and Nationality Technical Corrections Act, which established a new program that allowed interested states to act as IGAs on behalf of J-1 physicians. (34) This program allowed each state to request waivers for up to 20 physicians annually. Commonlyreferred to as the "Conrad 20" program after its sponsor Senator Kent Conrad, it was originally slatedto end on June 1, 1996. The Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA)extended the "Conrad 20" program until June 1, 2002. (35) On May 31, 2002, the "Conrad 20" program authorization expired. In an effort to assure continued services to medically underserved areas, the program was once again extended by the 21stCentury Department of Justice Appropriations Authorization Act. (36) This law not only extended thedate of the program to May 31, 2004, it also expanded the program to allow each state 30 waiversand enacted the law retroactively to May 31, 2002. This latest extension of the program expired onMay 31, 2004. On December 3, 2004, the "Conrad 30" program was once again extended. The new law extends the program until June 1, 2006 and includes provisions allowing states to recruit primary andspecialty care physicians; exempting waiver recipients from the H-1B numerical limits; and allowingstates to place up to five physicians in areas that serve populations from HHS-designated shortageareas without regard to the facility's location. During the program's two-year extension, Congressplans to investigate the physician shortage and the use of the "Conrad" program.

The Educational and Cultural Exchange Visitor program has become a gateway for foreign medical graduates (FMGs) to gain admission to the United States as nonimmigrants for the purposeof graduate medical education and training. The visa most of these physicians enter under is the J-1nonimmigrant visa. Under the J-1 visa program, participants must return to their home country aftercompleting their education or training for a period of at least two years before they can apply foranother nonimmigrant visa or legal permanent resident (LPR) status, unless they are granted a waiverof the requirement. The J-1 visa waiver program has recently undergone significant change. In February 2002, the United States Department of Agriculture (USDA), which had historically been the largest sponsorof waivers, decided to end its participation as an interested government agency (IGA). Thisdevelopment and the pending expiration of the "Conrad 20" program, which allowed 20 waivers perstate, threatened the continued availability of waivers. These developments raised concerns amongmany in medically underserved areas because it is often difficult for them to find U.S. medicalgraduates willing to practice in these areas. Bills introduced in the 107th Congress proposed changesto the "Conrad 20" program, including expanding the program and making it permanent. In an effort to ensure the continued availability of medical care in underserved areas, the Department of Health and Human Services (HHS) announced it would assume USDA's role as asponsor of J-1 primary care physicians. This was a policy change for HHS which has historicallybeen very restrictive in its sponsorship of waivers. Prior to this announcement, HHS had limitedsponsorship to research physicians and scientists involved in research of international or nationalsignificance. On November 2, 2002, the "Conrad 20" program was extended until 2004 and the number of waivers available to states was increased to 30. This program, which is now referred to as the"Conrad 30"or "State 30" program, expired on June 1, 2004. Several measures, to address the expiration of the "Conrad 30" program were introduced in the108th Congress. On December 3, 2004, S. 2302 became P.L. 108-441 . The new lawextends the program until June 1, 2006; exempts physicians granted waivers from the H-1Bnumerical limits; allows states to hire primary and speciality care physicians; and place up to fivephysicians in shortage areas designated by the state.

The Individuals with Disabilities Education Act is both a grants statute and a civil rights statute. It provides federal funding for the education of children with disabilities and requires, as a condition for the receipt of such funds, the provision of a free appropriate public education (FAPE). Originally enacted in 1975, the act responded to increased awareness of the need to educate children with disabilities, and to judicial decisions requiring that states provide an education for children with disabilities if they provided an education for children without disabilities. The statute contains detailed due process provisions, including the right to bring suit in order to ensure the provision of FAPE. IDEA states in part "[a]ny party aggrieved by the findings and decision ... made under this subsection, shall have the right to bring a civil action with respect to the complaint presented pursuant to this section ...." The judicial decisions concerning the rights of non attorney parents of children with disabilities to bring suit without an attorney have raised issues concerning whether the parents of a child with a disability are "part[ies] aggrieved" under IDEA. Whether the parents are parties aggrieved turns in large part on whether the rights guaranteed under IDEA are guaranteed for the child with a disability, for the parent of such a child, or both. Courts have varied in their views on this issue and therefore on the issue of whether non-attorney parents have the ability to pursue an IDEA case pro se. Jacob Winkelman has autistic spectrum disorder and, in accordance with an individualized education program (IEP), was placed in a preschool with the concurrence of both his parents and the Parma City school district. When he was old enough for kindergarten, his parents and school officials disagreed on his proper placement with his parents alleging that the school's proposed placement at Pleasant Valley elementary school was not appropriate to Jacob's needs. After rulings supporting the school district's determination by the hearing officer and a state level review officer, the Winkelmans appealed pro se to U.S. district court. The district court agreed with the administrative rulings and the Winkelmans appealed, again without a lawyer, to the sixth circuit court of appeals. The court of appeals issued an order dismissing the appeal unless an attorney was obtained within thirty days. The Winkelmans then sought and received a stay of this order from the Supreme Court pending a decision by the Supreme Court. The Supreme Court granted certiorari on October 27, 2006. The sixth circuit decision in Winkelman found that the recent sixth circuit decision in Cavanaugh ex rel. Cavanaugh v. Cardinal Local School District was dispositive of the question of whether non-attorney parents of a child with a disability could represent their child in court. Cavanaugh held that parents could not represent their child in an IDEA action and that the right of a child with a disability to FAPE did not grant such a right to the child's parents. The sixth circuit in Cavanaugh first noted that federal law allows an individual to act as their own counsel but that generally parents "cannot appear pro se on behalf of their minor children because a minor's personal cause of action is her own and does not belong to her parent or representative." Finding that this general principle was not abrogated by IDEA, the sixth circuit observed that IDEA explicitly grants parents the right to a due process hearing but "in stark contrast, the provision of the IDEA granting '[a]ny party aggrieved' access to the federal courts ... makes no mention of parents whatsoever." In addition, the court observed that the intended beneficiary of IDEA is the child with a disability, not the parents, and that although IDEA does grant parents some procedural rights, these only serve to ensure the child's substantive right and do not provide the parents with substantive rights. The circuit courts are not all in accord with the sixth circuit in finding that parents may not proceed pro se in an IDEA case. Currently, there is a three way split in their determinations of this issue with some circuits finding that non-attorney parents may not proceed pro se , another circuit holding that non-attorney parents have no limitations on their ability to proceed, and other courts of appeals holding that parents can proceed on procedural claims but must use a lawyer for substantive claims. In Maroni v. Pemi-Baker Regional School District the first circuit held that parents have a right to proceed pro se on both procedural and substantive grounds. The IDEA language stating that "[a]ny party aggrieved by the findings and decision ... made under this subsection, shall have the right to bring a civil action with respect to the complaint presented pursuant to this section ..." was seen as including parents of children with disabilities. This provision was described as not making a distinction between procedural and substantive claims and the procedural and substantive rights under IDEA were described as "inextricably intertwined." The first circuit noted that there are some "practical concerns" about recognizing parents as aggrieved parties: parents may not be the best advocates for their child as they may be emotionally involved and not able to "exercise rational and independent judgment." In addition, pro se litigants were seen as imposing burdens on the courts and schools districts due to poorly drafted or vexatious claims. However, the Maroni court rejected these practical concerns finding that, since there is no constitutional right to appointed counsel in a civil case, having a parent represent them was better for children with disabilities than having no advocate. In addition to the court of appeals decisions in Winkelman v. Parma City School District and Cavanaugh ex rel. Cavanaugh v. Cardinal Local School District which were discussed previously, other circuits have also denied parents the right to proceed pro se. For example, in Devine v. Indian River County School Board, the parents of a child with autism brought suit alleging that the child's IEP was inadequate. Although the parents were represented by an attorney at the beginning of the suit, they informed the court that they wished to discharge the attorney and proceed pro se. The court noted that IDEA does allow parents to present evidence and examine witnesses in due process hearings but found "no indication that Congress intended to carry this requirement over to federal court proceedings. In the absence of such intent, we are compelled to follow the usual rule--that parents who are not attorneys may not bring a pro se action on their child's behalf--because it helps to ensure that children rightfully entitled to legal relief are not deprived of their day in court by unskilled, if caring, parents." In Collinsgru v. Palmyra Board of Education, the parents sought special education services for their son whom they contended had a learning disability. The parents pursued the administrative remedies under IDEA without an attorney although they did retain a non-attorney expert. The administrative law judge found that the child's difficulties were not severe enough to qualify for special education and rejected the parents' complaint. The parents then filed a civil action in district court. The district court held that the parents could not proceed pro se to represent their child and rejected the parents assertion that the parents were pursuing their own rights. The court of appeals in Collinsgru first found that, under general legal theories regarding pro se representation, IDEA did not allow parents to proceed pro se to represent their child stating: "Congress expressly provided that parents were entitled to represent their child in administrative proceedings. That it did not also carve out an exception to permit parents to represent their child in federal proceedings suggests that Congress only intended to let parents represent their children in administrative proceedings." The third circuit noted that the requirement of representation by counsel was based on two policy considerations. First, the court found, there is a strong state interest in regulating the practice of law. Requiring a minimum level of competence was described as protecting not only the represented party but also his or her adversaries as well as the court from poor drafted or vexatious claims. Second, the court emphasized the importance of the rights at issue and the final nature of the adjudication. A licensed attorney would be subject to ethical obligations and may be sued for malpractice while an individual not represented by an attorney would not have these protections. The parents in Collinsgru argued that since, as parents, they were responsible for their son's education, they had joint substantive rights with their child under IDEA. They noted that parents are often the only available advocates for their child and that attorneys are often unwilling to take IDEA cases due to their specialized and complicated nature and since the cases often lack significant retainers. The court expressed some sympathy for these arguments but noted that Congress had provided for attorneys' fees in IDEA, and concluded that IDEA's statutory provisions indicated that "the rights at issue here are divisible, and not concurrent." The parents and the child were thus found to possess different IDEA rights: the parents "possess explicit rights in the form of procedural safeguards" while the child possesses both procedural and substantive rights. Other courts have also found that parents have procedural rights under IDEA which they can bring suit pro se to enforce. In Mosely v. Board of Education of the City of Chicago, the seventh circuit observed that IDEA "provides both children and their parents with an elaborate set of procedural safeguards that must be observed in the course of providing the child a free, appropriate public education." Citing Collinsgru for the proposition that IDEA confers different rights on parents and children, the court found that the parent's procedural rights were enough of an interest to allow a pro se suit to enforce these parental rights to proceed. Similarly, in Wenger v. Canastota Central School District the second circuit denied a parent's attempt to bring a suit pro se on behalf of his child but stated that the parent "... is, of course, entitled to represent himself on his claims that his own rights as a parent under the IDEA were violated...."

The Supreme Court granted certiorari in Winkelman v. Parma City School District (05-983) to determine whether, and if so, under what circumstances non-attorney parents of a child with a disability may bring suit without using an attorney under the Individuals with Disabilities Education Act. The circuit courts are split in their determinations of this issue with some circuits finding that non-attorney parents may not proceed pro se , another circuit holding that non-attorney parents have no limitations on their ability to proceed, and other courts of appeals holding that parents can proceed on procedural claims but must use a lawyer for substantive claims. This report will not be updated.

Since the terrorist attacks of September 11, 2001, Congress has appropriated more than a trillion dollars for military operations in Afghanistan, Iraq, and elsewhere around the world. The House and Senate are now considering an additional request for $33 billion in supplemental funding for the remainder of FY2010, and the Administration has also requested $159 billion to cover costs of overseas operations in FY2011. In the face of these substantial and growing sums, a recurring question has been how the mounting costs of the nation's current wars compare to the costs of earlier conflicts. The following table provides estimates of costs of major wars from the American Revolution through conflicts in Korea, Vietnam, and the Persian Gulf in 1990-1991. It also provides updated estimates of costs of current operations. Estimates are in current year dollars that reflect values at the time of each conflict and in constant dollars that reflect today's prices. The table also shows estimates of war costs as a share of the economy. Comparisons of costs of wars over a 230-year period, however, are inherently problematic. One problem is how to separate costs of military operations from costs of forces in peacetime. In recent years, the DOD has tried to identify the additional "incremental" expenses of engaging in military operations, over and above the costs of maintaining standing military forces. Before the Vietnam conflict, however, the Army and the Navy, and later the DOD, did not view war costs in such terms. Figures are problematic, as well, because of difficulties in comparing prices from one vastly different era to another. Inflation is one issue--a dollar in the past would buy more than a dollar today. Perhaps a more significant problem is that wars appear more expensive over time as the sophistication and cost of technology advances, both for military and for civilian activities. Adjusted for inflation, the War of 1812 cost about $1.6 billion in today's prices, which appears, by contemporary standards, to be a relatively small amount. But using commonly available estimates of gross domestic product, the overall U.S. economy 192 years ago was less than 1/1,400 th as large as it is now. So at the peak of the conflict in 1813, the war consumed more than 2% of the nation's measurable economic output, the equivalent of more than $300 billion today. The data in the attached table, therefore, should be treated, not as truly comparable figures on a continuum, but as snapshots of vastly different periods of U.S. history. For the Vietnam War and the 1990-1991 Persian Gulf War, the figures reported here are DOD estimates of the "incremental" costs of military operations (i.e., the costs of war-related activities over and above the normal, day-to-day costs of recruiting, paying, training, and equipping standing military forces). Estimates of the costs of post-9/11 operations in Afghanistan, Iraq, and elsewhere through FY2009 are by [author name scrubbed] of CRS, based on (1) amounts appropriated by Congress in budget accounts designated to cover war-related expenses and (2) allocations of funds in reports on obligations of appropriated amounts by the DOD. Data for FY2010 are DOD estimates of costs defined quite similarly. These figures appear to reflect a broader definition of war-related expenses than earlier DOD estimates of incremental costs of the Vietnam and Persian Gulf conflicts. In years prior to the Vietnam War, neither the Army and Navy, nor the DOD, nor any other agency or organization attempted to calculate incremental costs of war-related operations over and above the costs of peace-time activities. In the absence of official accounts of war expenditures, CRS estimated the costs of most earlier wars--except for the American Revolution, the Confederate side of the Civil War, and the Korean conflict--by comparing war-time expenditures of the Army and the Navy with average outlays for the three years prior to each war. The premise is that the cost of a war reflects, in each case, a temporary buildup of forces from the pre-war level. During the Korean War, however, the United States engaged in a large buildup of forces not just for the war, but for deployments elsewhere in the world as well. For the Korean conflict, therefore, CRS compared outlays of the DOD during the war with a trend line from average expenditures of the three years before the war to average expenditures of the three years after the war. Estimated costs of most conflicts, from the War of 1812 through the Korean War, are based on official reports on the budgets of the Army, Navy, and, for Korea, the Air Force. No official budget figures are available, however, for the Revolution or for the confederate states during the Civil War. The estimated cost of the American Revolution is from a financial history of the United States published in 1895 and cited in a Legislative Reference Service memo prepared in 1956. The estimated Civil War cost of the confederacy is from the Statistical Abstract of the United States 1994 edition. Data on Army and Navy outlays prior to 1940 are from the Department of Commerce, Historical Statistics of the United States from Colonial Times to 1970, Part 2, 1975. GDP estimates prior to 1940 are from Louis D. Johnston and Samuel H. Williamson, "The Annual Real and Nominal GDP for these United States, 1790 - Present." Economic History Services, October 2005, at http://www.measuringworth.org/usgdp/ . Outlays and GDP figures from FY1940 on are from the Office of Management and Budget. For each conflict, CRS converted cost estimates in current year prices into constant FY2011 dollars using readily available inflation indices. For years since 1948, CRS used an index of inflation in defense outlays from the DOD. For years from 1940-1947, CRS used an index of inflation in defense outlays from the Office of Management and Budget. For years prior to 1940, CRS used an index based on the Consumer Price Index (CPI) that the U.S. Department of Labor, Bureau of Labor Statistics (BLS) maintains and updates quarterly. That index extends back to 1913. For earlier years, CRS used an extension of the CPI by academic researchers that is maintained at Oregon State University. That index also uses the official BLS CPI from 1913 forward and periodically updates both earlier and later figures to reflect new, official CPI estimates. Inflation adjustments extending over a period of more than 200 years are problematic in many ways. The estimates used here are from reliable academic sources, but other experts might use alternative indices of prices or might weight values differently and come up with quite different results. In addition, over long periods, the relative costs of goods within the economy change dramatically. By today's standards, even simple manufactured goods were expensive in the 1770s compared, say, to the price of land. Moreover, it is difficult to know what it really means to compare costs of the American Revolution to costs of military operations in Iraq when, 230 years ago, the most sophisticated weaponry was a 36-gun frigate that is hardly comparable to a modern $3.5 billion destroyer. As a result, yesterday's wars appear inexpensive compared to today's conflicts if only because the complexity, value, and cost of modern technology are so much greater. Finally, a very technical and relatively minor point--the inflation indices used here are more specialized for more recent periods. Figures since 1940 are adjusted using factors specific to defense expenditures, but no such index is available for earlier years. At least in recent years, cost trends in defense have differed considerably from cost trends in the civilian economy. Contemporary inflation indices capture such differences, while older ones do not.

This CRS report provides estimates of the costs of major U.S. wars from the American Revolution through current conflicts in Iraq, Afghanistan, and elsewhere. It presents figures both in "current year dollars," that is, in prices in effect at the time of each war, and in inflation-adjusted "constant dollars" updated to the most recently available estimates of FY2011 prices. All estimates are of the costs of military operations only and do not include costs of veterans benefits, interest paid for borrowing money to finance wars, or assistance to allies. The report also provides estimates of the cost of each war as a share of Gross Domestic Product (GDP) during the peak year of each conflict and of overall defense spending as a share of GDP at the peak. Comparisons of war costs over a 230-year period, however, are inherently problematic. One problem is how to separate costs of military operations from costs of forces in peacetime. In recent years, the Department of Defense (DOD) has tried to identify the additional "incremental" expenses of engaging in military operations, over and above the costs of maintaining standing military forces. Figures used in this report for the costs of the Vietnam War and of the 1990-1991 Persian Gulf War are official DOD estimates of the incremental costs of each conflict. Costs of post-9/11 military operations in Afghanistan, Iraq, and elsewhere are estimates of amounts appropriated to cover war-related expenses. These amounts appear to reflect a broader definition of war-related expenditures than earlier DOD estimates of incremental Vietnam or Persian Gulf War costs. Before the Vietnam conflict, the Army and Navy, and later the DOD, did not identify incremental expenses of military operations. For the War of 1812 through World War II, CRS estimated the costs of conflicts by calculating the increase in expenditures of the Army and Navy compared to the average of the three years before each war. The premise is that increases reflect the cost of a temporary buildup to fight each war. Costs of the Revolutionary War and of the Confederate side in the Civil War are from other published sources. Costs of the Korean War were calculated by comparing DOD expenditures during the war with a trend line extending from the average of three years before the war to the average of three years after the war. Figures are problematic, as well, because of difficulties in comparing prices from one vastly different era to another. Inflation is one issue--a dollar in the past would buy more than a dollar today. Perhaps a more significant problem is that wars appear vastly more expensive over time as the sophistication and cost of technology advances, both for military and for civilian purposes. The estimates presented in this report, therefore, should be treated, not as truly comparable figures on a continuum, but as snapshots of vastly different periods of U.S. history.

In recent Congresses, renewed attention has been paid to the rules and practices of the Senate that allow committed Senate minorities (or individuals) to delay or prevent a vote on pending business unless a supermajority can successfully use the cloture process to reach a vote. Various proposals to change Senate rules in relation to extended debate and the use of cloture, among other issues, have been discussed; some of these proposals have been debated on the Senate floor, and some changes to the Standing Rules (as well as new temporary orders) have been adopted by the Senate. However, since reaching a vote on a contested proposal to amend the Senate Standing Rules likely would require, under Rule XXII, invoking cloture with the support of two-thirds of Senators voting, some supporters of change have advocated making changes to Senate procedure instead by establishing a new precedent (basically, a reinterpretation of the rules). Some Senators and outside observers have used the term "nuclear" to describe such proceedings, in part because they might rely on steps that are novel (potentially in contravention of existing rules and precedents), or because they could undermine the prerogatives exercised heretofore by Senate minorities or individual Senators. Some discussion of possible proceedings of this kind has focused chiefly on Senate consideration of presidential nominations to the executive branch and/or the federal judiciary. So-called "nuclear" floor proceedings were publicly contemplated in 2005 in relation to judicial nominations; in July 2013 similar actions were discussed in relation to presidential nominations to executive branch positions. On November 21, 2013, the Senate took actions to address concerns about both executive branch and judicial appointments (with the exception of nominations to the Supreme Court). Specifically, the Senate reinterpreted the application of Senate Rule XXII to floor consideration of presidential nominations by overturning a ruling of the chair on appeal. For nominations other than to the Supreme Court, the new precedent lowered the vote threshold by which cloture can be invoked--from three-fifths of the Senate to a simple majority of those voting, thereby enabling a supportive majority to reach an "up-or-down" vote on confirming a nomination. Reaching a confirmation vote, however, still requires either unanimous consent or a successful cloture process, as detailed further below. The vote threshold by which the Senate can confirm a presidential nomination is, and has always been, a numerical majority of those voting (provided a quorum is present). However, floor consideration of any nomination is subject to no general time limits under Senate rules, and those rules provided no mechanism by which a simple majority could end or even limit consideration and bring the Senate to a vote. While the Senate frequently agrees by unanimous consent to vote on a pending nomination, Senators opposing a particular nomination often have been able to delay or prevent a numerical majority from reaching such a vote. Paragraph 2 of Senate Rule XXII (also known as the "cloture rule") provides a process by which a supermajority of the Senate can vote to limit further consideration of a pending question. When the rule was adopted in 1917, the cloture process applied only to legislation. However, in 1949, the Rule was amended so that cloture could also be filed in relation to nominations, thereby making it possible for a supermajority to limit further consideration of a nomination and proceed to a vote. However, not until 1968 was a cloture motion filed in relation to a nomination. Since 1975, the Rule's supermajority threshold by which cloture could be invoked on a pending nomination (or any other question other than in relation to a proposed change to the Senate standing rules) has been three-fifths of the Senate (60, unless there is more than one vacancy in the chamber). As on legislation, a cloture motion filed on a nomination under Rule XXII receives a vote after two days of Senate session. The text of the Rule provides that, if on that vote the requisite supermajority supports cloture, the Senate will--after no more than 30 hours of consideration--vote on the pending question, with final approval subject to only a simple majority vote. Notably, unlike the process by which the Senate agrees to bring legislation to the floor for initial consideration, the procedures by which the Senate can bring up a nomination (that is, make it pending for floor consideration) do not, in current practice, rely on the provisions of Rule XXII. Specifically, by precedent, the motion to go into executive session and proceed to consider a specific item of business on the Executive Calendar (i.e., a nomination or treaty) is not subject to debate. As a result, reaching a vote on the motion does not require a cloture process, so a simple majority of those voting can agree to bring up the nomination without requiring a supermajority to invoke cloture in order to limit debate on the question of bringing up the nomination. Note, however, that the Senate (except by unanimous consent) cannot consider multiple nominations en bloc ; in addition, paragraph 2 of Rule XXII provides that once cloture has been invoked on any pending question, the question "shall be the unfinished business to the exclusion of all other business until disposed of." This means that the Senate can consider nominations only sequentially, absent unanimous consent to do otherwise. Cloture motions can be filed on multiple nominations, effectively allowing the two-day layover period before a vote on cloture to lapse concurrently on each nomination. However, once the Senate invokes cloture on one nomination, it cannot vote on cloture on any other nomination until the expiration of the post-cloture time (and a final vote) on the first nomination; in other words, processing multiple contested nominations requires the use of any post-cloture time in sequence, not concurrently. In January 2013, after extended deliberations about proposed changes to its Standing Rules and procedural practices, the Senate adopted S.Res. 15 --a standing order that governs certain floor proceedings, but that expires at the end of the 113 th Congress. The standing order did not change the process of invoking cloture provided by Rule XXII; rather, for certain nominations, Section 2 of S.Res. 15 provides only for different post-cloture limits on consideration from those provided in Rule XXII. Specifically, for the remainder of the 113 th Congress, all but the very highest of executive nominations are subject to a maximum of eight hours of post-cloture consideration, and district judge nominations are subject to only two hours, post-cloture. (See Table 1 below.) All other federal judicial positions, as well as high level executive nominations (effectively cabinet level), remain subject to up to a 30 hours of post-cloture debate, as provided for under Rule XXII. The precedent set on November 21, 2013, did not change the text of Rule XXII of the Standing Rules. The Senate applies its rules to specific situations in accordance with its precedents, most recently compiled as Riddick's Senate Procedure , cited earlier. Senate precedents are effectively an identification of instances in which the Senate established or applied a particular understanding of the actions that its rules preclude or allow in specific circumstances. The non-partisan Parliamentarian relies on these precedents to advise the presiding officer on how to enforce and apply the rules, as well as how to respond to points of order from Senators seeking to enforce the rules (or in response to parliamentary inquiries seeking to elucidate the rules' effects). Through action on any appeals of rulings of the chair or submitted points of order, however, the Senate itself is the final authority on the interpretation and application of its rules. In summary, in floor proceedings on November 21, the Senate established a new precedent by which it has reinterpreted the provisions of Rule XXII to require only a simple majority to invoke cloture on most nominations. The effect of the Senate's new precedent is to lower the vote threshold by which cloture can be invoked on a nomination other than to the U.S. Supreme Court from three-fifths of the Senate to a simple majority of those voting, thereby enabling a supportive simple majority to reach an "up-or-down" vote on confirming the nomination. The new precedent, however, does not expedite the cloture process. Absent unanimous consent to arrive at a vote, once the Senate proceeds to a nomination, a cloture motion can be filed on the nomination, but the Senate still will not vote on the cloture motion until the second day of Senate session after the cloture motion is filed (unless the Senate unanimously consents to schedule the vote earlier). The Senate can, however, turn to other business during the two days of session that elapse prior to the cloture vote. Under the new precedent, for the Senate then to limit debate on a nomination requires only a simple majority of those voting on cloture (unless the nomination is to the Supreme Court). Once cloture has been invoked, the nomination remains subject to post-cloture consideration, which, for the 113 th Congress is a maximum of 2, 8, or 30 hours, depending on the nomination (see Table 1 ). In future Congresses, the post-cloture consideration limits will revert back to 30 hours for all nominations, unless the Senate provides otherwise. In addition, Rule XXII still prohibits consideration of other business (except by unanimous consent) during this post-cloture period; therefore, multiple nominations can still only be processed sequentially. In sum, the new precedent did not change existing requirements for floor time to complete a cloture process and reach a vote on a pending nomination. Under previous practice, the Senate was already able to proceed to executive session and proceed to consider a nomination with the support of only a numerical majority. The new precedent now allows that same supportive majority to employ the cloture process to proceed to a vote on confirming the nomination . As a result, a simple numerical majority can now take actions to reach the final vote on a nomination, when before only three-fifths of the Senate could agree to limit consideration and reach a vote. Broader effects of the November 21 precedent cannot yet be fully assessed, but the precedent could have implications for elements of the nomination and confirmation process that occur prior to floor consideration. Under current Senate practices, the only nominations that the Senate can, by majority vote, proceed to consider, invoke cloture on, and confirm, are those that appear on the Executive Calendar. For judicial and most executive branch nominations, only those reported by committee are placed on the Executive Calendar; except by unanimous consent, the Senate has treated these nominations as eligible for floor consideration only after being favorably reported by committee. Before the new precedent, opponents of these nominations might have focused their opposition on floor consideration, aware of the supermajority threshold for invoking cloture on the nomination. The new lower (majority) threshold for cloture now might induce opponents to oppose such nominees more frequently in committee, since those not reported out of committee effectively can be considered on the Senate floor only by unanimous consent. Pursuant to S.Res. 116 , a Senate standing order adopted in the 112 th Congress, the process is somewhat different for 272 positions in cabinet departments, certain advisory boards, and independent agencies. S.Res. 116 provides a process by which these "privileged" nominations can be placed on the "Nominations" portion of the Executive Calendar, and thereby made eligible for floor consideration, without being first referred to and reported by committee--but only as long as no Senator requests that a nomination be referred. So while these nominations can potentially become eligible for floor consideration without committee action, any Senator can require that they be instead referred to committee--thereby effectively requiring the nomination to be reported by committee before floor consideration. In sum, the potential effects of the new precedent on pre-floor action are effectively the same for all nominations (whether "privileged" under S.Res. 116 , or not), except for those to the Supreme Court. In addition, while the lower threshold for cloture on nominations will remain in effect until the Senate takes further action to alter it, the reduction in the limits on post-cloture consideration for certain nominations (pursuant to S.Res. 15 , 113 th Congress) will revert back to 30 hours in the 114 th Congress (2015-2016). At the time the standing order was agreed to, Senators understood that the support of three-fifths of the Senate was potentially necessary to reach confirmation votes. Accordingly, the November 21 precedent could affect the likelihood that the standing order will be renewed. Particularly if the standing order is not renewed, Senators will need to continue to negotiate unanimous consent agreements to process routine nominations swiftly. Finally, the process by which the President selects nominees may be now influenced by the understanding that nominees considered on the floor in the future can receive a vote with only the support of a numerical majority. In the past, many nominees may have been selected with an eye towards the possible need for supermajority support. The procedures by which the precedent was set also may have implications for future proposals to alter Senate rules or their application. A key procedural detail on which the November 21 proceedings turned was the inability of opponents of these proceedings to extend debate on the appeal of the chair's ruling. Under Senate practice, appeals are typically subject to no debate limit except in a post-cloture environment; therefore, overturning a chair's decision on appeal in the face of sustained opposition typically would require a successful cloture process (and therefore a supermajority vote) to reach a vote on the appeal. The appeal of note in the events of November 21, however, was in relation to a non-debatable question (the cloture motion) and the appeal was therefore treated as itself being non-debatable; this allowed the Senate to reach a vote on the appeal immediately. Since the practicability of proposed "nuclear" proceedings has often turned on the Senate being able to reach a vote to establish new procedures in a contested situation, the parliamentary circumstances under which the new precedent was set will likely be examined for their implications for future attempts to change Senate rules or the Senate's interpretation and application of them. CRS Report R42929, Procedures for Considering Changes in Senate Rules , by [author name scrubbed], provides a detailed examination of the complications presented by certain procedural paths by which the Senate might consider changing its rules, with specific attention to the significance of debate limits (or lack thereof) on questions that may be raised during contested floor proceedings. On October 28, 2013, the Senate agreed to a motion by Majority Leader Harry Reid (NV) that the Senate proceed to Executive Session to consider the nomination of Patricia Ann Millett to be United States Circuit Judge for the District of Columbia Circuit; the majority leader immediately filed cloture on the nomination. On October 31, the Senate failed to invoke cloture on the Millett nomination, 55-38; immediately after the vote, the majority leader entered a motion to reconsider the vote by which cloture had not been invoked. On November 21, 2013, the majority leader moved to proceed (that is, asked the Senate to take up) the motion to reconsider the failed October 31 cloture vote on the Millett nomination. Since the question on which reconsideration was proposed--that is, a cloture motion--is itself not subject to debate, the motion to proceed to the reconsideration motion was also not subject to debate; therefore, after the yeas and nays (i.e., a rollcall vote) were requested and ordered, the Senate voted immediately on the motion to proceed to the reconsideration motion; the motion to proceed was agreed to, 57-40. Having thus taken up the reconsideration motion, the majority leader moved to reconsider the failed cloture vote; this question of whether or not to reconsider the failed cloture vote was also not subject to debate. After rejecting an intervening motion to adjourn made by Minority Leader Mitch McConnell, the Senate voted to reconsider the cloture vote, 57-43 (thus agreeing to bring the cloture motion back before the Senate). The majority leader then raised a point of order that "the vote on cloture under rule XXII for all nominations other than for the Supreme Court of the United States is by majority vote." Consistent with the provisions of paragraph 2 of Rule XXII that provide for a three-fifths vote on cloture (in relation to all questions except a proposal to amend the text of the Senate standing rules), the chair ruled against the point of order. The majority leader appealed the ruling of the chair. Since this appeal was in relation to a non-debatable question (the cloture motion), the appeal itself was therefore treated as non-debatable. After the chair responded to a series of parliamentary inquiries from the minority leader, the Senate voted on the appeal; 52 Senators voted to overturn the ruling and 48 voted to sustain the chair. After the vote, the minority leader raised a point of order that the three-fifths threshold provided for in Rule XXII applies to invoking cloture on a nomination. The chair ruled against the point of order, based on the precedent just set via vote on the previous appeal. The minority leader appealed the ruling of the chair, but the Senate sustained the ruling, 52-48. Finally, the chair then laid the cloture motion before the Senate. No debate being in order on the cloture motion, the Senate then re-voted on the failed cloture motion, agreeing to it 55-43. Based on the precedent just set by the Senate providing that a numerical majority was sufficient for invoking cloture on certain nominations (of which the Millett nomination was one), the presiding officer announced that the motion was agreed to. The Senate then continued proceedings on the nomination, but in post-cloture time (which, under Rule XXII, is limited to 30 hours of consideration).

On November 21, 2013, by overturning a ruling of the chair on appeal, the Senate set a precedent that lowered the vote threshold required by Senate Standing Rule XXII for invoking cloture on most presidential nominations. The precedent did not change the text of Rule XXII of the Standing Rules; rather, the Senate established a precedent reinterpreting the provisions of Rule XXII to require only a simple majority of those voting, rather than three-fifths of the full Senate, to invoke cloture on all presidential nominations except those to the U.S. Supreme Court. The precedent does not eliminate the potential need for a cloture process for the Senate to reach a vote on a contested nomination. The time required to invoke cloture on a pending nomination remains as it was before the precedent. Specifically, nominations are still subject to Rule XXII's requirement that (1) a cloture motion filed on a pending nomination lie over for two days of Senate session prior to the cloture vote, and (2) the nomination be subject to an additional 30 hours of post-cloture consideration prior to a vote on confirmation. For the 113th Congress only (pursuant to S.Res. 15), this post-cloture time limit is eight hours for most nominations and two hours for U.S. District Court judges; the limit is still 30 hours for high level executive nominations and the top judicial positions (see Table 1). The only direct effect of the new precedent is to change the vote threshold by which the Senate can invoke cloture (and thereby eventually reach a vote) on these nominations from three-fifths of the Senate to a numerical majority of Senators voting (with a quorum present). However, to the extent that the change may effectively limit the floor leverage of Senators opposing a nomination, there may be implications for the pre-floor stages during which nominations are vetted. In addition, the parliamentary circumstances under which the November 21 precedent was set will likely be examined for their implications for future attempts to change Senate procedures. A key element of the feasibility of such action is whether a Senate majority in favor of change can reach a vote to establish new procedures in the face of opposition. Reaching a vote to reinterpret existing rules, in a contested situation, might rely on steps that are novel or potentially are in contravention of existing rules and precedents; in addition, the effects of such actions could also undermine the existing procedural prerogatives available to Senators. Such proceedings have sometimes been called the "nuclear option." In this context, an important feature of the proceedings of November 21 was the inability of opponents to extend debate on the appeal of the chair's ruling. This report explains the procedural context within which the precedent was set and addresses the precedent's effects on floor consideration of nominations (as well as noting other potential effects on the nominations process). In addition, since the parliamentary circumstances under which the precedent was set fall within proceedings often called the "nuclear option," the report concludes by briefly noting the precedent's relevance for future proposals to alter or reinterpret Senate rules through the establishment of new precedent. An Appendix details the key procedural steps by which the precedent was set. This report will be updated if events warrant, or to add citations to additional CRS reports that address related issues.

As Congress perform oversight in the 110 th Congress, biodefense research, biosecurity, and the activities of the Department of Homeland Security (DHS) in this area may become of interest. As DHS continues its activities in biological threat assessment, the 110 th Congress may have a unique perspective into these federal forensics and research programs. Transparency and oversight of research and development in biodefense is an area of international interest, as development of biological weapons is prohibited under the Biological and Toxin Weapons Convention. Congressional oversight of federal programs, especially those performed in federal facilities for homeland security purposes, is considered to play a key role in ensuring transparency. The DHS and the Department of Health and Human Services (HHS) have leading roles in protecting civilians against biological weapons. The National Biodefense Analysis and Countermeasures Center (NBACC) is a program office within the DHS Science and Technology Directorate that funds biodefense research and other activities. The mission of the NBACC program is to understand current and future biological threats; assess vulnerabilities and determine potential consequences; and provide a national capability for conducting forensic analysis of evidence from bio-crimes and terrorism. DHS has requested and received appropriated funding for the construction of a biodefense facility dedicated to homeland security activities and overseen by the NBACC program. This facility, the first DHS laboratory focused on biodefense, has drawn the attention of Congress, arms control experts, local community groups, and others. This report will outline the organizational structure of NBACC, describe its mission, and report the funding DHS has received for construction of its facility. It will then discuss select policy issues, such as funding for NBACC facility construction, oversight of NBACC research, and the potential for duplication of federal effort between NBACC and other agencies. Funds for NBACC programs are provided through the DHS Science and Technology Directorate. Activities funded include both intramural and extramural efforts. The programs within NBACC, as well as the construction of the NBACC facility, have been reported as part of the Science and Technology Directorate's Biological Countermeasures portfolio. The NBACC program currently conducts research through partnerships and agreements with federal and private institutes. To provide a unique home for research overseen by the NBACC program, DHS is constructing an NBACC laboratory at Fort Detrick, MD as part of the National Interagency Biodefense Campus. Funds for the laboratory, estimated to cost $128 million, have been appropriated over FY2003-2005. Construction commenced on the NBACC facility in June 2006. The NBACC facility is operated as a federally funded research and development center (FFRDC). The U.S. Army Medical Research Acquisition Activity, acting as the contracting authority for DHS in this instance, released a Request for Proposals (RFP) for the operation of the NBACC facility. On December 20, 2006, DHS announced that Battelle National Biodefense Institute had been awarded the NBACC management contract. Similar to the Department of Energy National Laboratories, the NBACC facility is a government-owned, contractor-operated facility where the contract operator manages the facility and provides the technical expertise and program execution to support DHS's needs. The identity of the NBACC facility component centers has evolved since the facility's conception. Different information has been presented to Congress through various DHS testimony and documentation over the course of this evolution. In 2003, the FY2004 DHS budget justification and testimony by DHS Assistant Under Secretary for Science and Technology Albright stated that four centers would comprise NBACC: the Biodefense Knowledge Center (BKC), the Bioforensics Analysis Center, the Biothreat Assessment Support Center, and the Bio-Countermeasures Testing and Evaluation Center. In 2004, the FY2005 DHS budget justification and testimony by Assistant Under Secretary Albright stated that NBACC consisted of three organizational units: the Biodefense Knowledge Center, the National Bioforensic Analysis Center (NBFAC), and the Biological Threat Characterization Center (BTCC). In 2005, the FY2006 DHS budget justification and testimony by DHS Under Secretary for Science and Technology McQueary refer to the NBACC facility as having two component parts: the National Bioforensic Analysis Center and the Biological Threat Characterization Center. This two center configuration is reportedly the final configuration for the NBACC facility. The two NBACC component centers identified in the FY2006 DHS budget, the Biological Threat Characterization Center and the National Bioforensic Analysis Center, are operating in interim facilities pending construction of the NBACC laboratory building. The BTCC has ongoing activities in a number of government and private laboratories. The NBFAC is housed at the United States Army Medical Research Institute for Infectious Disease (USAMRIID), located in Fort Detrick, MD, and operates as a joint federal effort, including representatives of DHS, the Federal Bureau of Investigation, and the Army. The NBFAC is currently receiving, handling, and performing forensic analysis on biological samples. Apparently conceived as part of the NBACC facility, the Biodefense Knowledge Center was dedicated on September 10, 2004, and is located at the Department of Energy's Lawrence Livermore National Laboratory. This center operates as an independent center though its work is closely coordinated with that of the NBACC facility centers. While funding for the BKC originates from within the Biological Countermeasures portfolio, the BKC is funded independently, not as a component of the NBACC program. The BKC draws on the expertise of scientists at Lawrence Livermore National Laboratory and three additional national laboratories: the Pacific Northwest National Laboratory, Sandia National Laboratories, and Oak Ridge National Laboratory. Three Department of Homeland Security University Centers of Excellence, located at the University of Minnesota, the University of Southern California, and Texas A&M University, also collaborate with the Biodefense Knowledge Center. The NBACC facility is to be part of the federal biodefense research and development network. As such, its activities are to be coordinated with those of other network members, including the Plum Island Animal Disease Center, the National Institutes of Health (NIH), and USAMRIID. The mission of the NBACC program is to understand current and future biological threats; assess vulnerabilities and determine potential consequences; and provide a national capability for conducting forensic analysis of evidence from bio-crimes and terrorism. Each of the NBACC facility component centers executes a piece of this overall program mission. Also, the Biodefense Knowledge Center appears to collaborate with these centers to assist them in meeting mission goals. The Biological Threat Characterization Center is to conduct studies and laboratory experiments designed to find and address critical gaps in understanding current and future biological threats, assess vulnerabilities, conduct risk assessments, and determine potential impacts. An apparent goal of this program is to provide a science-based assessment of possible biological threats, focusing on those pathogens deemed by the Centers for Disease Control and Prevention to have the potential for high consequence. Types of research to be performed in characterizing biological threats include, but are not limited to, investigating potential biothreat pathogens, studying pathogen stability and viability, and assessing lethality through dose/response studies. An earlier presentation on NBACC program activities also included developing strategies for defeating genetically engineered pathogens, and expanding current capabilities in testing non-human primates exposed to biological aerosols. The National Bioforensic Analysis Center was designated in Homeland Security Presidential Directive 10 (HSPD-10), Biodefense for the 21 st Century , as the lead federal facility to conduct and facilitate the technical forensic analysis and interpretation of materials recovered following a biological attack. The NBFAC conducts analysis of evidence from a bio-crime or terrorist attack to obtain a "biological fingerprint" in order to identify perpetrators and determine the origin and method of attack. Consequently, when housed in the NBACC facility, the NBFAC would provide the federal government with a centrally coordinated, validated bioforensic analysis facility. To meet this mission, NBFAC is developing forensic tools, methods, and strain repositories for pathogens of concern. The Biodefense Knowledge Center supports NBACC facility component centers and has its own functions and missions. One is to provide scientific assessments and information to the Homeland Security Operations Center regarding potential bioterrorism events. Another is to be a repository of biodefense information, including genomic sequences for pathogens of concern, the existence and location of vaccines, bioforensics information, and information about individuals, groups, or organizations that might be developing these pathogens. Finally, the BKC aids in assessing potential bioterrorism agents as "material threats" for the purpose of the Project Bioshield countermeasure procurement process. The BTCC and the BKC jointly make these assessments. The total construction cost for the NBACC facility has been determined by DHS to be $141 million, a $13 million increase from the initially requested $128 million. Original funds for the construction were appropriated in FY2003-FY2005. The additional $13 million were reprogrammed from other portfolios. Construction began in June 2006 and is projected to be finished in FY2008. Community response to the NBACC facility construction has been mixed. The construction of the NBACC facility, along with new laboratory space for other federal agencies, at the Fort Detrick site has been identified as beneficially spurring investment and development in the surrounding area. Some local advocates and citizen groups have protested the construction of the NBACC facility though. They cite concerns regarding security, safety, and secrecy surrounding the facility. The DHS operates the NBACC facility as an FFRDC, overseen in a manner akin to the Department of Energy National Laboratories. The NBACC FFRDC contractor has the responsibility for enacting the projects and program developed by the NBACC program office. This includes bringing the existing interim centers into the new NBACC facility, when constructed, and continuing those activities currently ongoing, such as the biological risk assessment process. The degree to which the research programs of the NBACC program and component centers are transparent and actively overseen may become an area of Congressional interest. Two factors have contributed to an increased focus by biosecurity advocates on NBACC research activities: the degree to which classified research may be performed by the NBACC program and the extent and quality of review for compliance with the Biological and Toxin Weapons Convention (BWC). Because of the potential for classified research to be performed at the NBACC facility, some biodefense experts have identified the lack of transparency as problematic for international relations and treaty compliance. Other experts assert that such issues of transparency can be dealt with so long as a process for review and compliance with applicable treaties is developed and maintained. These issues and the Department's efforts to address these factors are described below. Some research activities performed by the BTCC and the NBFAC, either in interim facilities or at the to-be-constructed NBACC facility, may be classified in nature. The NBACC facility is being constructed in such a manner that the entire building can be certified as a Sensitive Compartmented Information Facility (SCIF). The FFRDC contractor operating the NBACC facility must be capable of providing employees cleared at the Top Secret/Sensitive Compartmented Information (TS/SCI) level. The balance of classified and unclassified activities will change depending on agency need and future planning. Thus, the extent to which the capability to perform classified research will be utilized is undetermined. Initially, only a portion of the NBACC facility may operate under classified circumstances, with this amount increasing or decreasing depending on evolving research priorities. The NBACC FFRDC RFP provides some expectations for the FFRDC contractor's future capabilities though, stating: The Government has estimated final operations work force at 120 people, with virtually all of them (>95%) requiring TS/SCI clearance. The offerors are expected to propose a strategy and commensurate workforce for initial operations and transition. The Government estimates that 20-25% of the Contractor's workforce during initial operations will require TS/SCI clearances. The Government estimates that >40-60% of the Contractor's workforce during transition will require TS/SCI clearances. Requiring that virtually all of the NBACC FFRDC workforce be eligible for, and eventually possess, clearance for classified information may provide advantages over requiring only a sub-section of the workforce to obtain requisite clearance. One advantage may be increased flexibility in workforce management given changing workload. Another may be an increased ability to generate synergy between research skills and knowledge due to a larger pool of qualified researchers able to converse about a particular problem. Conversely, some experts are concerned about the potential proliferation of dual-use research results and biological techniques specific to such sensitive research topics. They argue that as more scientists are trained and brought into biological threat assessment studies, the risk of diversion of material, information, or scientific technique to others may increase. While acknowledging that the use of security background checks can reduce this risk, they assert that this risk can not be eliminated. Some arms control experts and other stakeholders have raised concerns about the research to be performed by NBACC at the Fort Detrick facility. They assert that the research being undertaken might violate or might be interpreted as violating the Biological and Toxin Weapons Convention. While research activities may uphold both the letter and the spirit of the BWC, international observers may lack confidence in, or harbor suspicions about, those research activities being performed. Strong internal oversight and review of these research activities may allay some of these concerns or suspicions. As put by Petro and Carus, Thus, any federal program that focuses on threat characterization research will likely require strict administrative guidelines and procedures to ensure that all activities are legally compliant. The DHS asserts such a strong review process exists, as an internal process to the Department. The DHS has developed and implemented a management directive regarding compliance with arms control agreements. Adhering to this directive, DHS has established both a compliance assurance program office and a Compliance Review Group to determine whether the NBACC research activities are in compliance with the BWC, among other duties. , The Compliance Review Group is composed of senior DHS officials, including those with oversight of pertinent research areas. The compliance assurance program office has been established separately from the research program offices, so that reseach management and compliance oversight activities do not become conflated. Currently, all NBACC research activities are reviewed, and compliance determinations are made, before the research activities begin. If questions persist about whether a research activity may pose a compliance concern, the compliance assurance program office and the Compliance Review Group are empowered to require additional, clarifying information be presented before a compliance determination is made. Should the Compliance Review Group not reach consensus regarding a particular research activity, the final judgement is reportedly made by the DHS Secretary, who is obligated to ensure DHS activities are in compliance. While such an internal compliance review process may be robust, some arms control experts have been critical of compliance processes that remain entirely internal to a single agency. Such critics assert that interagency review, or review performed or coordinated through the White House, for example through the National Security Council or the Homeland Security Council, would provide greater expert input and further divorce the compliance review from the programmatic and budgetary aspects of a research program. Other possible mechanisms for review of potentially contentious research exist outside of the Department. To assess federal research and development programs that may have potential dual-use capabilities, the Department of Health and Human Services has established the National Science Advisory Board for Biosecurity. This board's duties include providing expert advice on ways to minimize potential misuse of dual-use research. The NSABB is expected to generate guidance on assessing dual-use research through local oversight at research institutions. The NSABB was not given responsibility to view or assess classified research programs, so might be of limited utility in overseeing such research. Selective transparency in activities performed at the NBACC facility and funded by the NBACC program is considered both essential and difficult to enact. While the ability for outside observers to identify and understand the activities underway at the NBACC facility and funded through the NBACC program is deemed by some experts as key to maintaining international confidence in the US biodefense program, such openness must preserve the protection granted to information deleterious to national security. It is difficult to determine what an appropriate balance is when weighing the potential release of information relating to national vulnerabilities against assuring others of the munificent focus of biodefense research. How to best achieve needed transparency while preserving necessary information restriction is a matter of contention. Some arms control experts claim that openness in the US biodefense program should be held as the model for other countries. Other biosecurity experts assert that special care must be taken to assure that information that would disclose a potential vulnerability is not inadvertently released. Once possible mechanism is the inclusion of local community members into the oversight process for NBACC research. In other areas of contentious biological research, local review boards, such as institutional biosecurity boards, have been used to oversee research activities. Typically, the primary purpose of an IBC is to ensure that recombinant DNA research follows the NIH Guidelines for Research Involving Recombinant DNA Molecules . IBCs are required by NIH guidelines to seat community members on the committee, in addition to scientists and safety officials from the institution. IBCs have also been highlighted as possible mechanisms for implementation of NSABB recommendations. The DHS has stated that an IBC will be established at the NBACC facility, but it is unclear what role the IBC would have in assessing research programs. Inclusion of such persons may be problematic in light of the potential for classified or law-enforcement sensitive nature of some activities. The establishment of an IBC at NBACC may provide a potential public oversight mechanism, reassuring the local community and others with respect to the research being performed at NBACC. Some advocates have assailed the utility of the IBCs though, asserting that the IBCs often do not provide effective oversight of research facilities where they are established. Another possible mechanism might be developing independent, external oversight of research activities, using scientific experts, possibly using members of the National Academies, to assess research programs. The DHS has established an advisory committee through the National Academies to provide input into the NBACC research process. The advisory committee's suggestion and activities have not, as yet, been widely discussed or publicized. Formalizing the committee input mechanism or more widely disseminating the results of the advisory committee's activities may be considered by critics as sufficient to allay transparency concerns. The Department of Homeland Security states that research performed by the Department is solely for defensive purposes, will be in accord with treaty obligations, and will be published, to the maximum extent possible, in the open scientific literature. As such, they are committed to assessing and reducing biodefense vulnerabilities, adhering to scientific standards and practices, and exercising sufficient and appropriate levels of openness. The Department points to its robust internal compliance review process, the establishment of a standing advisory committee, and its plan to conduct much of its research in an unclassified manner as indicators that critics concerns are overstated. Another area of concern amongst the arms control community and increasingly within Congress is the lack of a clear research plan for NBACC programs or for the NBACC facility. The research performed through the NBACC program is designed to fill in knowledge gaps regarding pathogens, test the effectiveness of biological countermeasures, and to assess the risk posed by new and future activities in biological science. Such research will likely span both classified and unclassified areas. Arms control experts have expressed concern that the research being considered at the NBACC facility may not be properly based on risk, but instead might be based on other characteristics, such as potential consequence or the ability of a nation state to develop such a weapon. These experts suggest that a more proper prioritization would focus on the capabilities of terrorists, rather than rogue nations. They also suggest that improper prioritization of research activities may lead to an arms race in the biodefense community, as scientists engaged in biodefense attempt to develop countermeasures to more dangerous pathogens developed in their own laboratories. Since the NBACC program deals with matters of homeland security, public oversight of its research activities might compromise homeland security. If that is the case, some advocates argue that a robust, prioritization and planning mechanism should be developed, so that the mechanism itself can be reviewed. They argue that such an activity will bolster confidence that proper prioritization and planning activities will occur, even if the results of those activities are not available. Others might argue that such structures already exist and are in place, citing the array of advisory boards and committees available to DHS in developing strategic planning. Since the efficacy of planning and prioritization is open to interpretation, developing appropriate metrics to assess this process may pose a challenge. The NBACC facility is to include laboratory space at the highest level of biosafety containment, Biosafety Level 4 (BSL-4). Such laboratories are required for performing experiments using the most dangerous pathogens, like viral hemorrhagic fevers such as Ebola virus. The volume of BSL-4 laboratory space has historically been small, with federal facilities available at the Centers for Disease Control and Prevention in Atlanta, GA and at USAMRIID in Fort Detrick, MD. Federal efforts are increasing the available BSL-4 laboratory space. The National Institute of Allergy and Infectious Diseases (NIAID) has funded the construction of two new BSL-4 facilities, one at the University of Texas Medical Branch at Galveston and one at the Boston University Medical Center. Additional BSL-4 laboratory space is proposed for the National Bio- and Agro-defense Facility. The increase in BSL-4 laboratory space is likely to result in a corresponding increase in the number of scientists trained in the techniques required to handle contagious, deadly pathogens. Some posit that such an increase will lead to further dissemination of information regarding biothreat agents, possibly to scientists who oppose the United States. Others argue that the increase in BSL-4 laboratory facilities and trained scientists will lead to a more robust biodefense capability, providing more rapid breakthroughs in pathogen identification and countermeasure development. The construction of a DHS BSL-4 facility dedicated to threat characterization has raised community fears with regard to potential pathogen leakage, theft, or loss, and possible indirect health impacts. Similar concerns have been raised regarding the construction of the NIAID BSL-4 facilities. The DHS and DOD assert that such a release is unlikely, given the high safety requirements of a BSL-4 facility. How the NBACC program and NBACC facility coordinate their efforts with other federal agencies may attract Congressional interest. When the Department of Homeland Security was formed, most programs addressing medical countermeasures to biological threats remained under the authority of the Department of Health and Human Services (HHS). Most civilian programs addressing nonmedical countermeasures, such as those funded by the Department of Energy, were transferred to the Department of Homeland Security. With the establishment of the NBACC facility, research and development activities in some areas being pursued by the BTCC would be closely related to those supported by HHS. Results of such DHS research and development activities could also help inform and shape policy and research agenda in other departments. For example, the risk assessment activities undertaken by DHS could potentially aid in informing HHS strategic deliberations. The DHS Secretary is charged with coordinating homeland security research and development activities across the federal government. If coordination is well-managed, the effectiveness of research and development activities would be optimized. Results from DHS testing and evaluation of biological countermeasures, for example, might inform new research areas for HHS to support. On the other hand, if coordination is ineffective, significant overlap and duplication of effort may occur between agencies. Additionally, effective coordination between the NBFAC and the Federal Bureau of Investigation (FBI) would be necessary for a prompt forensics response following a bioterrorism incident. The NBFAC has, in its interim space, completed processing of thousands of forensic samples in support of bioterror/biocrime cases for the FBI, acting as the lead federal facility for bioforensic analysis. The FBI has entered into contracts with Department of Energy Laboratories to perform forensics and attribution activities for nuclear materials. Lessons learned from these activities may lower barriers to effective interagency actions following a biological attack. Some coordinative activities designed to leverage the NBACC facility capabilities are already underway. The DHS, acting through the Science and Technology Directorate, has entered into the Interagency Biomedical Research Confederation at Fort Detrick. This group consists of agencies and institutes engaged in medical or biotechnology research at Fort Detrick and also includes representatives from the National Institutes of Health, the Agricultural Research Service, the Centers for Disease Control and Prevention, and the Army Surgeon General. Through committees and subcommittees established under this interagency group, these participants attempt to coordinate work in scientific areas of mutual interest, so as to encourage efficient management, foster scientific interchange, and maximize research and development productivity. The feasibility study performed for NBACC identified several potential routes for the construction of NBACC. A phased approach, in which the BKC was initially formed outside of the Fort Detrick facility and then incorporated into the facility at a later date, was one route identified. Another was the construction of the NBACC facility with the BKC integrated within it. The BKC was, instead, established separately at Lawrence Livermore National Laboratory, and now appears to be a center independent of the NBACC facility and NBACC program. The BKC, in its data collection, analysis, and dissemination capabilities, appears to play a similar role to the NBACC program and facility. The degree to which information needs and gaps identified by one of the centers may be filled by the other center may rest heavily on internal communications and interactions. Efficient information sharing and planning may play a key role in maximizing the effectiveness of both centers.

The mission of the National Biodefense Analysis and Countermeasures Center (NBACC) is to understand current and future biological threats; assess vulnerabilities and determine potential consequences; and provide a national capability for conducting forensic analysis of evidence from bio-crimes and bio-terrorism. The NBACC is operational, with a program office and several component centers occupying interim facilities. A laboratory facility dedicated to executing the NBACC mission and to contain two NBACC component centers is being built at Fort Detrick, Maryland, as part of the National Interagency Biodefense Campus. The laboratory facility, with an estimated construction cost of $141 million, will be the first Department of Homeland Security laboratory specifically focused on biodefense. Its programmatic contents and component organization appear to be evolving, as conflicting information has been provided during previous budget cycles. Congressional oversight of programs, especially those performed in federal facilities for homeland security purposes, is considered key to maintaining transparency in biodefense. Policy issues that may interest Congress include the operation of the NBACC facility as a federally funded research and development center, transparency and oversight of research activities performed through the center, and the potential for duplication and coordination of research effort between the Department of Homeland Security and other federal agencies. This report will be updated as circumstances warrant.

T he Pesticide Registration Improvement Extension Act of 2012 (PRIA 3), which amended certain provisions of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), reauthorized the U.S. Environmental Protection Agency (EPA) to collect and use two types of fees to enhance and accelerate the agency's pesticide registration program and related activities. Maintenance fees , which pesticide registrants must pay to keep existing pesticide registrations reviewed and issued by EPA, help to partially fund the agency's periodic reevaluation of registrations. PRIA 3 authorized the collection of maintenance fees until the end of FY2017. Registration service fees , which applicants must pay when seeking EPA review of various applications related to pesticide registrations, help to partially defray the costs of evaluating such applications. At the end of FY2017, PRIA 3 would have reduced the rate in which EPA may collect registration service fees annually over two years. However, successive continuing resolutions and, most recently, the Consolidated Appropriations Act, 2018, extended the authority to collect both types of fees until the end of FY2018 without a reduction in the amount of registration fees that EPA may collect. This report provides historical background on both types of fees and summarizes current statutory provisions regarding such fees and legislation introduced in the 115 th Congress that would reauthorize the authority to collect fees. FIFRA requires EPA to review and register the use of pesticide products meeting certain statutory criteria and periodically reevaluate existing pesticide registrations (i.e., registration review). Section 408 of the Federal Food, Drug, and Cosmetic Act requires EPA to establish maximum limits ("tolerances") for pesticide residues in or on food and animal feed. EPA assesses fees on pesticide manufacturers and distributors, referred to as "registrants," for pesticide registrations and pesticide-related applications. These fees, which are deposited in designated funds within the U.S. Treasury and subsequently appropriated, combined with discretionary appropriations from the General Fund of the U.S. Treasury pay for EPA's pesticide regulatory activities. Since 1954, Congress has authorized the collection of various fees to partially defray certain costs associated with federal pesticide regulation activities. Additional annual appropriations fund the majority of the costs. Enacted as part of the Consolidated Appropriations Act, 2004, the Pesticide Registration Improvement Act of 2003 (PRIA 1) established the current pesticide fee framework. PRIA 1 modified provisions originally enacted in 1988 that authorized the collection and use of maintenance fees to enhance and accelerate a one-time EPA review of pesticide registrations that the agency issued prior to November 1, 1984 (i.e., reregistration). PRIA 1 also authorized the collection and use of registration service fees to defray costs associated with EPA review of applications for registering new pesticide active ingredients and products, adding new uses to existing pesticide registrations, establishing and amending tolerances, and amending pesticide labels. PRIA 1 established a schedule that provided the fee amounts associated with various review activities and required EPA to complete its review of submitted applications within specific timeframes depending on the category of application if the agency collected the fee. In 2007, the Pesticide Registration Improvement Renewal Act (PRIA 2) reauthorized and amended the pesticide fee framework. PRIA 2 added new categories of applications for which registration service fees may be assessed, revised the schedule of timeframes in which EPA is required to make a decision on an application, and adjusted the fee amounts for both maintenance and registration service fees. With the enactment of PRIA 3 in 2012, Congress reauthorized and further amended the pesticide fee framework. The current pesticide fee framework, as amended by PRIA 3 and extended by the Consolidated Appropriations Act, 2018, is summarized in the following sections. In accordance with the Consolidated Appropriations Act, 2018, the authority to collect pesticide maintenance fees expires on September 30, 2018. FIFRA Section 4, as amended by PRIA 3, sets annual maximum maintenance fees per registrant generally based on the number of registrations held. Congress also established a cap on the aggregate amount of maintenance fees that EPA may collect annually ($27.8 million per fiscal year) from FY2013 through FY2018. If a registrant does not pay the required maintenance fee for its pesticide registration, Section 4 authorizes EPA to cancel the pesticide registration. Section 4 provides "small businesses" with certain fee reductions and exempts registrations of certain public health pesticides from the payment of maintenance fees. Collected maintenance fees are deposited as receipts in the "Reregistration and Expedited Processing Fund" in the U.S. Treasury. These receipts are made available to EPA as mandatory appropriations for offsetting costs associated with (1) evaluating inert ingredients and expedited processing of certain applications within specified statutory time frames, and (2) reevaluating registered pesticides (including setting tolerances). Additionally, Section 4 requires EPA to use up to $800,000 per year from FY2013 through FY2018 to enhance information systems capabilities to improve tracking of pesticide registration decisions. In accordance with the Consolidated Appropriations Act, 2018, EPA's authority to collect registration service fees begins to phase out starting at the end of FY2018. If the authority to collect registration service fees is not extended or reauthorized, pursuant to PRIA 3, the amount of registration service fees that EPA may collect would be reduced by 70% for FY2019 and, at the end of FY2019, the authority to collect registration service fees would expire. FIFRA Section 33, as amended by PRIA 3, sets registration service fee amounts for 189 different actions that may be requested by the applicant (e.g., review of new registration applications or amendments to existing applications). EPA must complete requested actions within specified timeframes, which vary based on the category of action. Section 33 presents the current fee schedule, which is subject to certain adjustments by EPA, and specified timeframes for the completion of requested actions. Section 33 provides "small business" fee reductions, and EPA may exempt from or waive a portion of the registration service fee for applications seeking to register "minor uses" of a pesticide. Applications involving tolerance setting in the "public interest" and federal and state governmental entities are exempt from the payment of registration service fees. The authority to collect and obligate registration service fees under FIFRA Section 33 must be provided, in advance, by annual discretionary appropriations. Section 33 prohibits EPA from assessing registration service fees if appropriations for salaries, contracts, and expenses for specified functions of the EPA Office of Pesticide Programs (excluding any fees appropriated) are less than the corresponding FY2012 appropriation ($128.3 million). Generally, EPA confirms whether minimum appropriations have been met to determine whether the agency is authorized to assess registration service fees for the fiscal year. However, for FY2013 through FY2018, annual appropriations have authorized EPA to assess registration service fees notwithstanding the condition of minimum appropriations. Section 33 requires EPA to deposit collected pesticide registration service fees as receipts in the "Pesticide Registration Fund" in the U.S. Treasury. Unlike receipts in the "Reregistration and Expedited Processing Fund," the expenditure of receipts in the "Pesticide Registration Fund" is subject to annual appropriations acts. Once Congress appropriates the fee receipts, EPA may use them without fiscal year limitation for the following purposes: covering costs associated with the review and decisionmaking of applications received with the payment of the applicable registration service fee; enhancing scientific and regulatory activities related to worker protection; awarding worker protection partnership grants ($500,000 in aggregate annually from FY2013 through FY2018); and carrying out a pesticide safety education program ($500,000 annually from FY2013 through FY2018). FIFRA requires the Inspector General of EPA to annually audit the Reregistration and Expedited Processing Fund and Pesticide Registration Fund in accordance with the act and the Chief Financial Officers Act of 1990, as amended. The Inspector General must submit the findings and recommendations of the audit to EPA and certain congressional committees. Additionally, FIFRA requires EPA to annually report on various aspects of its pesticide program activities. Congress appropriated a total of $8.89 billion for EPA for FY2018 in the Consolidated Appropriations Act, 2018 and the Further Additional Supplemental Appropriations for Disaster Relief Requirements Act, 2018. Of the total FY2018 enacted appropriations for EPA, the exact amount provided for the specified functions of the EPA Office of Pesticide Programs referenced above is not readily reported. As mentioned above, the Consolidated Appropriations Act, 2018, authorizes EPA to assess registration service fees notwithstanding the condition of minimum appropriations. From FY2004 through FY2018, collected maintenance fees ranged from $21.4 million to $28.7 million per fiscal year. In the same time period, collected registration service fees ranged from $10.6 million to $18.6 million per fiscal year. Collected maintenance and registration service fees each year are estimated to provide one-fourth of the total appropriation for EPA's pesticide program activities. Congress initiated legislative efforts to reauthorize the collection of maintenance and registration service fees in 2017. Congress did not enact reauthorization legislation but extended the authority to collect fees for one year through FY2018 appropriations. The House and Senate have passed separate versions of reauthorization legislation, summarized below, that await the resolution of differences. On March 20, 2017, the House passed the Pesticide Registration Enhancement Act of 2017 ( H.R. 1029 , H.Rept. 115-49 ), which would reauthorize the collection of both fees and amend the activities that fees may fund. On June 28, 2018, the Senate passed an amendment to H.R. 1029 , renamed the Pesticide Registration Improvement Extension Act of 2018. Both versions of H.R. 1029 would reauthorize the collection of maintenance fees and registration service fees through FY2023 and FY2025, respectively; increase the cap on annual maintenance fees per registrant by 12% and the aggregate for all maintenance fees from $27.8 million per fiscal year to an average amount of $31.0 million per fiscal year; direct EPA annually to set aside not more than $500,000 in the Reregistration and Expedited Processing Fund for expedited rulemaking and guidance development related to evaluating the efficacy of pesticides in controlling certain invertebrate pests; direct EPA annually to set aside not more than $500,000 in the Reregistration and Expedited Processing Fund for enhancing the good laboratory practices standards compliance monitoring program; revise registration service fee amounts for different actions the applicant may request the agency to conduct; add more actions in which registration service fees may be assessed; and revise certain time frames in which EPA is required to complete review of a requested action. The Senate amendment to H.R. 1029 would require EPA to carry out and not revise two final rules before October 1, 2021, with one exception. EPA promulgated both rules during the previous administration. One rule amended elements of the existing agricultural worker protection standard (e.g., training, notification, pesticide safety and hazard communication information, use of personal protective equipment, and providing supplies for routine washing and emergency decontamination). The Senate amendment would authorize EPA to propose and promulgate revisions to the standard that address application exclusion zones. The other rule revised standards for certified pesticide applicators ("Pesticides; Certification of Pesticide Applicators"), amending elements of the existing standard with the stated intent of protecting applicators, the public, and the environment from risks associated with the use of restricted use pesticides. Additionally, the Senate amendment to H.R. 1029 would direct the U.S. Government Accountability Office to publish a report by October 1, 2021, on the use of designated representatives. The report must examine the effect of designated representatives on the availability of pesticide application and hazard information and worker health and safety. In addition, the report must include any recommendations to prevent the misuse of pesticide application and hazard information. Section 9119 of H.R. 2 , the Agriculture and Nutrition Act of 2018, as passed by the House on June 21, 2018, would enact House-passed H.R. 1029 into law. The Senate amendment to H.R. 2 , the Agricultural Improvement Act of 2018, passed by the Senate on June 28, 2018, does not include a similar provision. On July 18, 2018, the House requested a conference with the Senate to resolve differences between the House and Senate versions of H.R. 2 . The two prior PRIA reauthorizations were enacted into law without roll call votes in the House and the Senate, suggesting a general consensus for extending the pesticide fee framework. In floor statements, members have recognized a coalition of organizations that represent the pesticide industry, state agricultural departments, and environmental and farmworker interests for developing PRIA in the early 2000s and assisting with reauthorizing legislation. However, the current iteration of PRIA reauthorization has not resulted in a final enactment due, in part, to disagreements between the House and Senate on EPA administration and enforcement of certain FIFRA regulations.

Division G of Title II of the Consolidated Appropriations Act, 2018 (P.L. 115-141) extended U.S. Environmental Protection Agency (EPA) authority to collect fees from the pesticide industry for the maintenance and evaluation of pesticide registrations under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA; 7 U.S.C. 136 et seq.) until the end of FY2018. Two types of industry-paid fees supplement annual appropriations from the General Fund to support EPA's pesticide regulatory program. Without the extension, the authority to collect maintenance fees would have expired at the end of FY2017 under the Pesticide Registration Improvement Extension Act of 2012 (PRIA 3; P.L. 112-177). Maintenance fees are paid by pesticide registrants to retain existing pesticide registrations, which govern the terms and conditions for lawful pesticide distribution and use. Additionally, without the extension, PRIA 3 would have gradually phased out the authority to collect registration service fees by the end of FY2019. Registration service fees are paid by applicants who seek EPA review of applications associated with pesticide registrations (e.g., new registrations, amendments to existing registrations). If these fee authorities are not reauthorized or extended after FY2018, pursuant to PRIA 3, the authority to collect maintenance fees would expire and the authority to collect registration service fees would be phased out by the end of FY2019. Since FY2004, total maintenance fees collected by EPA have ranged from $21.4 million to $28.7 million per fiscal year and total registration service fees have ranged from $10.6 million to $18.6 million per fiscal year. Maintenance and registration service fees collected each fiscal year have provided approximately one-fourth of the total appropriation for EPA's pesticide program activities. In the 115th Congress, the House-passed H.R. 1029, the Pesticide Registration Enhancement Act of 2017, and the Senate amendment to H.R. 1029, the Pesticide Registration Improvement Extension Act of 2018, would reauthorize the collection of maintenance fees until the end of FY2023 and registration service fees until the end of FY2025. The amount that EPA may collect in registration service fees would be reduced by 40% for FY2024 and 70% for FY2025 in a phase out. Both the House and Senate versions of H.R. 1029 would increase the cap on annual maintenance fees per registrant by 12% and the aggregate for all maintenance fees from $27.8 million per fiscal year to an average amount of $31.0 million per fiscal year. Both the House and Senate versions of H.R. 1029 would revise registration service fee amounts for different actions the applicant may request the agency to conduct and certain time frames in which EPA is required to complete review of a requested action. The Senate amendment to H.R. 1029 would require EPA to implement without revision two final rules promulgated during the previous administration before October 1, 2021. The two EPA rules address standards for the protection of agricultural workers from pesticide exposures and the certification of applicators that use restricted use pesticides. The Senate amendment to H.R. 1029 would also direct the U.S. Government Accountability Office to publish a report on the use of designated representatives and their effect on the availability of pesticide application and hazard information. On June 21, 2018, the House passed H.R. 2, the Agriculture and Nutrition Act of 2018, which includes a provision that would enact House-passed H.R. 1029. The Senate amendment to H.R. 2, the Agriculture Improvement Act of 2018, does not include a similar provision. On July 18, 2018, the House requested a conference with the Senate to resolve differences between the House and Senate versions of H.R. 2.

In response to concerns over competition from foreign firms, the U.S. Congress has increasingly looked for ways the federal government can stimulate technological innovation in the private sector. This technological advancement is critical in that it contributes to economic growth and long term increases in our standard of living. New technologies can create new industries and new jobs; expand the types and geographic distribution of services; and reduce production costs by making more efficient use of resources. The development and application of technology also plays a major role in determining patterns of international trade by affecting the comparative advantages of industrial sectors. Since technological progress is not necessarily determined by economic conditions, it can have effects on trade independent of shifts in macroeconomic factors that may affect the marketplace. Joint ventures are an attempt to facilitate technological advancement within the industrial community. Academia, industry, and government can play complementary roles in technology development. While opponents argue that cooperative ventures stifle competition, proponents assert that they are designed to accommodate the strengths and responsibilities of these sectors. Collaborative projects attempt to utilize and integrate what the participants do best and to direct these efforts toward the goal of generating new goods, processes, and services for the marketplace. They allow for shared costs, shared risks, shared facilities, and shared expertise. The lexicon of current cooperative activity covers various different institutional and legal arrangements. These ventures might include industry-industry joint projects involving the creation of a new entity to undertake research, the reassignment of researchers to a new effort, and/or hiring new personnel. Collaborative industry-university efforts may revolve around activities in which industry supports centers (sometimes cross-disciplinary) for research at universities, funds individual research projects, and/or exchanges personnel. Cooperative activities with the federal government might include projects that use federal facilities and researchers, federal funding for industry-industry or industry-university efforts, or financial support for centers of excellence at universities to which the private sector has access. There are many different types of cooperative arrangements. The flexibility associated with this concept can allow for the development of institutional and organizational plans tailored to the specific needs of the particular project. Issues of patent ownership, disclosure of information, licensing, and antitrust are to be resolved on an individual basis within the general guidelines established by law governing joint ventures. Collaborative ventures can be structured either "horizontally" or "vertically." The former involves efforts in which companies work together to perform research and then use the results of this research within their individual organizations. The latter involves activities where researchers, producers, and users work together. Both approaches are seen as ways to address some of the perceived obstacles to the competitiveness of American firms in the marketplace. Traditionally, the federal government has funded research and development (R&D) to meet mission requirements; in areas where the government is the primary user of the results; and/or where there is an identified need for R&D not being performed in the private sector. Most government support is for basic research which is often long-term and highly risky for individual companies; yet research can be the foundation for breakthrough achievements which can revolutionize the marketplace. Studies have shown that inventions based on R&D are the more important ones. However, the societal benefits of research tend to be greater than those that can be captured by the firm performing the work. Thus the rationale for federal funding of research in industry. The major emphasis of legislative activity has been on augmenting research in the industrial community. This focus is reflected in efforts to encourage companies to undertake cooperative research arrangements and expand the opportunities available for increases in research activities. Collaboration permits work to be done which is too expensive for one company to fund and also allows for R&D that crosses traditional boundaries of expertise and experience. A joint venture makes use of existing, and supports development of new resources, facilities, knowledge, and skills. Policy decisions focusing on increased research as a prelude to increased technological advancement were based upon the "pipeline model" of innovation. This process was understood to be a series of distinct steps from an idea through product development, engineering, testing, and commercialization to a marketable product, process, or service. Thus increases at the beginning of the pipeline--in research--were expected to result in analogous increases in innovation at the end. However, this model is no longer considered valid. Innovation is rarely a linear process and new technologies and techniques often occur that do not require basic or applied research or development. Most innovations are actually incremental improvements to existing products and processes. In some areas, particularly biotechnology, research is closer to a commercial product than this conception would indicate. In others, the differentiation between basic and applied research is artificial. The critical factor is the commercialization of the technology. Economic benefits accrue only when a technology or technique is brought to the marketplace where it can be sold to generate income and/or applied to increase productivity. In the recent past, it was increasingly common to find that foreign companies were commercializing the results of U.S. funded research at a faster pace than American firms. In a rapidly changing technological environment, the speed at which a product, process, or service is brought to the marketplace is often a crucial factor in its competitiveness. The recognition that more than research needs to be done has lead to other approaches at cooperative efforts aimed at expediting the commercialization of the results of the American R&D endeavor. These include industry-university joint activities, use of the federal laboratory system by industry, and industry-industry development efforts where manufacturers, suppliers, and users work together. Industry-university cooperation in R&D is one important mechanism intended to facilitate technological innovation. Traditionally, universities perform much of the basic research integral to certain technological advancements. They are generally able to undertake fundamental research because it is part of the educational process and because they do not have to produce for the marketplace. The risks attached to work in this setting are fewer than those in industry where companies must earn profits. Universities also educate and train the scientists, engineers, and managers employed by companies. Academic institutions do not have the commercialization capacity available in industry and necessary to translate the results of research into products and processes that can be sold in the marketplace. Thus, if the work performed in the academic environment is to be integrated into goods and services, a mechanism to link the two sectors must be available. Prior to World War II, industry was the primary source of funding for basic research in universities. This financial support helped shape priorities and build relationships. However, after the war the federal government supplanted industry as the major financial contributor and became the principal determinant of the type and direction of the research performed in academic institutions. This situation resulted in a disconnect between the university and industrial communities. Because industry and not the government is responsible for commercialization, the difficulties in moving an idea from the research stage to a marketable product or process appear to have been compounded. Efforts to encourage increased collaboration between the academic and industrial sectors might be expected to augment the contribution of both parties to technological advancement. Company support for research within the university provides additional funds and information on the concerns and direction of industry. For many companies, access to expertise and facilities outside of the firm expands or complements available internal resources. Yet, such cooperation should not necessarily be seen as a panacea. Oftentimes, collaborative ventures fail because of various factors including conflicting goals, differing research cultures, and financial disagreements. The federal government can share its extensive facilities, expertise, knowledge, and new technologies with partners in a cooperative venture. In certain cases, the government laboratories have scientists and engineers with experience and skills, as well as equipment, not available elsewhere. The government also has a vested interest in technology development. It does not have the mandate or resources to manufacture goods but has a stake in the availability of products and processes to meet mission requirements. In addition, technological advancement contributes to the economic growth vital to the health and security of the nation. Collaboration between government laboratories and industry is not, however, just a one way street. In several technological areas, particularly electronics and computer software, the private sector is more advanced in technologies important to the national defense and welfare of this country. Interaction with industry offers federal scientists and engineers valuable information to be used within the government R&D enterprise. The cooperative venture concept has a long history. In the early 1970s, the National Science Foundation established its Industry-University Cooperative Research Centers program. The Electric Power Research Institute, a research organization supported by the electric power utilities, has been in operation since 1973. In the private sector, the Microelectronics and Computer Technology Corporation which performed research for its member firms prior to its dissolution, and the Semiconductor Research Corporation which funds research in universities, were created in the early 1980s. The difference today is the number of projects and the scope of legislative activity designed to promote cooperative ventures. Faced with pressures from foreign competition, the government's interest has expanded beyond that of funding R&D, to meeting other critical national needs including the economic growth that flows from new commercialization in the private sector. While acknowledging that the commercialization of technology is the responsibility of the business community, in the past several years the government has attempted to stimulate innovation and technological advancement in industry. These activities often involve the removal of barriers to technology development in the private sector, thereby permitting market forces to operate and the provision of incentives to encourage increased innovation-related efforts in industry. Cooperative R&D efforts are a part of both these trends. To address competitiveness concerns associated with joint research and to encourage companies to participate in this work which is typically long-term, risky, and often too expensive for one company to finance, Congress passed the National Cooperative Research Act ( P.L. 98 - 462 ) in 1984. This legislation clarified the antitrust laws and requires that the "rule of reason" standard be applied in determinations of violations of these laws; that cooperative research ventures are not to be judged illegal "per se." It also eliminated treble damage awards for those research ventures found in violation of the antitrust laws if prior disclosure (as defined in the law) has been made. In addition, the act made some changes in the way attorney fees are awarded to discourage frivolous litigation against joint research ventures without simultaneously discouraging suits of plaintiffs with valid claims. Between 1985 (when the law went into effect) and August 2009, 1,343 joint ventures have filed with the Justice Department. The provisions of the National Cooperative Research Act were extended to joint manufacturing ventures by P.L. 103 - 42 , the National Cooperative Production Amendments Act of 1993. These provisions are only applicable, however, to cooperative production when the principal manufacturing facilities are "located in the United States or its territories, and each person who controls any party to such venture ... is a United States person, or a foreign person from a country whose law accords antitrust treatment no less favorable to United States persons than to such country's domestic persons with respect to participation in joint ventures for production." Additional collaborative work was facilitated by the Advanced Technology Program (ATP) at the Department of Commerce's National Institute of Standards and Technology which was created by the Omnibus Trade and Competitiveness Act of 1988 ( P.L. 100 - 418 ). Prior to its replacement in FY2008 by the Technology Innovation Program (which lost funding in FY2012), ATP provided seed funding, matched by private sector investment, to companies or consortia comprised of universities, companies, and/or government laboratories for the development of generic technologies that have broad application across industrial sectors. As of the end of 2007 when the program was terminated, 824 projects had been funded representing approximately $1.6 billion in federal financing matched by $1.5 billion in financing from the private sector. Of these projects, approximately 28% were joint ventures. The Technology Innovation Program (TIP) replaced ATP but received significantly reduced funding in FY2011 and no support in FY2012. While similar in intent to ATP in that it was designed to promote high-risk R&D that would be of broad-based economic benefit to the Nation, TIP operated somewhat differently yet still encouraged joint ventures. Funding under TIP was limited to small and medium-sized businesses whereas grants under ATP were available to companies regardless of size. In the Advanced Technology Program, joint ventures were required to include two separately owned for-profit firms and could include universities, government laboratories, and other research establishments as participants in the project but not as recipients of the grant. Under TIP, a joint venture could have involved two separately owned for-profit companies but also could be comprised of one small or medium-sized firm and a university. A single company was able to receive up to $2 million for up to three years under ATP; under TIP, the participating company (which must be a small or medium-sized business) could receive up to $3 million for up to three years. In ATP, small and medium-sized companies were not required to cost share (large firms provided 60% of the total cost of the project) while in TIP there was a 50% cost sharing requirement which, again, only applied to the small and medium-sized businesses that were eligible. There were no funding limits for the five-year funding available for joint ventures under ATP; TIP limited joint venture funding to $9 million for up to five years. The Advisory Board that was created to assist in the Advanced Technology Program included industry representatives as well as federal government personnel and representatives from other research organizations. The Advisory Board for the Technology Innovation Program was comprised of only private sector members. In January 2009, nine awards were announced for "new research projects to develop advanced sensing technologies that would enable timely and detailed monitoring and inspection of the structural health of bridges, roadways and water systems that comprise a significant component of the nation's public infrastructure." According to TIP, $42.5 million in federal money was expected to be matched by $45.7 in private sector support. Twenty more awards were announced in December 2009 totaling almost $71.0 million in NIST financing with approximately $145.7 million in funding from other sources. Of the projects selected for the two solicitations, thirteen were in the area of monitoring and inspection of civil infrastructure; four were in the area of advanced repair of civil infrastructure; eleven were in the area of process scale up for advanced materials; and one was in the area of predictive modeling for advanced materials. Nine additional projects in various areas including biopharmaceuticals, electronics, nanotechnology, renewable energy, and energy sources received awards of more than $22 million in December 2010. Federal funding for these projects was expected to be matched by approximately $24 million in private sector support. Additional laws have attempted to facilitate industry-university cooperation. Title II of the Economic Recovery Tax Act of 1981 ( P.L. 97 - 34 ) provided, in part, a temporary 25% tax credit for 65% of all company payments to universities for the performance of basic research. Firms were also permitted a larger tax deduction for charitable contributions of equipment used in scientific research at academic institutions. The Tax Reform Act of 1986 ( P.L. 99 - 514 ) kept this latter provision, but reduced the credit for university basic research to 20% of all corporate expenditures for this work over the sum of a fixed research floor plus any decrease in non-research giving. The 1981 Act also provided an increased charitable deduction for donations of new equipment by a manufacturer to an institution of higher education. This equipment must be used for research or training for physical or biological sciences within the United States. The tax deduction was equal to the manufacturer's cost plus one-half the difference between the manufacturer's cost and the market value, as long as it does not exceed twice the cost basis. While never made permanent, the research tax credit has been extended numerous times and changes have been made to certain provisions. The credit expired at the close of calendar year 2011. Amendments to the patent and trademark laws contained in P.L. 96-517 , commonly referred to as the "Bayh-Dole" Act, also were designed to foster interaction between academia and the business community. This law provides, in part, for title to inventions made by contractors receiving federal R&D funds to be vested in the contractor if it is a university, not-for-profit institution, or a small business. Certain rights to the patent are reserved for the government and these organizations are required to commercialize within a predetermined and agreed upon time frame. Providing universities with patent title is expected to encourage licensing to industry where the technology can be manufactured or utilized, thereby creating a financial return to the academic institution. University patent applications and licensing have increased since this law was enacted. Many cooperative industry-industry or industry-university programs are supported and/or organized by the federal departments and agencies. These include, but are not limited to, the National Science Foundation's Engineering Research Centers, the more than 40 Industry-University Cooperative Research Programs, and the Science and Technology Centers. The Department of Defense supports various Centers of Excellence, as does the Federal Aviation Administration. While most legislative activities are intended to facilitate technological advance across industries, there have been several efforts to provide direct assistance for cooperative ventures in a particular industry. These initiatives are based, in part, on national defense and economic security concerns over specific technologies that are, or are perceived as, potentially critical to a wide range of businesses. Among the joint ventures, funded primarily by the Department of Defense (DOD), have been SEMATECH (a joint private sector semiconductor manufacturing research effort which is now privately financed) and the National Center for Manufacturing Sciences which also receives support from the Department of Energy, the Department of Transportation, and the Environmental Protection Agency. In addition, DOD supports the Software Engineering Institute and the Department of Energy assists in the US Drive initiative that, among other things, encourages joint R&D between federal laboratories and private firms leading to commercialization. Cooperation between industry and the federal R&D enterprise is another facet of the effort to increase industrial competitiveness through joint ventures. The federal government will have spent an estimated $138.9 billion in FY2012 on research and development to meet the mission requirements of the federal departments and agencies. This has led to many technologies and techniques, as well as to the generation of knowledge and skills, which may have applications beyond their original intent. To foster their development and commercialization in the industrial community, various laws have established institutions and mechanisms to facilitate the movement of ideas and technologies between the public and private sectors. The Stevenson-Wydler Technology Innovation Act ( P.L. 96 - 480 ), as amended by the Federal Technology Transfer Act ( P.L. 99 - 502 ) and the Department of Defense FY1990 Authorizations ( P.L. 101 - 189 ), provided, in part, a legislative mandate for technology transfer from the federal government to the private sector, established a series of offices in the agencies and/or laboratories to administer transfer efforts, provided incentives for federal laboratory personnel to actively engage in technology transfer, and created new contractual means for industry to work with the laboratories including cooperative research and development agreements (CRADAs). P.L. 104 - 113 , the National Technology Transfer and Advancement Act, addressed existing policy with respect to the dispensation of intellectual property under a CRADA by amending the Stevenson-Wydler Act. P.L. 106 - 404 , the Technology Transfer Commercialization Act, made changes in existing practices concerning patents held by the government to make it easier for federal agencies to license such inventions to the private sector for commercialization. To further promote cooperative research and development among universities, government, and the private sector, changes in the patent laws were made by P.L. 108-453 . the CREATE Act. The legislation amended section 103(c) of title 25, United States Code, such that certain actions between researchers under a joint research agreement will not preclude patentability. A program of regional Centers for the Transfer of Manufacturing Technology (now part of the Hollings olHManufacturing Extension Partnership effort) to facilitate the movement to the private sector of knowledge and technologies developed under the aegis of the National Institute of Standards and Technology was established by the Omnibus Trade and Competitiveness Act. In addition, the law required that NIST provide technical assistance to state technology extension programs in an effort to improve private sector access to federal technology. Government-industry collaboration is further encouraged by a provision of the FY1991 National Defense Authorization Act ( P.L. 101-510 ) that amends the Stevenson-Wydler Act to allow government agencies and laboratories to develop partnership intermediary programs to augment the transfer of laboratory technology to the small business community. Cooperative work between small companies and federal laboratories leading to the commercialization of new technology is the intent of the Small Business Technology Transfer (STTR) program. Created by the Small Business Development Act of 1992, this effort provides funding for research proposals that are developed and executed collaboratively between a small firms and a scientist in a research organization. Extended several times, the program was scheduled to sunset at the end of FY2009, but was temporarily extended several times and is currently scheduled to terminate on September 30, 2017. It is not yet known whether federal support of cooperative ventures signals a long-term commitment to the development of technology. However, given current concerns over the federal budget, it is unlikely that large sums of government money will be forthcoming for such efforts in the future. Yet, other actions may reflect federal interest in the process of technological advancement. The use of the extensive government R&D system, with its expensive state-of-the-art facilities, can provide both academia and industry with resources that may be beyond their financial ability. And despite the often short-term focus of budget decisions, federal funds and non-monetary contributions to cooperative ventures may be leveraged by contributions from state and local agencies and the private sector. If the proliferation of programs is any indication, state and local jurisdictions have been in the forefront of cooperative endeavors. Many state and local economic development activities focus on increasing innovation and the use of technology in the private sector. Instead of competing for companies to relocate, many of these jurisdictions now see additional benefits accruing from the creation of new firms and the modernization of existing ones through the application of new technology. Various states and localities are attempting to foster an entrepreneurial climate by undertaking the development and support of a variety of programs to assist existing high technology businesses, to promote the establishment of new companies, and to facilitate the use of new technologies and processes in traditional industries. While these efforts vary by state and locality, many of them include industry-university-government cooperation. Several congressional proposals for increasing cooperative ventures built upon existing state and local activities in these areas. Proponents of cooperative work argue that certain benefits are associated with joint ventures. The increased popularity of this concept, and expanding federal support for this approach, however, might suggest some questions be raised to assess whether cooperative ventures are meeting expectations. It might be expected that an increasing number of industries and/or companies will come to the federal government for assistance in supporting cooperative R&D activities. Despite opposition by some to what has been described as "picking winners or losers," various sectors of the government have chosen to provide funding for cooperative ventures in specific industries while requiring that the private sector generate matching funds. At the same time, there are programs and policies that attempt to facilitate cooperative efforts across industry in general. Decisions might need to be made whether one approach is better than the other, or if both should continue. If part of government policy is to respond to individual industry requests for assistance, Congress may opt to consider developing procedures to select between industries and/or companies competing for limited federal funds. Can, and should, federal guidelines be established? In addition, is it possible to determine at this time what type of cooperative ventures are the most effective and efficient? Is there, in fact, one best model or should each venture be tailored to the specific situation? And finally, what are the implications of these decisions for policymaking in Congress? As noted above, innovation is a dynamic process that can involve idea origination, research, development, commercialization, and diffusion throughout the economy. However, it is not a linear process and an innovation may occur without developing through these steps. In fact, many innovations are incremental changes in existing goods and services in response to unmet market needs. The most crucial factor is the availability or use of the technology or technique in the marketplace. In the recent past, the commercialization and diffusion of products and processes often stood out as significant problems in terms of the ability of U.S. industries to compete. Firms in several other countries, first Japan and now China, India, and the East Asian newly industrializing countries, have been successful in commercializing the results of R&D. In various instances, this was research initially performed in the United States, as evidenced by the VCR and semiconductor chips. Basic research and the pursuit of science are done successfully in the United States as indicated, in part, by the number of Nobel prizes awarded to Americans. However, excellence in science does not necessarily assure leadership in world markets. It has been noted that the United States was the world's premiere economic power in the 1920s when this nation was far from being in the forefront of science. Instead, market leadership is significantly affected by the development and application of technology to make the goods and services the consumers want to purchase. Thus, questions may be raised as to whether programs and policies encouraging increased cooperative research, without concomitant efforts to facilitate the development and commercialization of technologies and techniques, can be effective mechanisms to increase the competitiveness of American industry. Do we need to know more about how to encourage the application of the research resulting from joint ventures in the manufacture of products and processes and in the delivery of services? Do these cooperative activities include mechanisms to facilitate the effective and timely transfer of the results back to the companies where they can be developed into goods for the marketplace? Since the major portion of the costs associated with bringing out a new product occur at the development and marketing stages, not in the research phase, should there be additional government incentives to encourage companies to spend funds for commercialization in addition to research? It is in the manufacturing arena where American companies appear to be the most vulnerable to foreign competition. Process technologies (those used in manufacturing) can significantly lower the costs of production and increase the quality of goods and services. In Global Competition , the President's Commission on Industrial Competitiveness (under former President Reagan) concluded that "... competitive success in many industries today is as much a matter of mastering the most advanced manufacturing processes as it is in pioneering new products." The costs associated with the development and purchase of new manufacturing equipment are high. This is particularly true for the 350,000 small companies which make up a major segment of the manufacturing community. Several of the cooperative efforts supported by the federal government address these manufacturing concerns. The Manufacturing Technology program of the Department of Defense, the advanced manufacturing initiatives in the Department of Energy, and the Manufacturing Extension Centers operated by the National Institute of Standards and Technology, although all different, are examples of government activities devoted to facilitating the development of new manufacturing techniques and/or their use in industry. Considering the importance of manufacturing, the existing cooperative programs may not be sufficient to increase the competitiveness of American industry. Are there more effective types of joint ventures? Cooperative efforts, where resources could be pooled and the equipment shared, may be one way to improve the manufacturing capability of U.S. firms, large or small. Will joint manufacturing prove to be a viable option? Should existing cooperative manufacturing programs in certain agencies be expanded or should new efforts in other departments be developed? Should one government agency have the lead in policy determinations; if so, the question remains in which federal department should the responsibility be vested? Many of the industries interested in cooperative ventures with federal financial support have approached the Department of Defense and, to a lesser extent, the Department of Energy's Defense Programs because these agencies have the greatest amount of available resources and/or funding. They also tend to have the expertise to operate large-scale programs and maintain close ties with certain industrial sectors which could be encouraged to increase cooperation. In addition, both DOD and DOE have a vested interest in the availability of certain technologies which could be provided by a healthy domestic commercial market. However, questions remain whether sponsorship of certain cooperative ventures by DOD and the Department of Energy's defense-related programs will lead to increased commercialization in the civilian marketplace. Critics argue that defense spending is not an effective mechanism to increase industry's ability to innovate and develop new technologies. Much of the research and development in the defense arena may be too specialized, overdesigned, and/or too costly to have value for commercial markets. The R&D also tends to concentrate on weapon systems and other defense hardware rather than on process technologies that are often necessary to improve manufacturing productivity. One reason cited for the competitive problems of the machine tool industry was its focus on defense needs rather than on the commercial market which is larger in the aggregate. On the other hand, the U.S. commitment to military R&D has contributed to a favorable balance of trade in the defense and aerospace industries. In the SEMATECH effort, the purpose of DOD support was to facilitate the commercial development of technologies with critical defense applications. The companies involved in SEMATECH were experienced semiconductor manufacturers and were knowledgeable about the markets' needs and operations. Thus, although the initial work performed by this semiconductor consortium may have been partially funded by the Defense Advanced Research Project Agency, it was designed to result in new products and processes in the civilian marketplace where both defense and commercial demand can be met. SEMATECH now operates without direct federal financing. The issue of cooperative work between the Defense Department and the private sector leading to commercial technologies was addressed in the former Technology Reinvestment Project and was part of the more recent Dual-Use Partnership Project. The Department of Energy has been expanding cooperative R&D activities in defense program laboratories in conjunction with an increase in all DOE collaborative efforts with industry. Decreased technology transfer budgets may impeded this effort, but several DOE defense laboratories are actively pursuing joint ventures with industry. With worldwide communications systems, it is virtually impossible to prevent the flow of scientific and technical information. What is critical to competitiveness is the speed at which this knowledge is used to make products, processes, and services for the marketplace. However, it appears that many foreign firms are willing and able to take the results of research performed both in the United States and their own countries and rapidly make high quality commercial goods. Many of these companies are purchasing American businesses or establishing U.S. subsidiaries to access American expertise. With the increased activity in research consortia, particularly those with federal support, questions might be asked as to whether or not foreign companies should or could be barred from access to the results. A larger issue is how to define an "American company." Is it determined by majority ownership, manufacturing, location, value added to the U.S. economy, or by some other definition? In addition, since technology is most effectively transferred by person-to-person interaction, would cooperative activities between American industry and foreign firms produce an outflow of information which could be used to increase competitive pressures? Government efforts to facilitate cooperative ventures have included both indirect supports and direct federal funding. Indirect measures include such things as tax policies, intellectual property rights, and antitrust laws that create incentives for the private sector. Other initiatives included government financing (on a cost shared basis) of joint efforts such as the now terminated Advanced Technology Program and the Technology Innovation Program at the National Institute of Standards and Technology, U.S. Department of Commerce. The Manufacturing Extension Partnership program requires state and/or local matching funds. In the past, participants in the legislative process generally did not make definite (or exclusionary) choices between these two approaches. However, recently these activities have been revisited. For example, efforts to eliminate the Advanced Technology Program and the Technology Innovation Program, funding for flat panel displays, and agricultural extension reflected concern over the role of government in developing commercial technologies and generally resulted in reductions of direct federal financing for such public-private partnerships or their elimination. It remains to be seen what approach will be taken by the Congress as it makes budget decisions that may affect the future of cooperative R&D.

In response to the foreign challenge in the global marketplace, the United States Congress has explored ways to stimulate technological advancement in the private sector. The government has supported various efforts to promote cooperative research and development activities among industry, universities, and the federal R&D establishment designed to increase the competitiveness of American industry and to encourage the generation of new products, processes, and services. Collaborative ventures are intended to accommodate the strengths and responsibilities of all sectors involved in innovation and technology development. Academia, industry, and government often have complementary functions. Joint projects allow for the sharing of costs, risks, facilities, and expertise. Cooperative activity covers various institutional and legal arrangements including industry-industry, industry-university, and industry-government efforts. Proponents of joint ventures argue that they permit work to be done that is too expensive for one company to support and allow for R&D that crosses traditional boundaries of expertise and experience. Such arrangements make use of existing, and support the development of new, resources, facilities, knowledge, and skills. Opponents argue that these endeavors dampen competition necessary for innovation. Federal efforts to encourage cooperative activities include the National Cooperative Research Act; the National Cooperative Production Act; tax changes permitting credits for industry payments to universities for R&D and deductions for contributions of equipment used in academic research; and amendments to the patent laws vesting title to inventions made under federal funding in universities. Technology transfer from the government to the private sector is facilitated by several laws. In addition, there are various ongoing cooperative programs supported by multiple federal departments and agencies. Given the increased popularity of cooperative programs, questions might be raised as to whether they are meeting expectations. Among the issues before Congress are whether joint ventures contribute to industrial competitiveness and what role, if any, the government has in facilitating such arrangements.

A number of federal laws prohibit discrimination in employment decisions, including hiring and firing of employees. Generally, these laws also include statutory exceptions for the employment of ministers within religious institutions and organizations. This protection arises most often in the context of employment legislation, but it has also been recognized in other contexts. The exceptions in these laws for religious organizations reflect a constitutional protection commonly known as the ministerial exception. This exception has been used to ensure that enforcement of nondiscrimination legislation does not violate the constitutional rights of religious entities to exercise freely their religious practices and to avoid government interference in internal matters. In 2012, the U.S. Supreme Court recognized the ministerial exception as a protection grounded in the Free Exercise and Establishment Clauses of the First Amendment in Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC . However, the Court did not define the scope of the exception, and a number of questions still remain unanswered in how it may be applied in future cases. This report analyzes the constitutional bases of the ministerial exception and examines selected statutory provisions reflecting its protections under federal employment laws. The report addresses critical questions involved in the application of the ministerial exception, including which employees qualify as ministers, the extent to which courts may defer to religious entities claiming the exception, and whether the exception may apply to any claim brought against a religious entity. A number of federal laws prohibit discrimination in employment, each protecting separate classes of individuals. Congress has included explicit statutory recognition of the hiring rights of religious organizations in these laws. Two prominent examples of legislation that include religious exemptions for prohibitions on discrimination are Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act (ADA). However, other nondiscrimination statutes, like the Age Discrimination in Employment Act and the Equal Pay Act, may also affect religious organizations' rights under the First Amendment. These exemptions are sometimes referred to as ministerial exceptions, but they differ from the constitutional ministerial exception as discussed in this report. Title VII prohibits discrimination in employment on the basis of race, color, religion, national origin, or sex. It is the most well-known statutory protection for religious discrimination and often is used as a model for other nondiscrimination legislation. Title VII generally prohibits employers from treating employees of one religion differently from employees of another religion. However, Title VII includes several exceptions that allow certain employers to consider religion in employment decisions, such as hiring, termination, etc. Specifically, Title VII's prohibition against religious discrimination does not apply to "a religious corporation, association, educational institution, or society with respect to the employment [i.e., hiring and retention] of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution, or society of its activities." A separate, but similar, exemption applies specifically to religious educational institutions, allowing such institutions "to hire and employ employees of a particular religion if [the institution] is, in whole or in substantial part, owned, supported, controlled, or managed by a particular religion or by a particular [organization], or if the curriculum of [the institution] is directed toward the propagation of a particular religion." Exemptions for religious organizations in the context of Title VII are not absolute. Once an organization qualifies as an entity eligible for a Title VII exemption, it is permitted to discriminate on the basis of religion in its employment decisions, but it may not discriminate on any other basis forbidden by Title VII. The ADA provides broad nondiscrimination protection in a variety of contexts, including employment, public services, public accommodations and services operated by private entities, transportation, and telecommunications for individuals with disabilities. It bars discrimination against qualified individuals because of the individual's disability in a range of employment decisions including application procedures, hiring, promotion, discharge, compensation, and other terms and conditions of employment. The ADA includes exemptions for religious organizations. Accordingly, the ADA's prohibition on nondiscrimination based on disability does not bar "a religious corporation, association, educational institution, or society from giving preference in employment to individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution, or society of its activities." Furthermore, the ADA permits religious organizations to "require that all applicants and employees conform to the religious tenets of such organization." Before Congress enacted statutory exemptions for religious organizations' hiring decisions, the U.S. Supreme Court recognized that the "freedom to select the clergy" has constitutional protection under the First Amendment. Statutory nondiscrimination provisions, for example, Title VII's prohibition on discrimination in employment on the basis of sex, would appear to interfere with this constitutional freedom though. The so-called "ministerial exception" reconciles statutory nondiscrimination provisions with constitutional freedom of religion protections by allowing religious organizations to select clergy without regard to such statutory restrictions. In 2012, the Court explicitly recognized the ministerial exception as a constitutional protection grounded under both the Establishment Clause and the Free Exercise Clause: "The Establishment Clause prevents the Government from appointing ministers, and the Free Exercise Clause prevents it from interfering with the freedom of religious groups to select their own [ministers]." The Supreme Court's justification of the ministerial exception relies upon its historical understanding that it must avoid intervening in the internal matters of church operation. The Court has long recognized that churches and other religious institutions have a right under the First Amendment to address their internal matters independently and without interference from government institutions. Furthermore, such action by courts would entangle the legal system in an inquiry of religious authority and doctrine, suggesting the type of probing interference contemplated by the entanglement prong of the Lemon test. Accordingly, the Court has barred interference in religious practices through decisions prohibiting the government from deciding disputes concerning religious authority or policies. In 1872, the Court recognized that matters of religious doctrine should be determined within the authority of the particular church and should be separate from any secular legal interpretation: The law knows no heresy, and is committed to the support of no dogma, the establishment of no sect. ... All who united themselves to such a body [the general church] do so with an implied consent to [its] government, and are bound to submit to it. But it would be a vain consent and would lead to total subversion of such religious bodies, if any one aggrieved by one of their decisions could appeal to the secular courts and have them [sic] reversed. It is of the essence of these religious unions, and of their right to establish tribunals for the decision of questions arising among themselves, that those decisions should be binding in all cases of ecclesiastical cognizance, subject only to such appeals as the organism itself provides for. Thus, the Court established the principle that determinations of church doctrine and practice were to be free of government control well before it had even developed other aspects of its First Amendment jurisprudence. In 1952, noting its historic recognition of a prohibition on government interference in matters of religion, the Court reiterated its earlier understanding of "a spirit of freedom for religious organizations, an independence from secular control or manipulation--in short, power to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine." The Court accordingly granted federal constitutional protection for the independent choice of churches for self-governance "as a part of the free exercise of religion against state interference" when it held that a legislature was constitutionally barred from determining the proper religious authority of the Russian Orthodox Church. On a number of occasions, the Court has reiterated the First Amendment limitations on the government's authority to decide matters of church internal disputes and practices. Just as it invalidated the legislature from doing so, it has also limited courts from overstepping their constitutional authority in making civil determinations of the propriety of church actions. The Court has held that "because of the religious nature of [disputes related to control of church property, doctrine, and practice], civil courts should decide them according to the principles that do not interfere with the free exercise of religion in accordance with church polity and doctrine." Recognizing that the authors of the First Amendment understood that "establishment of a religion connoted sponsorship, financial support, and active involvement of the sovereign in religious activity," the Court has interpreted the Establishment Clause to prohibit laws from fostering an "excessive entanglement" between government and religion. The Court has explained the bar on entanglement as an inquiry of whether the disputed government action would "establish or interfere with religious beliefs and practices or have the effect of doing so" or would create "the kind of involvement that would tip the balance toward government control of churches or governmental restraint on religious practice." Courts have generally addressed matters involving religious doctrine quite carefully. Litigation of employment discrimination claims in which religious organizations assert their freedom to hire clergy according to religious doctrine almost inevitably raises concerns that a legal decision on the merits of the case may lead to judicial interference with church decisions. In addition to avoiding making determinations on the validity of internal church policies and practices, the Court has refused to define religious practices or what may constitute religion, holding that courts may not judge the truth or falsity of religious beliefs. It has explained that the First Amendment ensures the freedom to believe, even if those beliefs cannot be proven. While courts must avoid determining the validity of religious beliefs, they must at times identify whether an individual's beliefs would qualify as religious for certain purposes, that is, religious exemptions for statutory requirements. To do so, the Court has stated a test for whether a belief qualifies as religious: "a sincere and meaningful belief which occupies in the life of its possessor a place parallel to that filled by the God of those admittedly qualifying for the exemption.... " In other words, the court will look at whether an individual's beliefs "are sincerely held and whether they are, in his own scheme of things, religious." As a result, courts generally examine whether an individual applies a particular belief consistently in his or her own practices. The beliefs of an individual seeking protection under the First Amendment are not required to conform with the beliefs of other members of his or her religious group. Furthermore, the individual is not even required to be a member of a religious group at all. The Court has been deferential to the individual's claim that a belief "is an essential part of a religious faith." It has recognized that beliefs are a matter of personal decision, which may vary greatly among different individuals or groups, but it has not allowed total deference to the individual's claim, however. Though the Court gives significant weight to an individual's characterization of his or her beliefs, that characterization is not dispositive in the analysis. The Court has explained that an individual's understanding of what might qualify as a religious view may not be reliable and courts may assess the nature of the belief independent of the individual's characterization. Attempts to define religion for certain statutory purposes have reflected courts' aversion to state explicitly the parameters of religious belief or practice. Often times, statutory definitions related to religion use the word to define itself. For instance, under Title VII, religion is defined to include "all aspects of religious observance and practice, as well as belief.... " Religious practices and observances are then defined "to include moral or ethical beliefs as to what is right and wrong which are sincerely held with the strength of traditional religious views." Under the tax code, individuals may claim an exemption based on religion if they can demonstrate themselves to be "a member of a recognized religious sect or division thereof and [ ] an adherent of established tenets or teachings of such sect or division by reason of which he is conscientiously opposed" to benefits that would otherwise be received. These definitions do not provide absolute clarity on what qualifies as "religion" or "religious." In a 1972 case recognizing a constitutional ministerial exception to employment discrimination laws, the U.S. Court of Appeals for the Fifth Circuit held the employment relationship between a church and its minister was beyond the reach of governmental regulation. In McClure v. Salvation Army , a woman who had been commissioned as a minister in the Salvation Army alleged that the organization discriminated against her based on her sex. The court recognized that the organization's action was constitutionally protected under the ministerial exception. It explained: The relationship between an organized church and its ministers is its lifeblood. The minister is the chief instrument by which the church seeks to fulfill its purpose. Matters touching this relationship must necessarily be recognized as of prime ecclesiastical concern. Just as the initial function of selecting a minister is a matter of church administration and government, so are the functions which accompany such a selection. If the government regulated the relationship between a church and its minister, it would be forced to review practices and decisions of a religious organization and unlawfully "intrude upon matters of church administration and government." To avoid the risk of such unconstitutional interference, the court recognized a ministerial exception to insulate decisions regarding those employment relationships from governmental review. Each of the federal circuit courts to consider the ministerial exception recognized its application to some extent, but the courts have differed on the scope of its application. Federal courts are generally in agreement that the ministerial exception bars lawsuits by clergy and religious leaders--regardless of the particular religious sect or denomination to which they minister--seeking redress for employment discrimination by their religious organization. The circuits differ, however, in how to apply the ministerial exception to other employees who may serve religious functions in the organization. Until 2012, when the Supreme Court considered the issue, the most commonly applied test applied by circuit courts in ministerial exception cases was the primary duties test (sometimes called the primary functions test). Under this test, ministerial employees are not identified by their job titles or ordination status, but rather by the function of their position. To apply the exception, a court must "determine whether a position is important to the spiritual and pastoral mission of the church." Courts applying the primary duties test have adopted the following standard as a general rule: "If the employee's primary duties consist of teaching, spreading the faith, church governance, supervision of a religious order, or supervision or participation in religious ritual and worship, he or she should be considered clergy." Several courts agreed that the ministerial exception may apply with regard to any employees who "perform particular spiritual functions." Some courts looked at other factors, in addition to the employee's primary functions, such as the nature of the claim asserted. Other courts decided ministerial exception cases on a case-by-case basis without applying a particular standard. In 2012, the Supreme Court issued its decision in Hosanna-Tabor Evangelical Church and School v. EEOC , a case which gave the Court an opportunity to recognize and clarify the application of the ministerial exception. In this case, a teacher with both religious and secular duties at a religiously affiliated school sought protection under the ADA after being terminated following her disability leave. The teacher claimed that her termination was improperly based on her disability and barred by the ADA. The school claimed that its decision was based on internal religious policies regarding its spiritual leaders, which included some teachers. The case required the Court to determine whether a teacher at a religious school qualified as a minister for purposes of the ministerial exception. In Hosanna-Tabor , Cheryl Perich, a "called" teacher at the school, had taken a disability leave of absence, but attempted to return to her position later in the school year. The school informed Perich that her position had been filled by a lay teacher for the remainder of the school year and offered her "a 'peaceful release' from her call, whereby the congregation would pay a portion of her health insurance premiums in exchange for her resignation as a called teacher." When Perich refused to resign, she was informed that she would likely be fired, and in response she notified the school that she intended to file a claim under the ADA. Hosanna-Tabor rescinded Perich's "call" and terminated her teaching position, citing "insubordination and disruptive behavior" and her threat of legal action against the institution. The Court's decision noted the significance of the specific position held by the teacher. Hosanna-Tabor Evangelical Lutheran Church and School hires two types of teachers: called teachers and lay teachers. Called teachers are deemed to have been called by God to teach and must meet certain qualifications, which include post-secondary theological study, endorsement by local church authority, and completion of an oral examination. Upon meeting these qualifications, called teachers receive the title of "Minister of Religion, Commissioned" and serve an open-ended term at the school. Lay teachers are not required to meet such qualifications and may not be trained by the church or even share the same affiliation. Lay teachers serve under one-year renewable contracts. The Court held that Perich qualified as a minister for purposes of the ministerial exception and therefore could not enforce the protections that would be available to other employees under the ADA. Notably, the Court's opinion in Hosanna-Tabor was unanimous, a rare occurrence for the current Court in First Amendment cases. However, agreement among the Justices is not particularly surprising given the narrow scope of the Court's opinion, which only recognized the widely accepted constitutional exception. It agreed with the circuit courts that the First Amendment provides protection for a religious organization's decisions regarding employment of its ministers. It also agreed "that the ministerial exception is not limited to the head of a religious congregation." However, the Court stopped short of defining what a minister is for purposes of the exception--the more contentious issue associated with the ministerial exception--stating its "[reluctance] ... to adopt a rigid formula for deciding when an employee qualifies as a minister." Instead, the Court treated the case as one of first impression limited only to the challenge in question, alluding that later legal challenges would allow it to consider the parameters of the exception. The Court explained that Hosanna-Tabor designated the employee as a minister, which required a number of religiously significant qualifications to be met. The employee regarded herself as a minister based on her position and accepted privileges available only to ministerial employees. Furthermore, the duties of the position "reflected a role in conveying the Church's message and carrying out its mission" and indicated that the employee "performed an important role in transmitting the Lutheran faith to the next generation." Accordingly, the Court held that the employee would qualify as a ministerial employee and Hosanna-Tabor's decision was not subject to the ADA. The statutory exemptions for religious organizations provided by Congress differ from the constitutional ministerial exception, though both are rooted in the same principles of non-interference in the internal decisions of church authority and operations. The constitutional exception protects religious organizations from liability for decisions regarding only ministerial employees, but may be applied to decisions made on any basis. The statutory exemptions generally exempt religious employers from liability for decisions regarding other employees, but are limited to decisions made on the basis of religion. To invoke the constitutional ministerial exception, an employer must be a religious organization and the employee must be a minister or ministerial employee. However, the religious employer does not need a religious basis for its decision. Rather, courts have indicated that the inquiry should focus on the action itself, rather than the motives: "The exception precludes any inquiry whatsoever into the reasons behind a church's ministerial employment decision. The church need not, for example, proffer any religious justification for its decision, for the Free Exercise Clause 'protects the act of a decision rather than a motivation behind it.'" Under the constitutional exception, courts have upheld the termination of a college chaplain who claimed her termination was a result of gender discrimination; a hospital chaplain who claimed her termination was a result of discrimination based on a disability; and a priest who claimed his termination resulted from race discrimination. Various circuit courts determined in each of these examples that the employee qualified as a ministerial employee and that the religious employer's decision was accordingly beyond the review of the court. Congress has extended the recognition of noninterference in employment decisions through statutory exemptions, but has limited the exemptions to avoid undermining the purpose of the legislation. Statutory exemptions apply only to religious employers making decisions based on religion. One federal court has explained that the statutory exemption is significantly distinct from the constitutional protections to such religious organizations because the "statutory exemption applies to one particular reason for employment decision--that based on religious preference." A number of federal circuit courts have noted that the statutory exemption allows religious organizations to make employment decisions based on religious preferences, but does not permit those decisions to be based on other preferences, like race, sex, or national origin. The statutory exemptions also differ from the constitutional exception because the statutory exceptions exempt employers from liability for decisions regarding any employee, rather than being limited to ministers and ministerial employees. For example, the religious exemption under Title VII has been held to allow a religious organization to terminate the employment of an employee with no religious duties. In 1987, the Supreme Court upheld the Title VII exemption when a religious employer discharged a building engineer because the employee failed to qualify for membership in the church that operated the facility for which he worked. The Court explained that the exemption was neutral and its purpose to limit governmental interference in religious matters was permissible. In light of the split among the circuit courts over the standard for determining the scope of the ministerial exception, it seemed likely in Hosanna-Tabor that the U.S. Supreme Court would clarify the analysis of how courts should define minister in future employment discrimination lawsuits involving religious organizations. Often, the Court accepts cases for review because a different standard is applied across the various circuits, which, if left unreviewed, means that the application of law is determined by the geography of the court in which the claim is filed rather than by a uniform national standard. The Court did not resolve the split among the circuits, however. Instead, it only announced its recognition of the ministerial exception as a constitutional protection for religious entities and explained that it could be applied to more than just the nominal head of the congregation. Many questions still remain regarding the scope of the ministerial exception: Who qualifies as a ministerial employee? Which legal claims might the ministerial exception apply to? What options does Congress have to affect the outcome of such cases? Although the Court did not provide the definitive clarification of the ministerial exception that many were expecting, its decision nonetheless indicates its preferred direction of the constitutional analysis for future cases. In Hosanna-Tabor , as discussed earlier, the Court declined to announce a uniform standard for applying the ministerial exception, noting its reluctance "to adopt a rigid formula for deciding when an employee qualifies as a minister," and decided only the facts of the case before it. The Court relied upon four general considerations in its decision: (1) the formal title given to the employee by the religious institution; (2) the substantive actions reflected by the title (i.e., the qualifications required to be granted such a title); (3) the employee's understanding and use of the title; and (4) the important religious functions performed by employees holding the title. Rejecting the primary duties test, the Court explained that the factors relied upon by the U.S. Court of Appeals for the Sixth Circuit may be relevant to the applicability of the ministerial exception, but they should not be treated as dispositive. For example, the Court disagreed with the Sixth Circuit that the title of commissioned minister was irrelevant. Rather, the Court stated that "although such a title, by itself, does not automatically ensure coverage, [it] is surely relevant, as is the fact that significant religious training and a recognized religious mission underlie the description of the employee's position." Likewise, according to the Court, the comparison of duties between similar positions and the proportion of religious duties versus secular duties may be relevant, but are not conclusive in the determination of ministerial employees: [T]hough relevant, it cannot be dispositive that others not formally recognized as ministers by the church perform the same functions--particularly when, as here, they did so only because commissioned ministers were unavailable. ... The amount of time an employee spends on particular activities is relevant in assessing that employee's status, but that factor cannot be considered in isolation, without regard to the nature of the religious functions performed and the other considerations discussed above. The Court's decision not to announce a formal standard for determining ministerial employees means that future decisions in lower courts may still be decided based on different standards. However, the Court's rejection of the application of the primary duties test provides a strong indication that at least courts in judicial circuits in which the test had prevailed will now be guided by factors considered significant to the Court in Hosanna-Tabor . The Court's decision indicated a significant amount of deference to religious authorities when identifying ministerial employees, relying on the school's understanding of its relationship with its called teachers. The Court noted that "although teachers at the school generally performed the same duties regardless of whether they were lay or called, lay teachers were hired only when called teachers were unavailable." Citing a long history of avoidance of determining matters of religion, the Court relied on historical precedent "[confirming] that it is impermissible for the government to contradict a church's determination of who can act as its ministers." The Court also deferred to the school's reason for termination, explaining that the exception applies regardless of whether the reason for termination is based on religion. During the lawsuit, Hosanna-Tabor maintained that "Perich was a minister, and she had been fired for a religious reason--namely, that her threat to sue the Church violated the Synod's belief that Christians should resolve their disputes internally." The Court emphasized that the purpose of the ministerial exception is to ensure that employment decisions of ministers and ministerial employees remains within the sole authority of the religious institution. Accordingly, the Court's opinion suggests that religious employers may make decisions regarding employment of ministers or ministerial employees for any reason it deems necessary to adherence to its beliefs, regardless of whether the stated reason is pretextual. Although the Court's decision was unanimous, Justice Thomas's concurring opinion, joined by Justice Alito, provides further support of the Court's deference to religious institutions when defining ministerial employees. Justice Thomas stated that the institution's "right to choose its ministers would be hollow ... if secular courts could second-guess the organization's sincere determination that a given employee is a 'minister' under the organization's theological tenets." The opinion also warned against the adoption of a strict definition in the future. If courts attempt to create a definitive standard for what positions qualify as ministerial, some religious groups, particularly those "whose beliefs, practices and membership are outside of the 'Mainstream' or unpalatable to some," would be disadvantaged because traditional definitions may not be easily applied to them. A definitive standard may raise constitutional concerns if a religious group feels pressed "to conform its beliefs and practices regarding 'ministers' to the prevailing secular understanding." The Court's opinions reflect the long-standing aversion to interpreting what religious tenets require. Just as the Court has recognized that it may not judge the veracity of beliefs or what constitutes religion, it has now indicated that it may be similarly improper for courts to decide who is a minister within a particular religion. It seems possible that, even with further litigation of the scope of the ministerial exception, the Court will defer to a religious institution's understanding of which employees function as ministers. Such deference would allow courts to avoid interpreting the religious doctrine of the institution and defining what constitutes spiritual leadership within the institution. Although it reflects long-standing and widely accepted principles of noninterference in the internal governance of religious institutions, the ministerial exception nonetheless raises concerns regarding the degree to which such institutions may operate without legal recourse to those with whom they may interact. In other words, if courts are prohibited from reviewing a church's decisions regarding its employees to avoid unconstitutional interference with religious operations, might they also be prohibited from hearing other challenges involving the church's decisions? The Court limited its decision in Hosanna-Tabor , holding only that the ministerial exception bars employment discrimination suits brought on behalf of a minister challenging a religious institution's decisions to terminate his or her employment. The Court expressly stated that it was expressing "no view on whether the exception bars other types of suits, including actions by employees alleging breach of contract or tortuous conduct by their religious employers," leaving such decisions to be determined in later cases. Thus, under Hosanna-Tabor , the ministerial exception applies, at a minimum, to employment discrimination lawsuits alleging improper termination of a minister by a religious institution, regardless of whether the reason given was based on religion or another factor. Lower court decisions have indicated some uncertainty in the applicability of the ministerial exception to other types of cases. As one federal court has stated, religious organizations "are not--and should not be--above the law" and "may be held liable for their torts and upon their valid contracts." This court also emphasized that such organizations remain subject to Title VII in cases that do not involve the organization's religious functions. Thus, according to some interpretations, even if the ministerial exception bars certain claims, other claims in the same case may proceed. For example, a university chaplain filed claims against her employer after the university decided to restructure her department and removed her from her position. The lawsuit asserted a variety of claims, including employment discrimination, breach of contract, and state tort claims (e.g., negligent supervision and retention). The U.S. Court of Appeals for the Third Circuit held that the ministerial exception barred any decision on the employment discrimination claims. The court also explained that the First Amendment protected the university's right to determine its internal structure and therefore the court could not consider the tort claim of negligent supervision and retention which resulted from the university's decision to restructure. However, because some of the chaplain's claims did not implicate the university's "freedom to select its ministers," judicial resolution of other claims, such as breach of contract, was not barred by the ministerial exception. In another example of a court applying the ministerial exception to cases challenging actions other than termination, the U.S. Court of Appeals for the Ninth Circuit applied the ministerial exception to a challenge filed by a seminarian over the sufficiency of the wages he received from his employing church. The court noted that the individual was challenging wages received in his capacity as a seminarian in which he was assisting with the administration of religious services, not for employment or duties outside the scope of seminary training. The court determined that the challenge was of a ministerial nature, and therefore it could not interfere with the church's decision. Some federal courts have indicated that the nature of the dispute is a critical factor in determining whether the ministerial exception applies. According to the U.S. Court of Appeals for the Second Circuit, the ministerial exception is not an absolute bar to legal challenges, indicating that a court must consider the nature of the dispute before it, in addition to the employee's position, when deciding whether or not to apply the exception. The U.S. Court of Appeals for the Ninth Circuit has stated that a court may consider a case if it is limited in a manner that allows for controlled discovery and avoids "wide-ranging intrusion into sensitive religious matters." Sexual harassment claims have been of particular concern in the debate over the applicability of the ministerial exception. Like any other claim, whether a court decides the merits of such cases likely depends on whether the accused institution claims religious justification for its actions. For example, the U.S. Court of Appeals for the Ninth Circuit permitted an ordained minister to pursue a sexual harassment claim against her church. The court explained that the ministerial exception applied only to the church's ministerial employment decisions, and that the sexual harassment claim was "narrower and thus viable" because it did not implicate a protected employment decision. The court noted that "the Church could invoke First Amendment protection ... if it claimed doctrinal reasons for tolerating or failing to stop the sexual harassment." Because the church did not defend its actions based on religious doctrine, the court explained that the issues for judicial resolution were limited to "a restricted, secular inquiry" and were appropriate for the court to consider. The Court's decision in Hosanna-Tabor did not address the scope of the statutory exception of the ADA. Rather, it was grounded in the constitutional protections afforded to religious organizations under the First Amendment. In other words, regardless of the explicit statutory protection for religious organizations like Hosanna-Tabor in the ADA, the school still was able to exercise its constitutional right to terminate Perich's employment without affording her the legislative protections of the ADA. Accordingly, the legislative options for Congress in response to the Court's decision in Hosanna-Tabor are extremely limited. Congress may seek to include a preferred standard of review in its religious exceptions to nondiscrimination legislation, but such clarification must comport with the requirements of the constitutional exception. The most probable method for clarification of the proper standard for the constitutional exception is further litigation, as the Court alluded in its decision.

Congress has enacted a number of federal laws banning discrimination in employment decisions, including hiring and firing of employees. For example, Title VII of the Civil Rights Act of 1964 prohibits discrimination in employment if the discrimination is based on race, color, religion, national origin, or sex. The Americans with Disabilities Act (ADA) prohibits discrimination based on disability. The Age Discrimination in Employment Act prohibits discrimination in employment based on age. Exceptions in these laws for religious organizations have reflected long-standing recognition of the autonomy of religious organizations in certain employment decisions. While these statutory provisions protect religious organizations in selected contexts, religious organizations also have constitutional protection, known as the ministerial exception. The ministerial exception protects the employment relationship between a religious entity and its ministerial employees. Courts have long held that the First Amendment of the U.S. Constitution bars the government from interfering with internal governance of religious organizations, including decisions regarding employment of ministers or ministerial employees. This exception has generally been framed relatively narrowly to avoid undermining the public policy goals of nondiscrimination legislation. Thus, only religious institutions may claim the ministerial exception and may only do so if the employee functions as a minister or ministerial employee. The boundaries of the exception are not yet settled though. In 2012, the U.S. Supreme Court recognized the ministerial exception as a necessary outgrowth of its jurisprudence on non-interference in the internal governance of religious organizations (Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC). However, the Court did not define the scope of the exception and declined to identify a standard for determining whether an employee could be labeled as ministerial. This report analyzes the history and constitutional bases for the ministerial exception and examines selected statutory provisions reflecting its protections under federal employment laws. The report examines the distinction between the constitutional and statutory protections for religious organizations and addresses critical questions involved in judicial consideration of the ministerial exception. It analyzes which employees may qualify as ministerial, the extent to which courts may defer to religious entities claiming the exception, and whether the exception may apply to any claim brought against a religious entity.

Information about contracts and other award types related to Hurricanes Katrina and Rita is available from several sources, including: Federal Procurement Data System (FPDS), at https://www.fpds.gov . Department of Homeland Security (DHS), at http://www.dhs.gov/dhspublic/interapp/editorial/editorial_0729.xml . (Information about contracts awarded by the Federal Emergency Management Agency (FEMA) is available at this website.) U.S. Army Corps of Engineers (USACE), at http://www.usace.army.mil . U.S. Navy, Military Sealift Command (MSC), at http://www.procurement.msc.navy.mil/Contract/Welcome.jsp . (The Military Sealift Command is the agency that awarded four contracts for four cruise ships to house evacuees in the Gulf Region. ) The Federal Procurement Data System is a government database that contains detailed information about contracts that have been awarded; task, delivery, and purchase orders that have been issued; and purchases that have been made under blanket purchase agreements (BPAs). Three spreadsheets are available on the FPDS website: Hurricane Katrina contract information, Hurricane Rita contract information, and contract information for other disasters that occurred in 2005. Although agencies are required to submit information to FPDS about contracts and other types of awards that exceed $2,500 in value, it is likely, as noted at the beginning of the three spreadsheets available on the FPDS website, that not all contracting actions have been entered into FPDS yet. Nevertheless, with more than 2,500 contracting actions listed by late October from many different agencies, and the use of 50 FPDS data elements to describe the contracting actions, FPDS spreadsheets offer the most comprehensive picture of emergency contracting. Contracting information available from the other three sources--FEMA (via the DHS website), USACE, and MSC--is not included in the FPDS spreadsheets. As noted on the FPDS spreadsheets, some contracting officials may not have access to the necessary computer systems or may not have time to submit information to FPDS. This caveat may also apply to FEMA. In the case of USACE and MSC, the Department of Defense (DOD) has not completed its connections to FPDS, though it expects to do so sometime in FY2006. Thus, very few DOD contracting actions are listed on the Hurricane Katrina spreadsheet. While the information presented here applies to government procurements generally, the information is provided to aid specifically in understanding the FPDS spreadsheets. Information listed on the FPDS spreadsheets includes the date that a transaction was signed; the date that the parties (that is, the government and a company) agreed would be the starting date for the contract's requirements, which may be the same as the date signed; the current completion date, which is the completion date of the base contract plus any options that have been exercised; the dollar value of the contract or other award; and the name and location of the vendor. Although the definition of "current completion date" does not mention, for example, delivery orders (DOs), it seems likely that completion date entries for DOs indicate the date by which deliveries are to be completed. The type of award an agency makes for a particular procurement depends, at a minimum, on whether the required items or services are available from an existing contract, a federal supply schedule, or a blanket purchase agreement. A blanket purchase agreement (BPA) is a "charge account" with qualified sources of supply. Generally, BPAs are used by agencies to fill anticipated repetitive needs for supplies or services. A contract is a mutually binding legal relationship which obligates a vendor to provide goods or services and the government to pay for them. A delivery order or a task order (TO) is used to purchase supplies or services, respectively, from an established government contract or with government sources. When this procurement vehicle is used, it is said that the agency "placed a task (or delivery) order against a contract." A purchase order (PO) is an offer by the government to buy supplies or services, under specified terms and conditions and using simplified acquisition procedures, from a vendor. Several different types of contracts are available to contracting officers and contractors, and contracting officers have many factors to consider when selecting which type of contract to use for a particular procurement. Factors include type and complexity of the agency's requirement, urgency of the requirement, performance period, and the extent and nature of proposed subcontracting. The following contracts have different pricing arrangements: Fixed-price contracts "provide for a firm price or, in appropriate cases, an adjustable price.... A fixed-price contract with economic price adjustment provides for upward or downward revision of the stated contract price upon the occurrence of specified contingencies." Cost-reimbursement contracts "provide for payment of allowable incurred costs, to the extent prescribed in the contract." Time-and-materials contracts provide "for acquiring supplies or services on the basis of--(1) Direct labor hours at specified fixed hourly rates that include wages, overhead, general and administrative expenses, and profit; and (2) Materials at cost, including, if appropriate, material handling costs as part of material costs." Labor-hour contracts are "a variation of the time-and-materials contract, differing only in that materials are not supplied by the contractor." A fixed price or cost-reimbursement contract that includes an incentive may be referred to as an "incentive contract." Incentive contracts "are appropriate when ... the required supplies or services can be acquired at lower costs and, in certain instances, with improved delivery or technical performance, by relating the amount of profit or fee payable under the contract to the contractor's performance." Another variation is called the "indefinite-delivery contract," which is "used to acquire supplies and/or services when the exact times and/or exact quantities of future deliveries are not known at the time of contract award," and which is sometimes referred to as an "indefinite-delivery/indefinite-quantity (IDIQ) contract." For every contracting action reported to FPDS, the procuring agency must assign a unique identifier--a procurement instrument identifier (PIID). Agencies are responsible for developing their own PIID coding schemes, but they must use alphabetical characters in the first positions to indicate the agency; assign alphanumeric characters to identify the appropriate office or administrative subdivision; and, similar to the assignment of numbers sequentially to public laws, assign numbers sequentially to contracting actions. Agencies may add other information, such as fiscal year, to their PIIDs. The Federal Procurement Data Center is required to maintain a registry of agencies' coding schemes and validate their use in all transactions. Full and open competition, which "means that all responsible sources are permitted to compete," is the policy of the federal government. However, exceptions are permitted. One category of exceptions provides for full and open competition after exclusion of sources. Procurements that are set aside for certain types of small businesses belong to this category, because large businesses are excluded from competition. Other than full and open competition, which is popularly referred to as "no bid" or "sole source" contracting, is permitted under seven circumstances: only one responsible source exists, and no other supplies or services will satisfy agency requirements; an unusual and compelling urgency for supplies or services exists; the government needs to achieve industrial mobilization, establish or maintain an essential engineering or research and development capability, or obtain expert services; an international agreement or treaty precludes full and open competition; a statute authorizes or requires that supplies or services be procured through another agency or from a specified source; disclosure of an agency's needs could compromise national security; and it is in the public interest not to conduct a full and open competition. Two columns on the FPDS spreadsheets--"Extent Competed" and "Reason Not Competed"--provide competition information about each procurement. While some spreadsheet entries include the phrase "other than full and open competition" or "full and open after exclusion of sources" for the former column, and the appropriate reason why there was no or limited competition, other entries refer to other types of limitations on procurements. For example, an agency might indicate that a particular procurement was "not available for competition," and then, as the reason, cite the Javits-Wagner-O'Day (JWOD) Act, which mandates that organizations that employ individuals who are blind or severely disabled are a required source of supplies and services for federal agencies. The FPDS data dictionary provides descriptions for the different entries permitted in these two columns. The term "interagency contracting" has several meanings. Perhaps the best known example is when agencies purchase goods and services from a federal supply schedule that has been established and is maintained by another federal agency, such as the General Services Administration (GSA). Another type of interagency contracting occurs when agency A purchases goods or services on behalf of agency B, which funds the purchase. An examination of the FPDS spreadsheets indicate that numerous purchases were made using this method. The purchasing department, and agency or office, if applicable, are listed in columns A and B, respectively. The funding agency code is located in column M. Apparently, if there is no entry in column M for a particular procurement, the department identified in column A funded the procurement. Conversely, there are many procurements for which the entry in column M does not match the department and agency identified in columns A and B. For example, GSA purchased goods and services that were paid for by the Air Force, the Army, DHS, FEMA, the Navy, and an office within the Department of Health and Human Services. A useful feature of FPDS is that it allows agencies to identify a contractor by type of organization or business, such as tribal government, small disadvantaged business, educational institution, woman-owned business, veteran-owned business, and nonprofit organization. The three hurricane-related spreadsheets available at FPDS use this information to show what type of organization was involved in each procurement. The data provided through the FPDS website and the other websites listed above provide a degree of transparency in what is often a murky process and can be used to analyze hurricane-related recovery procurements.

Information about contracts and other types of government procurements made in support of hurricane recovery efforts may be obtained online from the Federal Procurement Data System (FPDS), the Department of Homeland Security, the U.S. Army Corps of Engineers, and the U.S. Navy's Military Sealift Command websites. The government-wide database, FPDS, provides the most comprehensive and detailed information, but the other three websites include contracts not currently listed in FPDS. Available information about government procurements includes, among other things, the type of award (for example, a contract or a delivery order), the type of contract, and the extent of competition.

President George W. Bush unveiled the Proliferation Security Initiative (PSI) in Krakow, Poland, on May 31, 2003. PSI appeared to be a new channel for interdiction cooperation outside of treaties and multilateral export control regimes. In its December 2002 National Strategy to Combat Weapons of Mass Destruction (WMD) Proliferation, the Bush Administration articulated the importance of countering proliferation once it has occurred and managing the consequences of WMD use. In particular, interdiction of WMD-related goods gained more prominence. U.S. policy sought to "enhance the capabilities of our military, intelligence, technical, and law enforcement communities to prevent the movement of WMD materials, technology, and expertise to hostile states and terrorist organizations." PSI was started partially in response to legal gaps revealed in an incomplete interdiction of the So San , a North Korean-flagged ship that was carrying Scud missile parts to Yemen in December 2002. It was interdicted on the high seas by a Spanish warship after a tip from American intelligence. The boarding was legal because there was no ship under that name in the North Korean registry. Inspectors found 15 complete Scud-like missiles, 15 warheads, and missile fuel oxidizer hidden on board. However, U.S. and Spanish authorities had no legal basis to seize the cargo, and the ship was released. Yemen claimed ownership of the missiles and reportedly promised the United States that it would not retransfer the items or purchase additional missiles from North Korea. While it is not clear that if this incident had occurred after PSI was formed the outcome would have been different, it was clearly an impetus to quickly bring a multilateral interdiction coordination mechanism to fruition. Ten nations initially joined the United States to improve cooperation to interdict shipments (on land, sea, or in the air) of WMD, their delivery systems, and related materials. According to State Department officials, this core group defined the basic principles of interdiction and worked to expand support in the early years, but was later expanded to the 21 members of the Operational Experts Group (see below). The State Department website shows that currently 105 countries (including the United States) plus the Holy See participate in the initiative (see the Appendix ). Requirements for participation are fairly general in nature, partially because of early resistance to the idea of PSI in the international community, in particular hesitancy over sovereignty and free passage issues, as well as U.S. policymakers' intention to keep the arrangement informal and non-binding. For example, participating states are encouraged to: formally commit to and publicly endorse, if possible, the Statement of Principles; review and provide information on current national legal authorities and indicate willingness to strengthen authorities as appropriate; identify specific national assets that might contribute to PSI efforts; provide points of contact for interdiction requests; be willing to actively participate in PSI interdiction training exercises and actual operations as they arise; and be willing to consider signing relevant agreements or to otherwise establish a concrete basis for cooperation with PSI efforts. Some states, such as China, Pakistan, and South Africa, still remain outside the initiative. Other countries may participate indirectly in interdictions or information exchange related to WMD proliferation without becoming a full participant in PSI. Some countries that are not ready to sign on as full participants attend PSI exercises as observers. India has attended PSI exercises as an observer, but has not yet formally joined PSI. Taiwan has also participated in WMD-related interdictions. PSI has no international secretariat and no distinct program funding. The participants hold regular high-level meetings and exercises to test interdiction techniques. Some consider the lack of formal mechanisms as advantageous. Others, particularly early on, questioned the seriousness of the effort as well as its sustainability, as long as no formal mechanisms are created. The current configuration does not legally bind PSI adherents to this cooperative endeavor. An informal coordinating structure has developed through an Operational Experts Group (OEG), which discusses proliferation concerns and plans future exercises. The OEG consists of military, law enforcement, intelligence, legal, and diplomatic experts from 21 PSI states. The Deputy Assistant Secretary of Defense for Countering Weapons of Mass Destruction leads the U.S. delegation to PSI OEG meetings. An additional issue affecting successful implementation is conclusion of ship-boarding agreements, particularly with "flags of convenience" countries. To date, the United States has signed 11 ship-boarding agreements: in 2004 with Panama, the Marshall Islands, and Liberia; in 2005 with Croatia, Cyprus, and Belize; in 2007 with Malta and Mongolia; in 2008 with the Bahamas; and in 2010 with Antigua and Barbuda, and with Saint Vincent and the Grenadines. Such arrangements typically allow two hours to deny U.S. personnel the right to board a ship. When a merchant ship registers under a foreign flag to avoid taxes, save on wages, or avoid government restrictions, it is called a flag of convenience (FOC). FOCs are of particular concern for proliferation reasons because of looser government regulations over their shipments and the ease with which ships can switch from one registry to another to avoid tracking. Thirty-five countries have flags of convenience or "open" registries. Of these, Antigua and Barbuda, the Bahamas, Belize, Cambodia, Cyprus, Georgia, Honduras, Liberia, Malta, Marshall Islands, Moldova, Mongolia, Panama, St. Vincent, Sri Lanka, and Vanuatu are PSI participants. Panama, Liberia, and the Marshall Islands are the top three flags by tonnage and more than 70% of commercial ships are registered under a flag which is different from the country of ownership. A 2012 SIPRI study, Maritime Transport and Destabilizing Commodity Flows , estimated that flag of convenience ships accounted for over 70% of reported destabilizing military equipment, dual-use goods, and narcotics transfers by sea over the past two decades. The top five countries in this category were Panama, Liberia, Belize, Malta, and Honduras. All of these countries are PSI participants. This supports the priority that the United States has placed on concluding ship-boarding agreements with countries with FOC registries. The FY2011 Congressional Budget Justification for the Department of State described PSI's mission: "a commitment by over 90 states to take action to interdict shipments, disrupt proliferation networks, and shut down the front companies that support them." The long-term objective of PSI participants is to "create a web of counter-proliferation partnerships through which proliferators will have difficulty carrying out their trade in WMD and missile-related technology." It functions as an "activity, not an organization" and envisions countries working in concert to bolster their national capacities to interdict WMD shipment using a "broad range of legal, diplomatic, economic, military and other tools." Since its inception, there has been little publicly available information by which to measure PSI's success. One measurement might be the number of interdictions successfully carried out as a result of PSI countries cooperating, but this measurement has proven to be problematic. Secretary of State Condoleezza Rice, on the second anniversary of PSI, announced that PSI was responsible for 11 interdictions in the previous nine months. On June 23, 2006, Under Secretary for Arms Control and International Security Robert Joseph reported that between April 2005 and April 2006, PSI partners worked together "on roughly two dozen separate occasions to prevent transfers of equipment and materials to WMD and missile programs in countries of concern." In July 2006, Under Secretary Joseph said that PSI had "played a key role in helping to interdict more than 30 shipments." He also said that PSI cooperation stopped exports to Iran's missile program and the export of heavy water-related equipment to Iran's nuclear program. However, whether and to what extent PSI has contributed to these interdictions is unclear; they may have happened even without PSI. Moreover, even if the creation of PSI were followed by increased numbers of WMD-related interdictions, the increase may be the product of an upsurge in proliferation activity or improved intelligence. Often the interdictions themselves as well as their operational details are not public knowledge. PSI coordination may also have benefits for interdiction efforts overall, and the need to attribute an operation to PSI appears to have receded. Recent PSI meetings have emphasized capacity-building, best practices, and cooperation across agencies and governments. Several approaches under the PSI framework may help improve interdiction efforts. First, participating states agree to review their own relevant national legal authorities to ensure that they can take action. Second, participating states resolve to take action, and to "seriously consider providing consent ... to boarding and searching of its own flag vessels by other states." Third, participating states seek to put in place agreements, such as ship-boarding agreements, with other states in advance, so that no time is lost should interdiction be required. A fourth aspect is participating in joint interdiction exercises. As many describe it, PSI relies on the "broken tail-light scenario": officials look for all available options to stop suspected transport of WMD or WMD-related items. In practice, cargos can be seized in ports if they violate the host state's laws, hence the focus on strengthening domestic laws. On the high seas, ships have the rights of freedom of the seas and innocent passage under the Law of the Sea Convention and customary international law. The boarding agreements may allow for boarding, but not necessarily cargo seizure. In addition, a key gap in the PSI framework is that it applies only to commercial, not government, transportation. Government vehicles (ships, planes, trucks, etc.) cannot legally be interdicted. Thus, the missile shipments picked up by a Pakistani C-130 in the summer of 2002 in North Korea, reported by the New York Times in November 2002, could not have been intercepted under PSI. The October 2003 interdiction of a shipment of uranium centrifuge enrichment parts from Malaysia to Libya illustrated the need for multilateral cooperation. The Malaysian-produced equipment was transported on a German-owned ship, the BBC China , leaving Dubai, passing through the Suez Canal. The United States reportedly asked the German shipping company to divert the ship into the Italian port of Taranto, where it was searched. Passage through the highly regulated Suez Canal may give authorities an opportunity to delay ships and find a reason to board them. While some Bush Administration officials have cited this as an example of a successful PSI interdiction, others have argued it was part of a separate operation, and thus should not be used as evidence of PSI's success. Officials have emphasized that under PSI, states will develop "new means to disrupt WMD trafficking at sea, in the air, and on land." PSI exercises have been held to practice interdictions in all of these environments. In his 2004 speech introducing the initiative, President Bush proposed expanding PSI to address more than shipments and transfers, including "shutting down facilities, seizing materials, and freezing assets." However, the dual-use nature of some of the goods complicates these actions. In addition, while it may be comparatively easier to target shipments to states, such as Iran or North Korea, targeting terrorist acquisitions may be a greater challenge for intelligence agencies. Another focus for PSI has been the targeting of proliferation finance. On June 23, 2006, 66 PSI states participated in a High Level Political Meeting in Poland, which focused on developing closer ties with the business community to further prevent any financial support to the proliferation of WMD. PSI states have also hosted at least four workshops to introduce industry representatives to PSI goals and principles. In June 2011, PSI participants announced the concept of Critical Capabilities and Practices (CCP). A State Department press release explained that Operational Expert Group countries would identify and share "tools and resources that support interdiction related activities and by conducting events in a coordinated manner to develop, implement, and exercise CCPs." The meeting followed the sixth nuclear test by North Korea, and participants affirmed the importance of using the PSI and all other cooperative means to prevent the transfer of WMD technology to the DPRK. Participants also addressed the new challenges of intangible technology transfer, efforts of non-state actors to acquire WMD, and how to prevent proliferation finance as part of a comprehensive nonproliferation strategy. In May 2018, PSI members issued a Joint Statement in support of the most recent U.N. Security Resolutions 2375 and 2397 and called on states to enforce these measures to prevent proliferation to and from North Korea. U.S. officials have been careful to emphasize that PSI actions, including ship boarding and seizures, would be carried out in accordance with national legal authorities and international law and frameworks. The Statement of Interdiction Principles commits participants to "review and work to strengthen their relevant national legal authorities where necessary to accomplish these objectives, and work to strengthen when necessary relevant international law and frameworks in appropriate ways to support these commitments." There are differing opinions on whether the United States should work more aggressively to expand international legal authority for interdictions on the high seas and in international airspace. U.N. Security Council resolutions can provide for interdiction activities under Section VII of the U.N. Charter, which allows the Security Council to authorize sanctions or the use of force to compel states to comply with its resolutions. The 2005 Protocol to the Convention for the Suppression of Unlawful Acts Against the Safety of Maritime Navigation (SUA) requires states to criminalize transportation of WMD materials and their delivery vehicles. This protocol also "creates a ship boarding regime based on flag state consent similar to agreements that the United States has concluded bilaterally as part of the Proliferation Security Initiative." The United States Senate gave its advice and consent for ratification of the 2005 SUA Protocol on September 25, 2008 (Treaty Document 110-8). The Bush Administration attempted to expand international legal authority for PSI and related activities. The State Department has said that participating in PSI is a way for states to comply with their obligations under U.N. Security Council resolutions 1718, 1737, 1747, 1803, and 1540. U.N. Security Council Resolution 1540, passed in April 2004, requires all states to establish and enforce effective domestic controls over WMD and WMD-related materials in production, use, storage, and transport; to maintain effective border controls; and to develop national export and trans-shipment controls over such items, all of which should help interdiction efforts. While UNSCR 1540 was adopted under Chapter VII of the U.N. Charter, the resolution did not provide any enforcement authority, nor did it specifically mention interdiction or PSI. Early drafts of the resolution put forward by the United States had included explicit language calling on states to interdict if necessary shipments related to WMD. However, over China's objections, the word "interdict" was removed and was changed to "take cooperative action to prevent illicit trafficking" in WMD. U.N. Security Council 1874 does establish procedures for the required interdiction of WMD and other weapons going to or from North Korea. The PSI mechanism may assist countries in coordinating these actions. Subsequent resolutions further specified interdiction authorities as related to North Korea. The Law of the Sea Convention could also affect PSI implementation. The Convention has been supported by the Pentagon as a way to enhance PSI efforts. In a letter from the Joint Chiefs of Staff sent to the Senate in 2007, the Joint Chiefs argued for ratification, explaining that the convention "codifies navigation and over flight rights and high seas freedoms that are essential for the global mobility of our armed forces." The letter said that the Convention supports the efforts of the Proliferation Security Initiative. Senior military officials have also publicly said that not being a party hinders efforts to recruit new PSI participants. In his testimony before a Senate Armed Services Committee in April 2008, Vice Chief of Naval Operations Admiral Patrick Walsh said, "Our current non-party status constrains our efforts to develop enduring maritime partnerships. It inhibits us in our efforts to expand the Proliferation Security Initiative." The Senate Foreign Relations Committee considered the treaty with hearings held in June 2012 (see " Related Treaties and Conventions " below), however no further action has been taken since then. It may remain difficult for Congress to track and measure PSI's success. However, reporting and coordination requirements now in public law may result in more information than was available in the early years of PSI. The Implementing Recommendations of the 9/11 Commission Act of 2007 ( P.L. 110-53 ) requires the President to include PSI activities for each involved agency in his budget request, and requires submission to Congress of joint DOD-DOS reports to include detailed three-year plans for PSI activities no later than the first Monday in February each year. The act also recommends that PSI be expanded and that the United States should use the intelligence and planning resources of the NATO alliance, make participation open to non-NATO countries, and encourage Russia and China to participate. It gives the sense of Congress that PSI should be strengthened and expanded by establishing a clear authority for PSI coordination and increasing PSI cooperation with all countries. While PSI generally receives bipartisan support in principle, critics urge changes, such as increased transparency, expansion of participants, and improved coordination, rather than an end to the program. For example, the 9/11 Commission recommended that the United States seek to strengthen and expand PSI's membership. Others emphasize coordination. Former Chairman of the Senate Foreign Relations Committee Senator Richard Lugar said, "PSI is an excellent step forward, but what is lacking is a coordinated effort to improve the capabilities of our foreign partners so that they can play a larger detection and interdiction role." U.S. government organization and management issues have also been highlighted as areas for improvement. The Government Accountability Office (GAO) published a report in September 2006, Better Controls Needed to Plan and Manage Proliferation Security Initiative Activities , that recommended the following: (1) the Departments of Defense and State establish clear roles and responsibilities, interagency communication mechanisms, documentation requirements, and indicators to measure program results; (2) the Departments of Defense and State develop a strategy to work with PSI-participating countries to resolve issues that are impediments to interdictions; and (3) a multilateral mechanism be established to increase coordination, cooperation, and compliance among PSI participants. These recommendations were also endorsed by Congress in P.L. 110-53 , the Implementing Recommendations of the 9/11 Commission Act of 2007. The President was required to submit a report to Congress on implementation of these recommendations, which was done past the mandated deadline, in July 2008. A follow-up GAO report issued in November 2008 details U.S. agencies' efforts to increase PSI cooperation and coordination. It reported that the Bush Administration had not issued a directive to U.S. agencies to coordinate PSI functions, as required by law. A joint report by the Department of Defense and the State Department was submitted to Congress in January 2009. The Obama Administration has said that it would like to "institutionalize PSI" as part of its agenda. This could include following the mandates in the 9/11 Commission Act of 2007, although details have not yet been announced. GAO issued an update to this report series in March 2012 which concluded that more steps are needed to meet congressionally mandated reporting requirements and to better measure effectiveness (GAO-12-441). Geographic expansion of PSI participants remains a key issue--particularly how to engage China and India, as well as states in important regions like the Arabian Peninsula. Congress may also consider how intelligence resources are handled. Is intelligence sufficient and are there intelligence-sharing requirements with non-NATO allies? Also, how is PSI coordinated with other federal interdiction-related programs (e.g., export control assistance, WMD detection technologies, etc.)? One potential complication for congressional oversight of PSI is the absence of a way to measure PSI's success, relative to past efforts. Congress may choose to consider, again, how successfully the recommendations of P.L. 110-53 have been followed, and whether more non-proliferation policy coordination within the U.S. government may be required. Funds for PSI activities remain in large part a component of other programs that address WMD proliferation and interdiction, and thus PSI activities do not have separate budget lines. The Department of Defense does include a breakdown of expense exclusively dedicated to PSI in its annual report to Congress. However, other DOD programs also contribute to PSI efforts--for example, the U.S. Strategic Command budgets for combatant commanders' participation in WMD interdiction exercises, but these tasks are not necessarily under the PSI umbrella. DOD PSI-related activities have most recently been funded through the Cooperative Threat Reduction (CTR) program. The FY2017 National Defense Authorization Act (NDAA, P.L. 114-328) said that $4 million may be obligated for the PSI out of CTR Program funds. The State Department's Nonproliferation, Antiterrorism, Demining, and Related Programs (NADR) account funds PSI-related activities. FY2012 and FY2013 congressional budget justifications stated that the Nonproliferation and Disarmament Fund (NDF) can be used to support multinational exercises under the Proliferation Security Initiative, and staff travel to PSI meetings is drawn from State's general operating accounts. Participation by the FBI and DHS's Customs and Border Patrol appears to be funded on an ad hoc basis through operating funds. The Department of Energy's budget justification includes funds for National Laboratory research on WMD interdiction technologies, which would contribute to PSI efforts. On October 1, 2007, the Senate Committee on Foreign Relations received the Protocol of 2005 to the Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation (the "2005 SUA Protocol") for consideration. The protocol was signed by the United States on February 17, 2006. In President Bush's submission note to the Senate, he summarizes the importance of this protocol to PSI activities: "The 2005 SUA Protocol also provides for a ship-boarding regime based on flag state consent that will provide an international legal basis for interdiction at sea of weapons of mass destruction, their delivery systems and related materials." On July 29, 2008, the committee unanimously ordered the resolutions to advise and consent to the 2005 SUA Protocol. The full Senate approved the Protocol on September 25, 2008. Congress would need to approve implementing legislation for ratification to be finalized. On June 6, 2012, the House Judiciary Committee reported out the Nuclear Terrorism Conventions Implementation and Safety of Maritime Navigation Act of 2012 ( H.R. 5889 ), which includes implementing legislation for the SUA Protocol. As mentioned above, the Senate considered giving consent to ratification of the Law of the Sea Convention (Treaty Doc 103-39), which military and other government officials argue will positively impact PSI implementation. Critics of the treaty cite concerns about limiting U.S. sovereignty. The Senate Foreign Relations Committee (SFRC) recommended advice and consent for U.S. adherence to the treaty on October 31, 2007. The SFRC held hearings on the convention beginning on May 23, 2012. Secretary of State Hillary Clinton said that "joining the convention would likely strengthen the PSI by attracting new cooperative partners." In response to a question from Senator Menendez about the impact of the convention on interdictions at sea, Secretary of Defense Leon Panetta said that the convention would enhance the Proliferation Security Initiative and expand the range of interdiction authorities. His testimony stated: The U.S. and our partners routinely conduct a range of interdiction operations at sea based on UN Security Council Resolutions, treaties, port state control measures and the inherent right of self-defense. Further, the Convention expands the range of interdiction authorities found in the 1958 Law of the Sea Conventions we've already joined. In short, the U.S. would be able to continue conducting the full range of maritime interdiction operations. A panel of top military officers testified in support of the treaty. Critics of the convention cite problems with provisions that are not related to interdiction activities, argue that adherence is not necessary to continue current interdiction activities, or cite concerns about whether the treaty would limit current interdiction authorities. Early on, some members of Congress showed support for PSI through legislation. In the 111 th Congress, House Foreign Affairs Committee Ranking Member Ileana Ros-Lehtinen introduced H.Res. 604 , which recognized "the vital role of the Proliferation Security Initiative in preventing the spread of weapons of mass destruction." Another bill sponsored by Representative Ros-Lehtinen, the Western Hemisphere Counterterrorism and Nonproliferation Act of 2009 ( H.R. 375 ), included a sense of Congress that PSI has "repeatedly demonstrated its effectiveness in preventing the proliferation of weapons of mass destruction," and that the Secretary of State should seek to secure the "formal or informal cooperation by Western Hemisphere countries" for PSI. The Foreign Relations Authorization Act for Fiscal Years 2010 and 2011 ( H.R. 2410 ) called for "the expansion and greater development of the Proliferation Security Initiative (PSI)". The associated H.Rept. 111-136 , in its section on minority views, praises PSI thus: "The Proliferation Security Initiative is an outstanding example of U.S. leadership in the area of nonproliferation. The PSI has demonstrated that success can be achieved through a flexible consensus of like-minded countries without the need for an international bureaucracy, constraining treaties, or formal permission that often never comes." The Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 ( P.L. 111-195 ) calls for any countries designated as destinations of diversion concern to be encouraged to participate in PSI and to conclude a ship-boarding agreement with the United States. The FY2013 Foreign Relations Authorization Act ( H.R. 2583 ) singles out PSI as a nonproliferation tool, stating as a goal of the bill "enhancing U.S. nonproliferation policy, including by strengthening the Proliferation Security Initiative, to prevent Iran and other rogue states from acquiring nuclear weapons, ballistic missiles, and other means of assaulting the U.S. and our allies." Title VI of the act authorizes the President to utilize the Proliferation Security Initiative and other measures deemed necessary to enforce U.S. laws, Executive Orders, and bilateral and multilateral agreements for the purpose of interdicting the import into or export from Iran any items, materials, goods, technology useful for any nuclear, biological, chemical, missile or conventional arms program; and to utilize ship boarding agreements with other countries to carry out these functions. ( H.Rept. 112-223 ) It also amends the Iran, North Korea, and Syria Nonproliferation Act ( P.L. 106-178 ) to require a report every 120 days (instead of every six months) on the proliferation interdiction efforts of other governments, in addition to U.S. interdiction efforts. The FY2017 Department of State, Foreign Operations, and Related Programs Appropriations Act (S.3117), which was passed in t he FY2017 Continuing Appropriations Act (P.L. 115-31), instituted new reporting requirements for State Department. Specifically, the bill dictated that, (11) PROLIFERATION SECURITY INITIATIVE- Funds appropriated by this Act under the heading 'Nonproliferation, Anti-terrorism, Demining and Related Programs' shall be made available for programs to increase international participation in the Proliferation Security Initiative (PSI) and endorsement of the PSI Statement of Interdiction Principles: Provided, That not later than 45 days after enactment of this Act, the Secretary of State shall submit a report to the Committees on Appropriations detailing steps to be taken to implement the requirements of this paragraph.

The Proliferation Security Initiative (PSI) was formed to increase international cooperation in interdicting shipments of weapons of mass destruction (WMD), their delivery systems, and related materials. The Initiative was announced by President Bush on May 31, 2003. PSI does not create a new legal framework but aims to use existing national authorities and international law to achieve its goals. Initially, 11 nations signed on to the "Statement of Interdiction Principles" that guides PSI cooperation. As of June 2018, 105 countries (plus the Holy See) have committed formally to the PSI principles, although the extent of participation may vary by country. PSI has no secretariat, but an Operational Experts Group (OEG), made up of 21 PSI participants, coordinates activities. Although WMD interdiction efforts took place with international cooperation before PSI was formed, supporters argue that PSI training exercises and boarding agreements give a structure and expectation of cooperation that has improved interdiction efforts. Many observers believe that PSI's "strengthened political commitment of like-minded states" to cooperate on interdiction is a successful approach to counter-proliferation policy. The effort faced early criticism that said it would be difficult to measure the initiative's effectiveness, guarantee even participation, or sustain the effort over time in the absence of a formal multilateral framework. However, successive administrations have supported the PSI and worked to expand membership. Its goals have been a part of U.S. national security strategy. The 2018 Nuclear Posture Review says, "The United States will continue to work with allies and partners to disrupt proliferation networks and interdict transfers of nuclear materials and related technology." This report will be updated as events warrant.

The rules of both the House and the Senate provide power to committees and subcommittees to subpoena witnesses and documents. Committees' subpoena power is defined thus: "The authority granted to committees by the rules of their respective houses to issue legal orders requiring individuals to appear and testify, or to produce documents pertinent to the committee's functions, or both." Consistent with this grant of power, most committees have adopted in their own rules subpoena provisions containing procedures for exercising this power. Committee rules may cover authorization, issuance, and service of subpoenas; may cover just one or two of these actions; or may be silent on exercise of the subpoena power. A subpoena must be authorized pursuant to committee rules--a decision to approve this legal order to a person to appear or to provide documents. Once authorized, if the committee wishes to take the next step, a subpoena must be issued pursuant to committee rules--signed and given to an individual to deliver the subpoena to the person named in it. To deliver a subpoena to the person named is to serve the subpoena. Most House and Senate committees have specifically included in their rules one or more provisions on committees' and subcommittees' power to authorize subpoenas by majority vote. Most House committees have also delegated to their chair the power to authorize subpoenas. Many of these rules delegating authority also require the chair to consult or notify the committee's ranking minority member. Most Senate committees' subpoena rules delegate to the chair and ranking minority member together the power to authorize subpoenas. Most Senate committees also have rules on committee authorization of subpoenas, and many have rules on subcommittee authorization. In addition to rules on authorizing subpoenas, the rules of most committees in both chambers also address issuing subpoenas. Most House committees' rules delegate authority to issue subpoenas to the chair, and allow another committee member who has been designated by the committee to sign a subpoena. Most Senate committees' rules delegate authority to issue subpoenas to the chair, and allow another committee member designated by the chair to sign a subpoena. This report begins with an explanation of how to analyze committees' subpoena rules. The report then first surveys House committees' subpoena rules, followed by a survey of Senate committees' subpoena rules. Both surveys begin with a brief description of chamber rules, followed by a short summary of that chamber's committees' rules that are ancillary to committee subpoena authorization procedures or appear in only one or two committees' rules. The surveys each include a table that compares the chamber's committees' rules on authorizing and issuing subpoenas, with table notes adding further detail. All committee rules analyzed in this report are rules adopted at the beginning of the 115 th Congress. The committees published their rules in the Congressional Record, complying with their chamber's rule on publication. All rules were published in the Record before March 31, 2017. The " Introduction " summarized three components of committees' subpoena authority: authorizing, issuing, and serving a subpoena. Beyond those three components, a number of procedural options are available both to the House and Senate in what subpoena authority the chambers grant their committees and to committees in writing rules on the exercise of that authority. To analyze a committee's authority to authorize subpoenas, the following questions are useful: Has the House for a House committee (or subcommittee) or the Senate for a Senate committee (or subcommittee) granted subpoena authority? For standing committees and their subcommittees, the answer is currently in the affirmative; for ad hoc committees and subcommittees, the parent chamber may have withheld subpoena authority. Has the House or Senate granted subpoena authority but conditioned it in some way? For example, on occasion in the past, subpoena authority granted a committee could be exercised only by the committee's action, not by action of or delegation to the chair. In a committee's rules -- Does a committee require the authorization of an investigation by the committee (or a subcommittee) before subpoenas may be authorized? Do a committee's rules distinguish between hearings and investigations? If so, may subpoenas be authorized for hearings? Are the committee's rules silent on authorizing subpoenas or are there one or more rules on authorizing subpoenas? If a committee's rules are silent, how has the committee authorized subpoenas in the past? Has the committee authorized each subpoena or delegated authority to the chair or exercised its authority in another way? Is this past practice instructive or precedential? If there are one or more rules, who may authorize a subpoena: the committee, the chair, or the chair and ranking minority member together? What is the role of the ranking minority member? Must the ranking minority member be notified or consulted, or does the ranking minority member have authority to disapprove the authorization of a subpoena? Are there backup procedures available to a committee chair? For example, if the committee's rules give disapproval authority to the ranking minority member, may the chair proceed in the absence of a response from the ranking minority member or may the committee nonetheless authorize a subpoena if the ranking minority member disapproves? What constraints are placed on a chair's exercise of subpoena authority delegated to the chair? For example, some House committees allow the chair to authorize a subpoena only after the House has adjourned for three days. May a chair authorize a subpoena that the committee has considered or has rejected? What time limits appear in a committee's rules? For example, a ranking minority member may have 48 hours to respond to a chair proposing to authorize or to issue a subpoena, or a chair may be required to notify committee members within one week of the issuance of a subpoena. What is the quorum for the committee to authorize a subpoena? Must minority members be present? Must a minority member support the authorization? What are the committee's rules to suspend or change its rules? For example, is advance notification to all committee members required? Who may issue a subpoena: the chair, a member designated by the chair, a member designated by the committee, or a member or members designated by committee rule? Who may serve a subpoena? In committee rules applicable to a committee's subcommittees -- Has the committee granted subpoena authority to its subcommittees or withheld this authority from them? May a committee's subcommittees adopt their own subpoena rules? Must either the committee or the subcommittee authorize an investigation before subpoenas may be authorized? Must the committee or the chair or the chair and ranking minority member approve a subcommittee investigation? Who may authorize a subpoena: the subcommittee, the chair, or the chair and ranking minority member? Who may issue a subpoena: the chair, a member designated by the chair, a member designated by the subcommittee, or a member or members designated by committee rule together? What role do committee rules provide for the committee chair and ranking minority member, or the committee, in approving the authorization or issuance of a subcommittee subpoena? May a subcommittee chair authorize a subpoena that the subcommittee has considered or has rejected? What time limits appear in a committee's rules applicable to a subcommittee chair's exercise of authority, the role of the subcommittee ranking minority member, the approval or notification of the committee chair and ranking minority member, and other procedures? What is the quorum for the subcommittee to authorize a subpoena? Must minority members be present? Must a minority member support the authorization? Rule XI, clause 2(m)(1) and (3) authorizes committees and subcommittees to issue subpoenas for the attendance of witnesses and the production of documents. Clause 2(m)(3) requires authorization by a committee or subcommittee, "a majority being present." Unless otherwise provided in a committee's rules, a quorum of one-third of a committee is required to debate a subpoena, under Rule XI, clause 2(h)(3). Rule XI, clause 2(m)(3) also allows committees to adopt rules to delegate the authorization and issuance of subpoenas to a committee's chair "under such rules and under such limitations as the committee may prescribe." This same subparagraph requires subpoenas to be signed by the chair or by a member who has been designated by the committee. Rule XI, clause 2(m)(3)(B) allows a committee or subcommittee to designate a return for documents other than at a meeting or hearing. Clause 2(m)(3)(C) allows enforcement of a subpoena only as authorized or directed by the House. Rule X, clause 10(b) makes Rule XI, clause 2(a) applicable to select and joint committees, unless the House has decided otherwise. Applicability of this rule makes the other provisions of Rule XI, clause 2, including subpoena authority, applicable to select and joint committees. If a committee meets to consider one or more subpoenas for a witness, witnesses, or documents, it meets in a markup session, and members may offer amendments and motions, make points of order, and engage the relevant procedures and procedural strategy that could also occur in a markup of legislation. When a House committee or subcommittee will consider authorizing a subpoena, the committee's rules on scheduling, notice, open meetings, quorum, and voting apply. Committees' rules also mirror a House rule requiring a majority to be actually present to report (Rule XI, clause 2(h)(1)). The House Office of General Counsel maintains subpoena-related forms to assist committees and may advise committees on subpoenas. Most committees' rules have also delegated authority to issue subpoenas to their chair, but many committees with such a rule also require the chair to consult or notify the ranking minority member. In many committees, subcommittees may authorize and issue subpoenas subject to specified conditions. Some committees' rules are not explicit on procedures for subcommittees to authorize subpoenas. The principal attributes of committees' subpoena rules are analyzed and displayed in Table 1 . Yet other provisions pertaining to subpoenas appear in committee rules but are not included in Table 1 . Generally, these rules are ancillary to subpoena authorization rules. They are, therefore, described here. Several committees reference the authority of the House to enforce a subpoena issued by the committee or, if permitted by committee rules, its subcommittees. These committees are the Committees on Appropriations, Armed Services, House Administration, and Transportation and Infrastructure. The Permanent Select Committee on Intelligence has a rule establishing conditions prior to the referral of a contempt recommendation to the House. "Reasonable" notice of a meeting to consider a contempt recommendation must be given to all committee members. The committee must meet and consider the contempt allegations. The individual who is the subject of the allegations must have an opportunity to respond in writing or in person as to why or why not the individual should be held in contempt. The committee by majority vote must agree to recommend a contempt citation to the House. The Committee on Ethics has four rules related to subpoenas separate from their authorization and issuance. One rule provides that "things" submitted pursuant to a subpoena by an investigative subcommittee are "deemed to have been taken or produced in executive session." Two rules relate specifically to subpoenas issued by adjudicatory subcommittees. First, a subpoena for documents may specify terms of return other than a meeting or hearing of the subcommittee. Second, a subpoena requiring a witness to appear must be served "sufficiently in advance" of the scheduled appearance to allow the witness to prepare and to retain counsel. The fourth rule proscribes committee members and staff from disclosing to a person outside the committee the name of a witness subpoenaed to testify or produce documents. The final rule appears to apply to all subpoenaed witnesses, covering, with exceptions, travel expenses at the per-diem rate established by the House Administration Committee. The Committee on Transportation and Infrastructure has a similar rule to that of the Committee on Ethics on expenses of subpoenaed witnesses. The rules of the Committee on Homeland Security allow the chair with the concurrence of the ranking minority member or the committee to include provisions in a subpoena that "prevent" the disclosure of the committee's demand for information "when deemed necessary for the security of information or the progress of an investigation." Such provisions may prohibit witnesses and their counsel from revealing the committee's inquiry. Another rule pertaining to a subpoena for documents allows the committee to specify terms of return other than a regularly scheduled meeting of the committee. Six committees also have rules on service of subpoenas. Five committees--Budget, Financial Services, House Administration, Natural Resources, and Rules--provide that a subpoena may be served by any person designated by the chair or by the member authorized by the committee to issue subpoenas. The Intelligence Committee's rule allows the chair to designate a person to serve a subpoena. The Intelligence Committee's rules also specifically require a copy of the committee's rules to be attached to any subpoena. Table 1 compares House committees' rules in the 115 th Congress on whose authority a subpoena may be authorized and issued and on notifying members of a committee that a subpoena has been issued. Committees are listed in alphabetical order in the left column, with the Permanent Select Committee on Intelligence appearing at the end of the table. The first three rows of the headings contain key terms describing committees' rules, as explained immediately below. A check in a box indicates that that committee adopted a rule or a closely related variation on it. An empty box indicates that a committee did not address that subject. Certain checks and blank boxes are footnoted to offer additional detail on a particular committee's rule or lack of a rule. In some cases, a single table note is used to offer additional detail on a rule or circumstances that affect more than one committee's rules. The following list explains the headings in Table 1 : Committee/Subcommittee by Majority Vote--a committee or subcommittee may authorize a subpoena by a majority vote. Chair--indicates under what conditions a chair has been delegated power to authorize a subpoena: On Own Initiative--a chair may authorize subpoenas, subject to conditions in the committee's rules. Ranking Minority Member--indicates the role of a ranking minority member in allowing the chair to authorize or issue a subpoena: Concurs--the ranking minority member must concur with the chair before a subpoena is authorized or issued. Consulted--the chair must consult or notify the ranking minority member before authorizing or issuing a subpoena. Three Days--a chair may authorize and issue a subpoena only when the House has adjourned for more than three days. Authorized To Sign or Issue Subpoena--who is authorized by committee rules to sign or issue a subpoena--the chair, a committee member designated by the chair, or a committee member designated by the committee. Notification to Committee (as soon as practicable)--a chair shall notify the committee as soon as practicable that a subpoena has been issued. Senate committees and subcommittees are authorized to subpoena witnesses and documents (Rule XXVI, paragraph 1). No additional details specific to authorizing or issuing subpoenas appear in Rule XXVI. If a committee meets to consider one or more subpoenas for a witness, witnesses, or documents, it meets in a markup session, and Senators may offer amendments and motions, make points of order, and engage the relevant procedures and procedural strategy that could also occur in a markup of legislation. The Senate Office of Legal Counsel may advise committees on subpoenas. Most Senate committees in their rules have also delegated authority to issue subpoenas to their chair and ranking minority member acting together. Some committees' rules are explicit on procedures for subcommittees to authorize subpoenas. Other provisions pertaining to subpoenas, but not directly relating to authorizing or issuing them, may appear in committees' rules. The Select Committee on Ethics has a unique rule for withdrawing a subpoena. The committee by a recorded vote of no fewer than four members may withdraw a subpoena that it had authorized or that the chair and vice chair together had authorized. In addition, the chair and vice chair together could withdraw a subpoena that they had authorized. The Ethics Committee has rules in addition that by a recorded vote of no fewer than four members, may prohibit committee members and staff and outside counsel from publicly identifying a subpoenaed witness prior to the day of the witness's appearance, except as authorized by the chair and vice chair acting together; allow the respondent in an adjudicatory hearing to "apply to the Committee" for the subpoena of witnesses and documents in the individual's behalf; allow a subpoenaed witness to request, subject to the committee's approval, not to be photographed at a hearing or to have the witness's testimony broadcast or reproduced while testifying; require a subpoena to be served sufficiently in advance of a scheduled appearance to provide the witness with "a reasonable period of time" to prepare and to obtain counsel; and permit service of a subpoena by any person 18 years of age or older designated by the chair or vice chair. Four other committees have additional rules that pertain to subpoenas, but not specifically to their authorization or issuance. These rules are as follows: A rule of the Foreign Relations Committee deals with the return of a subpoena, or of a request to an agency, for documents. The rule states that the return could be a time and place other than a committee meeting. If the return was incomplete or accompanied by an objection, the rule states that that is good cause for a hearing of the committee on shortened notice. On such a return, the chair or a member designated by the chair could convene a hearing on four hours' notice to members by telephone or email. One member is a quorum for this hearing, which occurs for the sole purpose of "elucidat[ing] further information about the return and to rule on the objection." The Health, Education, Labor, and Pensions Committee's investigations and subpoena rule has an additional provision that makes information obtained from investigative activity available to committee (or subcommittee) members requesting the information and to staff of committee (or subcommittee) members who have been designated in writing by the members, subject to restrictions contained in Senate rules. A committee member may also request information relevant to an investigation to be "summarized in writing as soon as practicable." Moreover, the committee or a subcommittee chair must call an executive session to discuss investigative activity and the issuance of subpoenas in support of this activity at the request of any member. A rule of the Small Business and Entrepreneurship Committee specifically authorizes the chair to rule on objections or assertions of privilege in response to subpoenas or on questions raised by a committee member or staff. The Select Committee on Intelligence has a rule on recommending that an individual "be cited for contempt of Congress or that a subpoena be otherwise enforced." A recommendation could not be forwarded to the Senate unless the committee had met and considered the recommendation, provided the individual an opportunity to oppose the recommendation in person or in writing, and agreed by majority vote to forward the recommendation to the Senate. Another rule of the committee allows the chair, vice chair, or committee member issuing a subpoena to designate any person to serve a subpoena. Committees' other procedural rules affect scheduling and conducting meetings to authorize a subpoena. These other rules deal with the notice for and agenda of a meeting, the quorum to conduct business, voting, and consideration. Committees' rules also mirror a Senate rule requiring a majority to be physically present, and the concurrence of a majority of the members present, to report (Rule XXVI, paragraph 7). Table 2 compares committees' rules in the 115 th Congress on subpoena requirements across the 20 Senate committees. The 16 standing committees with legislative authority are listed in alphabetical order in the left-most column, followed by the 2 additional permanent committees with legislative authority. The two committees without legislative authority appear in the last two positions of the table. The first two rows of the heading contain key terms describing the committees' rules, as explained immediately below. A check in a box indicates that a committee adopted a rule or a closely related variation on it. An empty box indicates that a committee did not address that subject in its rules. Certain checks and blank boxes are footnoted to offer additional detail on a particular committee's rule or lack of rule. In some cases, a single table note is used to give additional detail for a rule or circumstances that affect more than one committee's rules. The following list explains the headings in Table 2 : Committee--In addition to a committee's name, footnotes appear with committees' names that explain the coverage of subcommittee subpoena authority in the committee's rules. Authorization--refers to who has the authority to authorize a subpoena--the chair, the chair with the ranking minority member, or the committee. RMM is used as an abbreviation for ranking minority member . Issued upon Signature of--refers to whose signature is required for the issuance of a subpoena--that of the chair, of a committee member designated by the chair, or of a committee member(s) designated by the committee.

House Rule XI, clause 2(m)(1) and (3) authorizes House committees and subcommittees to issue subpoenas for the attendance of witnesses and the production of documents. Senate Rule XXVI, paragraph 1 authorizes Senate committees and subcommittees to subpoena witnesses and documents. In turn, most House and Senate committees have adopted in their own rules subpoena provisions containing procedures for exercising this grant of power from their parent chamber. Committee rules may cover authorization, issuance, and service of subpoenas; may cover just one or two of these actions; or may be silent on exercise of the subpoena power. A subpoena must be authorized pursuant to committee rules--a decision to approve this legal order to a person to appear or to provide documents. Once authorized, if the committee wishes to take the next step, a subpoena must be issued pursuant to committee rules--signed and given to an individual to deliver the subpoena to the person named in it. To deliver a subpoena to the person named is to serve the subpoena. Most House and Senate committees have specifically included in their rules one or more provisions on committees' and subcommittees' power to authorize subpoenas by majority vote. Most House committees have also delegated to their chair the power to authorize subpoenas. Many of these rules delegating authority also require the chair to consult or notify the committee's ranking minority member. Most Senate committees' subpoena rules delegate to the chair and ranking minority member together the power to authorize subpoenas. In addition to rules on authorizing subpoenas, the rules of most committees in both chambers also address issuing subpoenas. Most House committees' rules delegate authority to issue subpoenas to the chair, and allow another committee member who has been designated by the committee to sign a subpoena. Most Senate committees' rules delegate authority to issue subpoenas to the chair, and allow another committee member designated by the chair to sign a subpoena. Some committees' rules are explicit on procedures for subcommittees to authorize subpoenas; other committees' rules are not explicit. Committees in both chambers have other rules on subpoenas than the prevailing approach in one chamber. Requirements or limitations pertaining to subpoenas may appear in committees' rules, such as conditions placed on a chair's exercise of subpoena authority delegated to the chair or on a ranking minority member's role in authorizing a subpoena. The distinctions among committees' subpoena rules are varied and nuanced. Committees' other procedural rules affect scheduling and conducting meetings to authorize a subpoena. These other rules may deal with the notice for and agenda of a meeting, the quorum to conduct business, and voting.

Allegations of North Korean (Democratic People's Republic of Korea, or DPRK) drug production, drug trafficking, and other crime-for-profit activities have been an issue of concern for Congress, the Administration, the media, and the diplomatic community. The issue is twofold. First is general U.S. interest in halting criminal behavior (upholding the rule of law and protecting U.S. citizens and assets from illicit activity). Second is how to deal with a government suspected of countenancing or sponsoring activity that may threaten U.S. diplomatic and security interests. A challenge facing policy makers is how to balance pursuing anti-drug, counterfeiting, and crime policies vis-a-vis North Korea against effectively pursuing other high-priority U.S. foreign policy objectives, including (1) limiting possession and production of weapons of mass destruction, (2) limiting ballistic missile production and export, (3) curbing terrorism, and (4) addressing humanitarian needs. A core issue is whether the income from the DPRK's reportedly widespread criminal activity has financed the acquisition of weapons of mass destruction and has strengthened the DPRK's ability to maintain, until recently, truculent, no-compromise positions on the issue of its nuclear weapons program. Some also speculate that the DPRK's criminal smuggling networks could help facilitate the illicit movement of nuclear materials in and out of the country. U.N. Resolution 1718 (2006) provides for economic sanctions against persons or entities engaged in or providing support for, including through illicit means, DPRK's nuclear-related, other weapons of mass destruction-related and ballistic missile-related programs. Counterfeiting, copyright and trademark violations, and other illicit activity occur in virtually all countries of the world, but in the North Korean case, numerous sources indicate that the state apparently had--and may continue to be--sponsoring some of these activities. In this view, if the DPRK is to join the larger international community of nations, it would be expected to cease state-sponsorship of such activities and to take appropriate measures against private parties engaged in such production and/or distribution. As the Six-Party Talks on North Korea's nuclear program have proceeded in 2008, it appears that the U.S. goal of denuclearization has outweighed concerns related to DPRK illicit activity (with the exception of proliferation of nuclear weapons technology and materials). Such illicit activity by North Korea, however, could resurface as the Six-Party process proceeds and attention turns toward normalizing diplomatic ties with the DPRK by the United States, Japan, and South Korea and allowing North Korea to join international financial institutions such as the Asian Development Bank, International Monetary Fund, and the World Bank. The role of Congress in this issue includes overseeing U.S. policy, eliciting information and raising public awareness of the issue, and balancing U.S. interests when foreign policy goals may conflict with anti-crime activities. Congress also authorizes and appropriates funds for humanitarian and other economic assistance for North Korea. Areas of DPRK criminal activity commonly cited have included production and trafficking in (1) heroin and methamphetamine; (2) counterfeit cigarettes; (3) counterfeit pharmaceuticals (e.g., "USA" manufactured Viagra®️); and (4) counterfeit currency (e.g., U.S. $100 bill "supernotes"). Media reports also have indicated that North Korea may be engaged in insurance fraud, endangered species trafficking, and human trafficking as a matter of state policy. News reporting on the subject reached its height in 2003, when the Bush Administration was activity raising the issue of DPRK's crime-for-profit activities at the highest levels. Since then, fewer public reports have surfaced to indicate that DPRK illicit activities are continuing. At the same time, no public reports indicate that DPRK has completely halted its crime-for-profit activities. In 2008, the State Department reports that while DPRK's drug trafficking appears to have declined substantially, "DPRK-tolerance of criminal behavior may exist on a larger, organized scale, even if no large-scale narcotics trafficking incidents involving the state itself have come to light." The estimated aggregate scale of DPRK's crime-for-profit activity has been and may still be significant--and arguably provides important foreign currency resources to the heavily militarized North Korean state. DPRK crime-for-profit activities are reportedly orchestrated by a special office charged with bringing in foreign currency under the direction of the ruling Korean Worker's Party. North Korean drug trafficking, trade in counterfeit products, and the counterfeiting of U.S. currency, to the extent that it does indeed exist, have been a matter of concern in Asian, European, and U.S. law enforcement, foreign policy, and national security communities. At least 50 documented incidents, over decades, many involving arrest or detention of North Korean diplomats, have linked North Korea to drug trafficking. Such activity, particularly production and trafficking of methamphetamine and trade in counterfeit cigarettes, appears to be continuing. With the caveat that dollar value estimates of clandestine activities are highly speculative, conservative estimates suggest North Korean criminal activity generates as much as $500 million in profit per year, with some estimates reaching the $1 billion level. One recent economic study by Stephan Haggard and Marcus Noland, however, places current illicit activity at a much lower level and considers the lower end of the various published estimates of profit as the upper bound. For example, the Haggard/Noland study estimates drug trafficking in 2005-2006 at about $20 to $35 million. In contrast, the (South) Korea Institute for Defense Analysis reportedly stated that North Korea earns between $700 million and $1 billion per year from exporting weapons and trading drugs and counterfeit money. In 2003, an official from U.S. Forces Korea reportedly stated that North Korea's annual revenue from exports of illegal drugs was estimated at $500 million and from counterfeit bills at $15 to $20 million. The official also stated that in 2001, North Korea exported ballistic missiles worth $580 million to the Middle East. More recently, some sources report that North Korea has been exporting conventional military weapons to Burma (Myanmar) in contravention to current U.N. prohibitions against North Korea. One basis for the $500 million to $1 billion figure for illicit exports is that it can be inferred from international trade data and from reported anecdotes that markets in Pyongyang have ample supplies of imported foreign goods. In 2004, North Korea is estimated to have incurred a trade deficit of $1.8 billion. This deficit rose to about $2.0 billion in 2005, dropped to an estimated $1.3 billion in 2006, and rose to an estimated $2.7 billion in 2007. Some of this imbalance is financed through food and other aid, capital inflows, borrowing, remittances from North Korean laborers working abroad (especially in Russia and the Middle East), and tourism. Pyongyang, however, does little borrowing on international markets, and Tokyo has been cracking down on remittances from ethnic North Koreans in Japan. Inflows of capital also seem small, although they are rising as China and South Korea invest in enterprises in the North. As a result, some surmise that in some years as much as $1 billion has been financed by illicit activity. There has been evidence to suggest that the North Korean government is supporting drug production and trafficking as a matter of state policy. Since 1976, North Korea has been linked to more than 50 verifiable incidents involving drug seizures in at least 20 countries. A significant number of these cases has involved arrest or detention of North Korean diplomats or officials. Concerns about North Korean drug trafficking and production were further expressed in the International Narcotics Control Board's 1997 annual report, which referred to such DPRK drug trafficking incident claims as "disquieting." In 1999, substantial seizures of North Korean methamphetamine occurred in Japan (35% of the total methamphetamine seizures in Japan that year). Large seizures of heroin and methamphetamine with a link to the DPRK have since occurred in Taiwan, and in April of 2003, the "Pong Su," a DPRK state enterprise-owned, sea-going vessel of around 4,000 metric tons apparently delivered a large quantity of DPRK-trafficked and also possible DPRK-origin heroin to Australia. Although members of the vessel's North Korean crew were subsequently acquitted on charges relating to the smuggling of the drugs, experts have little doubt of a North Korean connection to the drug shipment. Since 2003, however, no incidents definitively and directly linking the DPRK State apparatus to such drug trafficking activity have come to light. The State Department's March 1, 2008, International Narcotics Control Strategy Report states that drug trafficking with a connection to North Korea "appears to be down sharply and there have been no instances of drug trafficking suggestive of state-directed trafficking for five years." Many analysts suggest that any decline in DPRK state-linked drug trafficking activity would likely be in response to enhanced international attention paid to such activity in the wake of the April 2003 seizure of heroin carried on the North Korean Vessel the "Pong Su." Others, however, remain skeptical and offer an alternative explanation. They suggest that the decline in seizures is because North Korean source methamphetamine is now regularly being mistakenly identified as "Chinese source," given growing links of Chinese criminal elements to North Korea's drug production/trafficking activities. In line with such a conclusion are press reports in late 2006 of the arrests in China in differing locations of North Korean nationals involved with Chinese criminals in the trafficking of methamphetamine. However, it is not clear from the reports whether the drugs were of DPRK origin or whether the North Koreans arrested had links with DPRK officials. North Korea has reportedly produced three main types of illicit drugs: (1) opiates, including opium and heroin; (2) synthetic drugs, especially methamphetamine; and (3) counterfeit pharmaceutical drugs. In 2008, the amount of illegal drug production and trafficking is unlikely to be large enough for North Korea to be cited on the State Department's drug "majors list," which could make Pyongyang subject to the drug certification process applicable to "major" producers and potentially liable to discretionary trade sanctions and restrictions on non-humanitarian aid. According to press reports and North Korean defectors, farmers in certain areas have been ordered to grow opium poppies in the past. In 2006 congressional testimony, a representative of the State Department reported that North Korea cultivates 4,000 to 7,000 hectares of opium poppy, producing approximately 30 to 44 metric tons of opium gum annually. Though such estimates appear reasonable, they are nevertheless based on indirect and fragmented information. With the caveat that conclusive "hard" data is lacking, U.S. government investigative agency sources estimate North Korean raw opium production capacity at 50 tons annually. North Korean government chemical labs reportedly have the capacity to process 100 tons of raw opium poppy into opium and heroin per year. North Korea's maximum methamphetamine production capacity is estimated to be 10 to 15 metric tons of the highest quality product for export. This coincides with a time when markets for methamphetamine are dramatically expanding in Asia, especially in Thailand, Japan, the Philippines, and more recently in Cambodia and China. North Korea also has an advanced pharmaceutical industry, and it is widely believed that large-scale production of expertly packaged pharmaceuticals such as knock-off erectile enhancement drugs (particularly, Viagra®️ and Cialis®️) has been orchestrated by Pyongyang. However, public source data on such alleged activity is sketchy. At issue is not the existence of the knock-off drugs, but whether the DPRK is indeed the manufacturer, with some speculating that China may be the source of production. An emerging genre of reports, yet to be substantiated, suggests that as state control of drugs in the DPRK becomes looser, a growing amount of stimulants for domestic sale and consumption are being produced privately by scientists in the DPRK and funded by private investors. Some reports suggest drug abuse is becoming widespread among senior military officials and also among the poor as a means to dull hunger. Others suggest that drug addiction is spreading among cadres such as the officer corps of the People's Army Security Department and high-ranking party officials. A scenario is being presented of drugs sold openly at farmers markets, at times being used instead of currency in transactions. Besides the production and distribution of illicit drugs, DPRK appears to have been involved in the production and distribution of counterfeit foreign currencies as a means of generating foreign exchange. The United States has accused DPRK of counterfeiting U.S. $100 Federal Reserve notes (supernotes) and passing them off in various countries. Officials familiar with the bogus currency in question note its exceptional quality--so good that many cashier-level bank personnel would likely not be able to detect the forgeries. In an April 2008 hearing, a Treasury official stated that it has continued to work with the U.S. Secret Service to counteract North Korea's counterfeiting of U.S. currency and that high-quality counterfeit bills produced by North Korea, known as the "Supernote," continue to surface. Media reports indicate that counterfeit $100 bills are used in North Korean markets as currency and are valued at about the equivalent of $70. It is not clear, however, whether the counterfeit bills circulating are from existing stocks or are currently being produced. The anti-counterfeiting security features incorporated into new U.S. bills make counterfeiting much more difficult. In 2006, U.S. officials cited the figure of $45-$48 million detected or seized since 1989. However, because counterfeiting is a form of clandestine criminal activity and North Korea is a closed society, the amount of alleged DPRK-produced counterfeit currency in circulation is speculative at best. Estimates of the profit such transactions bring to the Pyongyang regime--to the extent they are based on open source material--are also speculative. Amounts commonly cited, which take into account many factors, range from $15 million to $25 million in profit per year. At least 13 reported incidents between 1994 and 2005 show North Korean involvement in counterfeiting and smuggling or distributing U.S. currency. All of these incidents occurred in either Asia or Europe. The use of DPRK diplomatic passports and the involvement of DPRK diplomats, embassy personnel, and employees and officers of DPRK state-owned and -operated trading companies connect most of these incidents to the government of North Korea in varying degrees. Taken collectively, the link is seen as even stronger. Of these 13 incidents, 6 occurred after 1999. Counterfeiting of foreign currency is apparently a phenomenon that is not new to the government of North Korea. Seoul's War Memorial Museum reportedly contains DPRK-manufactured South Korean currency from the 1950s, the production of which reportedly continued into the 1960s. South Korean media reports cite a 1998 South Korean National Intelligence Service (IS) Report to the effect that North Korea had forged and circulated U.S. $100 banknotes worth $15 million a year. Subsequent reports to the South Korean National Assembly in the same year and in 1999 are cited in the media as stating that North Korea operates three banknote forging agencies and that more than $4.6 million in bogus dollar bills had been uncovered on 13 occasions between 1994 and 2005. Arrests and indictments point to DPRK trafficking in bogus U.S. currency as recently as 2005. In August 2005, federal law enforcement authorities completed two undercover operations that focused on the activities of members of China's Triad criminal syndicates. The operations, named Royal Charm and Smoking Dragon, reportedly netted some $4 million in supernotes believed to be of North Korean origin. Illicit narcotics, counterfeit brand cigarettes and pharmaceuticals were seized as well. U.S. government authorities indicate there is the potential that any scheduling of trials and/or the plea bargaining process will reveal direct links between some of the smugglers and North Korean officials or government entities. The Banco Delta Asia (BDA) bank is located and licensed in the Macau Special Administrative Region of China. According to the U.S. Treasury Department, BDA played an important role in laundering money that had been derived from DPRK's crime-for-profit activities. Treasury claims that senior BDA officials worked with DPRK officials "to accept large deposits of cash, including counterfeit U.S. currency, and agreeing to place that currency into circulation." In addition, BDA clients were reportedly known to include a DPRK front company, which had been involved for more than a decade in distributing counterfeit money, smuggling counterfeit tobacco products, and suspected in being involved in drug trafficking. On March 19, 2007, the Treasury Department finalized a rule based on Section 311 of the USA PATRIOT Act (31 U.S.C. 5318A), which prohibited U.S. financial institutions from opening or maintaining correspondent accounts for or on behalf of BDA. This order, which continues to remain in effect, has also led banks, not only from the United States but from other nations as well, to refuse to deal with even some legitimate North Korea traders. North Koreans appear to have moved some of their international bank accounts to alternative banking institutions, including those in China, Austria, and Switzerland. The DPRK also enacted an Anti-Money Laundering Law partly to ease foreign concerns over alleged money laundering by North Korean entities. Pyongyang cited the BDA action in the past when it refused to return to the Six-Party Talks on its nuclear program and received a pledge by the United States as an aside in the process of negotiating the Six-Party Agreement of February 13, 2007, to resolve the BDA issue. In the process of seeking to resolve the issue, the United States agreed to release blocked assets--some $25 million--to DPRK authorities. After considerable effort, the $25 million in Banco Delta funds were returned to North Korea via the U.S. Federal Reserve and a Russian bank in June 2007 as a condition for restarting the Six-Party talks. This decision was both praised and criticized by observers. Some described the release of funds as one of the Administration's "notable foreign-policy successes" because it was seen as having contributed to bringing DPRK back to the negotiating table for the Six-Party Talks. Others argued that returning the funds to North Korea compromised the spirit of international agreements the United States has supported, including U.N. Resolution 1718, which condemns the alleged use of crime-for-profit activities to finance DPRK's nuclear ambitions. In addition to the issue of returning the frozen funds, some analysts claim that the BDA issue brought to the surface lingering questions about the way the international banking community treats DPRK accounts. Specifically, the financial effects of the BDA action were larger than expected. It caused a run on accounts at the bank that compelled the government of Macau to take over BDA's operations and place a temporary halt on withdrawals. It also appears to have obstructed some legitimate North Korean financial interests, as the BDA action caused other banks around the region, including Chinese, Japanese, Vietnamese, Thai, and Singaporean banks, to impose voluntarily more stringent regulations against North Korean account holders. As North Korean traders and others move forward, some question whether the situation will return to "business as usual," "business with caution," or remain as "no business at all." In the case of China, a media report indicates that the country is allowing North Koreans to open bank accounts in China to settle business transactions in Chinese yuan. This enables them to conduct transactions in the Chinese currency. Counterfeit cigarette production may have replaced illegal drug trafficking as a major source of crime-for-profit revenue for North Korea. In 2008, the State Department reports that "the continuing large-scale traffic in counterfeit cigarettes from DPRK territory suggests, at the least, that enforcement against notorious organized criminality is lax, or that a lucrative counterfeit cigarette trade has replaced a riskier drug trafficking business as a generator of revenue for the DPRK state." Reports from the past several years have charged the DPRK with producing counterfeit cigarettes for export of seemingly genuine Japanese brand cigarettes (Mild Seven) and U.S. brands such as Marlboro. According to the Wall Street Journal , U.S. authorities seized more than a billion of the "fake smokes" in California in 2005. Millions more packs of fake Marlboros, Mild Sevens, and other cigarettes made in North Korea have been seized in Taiwan, the Philippines, Vietnam, and Belize. Officials from Philip Morris, which launched a major undercover operation to investigate the trade, have been cited as stating that DPRK-made knock-offs of its Marlboro brand have been discovered in more then 1,300 places. They cite DPRK knock-off cigarette production capacity as being in the range of more than two billion packs a year, making Pyongyang one of the largest producers of such contraband in the world. Press reports cite a confidential report prepared by a consortium of tobacco manufacturers to the effect that the DPRK regime could be earning some $80 to $160 million in payoffs alone from manufacturers of such counterfeits. Gross revenues from such sales, according to the report, could generate between $520 and $720 million annually. One of the main hubs of such activity is reportedly Rajin, a free trade zone port city on North Korea's east coast. Many of the cigarette factories in Rajin are reportedly owned and financed by Chinese criminal groups. According to one report, the DPRK regime allows specific deep-sea smuggling vessels to use its ports and provides the gangs with a secure delivery channel. North Korean state-owned enterprises, mostly located in the Pyongyang area, also reportedly produce contraband cigarettes. A 2006 article on North Korean cigarette production found that DPRK cigarette manufacturers have been turning more toward producing domestic low-priced brand cigarettes instead of counterfeit products. The article states that relative to the price of rice, the price of a package of cigarettes has been falling and their quality has been rising. In 2007, the DPRK imported $12.95 million ($14.1 million in 2006 and $13.5 million in 2005) in tobacco products from China. Domestic brands now are taking market share from imports, and North Korean cigarette producers--even the factories operated by the No. 39 Department of the Workers' Party, which accumulates and manages Kim Jong-il's slush funds--reportedly have been producing more for the domestic market than counterfeits of brands such as Mild Seven, Crown (both Japanese brands), and Dunhill. Media reports indicate that Greek authorities seized some four million cartons of contraband cigarettes through the fall of 2006, of which three million were aboard North Korean vessels. For example, on September 25, 2006, Greek officials detained a North Korean freighter that was carrying 1.5 million cartons of contraband cigarettes and arrested the seven seamen on board. According to information from Greek customs authorities, the ship's load of counterfeit, duty-unpaid cigarettes would have brought 3.5 million euros in taxes. Media reports from late 2006 suggested that the DPRK may be involved in insurance fraud as a matter of state policy. Some industry experts are concerned that claims for property damage are vastly overstated; circumstances of accidents are being altered; and that claims for deaths are not accident-related. A recent example cited in media reports of possible DPRK state involvement in insurance fraud involves a ferry accident that reportedly occurred in April 2006 near the coastal city of Wonsan. After the accident, North Korea declared that 129 people had died, all of whom were provided life insurance coverage when they bought a ticket. It was claimed that most of the victims had died of hypothermia, although weather data apparently indicated that temperatures were warmer than reported by Pyongyang's Korea National Insurance Corporation. In another case, in July 2005, a medical rescue helicopter apparently crashed into a government owned disaster supply warehouse, setting it on fire. It reportedly took the DPRK authorities only 10 days to file a claim that included a detailed inventory of hundreds of thousands of items--a task which insurance industry officials say normally takes most governments many months. Although a practice of North Korean state initiated insurance fraud has not been confirmed, criminal conduct of this nature would appear consistent with a well-established pattern of DPRK crime-for-profit activity. One industry source estimated in 2006 that the extent of fraudulent DPRK insurance claims could have exceeded $150 million. Several reports link North Korean officials with trafficking in endangered species, which is in contravention to the U.N. Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). The DPRK is not a member of CITES; however, DPRK diplomats allegedly have been caught trafficking in CITES-protected species between treaty member states, including France, Russia, and Kenya. According to the State Department, known DPRK violations of CITES began in the 1980s and have mainly involved trafficking in elephant ivory and rhino horn. Although some may argue that cases of endangered species smuggling by DPRK diplomats may have been for personal use, the sheer size of confiscated shipments--as much as several hundred kilograms each--suggests that endangered species trafficking could have been planned by a North Korean government entity. According to the State Department, North Korea is a source country for men, women, and children trafficked for forced labor and commercial sexual exploitation and has been listed by the U.S. government as a "Tier 3" country for as long as it has been included in the State Department's Trafficking in Persons annual reports. As a Tier 3 country, North Korea reportedly does not comply with minimum standards for eliminating trafficking and is not making significant efforts to do so. It remains unclear to what extent DPRK profits from human trafficking activities as a source of revenue. However, the State Department indicates that North Korea directly contributes to labor trafficking by maintaining a system of force labor prison camps inside the country, where an estimated 150,000 to 200,000 prisoners are forced to log, mine, and tend crops. According to Mark Lagon, Director of the U.S. Office to Monitor and Combat Trafficking in Persons, the most common form of DPRK trafficking are North Korean women and children who voluntarily cross the border into China and are picked up by trafficking rings and sold as brides in China and elsewhere, including Russia and Mongolia. The 2007 Trafficking in Persons report further states that North Korean women and girls may also be lured out of DPRK with promises of food, jobs, and freedom, only to be forced into prostitution, marriage, or exploitative labor arrangements in China. U.S. policy has addressed North Korea's crime-for-profit activities through several tracks, including diplomacy, law enforcement, economic sanctions, and economic incentives. In some instances, the various tracks may overlap considerably, while in other cases, they may work at cross-purposes. Congress has played an active role in the oversight of U.S. policy toward North Korea and may further consider evaluating U.S. efforts to reduce North Korea's crime-for-profit activities or explore in more detail the dynamics and trends related to the regime's illicit financial channels. One strategy on the diplomatic front has been to use fora such as the Six-Party Talks on nuclear proliferation to address issues such as North Korea's illicit activities. This was the initial preference of the Bush Administration, but since sometime after the BDA action in 2007, this tactic no longer appears evident. As the Bush Administration comes to a close, denuclearization is the primary emphasis of policy on North Korea. Also, if the DPRK is able to earn foreign exchange and receive more economic assistance, the pressure to generate foreign currency through illicit activities arguably will diminish. The policy debate heretofore has been divided between those who argue to pressure North Korea with unilateral tactics that cut DPRK off from access to its illicitly generated profits through economic sanctions and a second group of policymakers more in favor of engagement who seek to resolve the North Korean problem mainly by negotiations. Its goal is to change DPRK's "bad behavior" by bringing the country into the circle of peaceful nations and inducing it to act in accord with international standards. In 2008, the latter argument seems to be carrying the day. Following recent developments in the Six-Party talks, a continued policy challenge for the United States is to receive a commitment by Pyongyang to curtail its alleged crime-for-profit activities. A possible vehicle for this discussion could be the working team on the normalization of diplomatic relations between the DPRK and the United States. Since Japan, South Korea, and China also have considerable interest in protecting themselves from North Korean illicit activity, it also may be addressed in the working team on normalizing relations between the DPRK and Japan as well as in other negotiations. So far, however, the working teams have not appeared to have addressed North Korean crime-for-profit activities. On the law enforcement side are actions such as the prosecution of criminal behavior and those resulting from the Bush Administration's Illicit Activities Initiative (IAI). The IAI was established in 2003 as an interagency effort aimed at curtailing North Korean involvement in narcotics trafficking, counterfeiting, and other illicit activities. The major purposes of the initiative have been to provide policy support for the Six-Party Talks and to hold North Korea to internationally accepted standards of behavior by enforcing relevant U.S. and other laws. The IAI has come to involve fourteen different U.S. government departments and agencies, and it has received cooperation from fifteen different governments and international organizations. The Banco Delta Macau action stemmed partly from the work of the IAI. The United States and other nations also are taking direct measures to halt shipments of illicit cargo from North Korea. The Proliferation Security Initiative (PSI), for example, is aimed at stopping shipments of weapons of mass destruction, their delivery systems, and related materials by tracking and searching suspected ships or other conveyances transporting such cargo. Fourteen nations have signed on to the PSI, and many more have endorsed the principles. Although not directed at illicit activities per se, the prospect of ships being inspected complicates North Korean efforts to smuggle items such as illegal drugs, fake pharmaceuticals, and counterfeit currency. A weakness of the PSI, however, is that the DPRK's immediate neighbors, China and South Korea, have not joined the effort, though there is some speculation that Seoul may join under new President Lee Myung-bak. In addition, no North Korean ships or airplanes have been halted by a PSI operation. The role of Congress in this issue includes oversight of U.S. policy, eliciting information and raising public awareness of the issue, and in balancing U.S. interests when foreign policy goals may conflict with anti-crime activities. Congress also may be asked to provide funding for energy and food assistance to North Korea as part of a resolution of the DPRK's nuclear weapons program, because some contend that additional supplies of energy and food could reduce the need to rely on illicit activities in some North Korean quarters. Congressional action also could be required to enable North Korea to earn more foreign exchange through an increase in its legitimate exports or by attracting investments from U.S. businesses. This could include, for example, granting the DPRK normal trading nation status (most favored nation status) with respect to U.S. import duties, or by allowing goods from North and South Korea's Kaesong Industrial Complex to be included in the proposed Korea-U.S. Free Trade Agreement. For those assuming that the Pyongyang regime wants to curb its crime-for-profit activity, an important question yet unresolved is the degree to which the leadership will be able to do so. Analysts point out that in nations or regions where the crime has become institutionalized, income from such activity often becomes "addictive" to those involved in the criminal conduct. In such instances, a class of criminal entrepreneurs is created and, in the case of North Korea, analysts point to the systematic criminalization of the state, over years, and its growing intimate relationships with organized crime elements throughout Asia. That is not to say that North Korean criminals, like other criminals, would not be able to switch emphasis from risky criminal activity, such as narcotics trafficking, to less risky and potentially even more lucrative large-scale manufacture and trade in counterfeit cigarettes and pharmaceuticals--a trend that may well be underway. Indeed, state countenanced--if not state sponsored--production of seemingly genuine Japanese and U.S. cigarettes appears to be flourishing, as may large scale production of expertly packaged pharmaceuticals such as Viagra®️. Whereas the capacity to produce opium is dependent on the availability of suitable land and climatic conditions, methamphetamine production and a wide range of counterfeiting activities are not limited by agricultural production constraints. Reports of substantial DPRK imports of ephedrine--an essential precursor for methamphetamine production--support the theory that the DPRK has developed a significant production capacity for methamphetamine. Such activity is occurring at a time when (1) North Korea urgently needs foreign currency, and (2) the southeast Asian methamphetamine market continues to expand. Some see promise in the efforts by the international community to entice and/or pressure Pyongyang into reducing its involvement in crime-for profit activity. Others, however, argue that the more legitimate the source of income, the greater the pressure for accountability on the regime, since revenue from illicit activities does not usually enter official records. Hence, they maintain that proposals to shift DPRK crime-related income toward legitimate-source income ignore the fact that the current regime diverts some illicit earnings to slush funds designed to sustain the loyalty of a core of party elite and to underwrite weapons development programs. They suggest, therefore, that prospects for a decrease in crime-for-profit activity are not good and that the current regime is likely to be neither willing nor able to change its dependence on income where no accountability is involved. Still, it appears that Pyongyang is reducing much of its illicit activity as it finds other means to export and earn foreign exchange.

Strong indications exist that the North Korean (Democratic People's Republic of Korea or DPRK) regime has been involved in the production and trafficking of illicit drugs, as well as of counterfeit currency, cigarettes, and pharmaceuticals. It appears that drug trafficking has declined and counterfeiting of cigarettes may be expanding. Reports indicate that North Korea may engage in insurance fraud, human trafficking, and wildlife trafficking as a matter of state policy. DPRK crime-for-profit activities have reportedly brought in important foreign currency resources and come under the direction of a special office under the direction of the ruling Korean Worker's Party. With the caveat that dollar value estimates of clandestine activities are highly speculative, conservative estimates suggest North Korean criminal activity has generated as much as $500 million in profits per year (about a third of DPRK's annual exports) but has decreased in recent years. A core issue is whether the income from the DPRK's reportedly widespread criminal activity is used to finance the development of weapons of mass destruction or other key military programs, thereby contributing to the DPRK's reluctance to curb its aggregate level of such activity. Some also speculate that the DPRK's criminal smuggling networks could help facilitate the illicit movement of nuclear or other materials in and out of the country. Policy analysts in the past have suggested that North Korean crime-for-profit activity has been carefully controlled and limited to fill specific foreign exchange shortfalls. However, some concern exists that North Korean crime-for-profit activity could become a "runaway train" that once established could escape control. If the DPRK's crime-for-profit activity has become entrenched, or possibly decentralized, some analysts question whether the current Pyongyang regime (or any subsequent government) would have the ability to effectively restrain such activity, should it so desire. Moreover, some suggest that proposals to shift DPRK crime-related income toward legitimate-source income ignore the fact that the current regime diverts some illicit earnings to slush funds designed to sustain the loyalty of a core of party elite and to underwrite weapons development programs. A challenge facing U.S. policy makers is how to balance pursuing anti-drug, counterfeiting, and crime policies vis-a-vis North Korea against effectively pursuing several other high priority foreign policy objectives, including (1) nuclear nonproliferation negotiations via the Six-Party talks, (2) limiting ballistic missile production and export, (3) curbing terrorism, and (4) addressing humanitarian needs. As the Six-Party process has proceeded in 2008, it appears that the U.S. overriding goal of denuclearization outweighs concerns related to DPRK illicit activity (with the exception of proliferation of nuclear weapons technology and materials). Such illicit activity, however, could surface again as an issue as talks proceed on diplomatic normalization with the DPRK. This report will be periodically updated. For additional CRS analysis of DPRK issues, see CRS Report RL33590, North Korea's Nuclear Weapons Development and Diplomacy, by [author name scrubbed], and CRS Report RL33567, Korea-U.S. Relations: Issues for Congress, by [author name scrubbed].

The public disclosure of the details of one's personal finances, ownerships, investments, and income is required from high-level elected and appointed officials in all three branches of the federal government under the provisions of law originally enacted as the Ethics in Government Act of 1978. Such public disclosure requirements in federal law were enacted in the wake of the "Watergate" scandal to facilitate supervision, regulation, and deterrence of conflicts of interest between the private financial interests and the official public duties of federal officers, and to increase the confidence of the public in the integrity of their elected and appointed officials in the federal government. The public reports mandated by the Ethics in Government Act of 1978 have always been available to the public and the press at the ethics office of the employee's agency. Provisions of law more recently adopted by Congress in the so-called "STOCK Act" now require that the personal financial disclosure reports by the highest-level officials in the government--the President, Vice President, Members of and candidates to Congress, and executive officials compensated on the Executive Schedule at level I (Cabinet officials) and level II (Under Secretaries of departments and heads of many executive branch and independent regulatory agencies)--are also to be posted on the Internet for public access and searching. The disclosure reports for other government employees who are required to file public reports will remain publicly available at the employee's agency. Reporting under the disclosure law is to be made annually by May 15 of each year by all federal officials covered by the law, and must also be made periodically during the course of the year by such covered officials and employees with respect to certain securities transactions over $1,000. In addition to the public disclosure reports from high-level officials and employees, there may also be required from other federal employees (who are not required to file public reports) confidential financial disclosure reports that are made to the employee's agency. The law requiring public disclosure of personal financial information applies to the President, the Vice President, all Members of Congress (as well as candidates for President, Vice President, and Congress), federal judges and justices, and to high-level staff in the executive, legislative, and judicial branches of the federal government. For those federal officials and employees not in positions specifically named in the law, whether such employee is required to file public financial disclosure statements is generally determined, in the first instance, by the rate of compensation that the employee is entitled to receive from the federal government, and then, secondly, by the number of days such employee works for the federal government at that salary rate. In the executive branch, any officer or employee of the government who "occupies a position classified above GS-15," or, if not on the General Schedule, is in a position compensated at a "rate of basic pay ... equal to or greater than 120 percent of the minimum rate of basic pay payable for GS-15," and who is compensated at that rate for at least 60 days in a calendar year, is required to file public financial disclosure reports. In a somewhat similar manner in the judicial and legislative branches, employees are generally covered if they earn a salary greater than 120% of the base salary of a GS-15 (regardless of whether they are on the General Schedule or not) and if they work at that rate of pay on more than 60 days in a calendar year. In addition to incumbent federal officials, persons who are nominated by the President to a position for which Senate confirmation is required must also file a public financial disclosure report within five days of transmittal by the President to the Senate of such nomination. This financial disclosure statement is filed with the designated agency ethics officer of the agency in which the nominee will serve, and copies of the report are transmitted by the agency to the Director of the Office of Government Ethics (OGE). The Director of OGE then transmits a copy to the Senate committee which is considering the nomination of that individual. A presidential nominee must file an updated report to the Senate committee reviewing his or her nomination at or before the commencement of hearings, updating the information through the period "not more than five days prior to the commencement of the hearing," concerning information specifically related to honoraria and outside earned income. Committees of the Senate may require any additional information from a nominee that they deem necessary or desirable, and may further require ethics agreements from the nominee as to the disposition of particular assets, or the intention to recuse himself or herself from certain governmental matters. The annual financial disclosure statements mandated under the Ethics in Government Act of 1978--to be filed by May 15 of each year by incumbent officials--require the public reporting and disclosure of detailed financial information about the private financial interests, assets, ownerships, and financial and business associations of the public official, as well as certain financial information relative to the official's spouse and dependent children. The disclosure statement requires public listing of the identity and/or the value (generally in "categories of value") of such items as the following: Income--the official's private income of $200 or more (including earned and unearned income such as dividends, rents, interest, and capital gains) and the source of such income Gifts--gifts received from private sources over a certain amount (including reimbursements for travel over threshold amounts) Assets--the identification of all assets and income-producing property (such as stocks, bonds, mutual funds, other securities, rental property, etc.) of over $1,000 in value (including savings accounts over $5,000) Liabilities--liabilities owed to creditors exceeding $10,000. Information on mortgages on personal residences must be disclosed by the President, Vice President, Members of Congress, and nominees and incumbents in most presidentially appointed and Senate-confirmed positions Transactions--financial transactions, including purchases, sales, or exchanges exceeding $1,000 in value, of income-producing property, stocks, bonds, mutual funds, exchange traded funds, or other securities Outside Positions--positions held in outside businesses and organizations Agreements--agreements for future employment or leaves of absence with private entities, continuing payments from or participation in benefit plans of former employers Blind Trusts--the cash value of the interests in any blind trusts Information in the reports concerning the finances of the spouse and dependent children of covered federal officials is to include particular disclosures with regard to the income, gifts, assets, liabilities, and financial transactions of such individuals. Although the identity of financial assets and of income-producing property over $1,000 in value must generally be disclosed by federal officials, even if such assets are held in "trusts" for the benefit of the official or the official's spouse or dependent children, the identity of the underlying assets need not be disclosed if held in a "qualified blind trust," or in a trust not established by the official (when the official and his or her spouse and children have no knowledge of the holdings in such trust). The conflict of interest theory under which the "blind trust" provisions operate is that since the government officer will eventually not know the identity of the specific assets in the trust (there cannot be any restrictions on the sale or disposition of assets in a "qualified" blind trust and the trustee must be independent of the official), those financial interests could not act as influences on the officer or employee's official decisions, thus avoiding real or apparent conflicts of interests. Assets originally placed into the trust will, of course, be known to the official, and therefore will generally continue to be "financial interests" of the public official for conflict of interest purposes, when applicable, until the trustee notifies the official "that such asset has been disposed of, or has a value of less than $1,000." Under the provisions of the "STOCK Act," signed into law on April 4, 2012, all federal officials who are required to file annual public financial disclosure statements must also file periodic reports during the year which detail financial transactions of $1,000 or more taken by or for the official. These more frequent, periodic transaction reports must be filed within 30 days after the official is notified of a covered transaction in stocks, bonds, or other such securities (but no later than 45 days after the date of the transaction). The requirement for more frequent filing applies generally to transactions in stocks and bonds of individual companies, but does not apply to most mutual funds or to exchange traded funds (ETFs), nor to transactions in real property. The requirement for more frequent and prompt reporting of transactions was adopted as part of the so-called STOCK Act as an adjunct to the existing prohibition on the use of "inside information" by public officials, and was intended to apply to trading in securities whose value could be affected by such information. Federal officials generally file copies of their financial disclosure reports with their designated agency ethics official in the agency in which the reporting official is employed. In the executive branch of government, the President and Vice President file their reports with the Office of Government Ethics (OGE), while all other financial disclosure reports are to be filed with the designated agency ethics officer within the agency or department in which the officer serves. In the legislative branch of government, Members and covered staff of the House of Representatives file their disclosure reports to the Clerk of the House, who forwards a copy to the House Ethics Committee for review. Senators and covered Senate staff file copies of their reports to the Secretary of the Senate, who forwards a copy to the Senate Select Committee on Ethics. In the judicial branch of government, judges, justices, and judicial staff file copies of their reports with the Judicial Conference. The public financial disclosure reports required to be made by officers and employees of the federal government under the Ethics in Government Act of 1978 have always been available to the public and the press for copy or inspection from the official's agency (the designated ethics office) within 30 days after the May 15 filing deadline. Under more recent legislation known as the STOCK Act, reports for the highest-level officials in the government, including the President, Vice President, Members of and candidates to Congress, and executive officials compensated at level I of the Executive Schedule (Cabinet officials), and level II of the Executive Schedule (which includes Deputy Secretaries of the departments as well as the heads of many executive and independent agencies) are now also required to be posted on the Internet by their respective agencies. The public availability or Internet publication of the disclosure reports include, in addition to the annual May 15 reports, the more frequent periodic transaction reports concerning purchases or sales of securities of $1,000 or more in value. As originally adopted, the STOCK Act would have required the Internet posting of all the public financial disclosure reports required from nearly 30,000 employees in the executive and legislative branches of government. Concerns over potential identity theft, the increased opportunities for malicious data mining, and public safety concerns for many federal employees in law enforcement or for those employed overseas, as well as constitutional concerns over financial privacy, led to a study and re-examination of the issue of Internet publication of the detailed financial reports by lower-level federal officials. In a study by the independent National Academy of Public Administration (NAPA), that organization concluded that "the online posting requirement does little to help detect conflicts of interest and insider trading, but that it can harm federal missions and individual employees. " Congress responded by amending the STOCK Act to require the Internet posting of the disclosure reports filed by the highest-level officials in the government, but leaving in place the existing public availability of the disclosure reports for all other employees in the executive and legislative branches. In addition to the legislative and regulatory scheme for public financial disclosure for certain federal officials, there is in place a requirement for confidential disclosure reports to be filed with an employee's agency by some lower-level federal officers and employees. The confidential reporting requirements are intended to complement the public disclosure system, and apply to those employees who do not have to file under the public reporting provisions of the Ethics in Government Act. Generally, the confidential reporting requirements apply to certain "rank and file" employees who are compensated below the threshold rate of pay for public disclosures (GS-15 or below, or less than 120% of the basic rate of pay for a GS-15), and who are determined by the employee's agency to perform duties or exercise responsibilities in regard to government contracting or procurement, government grants, government subsidies or licensing, government auditing, or other governmental duties which may particularly require the employee to avoid financial conflicts of interest. Such a person may be required to file a confidential report if he or she performs the duties of such a position "for a period in excess of 60 days during the calendar year." Additionally, unless required to file public reports, confidential reports are required from all "special Government employees" in the executive branch (those employees who are employed by the government for not more than 130 days in a year), including those who serve on advisory committees. With respect to advisory committees, it should be emphasized, however, that the disclosure provisions of federal law and regulation apply only to persons who are "officers or employees" of the federal government, and thus do not apply to private individuals who are serving on advisory committees as "representatives" of outside, private, or other non-federal entities.

High-level officials in all three branches of the federal government are required to publicly disclose detailed information concerning their financial holdings and transactions in income-producing property and assets, such as stocks, bonds, mutual funds, and real property, as well as information on income, gifts, and reimbursements from private non-governmental sources. Covered federal officials must disclose this information not only for themselves, but also must disclose much of the same required financial information with regard to their spouses and dependent children. Public financial disclosure and reporting requirements, originally adopted in the Ethics in Government Act of 1978, apply to the President, Vice President, all Members of Congress (as well as to candidates for President, Vice President, or Congress), federal judges and justices, and to employees in all three branches of the federal government who are compensated at a rate of pay over a particular amount (generally, 120% of the base salary of a GS-15) for more than 60 days in a calendar year. Covered officers and employees of the federal government must file detailed financial reports on an annual basis by May 15, setting out information for the previous year on income, gifts, reimbursements, financial holdings and assets, financial transactions, outside positions held, and any agreements or understandings for future private employment. In addition to the annual May 15 reports, all covered public filers must file more frequent public reports throughout the year concerning financial transactions of over $1,000 in assets such as stocks or bonds. Such periodic reports on financial transactions must be filed within 30 days of the receipt of notice of any such covered purchase or sale (but not later than 45 days of the actual transaction). For the highest-level officials in the executive and legislative branches of government--the President, Vice President, Members of Congress, and executive officials compensated on Level I of the Executive Schedule (Cabinet officials) and Level II of the Executive Schedule (including sub-Cabinet officials and heads of executive branch and independent agencies)--all of the public reports required to be filed, including the annual report and the periodic transaction reports, are to be posted on the Internet for public availability, searching, and downloading. For all other covered employees in the federal government, the financial disclosure reports remain publicly available to individuals and the press at the employee's agency.

The Fair Housing Act (FHA) was enacted "to provide, within constitutional limitations, for fair housing throughout the United States." The original 1968 act prohibited discrimination on the basis of "race, color, religion, or national origin" in the sale or rental of housing, the financing of housing, or the provision of brokerage services. In 1974, the act was amended to add sex discrimination to the list of prohibited activities. The last major change to the act occurred in 1988 when it was amended to prohibit discrimination on the additional grounds of physical and mental handicap, as well as familial status. However, legislation that would amend the FHA is routinely introduced in Congress, including proposals to extend the act's anti-discrimination provisions to prohibit discrimination based on sexual orientation, gender identity, marital status, source of income, and status as a military servicemember or veteran; and to make clear that the act does not support disparate impact discrimination claims. This report provides an overview of the types of discriminatory practices barred by the FHA, as well as certain activities that are exempted from the act's coverage. It also analyzes various legal tests applied by courts to assess both intentional (a.k.a., disparate treatment) discrimination and disparate impact discrimination claims brought under the act. Additionally, the report addresses several specific types of discrimination that have been the source of fair housing litigation, including how the act's proscription on discriminating against families with children interplays with housing communities for older persons; how the prohibition against discriminating on the basis of sex can provide protections to lesbian, gay, bisexual, and transgender (LGBT) individuals who are not expressly protected under the act; and the intersection of local zoning laws, group homes, and the FHA's protections against discrimination on the basis of mental and physical disabilities. The report concludes with an overview of how the act can be enforced, as well as the potential remedies available to victims of unlawful discrimination and potential penalties that can be assessed against violators. The FHA prohibits discrimination on the basis of race, color, religion, sex, handicap, familial status, or national origin in the sale or rental of housing, the financing of housing, the provision of brokerage services, or in residential real estate-related transactions. In general, the FHA applies to a broad assortment of housing, both public and private, including single family homes, apartments, condominiums, mobile homes, and others. The act's coverage extends to "residential real estate-related transactions," which include both the "making [and] purchasing of loans ... secured by residential real estate [and] the selling, brokering, or appraising of residential real property." Thus, the provisions of the FHA extend to the secondary mortgage market. HUD regulations elaborate upon the types of housing practices in which discrimination is prohibited and provide illustrations of such practices. Under the regulations, the housing practices in which discrimination is prohibited include the sale or rental of a dwelling; the provision of services or facilities in connection with the sale or rental of a dwelling; other conduct which makes dwellings unavailable to persons; steering; advertising or publishing notices with regard to the selling or renting of a dwelling; misrepresentations as to the availability of a dwelling; blockbusting; and the denial of "access to membership or participation in any multiple-listing service, real estate brokers association, or other service ... relating to the business of selling or renting dwellings." Yet another provision makes it unlawful to "coerce intimidate, threaten, or interfere with" individuals for exercising, or aiding others in the exercise of their rights under the FHA. Finally, as noted above, the FHA applies to public as well as private housing. As a result, a number of lawsuits over the years have challenged the fair housing practices of state and local housing authorities and even HUD itself, particularly with respect to discrimination in low-income public housing. For example, in one 2005 case, African American residents of public housing in Baltimore sued HUD and various local agencies on race discrimination grounds. The court ultimately held that HUD had violated the FHA "by failing adequately to consider regional approaches to ameliorate racial segregation in public housing in the Baltimore Region." Although the FHA is broadly applicable, it includes some exemptions. For one, the FHA does not apply to single family homes that are rented or sold without the use of a real estate agent by a private owner who owns no more than three single family homes at the same time, provided that certain other conditions are met. In addition, neither a religious group nor a nonprofit entity run by a religious group is prevented by the act "from limiting the sale, rental, or occupancy of dwellings that it owns or operates for other than a commercial purpose to persons of the same religion, or from giving preferences to such persons, unless membership in such religion is restricted on account of race, color, or national origin." The act also does not prevent a private club "from limiting the rental or occupancy of [] lodgings to its members or from giving preference to its members" if those lodgings are not being run for a commercial purpose. "Housing for older persons," as the term is defined by the act, is exempted from the FHA's proscription of discrimination on the basis of familial status. In other words, "housing for older persons" may exclude families with children. The FHA does not "limit[] the applicability of any reasonable local, State, or Federal restrictions regarding the maximum number of occupants permitted to occupy a dwelling." In 1995, the Supreme Court considered the issue of zoning restrictions in the context of group homes for the handicapped. In City of Edmonds v. Oxford House, Inc. , a group home for 10 to 12 adults recovering from alcoholism and drug addiction was cited for violating a city ordinance because it was located in a neighborhood zoned for single-family residences. The ordinance that Oxford House, Inc. was charged with violating defined "family" as "persons [without regard to number] related by genetics, adoption, or marriage, or a group of five or fewer [unrelated] persons." The Supreme Court held that the city's zoning ordinance did not qualify for this exemption because the ordinance's definition of family was not a restriction regarding "'the maximum number of occupants' a dwelling may house." According to the Court, the FHA: does not exempt prescriptions of the family-defining kind, i.e., provisions designed to foster the family character of a neighborhood. Instead, SS3607(b)(1)'s absolute exemption removes from the FHA's scope only total occupancy limits, i.e., numerical ceilings that serve to prevent overcrowding in living quarters. Because the ordinance in question set a numerical ceiling for unrelated occupants but not related occupants, the Court concluded that it was designed to preserve the "family character of [] neighborhood[s]," not to place overall occupancy limits on residences. As a result, the Court held that the ordinance was not exempt from the FHA's prohibition against disability discrimination. The Court did not decide whether or not this ordinance actually violated the FHA. Additionally, in response to concerns that occupancy limits could conflict with the prohibition against familial status discrimination, Congress enacted Section 589 of the Quality Housing and Work Responsibility Act of 1998. This legislation required HUD to adopt the standards specified in the March 20, 1991, Memorandum from the General Counsel , which states that housing owners and managers have discretion to "implement reasonable occupancy requirements based on factors such as the number and size of sleeping areas or bedrooms and the overall size of the housing unit." HUD concluded that "an occupancy policy of two persons in a bedroom, as a general rule, is reasonable" under the FHA. In July 2015, HUD issued final regulations designed to implement an FHA mandate that executive agencies administering HUD programs, as well as HUD-grantees and other recipients of HUD funding, further the FHA's goals of reducing segregation and housing barriers. The rule was issued in response to recommendations expressed in a Government Accountability Office (GAO) report on HUD's oversight of grantees' compliance with these mandates. Among other things, HUD's Affirmatively Furthering Fair Housing rule requires covered entities to "identify and evaluate fair housing issues" in a standardized fashion through an "Assessment of Fair Housing" (AFH) plan; incorporate housing data accumulated and publicly disseminated by HUD, when establishing housing-related goals, plans, and decisions; and allow members of the public "to provide input about fair housing issues, goals, priorities, and the most appropriate use of HUD funds ...." The rule went into effect on August 17, 2015; however, participants will have at least one year to submit their first AFH plan, with smaller participants being given more time. FHA discrimination claims fall into two broad categories: intentional, also referred to as disparate treatment discrimination, and disparate impact discrimination. Courts apply different legal tests to assess the validity of intentional versus disparate impact discrimination claims. Disparate treatment claims allege that a defendant made a covered housing decision based on "a discriminatory intent or motive." Disparate impact claims, on the other hand, involve allegations that a covered practice has "a disproportionately adverse effect on [a protected class] and [is] otherwise unjustified by a legitimate rationale." These two categories of discrimination are explored in turn. Intentional discrimination claims under the FHA can be supported either through (1) direct evidence of discrimination or (2) indirect/circumstantial evidence. Courts apply different legal tests to assess claims involving direct and indirect evidence. Additionally, courts apply a different legal framework to assess a subset of disparate treatment claims in which statutes or local ordinances that discriminate on their face against a protected class are challenged. "Direct evidence is evidence showing a specific link between the alleged discriminatory animus and the challenged decision sufficient to support a finding ... that an illegitimate criterion actually motivated the adverse ... decision." When a plaintiff provides sufficient direct evidence to support an intentional discrimination claim, the defendant generally has the burden of proving, by a preponderance of the evidence, that it would have denied or revoked the housing benefit regardless of the impermissible motivating factor in order to avoid liability under the FHA. FHA disparate treatment claims based on circumstantial evidence from which discrimination may be inferred generally are evaluated under the so-called McDonnell Douglas burden-shifting scheme. Under McDonnell Douglas , the initial burden rests with the plaintiff to establish a prima facie case of intentional discrimination by a preponderance of the evidence. A plaintiff can establish a prima facie case by evidencing that (a) she is a member of a protected class; (b) she qualified for a covered housing-related service or activity (e.g., housing rental or purchase); (c) the defendant denied an application for or revoked use of the plaintiff's housing benefit; and (d) the relevant housing-related service or activity remained available after it was revoked from or denied to the plaintiff. If a plaintiff is able to establish a prima facie case, then the burden shifts to the defendant to provide evidence that the revocation or denial of the housing benefit furthered a legitimate, nondiscriminatory purpose. The Supreme Court has explained that "[t]he explanation provided must be legally sufficient to justify a judgment for the defendant." The justification requires actual evidence and must be more than "an answer to the complaint or [an] argument by counsel." If the defendant is able to meet this burden, then the plaintiff can still prevail on her disparate treatment claim if she is able to show, by a preponderance of the evidence, that the stated purpose for the denial or revocation was really just a pretext for discrimination. Laws that explicitly differentiate between a protected class and unprotected groups are generally "characterized as claims of intentional discrimination." (These types of claims frequently come up in the context of local zoning laws that impact group homes, which are discussed in the " Group Homes and Zoning Restrictions " of this report.) As the Supreme Court has explained in the Title VII employment context, "the absence of a malevolent motive does not convert a facially discriminatory policy into a neutral policy with a discriminatory effect." Plaintiffs, therefore, establish a prima facie case of intentional discrimination by simply proving that the law in question treats an FHA-protected class differently. Upon meeting this burden, the U.S. courts of appeals are split as to which of two disparate treatment tests defendants must meet. A minority of courts, including the Eighth Circuit, applies a rational basis test, which merely requires the defendant town or city to show there is a legitimate, nondiscriminatory purpose for classification (or denial from a variance) on the basis of a FHA protected class. This is a relatively low burden to meet. The majority rule, which is followed by the Sixth, Ninth, and Tenth Circuits, on the other hand, requires the defendant to meet a more exacting test--to show that the justification for the facial discrimination is (1) beneficial to the members of the protected class; or (2) reasonably related to a matter of public safety that is "tailored to the particularized concerns [of the] individual residents" that are targeted by the law in question. In June 2015, the Supreme Court, in the 5-4 decision in Texas Department of Housing Community Affairs v. Inclusive Communities Project , confirmed the long-held interpretation that, in addition to outlawing intentional discrimination, the FHA also prohibits certain housing-related decisions that have a discriminatory effect on a protected class. Historically, courts have generally recognized two types of disparate impacts resulting from "facially neutral decision[s]" that can result in liability under the FHA. The first occurs when that decision has a greater adverse impact on one [protected] group than on another. The second is the effect which the decision has on the community involved; if it perpetuates segregation and thereby prevents interracial association it will be considered invidious under the Fair Housing Act independently of the extent to which it produces a disparate effect on different racial groups. The Supreme Court's holding in Inclusive Communities that "disparate-impact claims are cognizable under the [FHA]" mirrors previous interpretations of the Department of Housing and Urban Development (HUD) and all 11 federal courts of appeals that had ruled on the issue. However, HUD and the 11 courts of appeals had not all applied the same criteria for determining when a neutral policy that causes a disparate impact violates the FHA. In a stated attempt to harmonize disparate impact analysis across the country, HUD finalized regulations in 2013 that established uniform standards for determining when such practices violate the act. The Inclusive Communities Court did not expressly adopt the standards established in HUD's disparate impact regulations. Rather, the Court adopted a three-step burden-shifting test that shares some similarities with these standards. At step one, the plaintiff has the burden of establishing evidence that a housing decision or policy caused a disparate impact on a protected class. At step two, defendants can counter the plaintiff's prima facie showing by establishing that the challenged policy or decision is "necessary to achieve a valid interest." The defendant will not be liable for the disparate impact resulting from a "valid interest" unless, at step three, the plaintiff proves "that there is an available alternative practice that has less disparate impact and serves the entity's legitimate needs." In addition, the Court outlined a number of limiting factors that lower courts and HUD should apply when assessing disparate impact claims. The Court made clear that, before a plaintiff can establish a prima facie case of discriminatory effect based on a statistical disparity, courts should apply a "robust causality requirement" that requires the plaintiff to prove that a policy or decision led to the disparity. The Court stressed that a careful examination of the plaintiff's causality evidence should be made at preliminary stages of litigation to avoid "the inject[ion of] racial considerations into every housing decision"; the erection of "numerical quotas" and similar constitutionally dubious outcomes; the imposition of liability on defendants for disparities that they did not cause; and unnecessarily protracted litigation that might dissuade the development of housing for the poor, which would "undermine [the FHA's] purpose as well as the free-market system." It likely will take years to gain a strong understanding of how the Inclusive Communities decision will affect future disparate impact litigation under the FHA (and other laws such as Title VII of the Civil Rights Act of 1964). While plaintiffs historically have faced fairly steep odds of getting their disparate impact claims past the preliminary stages of litigation, much less succeeding on the merits of those claims, it is possible that the "cautionary standards" stressed by the Inclusive Communities majority might result in even fewer successful disparate impact claims and swifter disposal of claims that are raised. This section addresses several different types of discrimination that have been the source of a significant number of legal disputes or otherwise raise unique legal issues under the FHA. While the FHA prohibits discrimination based on sex, the act does not explicitly prohibit discrimination on the basis of sexual orientation or gender identity. Bills that would extend the FHA's anti-discrimination provisions to prohibit discrimination based on sexual orientation or gender identity, however, have been frequently introduced in Congress in recent years. Nevertheless, certain forms of discrimination against members of the LGBT community can violate the FHA. For instance, a landlord who harasses or otherwise discriminates against an LGBT individual because of his or her failure to conform to stereotypes regarding gender roles could, under certain circumstances, be held liable under the FHA for discriminating on the basis of sex. Additionally, HUD has recommended that Congress amend the FHA to provide protections based on sexual orientation; issued guidance explaining that most discrimination suffered by transgender individuals will violate the FHA's prohibition on sex discrimination; and taken steps to ensure that its programs are open to all families regardless of sexual orientation by requiring that grant applicants seeking HUD funding comply with local and state anti-discrimination laws. In 2012, HUD issued new regulations that prohibit discrimination on the basis of sexual orientation, gender identity, or marital status in specified HUD programs. Notably, the regulations were issued pursuant to HUD's authority under Section 2 of the Housing Act of 1949 -- not the FHA . Section 2 charges HUD to pursue "the goal of a decent home and a suitable living environment for every American family" and to seek equal housing opportunity for all. The scope of the 2012 regulations is limited to specified HUD programs, and does not extend to cover the wide array of entities that are prohibited from engaging in housing discrimination under the FHA. In addition to prohibiting discrimination on the grounds discussed above, the FHA also prohibits discrimination in housing on the basis of handicap. The act defines "handicap" as "(1) a physical or mental impairment which substantially limits one or more of such person's major life activities, (2) a record of having such an impairment, or (3) being regarded as having such an impairment." The definition of handicap expressly precludes the current, illegal use of or addiction to a controlled substance. However, because this exclusion does not apply to former drug users, the definition of handicap could encompass individuals who have had drug or alcohol problems that are severe enough to substantially impair a major life activity, but who are not current illegal users or addicts. As a result, recovering alcoholics and drug addicts can fall within the definition of "handicap." Discrimination on the basis of handicap under the FHA includes not allowing handicapped individuals to make reasonable changes to a housing unit that will "afford [them] the full enjoyment of the premises." However, a landlord can premise the changes on the handicapped individual's promise to return the unit to its original state. A landlord may not increase a required security deposit to cover these changes, but can require handicapped persons to, in certain circumstances, make payments into an escrow account to cover restoration costs. Discrimination against a handicapped person also includes "refus[ing] to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy the dwelling." In addition, all "covered multifamily dwellings" built after March 13, 1991, must meet certain design and construction specifications that ensure they are readily accessible to and usable by handicapped persons. The FHA's protection for handicapped persons does not require "that a dwelling be made available to an individual whose tenancy would constitute a direct threat to the health or safety of other individuals or whose tenancy would result in substantial physical damage to the property of others." It also is unlawful to ask about the handicaps of an applicant for housing, or someone with whom the applicant is associated. However, the regulations do allow raising certain questions that may have some bearing on one's handicap, as long as they are posed to all applicants. For example, all applicants could be asked whether they would be able to mow the lawn, if required in a rental agreement. Several other federal laws also protect individuals with disabilities from various forms of housing discrimination. The Americans with Disabilities Act (ADA), which broadly prohibits discrimination against individuals with disabilities, generally does not apply to housing. However, it does cover "public accommodations," which includes "an inn, hotel, motel, or other place of lodging except for an establishment located within a building that contains not more than five rooms for rent or hire and that is actually occupied by the proprietor of such establishment as the residence of such proprietor." The ADA also covers "commercial facilities," which it defines as "facilities intended for nonresidential use ... whose operations affect commerce." The term excludes, however, "facilities that are covered or expressly exempted from coverage under the Fair Housing Act." In other words, the ADA leaves to the FHA the determination as to which statute applies to any particular facility. Under Section 504 of the Rehabilitation Act of 1973, discrimination against individuals with disabilities is prohibited in any federally funded or federally conducted program or activity. Finally, under the Architectural Barriers Act of 1968, certain publicly owned residential buildings and facilities, must be accessible to individuals with physical disabilities. The FHA's prohibition against discrimination on the basis of handicap extends to protect group homes for the disabled from discrimination by certain types of state or local zoning laws. While the FHA does not "limit[] the applicability of any reasonable local, State, or Federal restrictions regarding the maximum number of occupants permitted to occupy a dwelling," it does generally prohibit "[l]ocal zoning and land use laws that treat groups of unrelated persons with disabilities less favorably than similar groups of unrelated persons without disabilities." Nevertheless, some municipalities have attempted to restrict the location of group homes for disabled individuals by enacting zoning ordinances that establish occupancy limits for group homes. Typically justified as a way to maintain the residential character of certain neighborhoods, such occupancy limits frequently operate to restrict group homes for recovering drug users or other disabled individuals. It is also possible that a city could violate the FHA's reasonable accommodation requirement for refusing to authorize a variance from such an occupancy ordinance under certain circumstances. As a result, these limits are the subject of controversy and legal challenges under the FHA, and the Department of Justice and HUD have issued joint guidance on the issue. Determining whether zoning ordinances violate the FHA requires a case-by-case assessment, based on the ordinance language and the specific facts surrounding the alleged violation and/or the city's denial of a variance from the ordinance. This makes predicting how a court will rule on a particular ordinance difficult. This is especially true in light of the fact that, as mentioned in the " Disparate Treatment Discrimination " section above, the lower courts do not apply a single, uniform test. If a plaintiff is able to establish a prima facie case by showing that a state or local law is facially discriminatory, then a minority of courts, notably the Eighth Circuit, merely requires that the defendant's show that the ordinance is rationally related to a legitimate, nondiscriminatory purpose. Most courts, such as the Sixth, Ninth, and Tenth circuit courts of appeal require defendants to meet a more exacting standard--to show that the justification for the facial discrimination is (1) beneficial to the disabled; or (2) reasonably related to a matter of public safety that is "tailored to the particularized concerns [of the] individual residents" that are targeted by the law in question. The group home joint guidance states that "[t]he Department of Justice and HUD take the position, and most courts that have addressed the issue agree that density restrictions are generally inconsistent with the Fair Housing Act." For example, the Sixth Circuit Court of Appeals, in Larkin v. Department of Social Services , addressed a state licensing requirement that group homes for the handicapped may not be spaced within a 1,500 foot radius of other such group homes and must notify the communities in which the group homes are to be located. The court ruled that these spacing and notification requirements discriminated on their face by "singl[ing] out for regulation group homes for the handicapped...." Once the court ruled that these non-uniform conditions were facially discriminatory, the court applied the more demanding test employed by the majority of courts that required the defendant to "demonstrate that they are warranted by the unique and specific needs and abilities of those handicapped persons to whom the regulations apply." The Sixth Circuit held that the state had failed to meet this burden because the ordinance "is too broad, and is not tailored to the specific needs of the handicapped." The group home joint guidance also addresses claims that localities failed to make "reasonable accommodations" for group homes. It explains: Whether a particular accommodation is reasonable depends on the facts, and must be decided on a case-by-case basis. The determination of what is reasonable depends on the answers to two questions: First, does the request impose an undue burden or expense on the local government? Second, does the proposed use create a fundamental alteration in the zoning scheme? If the answer to either question is "yes," the requested accommodation is unreasonable. One example of a necessary reasonable accommodation might be allowing a deaf tenant to have a hearing dog in an apartment complex that normally prohibits pets. Another example might be the provision of a variance from an ordinance that bars five or more unrelated people from living in a single family home, for a group home of five handicapped individuals, where it is shown that such a home would "have no more impact on parking, traffic, noise, utility use, and other typical concerns of zoning than an 'ordinary family.'" In contrast, it likely would not be unreasonable to deny a variance from this ordinance for a group home of 35 handicapped individuals. The Fair Housing Amendments Act of 1988 added "familial status," which generally means living with children under 18, to the grounds upon which discrimination in housing is prohibited. One exception to the 1988 law barring familial status discrimination, however, is that "housing for older persons" may discriminate against families with children. The committee report that accompanied the 1988 amendments explains the purpose of this exemption: In many parts of the country families with children are refused housing despite their ability to pay for it. Although 16 states have recognized this problem and have proscribed this type of discrimination to a certain extent, many of these state laws are not effective.... The bill specifically exempts housing for older persons. The Committee recognizes that some older Americans have chosen to live together with fellow senior citizen[s] in retirement type communities. The Committee appreciates the interest and expectation these individuals have in living in environments tailored to their specific needs. "Housing for older persons" is defined as housing that is (1) provided under any state or federal housing program for the elderly; (2) "intended for and solely occupied by persons 62 years of age or older"; or (3) "intended and operated for occupancy by persons 55 years of age or older" and that meets several other requirements such as having at least 80% of units occupied by a minimum of one individual 55 or older. An individual who believes in good faith that his or her housing facility qualifies for the familial status exemption will not be held liable for money damages, even if the facility does not in fact qualify as housing for older persons. The Secretary of HUD, the Attorney General, and victims of discrimination may each take action to enforce the FHA's protections against discrimination. HUD has primary administrative enforcement authority of the act, which it typically fulfills through administrative adjudications. However, the Department of Justice may also bring actions in federal court under certain circumstances. Within one year of the occurrence or end of an alleged discriminatory housing action, a harmed party may file a complaint with the Secretary, or the Secretary may file a complaint on his own initiative. When a complaint is filed, the Secretary must, within 10 days, serve the respondent--the party charged with committing a discriminatory practice--with notice of the complaint. The respondent must then answer the complaint within 10 days. From the filing of the complaint, the Secretary has 100 days, subject to extension, to complete an investigation of the alleged discriminatory actions. During this time, the Secretary must, "to the extent feasible, engage in conciliation with respect to" the complaint and, as warranted, the Secretary may enter into a conciliation agreement, which can include binding arbitration and the harmed party being awarded monetary damages or other relief. At the completion of the investigation, the Secretary must determine whether "reasonable cause exists to believe that a discriminatory housing practice has occurred or is about to occur." If he finds no reasonable cause, then he must dismiss the complaint. If he finds reasonable cause, then he must file a charge on behalf of the harmed party in the absence of a conciliation agreement. If a charge is filed, then the Secretary or any party to the dispute may elect to have the case heard in a federal district court. Otherwise, the case shall be heard by an administrative law judge (ALJ). In such a hearing, parties may appear with legal representation, have subpoenas issued, cross examine witnesses, and submit evidence. The ALJ must initiate a hearing within 120 days of a charge being issued, unless adhering to that time frame is impracticable. He also must "make findings of fact and conclusions of law within 60 days after the end of the hearing ... unless it is impracticable to do so." "If the [ALJ] finds that a respondent has engaged or is about to engage in a discriminatory housing practice," the ALJ is to order the harmed party relief, which can include monetary damages, civil penalties, and injunctive or other equitable relief. The ALJ may also impose a civil penalty of up to $10,000 for a first offense or more if it is not a first offense. The ALJ's orders, findings of fact, and conclusions of law may be reviewed by the Secretary. Parties also are authorized to appeal administrative orders to the federal courts. The Secretary may seek enforcement of an administrative order in a federal court of appeals. Such court may "affirm, modify, or set aside, in whole or in part, the order, or remand" it to the ALJ for additional proceedings. The court also may grant any party "such temporary relief, restraining order, or other order as the court deems just and proper." Reasonable attorney's fees also may be awarded to a prevailing party, except where the United States is the prevailing party. The Attorney General (AG) may bring a civil action in federal district court if (1) the AG has reasonable cause to think that an individual or a group is "engaged in a pattern or practice" of denying one's rights under the FHA and "such denial raises an issue of general public importance"; or (2) the Secretary refers to him a case involving a violation of a conciliation agreement or of housing discrimination. In such a civil action, the court may issue preventive relief, such as an injunction or a restraining order; provide monetary damages; issue civil penalties; or provide some other appropriate relief. In some instances, prevailing parties may be able to recover reasonable legal costs and fees. Individuals who use force or the threat of force to "willfully injur[e], intimdiate[] or interfere[] with ..." a person's ability to own, rent, sell, or otherwise engage in housing-related activities because that person's race, color, national origin, handicap, sex, religion, or familial status also could be subject to criminal penalties. An "aggrieved person" may initiate a civil action, in either a federal district or a state court, within two years of "the occurrence or the termination of an alleged discriminatory housing practice, or the breach of a conciliation agreement." If the Secretary has filed a complaint, an aggrieved person may still bring a private suit, unless a conciliation agreement has been reached or an administrative hearing has begun. The AG may intervene in a private suit if he determines that the suit is of "general public importance." If the court determines that discrimination has occurred or is going to occur, it may award punitive damages, actual damages, equitable relief (e.g., restraining order, injunction), or other appropriate relief. In some instances, prevailing parties may be able to recover reasonable legal costs and fees.

The Fair Housing Act (FHA) was enacted "to provide, within constitutional limitations, for fair housing throughout the United States." The original 1968 act prohibited discrimination on the basis of "race, color, religion, or national origin" in the sale or rental of housing, the financing of housing, or the provision of brokerage services. In 1974, the act was amended to add sex discrimination to the list of prohibited activities. The last major change to the act occurred in 1988 when it was amended to prohibit discrimination on the additional grounds of physical and mental handicap, as well as familial status. However, legislation that would amend the FHA is routinely introduced in Congress, including S. 1858/H.R. 3185, H.R. 501, and H.R. 3145 in the 114th Congress. Key Takeaways The FHA prohibits discrimination on the basis of "race, color, religion, sex, handicap, familial status, or national origin...." In general, the FHA applies broadly to all sorts of housing, public and private, including single family homes, apartments, condominiums, mobile homes, and others. The act's coverage also extends to the secondary mortgage market. However, the act includes some exemptions. For example, the FHA does not "limit[] the applicability of any reasonable local, State, or Federal restrictions regarding the maximum number of occupants permitted to occupy a dwelling." While the FHA prohibits discrimination based on sex, the FHA does not prohibit discrimination on the basis of sexual orientation or gender identity. However, certain forms of discrimination against members of the LGBT (lesbian, gay, bisexual, transgender) community can violate the FHA. In June 2015, the Supreme Court held in Texas Department of Housing and Community Affairs v. Inclusive Communities Project that, in addition to intentional discrimination, disparate impact claims are cognizable under the FHA--a view previously espoused by HUD and the 11 U.S. Courts of Appeals to render opinions on the issue. Although plaintiffs historically have faced fairly steep odds of getting their disparate impact claims past the preliminary stages of litigation, much less succeeding on the merits, the "cautionary standards" stressed by the Inclusive Communities Court might result in even fewer successful disparate impact claims being raised in the courts and swifter disposal of claims that are raised. In July 2015, HUD issued final regulations designed to implement an FHA mandate that executive agencies administering HUD programs, as well as HUD-grantees and other recipients of HUD funding, affirmatively further the FHA's goals of reducing segregation and housing barriers. The FHA may be enforced in varying ways by the Attorney General, by the Department of Housing and Urban Development (HUD), and by victims of discrimination. Potential remedies available under the act include actual damages, punitive damages, equitable relief, and reasonable legal costs. Violators also may be assessed civil penalties.

According to USDA, FY2012 agricultural exports are forecast to reach $131 billion, slightly below the fiscal 2011 record level of $137 billion. U.S. agricultural imports are forecast to reach $106.5 billion in FY2012, a record high and a $12 billion increase over FY2011 agricultural imports. The expected $24.5 billion U.S. agricultural trade surplus for FY2012 is below FY2011's all-time high of $42.9 billion. In 2011/2012, a forecast 48.8% of the U.S. wheat crop will be exported, while 13.8% of the U.S. corn crop will move into world markets. The export share of soybeans is forecast to be 41.7% in 2011/2012. Oilseed exports are down slightly due to early-season shipments from South America. Cotton's export share in 2011/2012 is forecast to be 70.2%. Cotton is the United States' most export-dependent field crop. U.S. livestock products are much less export-dependent than crops. Beef exports, which grew from around 4% of production in 1990 to almost 10% by 2003, have slowly recovered from export bans on U.S. beef following the 2003 discovery of a BSE-infected cow in the United States. The beef export share of production in 2012 is forecast to be 11%. Pork exports as a share of production have grown substantially, from 1.6% in 1990 to a forecast 22.1% in 2012. Poultry's export share of production has almost tripled since 1990, from 6.2% to a forecast 18.3% in 2012. The United States exports a wide range of agricultural products, including horticultural products, field crops, livestock products, and poultry. Horticultural product exports (fruits, vegetables, tree nuts, and their preparations)--forecast at $28 billion for FY2012--comprise the largest commodity category of U.S. agricultural exports in FY2012. Oilseeds (mainly soybeans) and oilseed products (mainly meal and oil)--with a forecast value of $25 billion in FY2012--are the second-largest commodity component of U.S. agricultural exports. Livestock and poultry products together would amount to more than $24 billion in FY2012. Field crop exports (including feed grains, wheat, cotton, and tobacco) are forecast to account for more than $35 billion of U.S. agricultural exports in FY2012. Bulk agricultural export s include products like wheat, coarse grains, cotton, and soybeans. Intermediate product s have been processed to some extent and include products like wheat flour, soybean oil, and feeds. Consumer-ready products include both processed products such as breakfast cereals and products such as fresh fruits and vegetables, meat and dairy products, and wine and beer. Until 1990, bulk agricultural exports were the mainstay of U.S. farm export trade. The total of high-value (intermediate plus consumer-ready) products has exceeded the value of bulk agricultural exports in every fiscal year since FY1991. In FY2011, high-value exports accounted for 56.3% of total U.S. agricultural exports and bulk exports for 43.6%. Canada , with Mexico a U.S. partner in the North American Free Trade Agreement (NAFTA), is the largest market for U.S. agricultural exports, with exports valued at $19 billion. Mexico is the second-largest market, with exports valued at $17.5 billion. Total U.S. agricultural exports to its NAFTA partners are forecast at $36.5 billion for FY2012. Chi na is third-largest market for U.S. agricultural exports in FY2012, with exports valued at $17 billion. Japan ($13.5 billion forecast for FY2012), which was the number-one U.S. destination for agricultural products for many years, is forecast to be the fourth-largest export destination. It is followed by the EU-27 , the fifth-largest U.S. farm export market, with forecast agricultural exports of $10 billion. Other Asian markets-- South Korea , Taiwan , Hong Kong --also are major markets for U.S. agricultural exports, with forecast values in FY2012 of $6.9 billion, $3.5 billion, and $3.3 billion, respectively. Wheat: The United States is the major supplier of wheat and wheat products to the world market, with a forecast export market share of 18.6% in marketing year 2011/2012. Australia (15.1%), the Russian Federation (14.0%) and Canada (12.9%) are major competitors in this market (see Figure 7 and Table 7 ). Rice: Thailand (22% export market share forecast for 2011/2012) is the world's major rice exporter, but Vietnam (21%) has emerged as a major competitor. India (14.1%) and Pakistan (11.8%) are forecast to have the third- and fourth-largest export market shares in 2011/2012. The United States would be the world's fifth-largest rice exporter with a forecast share in 2011/2012 of 9.6% (see Figure 8 and Table 8 ). Corn: The United States has the world's largest export market share for corn, with a 2011/2012 forecast share of 44.4% (see Figure 9 and Table 9 ). Since the mid-1990s, Brazil has increased its share of world corn exports, while China, an exporter of corn during most of the last 16 years, has lost export market share. Soybeans: Brazil is forecast to be the world's main supplier of soybeans to the world market in 2011/2012, with a share of 40.7%. Brazil's export market share has grown compared to its 10.9% share in 1995/1996. The United States is forecast to have the second-largest export market share at 37.4%, down from 73% in 1995/1996 (see Figure 10 and Table 10 ). Cotton: U.S. cotton exports are estimated to be 30.1% of the world total in 2011/2012. U.S. competitors include India (16.4%), Australia (11%), Uzbekistan (7.5%), and West/Central African countries (6.4%) (see Figure 11 and Table 11 ). Beef: Australia, with 16.8% (forecast) of world exports in 2012, is the largest supplier of beef to world markets. The U.S. share of world beef exports is forecast to be 15.2% in 2012. Lingering effects of mad cow disease continue to affect demand for U.S. beef in world markets; the U.S. share of world beef exports had reached 18.9% in 2000. (See Figure 12 and Table 12 .) Pork: The United States is forecast to have the largest export market share for pork (35.3%) in 2012. Main competitors for pork export market shares include the EU (29.0%) and Canada (17.7%). (See Figure 13 and Table 13 .) Poultry: Brazil is the world's leading supplier of poultry meat to the world market (36.1% forecast export market share for 2012). The United States, with 31.7% of world poultry meat exports, and the EU, with 11.7%, have lost market share to Brazil over the past decade. (See Figure 14 and Table 14 .) Dairy Products: For 2012, New Zealand (29.3%) and the EU (27.3%) are forecast to be the leading suppliers of nonfat dry milk to world markets (see Figure 15 and Table 15 ). The EU (44.5%) is the leading supplier of cheese to world markets (see Figure 16 and Table 16 ), while New Zealand (61.1%) is the world's largest exporter of butter (see Figure 17 and Table 17 ). Brazil is the world's leading exporter of sugar, with an export market share forecast at 42.0% for 2011/2012. DR-CAFTA (including the Dominican Republic and Central American countries), with 5.4% of global sugar exports, is forecast to be the world's second-largest exporter of sugar in 2011/2012. The United States is a sugar importer, with negligible sugar exports (forecast to be 0.3% for 2011/2012). High-value horticultural products (fruits, nuts, vegetables, and preparations; wine and malt beverages; nursery stock and flowers; and others) are the largest category of U.S. agricultural imports, and are forecast to be $43.3 billion in FY2012. Other sizeable commodity imports forecast for FY2012 are livestock and dairy ($13 billion), grains and feeds ($9.3 billion), and oilseeds and products ($8.1 billion). Imports of tropical products such as coffee, cocoa, sugar, and products are forecast to be $31.1 billion in FY2012. NAFTA partners Canada ($20.7 billion) and Mexico ($17.3 billion) and the EU-27 ($16.8 billion) are forecast to be the source of more than 50% of total U.S. agricultural imports ($106.5 billion) in FY2012. Indonesia is expected to ship $4.7 billion of farm products to the United States in FY2012; agricultural imports from Brazil are expected to reach $4.4 billion in FY2012. Australia, with whom the United States entered into a free trade agreement (FTA) in 2005, is forecast to provide the United States with $2.4 billion worth of agricultural imports in FY2012. Colombia, a prospective FTA partner, is forecast to ship $2.6 billion of farm products to the United States in FY2012. Economic growth in Asia has contributed to relatively consistent long-term growth in U.S. agricultural exports to the region. Despite some year-to-year variation, the EU, the United States' fifth-largest agricultural export market, has been a relatively stable market for U.S. agricultural exports, with little growth since 1992. Agricultural exports to countries in the former Soviet Union have declined in value since the 1992 break-up of the USSR. Agricultural exports to Latin America, including Mexico, and to Canada have grown rapidly since the early 1990s, due in part to geographic proximity and NAFTA, among other factors. Like the EU, Japan also has been a relatively stable and slow-growing market for U.S. agricultural exports. U.S. agricultural exports to China, fueled by rates of GDP growth in excess of 9%, have grown rapidly since the early 1990s (16.4%). FY2012 U.S. agricultural exports to China are forecast to be more than 10 times their value in FY2001, when China became a member of the World Trade Organization. Rapid income growth in Southeast Asia also has stimulated demand for U.S. agricultural exports since 1992. Agricultural exports to South Asia also have shown growth since 1992. Growth in U.S. agricultural trade with Canada and Mexico, both NAFTA trading partners, and with Latin America has been particularly strong since 1992. U.S. agricultural exports to Canada are forecast to be $19 billion in FY2012. U.S. agricultural exports to Mexico are expected to be $17.5 billion in FY2012. U.S. agricultural exports to Latin America (excluding Mexico) are expected to reach $12.3 billion in FY2012, down from $12.4 billion in FY2011. The Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 , 2008 farm bill) was enacted into law in June 2008 and will govern most federal farm and food policies through 2012. The 2008 farm bill provides price and income support to U.S. agricultural producers through 2012. In addition, the farm bill authorizes programs for conservation, rural development, nutrition (domestic food assistance), trade, and food aid. Budgetary outlays for all U.S. agricultural programs were $139.3 billion in FY2011. By one widely used measure, the producer support estimate (PSE) calculated by the Organization for Economic Cooperation and Development (OECD), the United States provided an estimated $25.6 billion in agricultural support to producers in 2010 (provisional estimate). PSEs measure assistance to producers in terms of the value of monetary transfers generated by agricultural policy. Transfers are paid by consumers or by taxpayers in the form of market price support, direct payments, or other support. They are a broader measure of support than direct government spending alone. The percentage PSE measures support in relation to gross farm receipts. As a percent of gross farm receipts, the PSE for the United States is 7% in 2010, the third-lowest among OECD countries ( Figure 24 , Table 24 ). OECD attributes a decrease of 3% (over 2009) in the PSE expected for the United States for 2010 to a decrease in market price support for dairy. Over a longer period, the trend in producer support in the United States has been downward, dropping from a PSE of 22% in 1986-1988 to 7% in 2010. Among U.S. commodities, sugar is the most highly subsidized product in the United States, with a provisional single commodity transfer estimated at 28.3% of the gross value of sugar production in 2010 ( Figure 25 , Table 25 ). With agricultural exports totaling $137 billion in FY2011, the United States is the world's largest exporter of agricultural products. The United States applies tariffs and tariff quotas to products entering the United States from abroad. According to the World Trade Organization (WTO), the United States' average applied tariff for agricultural products is 8.9%, which is above the average applied U.S. tariff for non-agricultural products (4%), but relatively low compared to other WTO member countries. About 170 tariff lines (a tariff line is a product as described in a schedule or list of tariffs) are subject to tariff quotas, including beef, dairy products, and sugar. The average in-quota tariff was 9.1% in 2007, while the out-of-quota was 42%. Under the WTO Agreement on Agriculture, the United States made export subsidy reduction commitments for 13 commodities. The 2008 farm bill repealed authority for the Export Enhancement Program (EEP), which was used to fund subsidies for those products, with the exception of dairy products. Export subsidies, in the form of cash bonuses, can be provided to exporters of dairy products under the Dairy Export Incentive Program (DEIP), which was reauthorized in the 2008 farm bill through 2012. Prior to its repeal, no expenditures were made for EEP from FY2002. Spurred by declining prices for dairy products in 2008-2009, USDA announced in May 2009 DEIP allocations for nonfat dry milk, butter fat, and cheeses. DEIP bonuses of $19 million were awarded in FY2009. In FY2010, DEIP bonuses of $2 million were awarded. No bonuses were awarded in FY2011. A federally chartered public corporation operated by USDA, the Commodity Credit Corporation (CCC), makes credit guarantees available to private financial institutions who finance the purchase of U.S. agricultural exports. Under the GSM-102, the CCC guarantees repayment of credit made available to finance U.S. agricultural exports on credit terms of up to three years. Exporters tallied $4.1 billion of agricultural exports under the GSM-102 program in FY2011. USDA announced $5.4 billion in CCC guarantees for agricultural exports under the GSM-102 program for FY2012. The CCC also operates the Facilities Guarantee Program (FGP), which guarantees credit to U.S. banks that finance export sales of U.S. goods and services that are used to improve agricultural export-related facilities in emerging markets (storage, processing, and handling facilities). Two export market development programs, the Market Access Program (MAP) and the Foreign Market Development Program (FMDP), assist producer groups, associations, and firms with promotional and other activities. The United States is the world's leading supplier of food aid. It provides more than half of the global total. The United States provides food aid mainly through P.L. 480, also known as the Food for Peace Program. Wheat and wheat flour are the main commodities provided as food aid, but rice and vegetable oils are also important in P.L. 480 programs. Higher-value products are made available in special feeding programs. Responsibility for implementing food aid programs is shared by USDA and the U.S. Agency for International Development (AID). P.L. 480 food aid is provided on a grant basis through Title II of the Food for Peace Act of 2008, the successor legislation of the Agricultural Trade and Development Assistance Act of 1954 (P.L. 480). Two other food aid programs are conducted under Section 416(b) of the Agricultural Act of 1949 and the Food for Progress Act of 1985. The former provides surplus CCC inventories, if available, as donations; the latter provides concessional credit terms or commodity donations to support emerging democracies or countries making free market economic reforms. A recently enacted food aid program, the McGovern-Dole School Food for Education Program, finances school feeding and child nutrition projects in poor countries.

U.S. agricultural exports, imports, and the agricultural trade surplus are expected by the U.S. Department of Agriculture (USDA) to reach record levels in FY2011. FY2011 U.S. farm exports are forecast by the U.S. Department of Agriculture to reach $137 billion, while agricultural imports are expected to reach $93 billion. The agricultural trade surplus is projected to be $44 billion. Exports of high-value products (e.g., fruits, vegetables, meats, wine and beer) have increased since the early 1990s and now account for 60% of total U.S. agricultural exports. Exports of bulk commodities (e.g., soybeans, wheat, and feed grains) remain significant. Leading markets for U.S. agricultural exports are China, Canada, Mexico, Japan, the European Union (EU), South Korea, and Taiwan. The United States in 2011 is forecast to be the world's leading exporter of corn, wheat, soybeans, and cotton. The U.S. share of world beef exports, which declined after the 2003 discovery of a case of "mad cow disease" in the United States, is recovering as more countries have re-opened their markets to U.S. product. The United States, European Union, Australia, and New Zealand are dominant suppliers of dairy products in global agricultural trade. New Zealand and the United States are the main suppliers of nonfat dry milk to world markets, while the EU is the leading supplier of cheeses. China has been among the fastest-growing markets for U.S. agricultural exports. Agricultural exports to Canada and Mexico, both partners of the United States in the North American Free Trade Agreement (NAFTA), have also grown rapidly. Most U.S. agricultural imports are high-value products, including fruits, nuts, vegetables, wine, and beer. The biggest import suppliers are NAFTA partners Canada and Mexico, and the EU. Together these three are forecast to provide more than 50% of total U.S. agricultural imports in FY2011. Brazil, Australia, Indonesia, New Zealand, and Colombia are also important suppliers of agricultural imports to the United States. According to estimates by the Organization for Economic Cooperation and Development (OECD), the United States provides the third-lowest amount of government policy-generated support to its agricultural sector among OECD countries. The United States' average applied tariff for agricultural products is estimated by the World Trade Organization to be 8.9%, a little more than twice the average applied tariff for non-agricultural products. Export subsidies, export credit guarantees, and market development programs are among the programs used by the United States to promote U.S. agricultural exports. The United States also provides U.S. agricultural commodities to developing countries as food aid for emergency relief or use in nonemergency development activities.

To address the turmoil in financial markets, Congress passed and the President signed the Emergency Economic Stabilization Act (EESA; H.R. 1424 , P.L. 110-343 ) on October 3, 2008. The act authorizes the Secretary of Treasury "to restore liquidity and stability to the financial system of the United States" (Sec. 2) by purchasing or insuring "troubled assets." The Secretary will design the mechanism for purchasing the troubled assets and methods for pricing and valuing these assets. The act broadly defines troubled assets as (1) mortgages and any securities based on such mortgages whose purchase the Secretary determines will promote financial market stability, and (2) any other financial instrument whose purchase the Secretary and the Federal Reserve Board Chairman determines will promote financial market stability. The act authorized the Treasury Secretary to use $700 billion to enhance liquidity and to inject capital into financial markets by purchasing (1) mortgages and pools of mortgages, (2) preferred stock in ailing financial institutions, and (3) troubled mortgage-backed securities (MBSs). Secretary Paulson had indicated that reverse auctions would be used to purchase mortgage-backed securities from troubled financial institutions. Well-designed auctions can help price such assets in an efficient manner. The Bush Administration Treasury Secretary at the time, Henry Paulson, soon decided to use the Troubled Asset Relief Program (TARP) to inject capital into financial institutions by purchasing special preferred equity shares. Members of the Bush Administration have said that they came to believe that direct capital injections would provide greater leverage to stimulate borrowing and that the sharp deterioration in financial markets in mid October 2007--during the time that Congress was considering EESA--required strategies that could be implemented more quickly. In mid-January 2009, Congress declined to block a Presidential request to release the second tranche of $350 billion in TARP funds. On January 22, 2009, the House passed a measure ( H.J.Res. 3 ) to disapprove release of those funds on a 270-155 vote, but the Senate had declined on January 15, 2009, to pass a related measure ( S.J.Res. 5 ) by a 42-52 vote. On February 10, 2009, Treasury Secretary Timothy Geithner outlined a "Financial Stability Plan" intended to address continued financial and economic turmoil. Geithner said that he aimed "to use private capital and private asset managers to help provide a market mechanism for valuing the assets." According to some experts, market pricing of such assets implies that reverse auctions would play an important role in the plan. Many proposed plans to address financial turmoil involve asset purchases by federal entities. Market-based pricing would probably involve auctions or similar mechanisms. This report provides Congress with information on the uses, design, and functions of auctions. It reviews some common types of auctions used by the federal government and some of the issues of auction design that may face the Treasury Department. The deterioration in the credit quality of mortgage-related assets and similar types of assets, according to many experts, is closely linked with the credit crunch that emerged in August 2007, and which worsened in the fall of 2008. Many have therefore argued that creating a government-sponsored vehicle to absorb troubled assets, either directly by asset purchases or indirectly by acquiring equity shares in institutions that hold troubled assets, would strengthen lenders' balance sheets, which in turn would stimulate new lending. Thus, the federal government, in this view, can encourage lending by shouldering some portion of risks associated with troubled assets. Government purchases of troubled assets, however, present two types of risks to federal stakeholders. First, uncertainty about the fundamental value of troubled assets implies that federal stakeholders will bear financial risks, especially when those risks are related to systematic economic trends. Second, the government may overpay for troubled assets or for equity in firms that hold such assets. In early February 2009, the chair of the EESA Congressional Oversight Board expressed concern that the Troubled Asset Relief Program (TARP) had overpaid for assets it had acquired. Details of Secretary Geithner's proposals have not yet been released. The plan outline released on February 10, 2009, indicates that market-based asset purchases, which presumably would involve auction mechanisms, would play an important role. Congress, therefore, may wish to understand how Treasury proposals determine asset purchase prices when it considers enabling legislation and while it conducts on-going oversight of TARP and related programs. In early October 2008, the Bush Administration proposed using reverse auctions to purchase mortgage-related securities from financial institutions, which are similar to the multiple-unit Dutch auctions that the Treasury uses to sell government securities. While the Bush Administration focused on other strategies to address continuing financial turmoil, a "Financial Stability Plan" outlined by President Obama's Treasury Secretary, Timothy Geithner, may include reverse auctions as part of the proposed "Public-Private Investment Fund." In a reverse auction, a buyer accepts bids from multiple potential sellers. In reverse multi-unit Dutch auctions, a buyer (e.g., the U.S. Treasury) buys a given number of units from private parties (e.g., financial institutions) at a price set by the last accepted bid. The box below contains a hypothetical example of a reverse Dutch auction. Auctions provide a means of selling objects whose value to potential owners is unknown to the seller. Many different auction mechanisms are in common use. A large research literature in economic theory and experimental economics examines how different types of auctions work. On the one hand, well-designed auctions can provide an expeditious and efficient method for selling or acquiring objects. On the other hand, poorly designed auctions have caused governments to forego large amounts of revenue. Moreover, poorly designed auctions may increase the likelihood that valuable resources are allocated to buyers who value those resources less than others--a source of inefficiency. In particular, auctions suitable for some applications may be unsuited for other applications. The American government has used reverse auctions since Robert Morris, who headed the Treasury Department, used them to procure supplies for troops in the Revolutionary War. In recent decades, the Treasury Department has used auctions to sell federal securities. Over time, the federal government has gained valuable experience in conducting and designing auctions, which has reduced costs and increased revenues compared to other methods. Current U.S. Treasury auctions, which use a multi-unit Dutch auction mechanism to sell securities, have apparently provided a starting point for Administration proposals to buy "troubled assets" via reverse Dutch auctions. Because the reverse Dutch auction process would, in approximate mirror fashion, resemble Treasury auctions of government securities to primary dealers, key market participants could quickly familiarize themselves with new bidding procedures. Those administering Treasury reverse auctions, however, recognize that differences between Treasury securities and troubled assets have consequences for auction design. Designing reverse Dutch auctions may present some tradeoffs between enhancing competition among bidders and overpaying for assets relative to their quality. Careful auction design, however, can help minimize these problems. In the Dutch auction mechanism used to sell U.S. Treasury securities, all successful buyers pay the same price; in other words, it is a uniform-price mechanism. Uniform-price mechanisms, according to some experts, may encourage more aggressive bidding, which raises expected revenues. While details of the Treasury reverse Dutch auctions remain unspecified, the U.S. Treasury would probably announce that it wished to buy a given amount of mortgage-related securities (MBSs) of specific types or issues for a given auction. Bidders would then list securities they wish to sell and specify prices. The Treasury would then buy the securities listed at the lowest prices until the specified amount was reached. The price offered by the last successful bidder would then be paid to all successful bidders. As noted above, federal stakeholders bear the costs of risks caused by uncertainty about the value of troubled assets and by the possibility of overpaying for assets. These risks are heightened when quality differences among assets are large. The diversity or heterogeneity of troubled assets may present challenges to the Treasury auction program. The mortgage-backed securitization process was intended to create marketable assets with credit characteristics that could be readily assessed by credit agencies and buyers. Credit rating agencies claimed that the rating process sorted asset-backed securities and other assets into categories with essentially homogenous profiles. All assets of a specific type receiving a given rating were supposed to embody essentially similar risk characteristics. Confidence in the credit rating process has deteriorated over the past two years, however. Credit rating agencies, according to the Securities and Exchange Commission (SEC), struggled to keep up with more complex types of securities and had difficulty assessing risks embedded in subprime mortgage-backed assets. In addition, according to the SEC, none of the rating agencies examined had specific written procedures for rating residential MBSs and collateralized debt obligations. Thus, some buyers may doubt that credit ratings represent a true gauge of asset quality. Tightened market liquidity in capital markets since August 2007 may stem in part from potential buyers' uncertainty about the credit quality of MBSs and other assets. Buyers may worry that sellers could have incentives to sell assets with difficult-to-detect risks before assets without such hidden hazards. Similar problems may occur with reverse Dutch auctions used to buy troubled assets. A typical Treasury auction sells a large volume of identical government securities whose characteristics are well understood. The reverse Dutch auctions used by the Treasury would need to be adapted to buy highly diverse and relatively small-volume securities, whose characteristics may not be well understood by many buyers. A typical mortgage-backed security issue, while enormous relative to a single housing mortgage, is small when compared to the size of a typical Treasury security issue, and individual tranches (slices) of MBSs are smaller still. Different MBSs and related structured finance assets are very diverse, although their structures and pricing follow some general principles. Thus, selling Treasury securities is like selling commodity steel; buying mortgage-backed securities is like buying used cars. If the Treasury were to run a large number of narrowly defined reverse auctions, it would be more difficult to prevent certain types of market manipulation. For example, a bidder who gains control of a large proportion of an issue might exert influence on auction outcomes. But, if a wider variety of securities or assets were allowed in the same auction, which would sharpen competition, sellers may have an incentive to submit bids for those assets with hidden flaws. Reverse Dutch auctions may therefore be vulnerable to adverse selection, meaning that the average credit quality of submitted assets of a given type may be systematically worse than the average credit quality of all assets of that type. In addition, if assets submitted to an auction were on average worse than other assets of a given type, then auction prices might be biased downwards. Some empirical research has found that adverse selection problems can lower prices on eBay auctions. If reverse auctions for troubled assets generated downwardly biased prices, that could affect valuations of assets held by other firms through mark-to-market accounting requirements. Thus, a downward bias in auction prices due to adverse selection could affect the market value or even solvency of some firms, whether or not they participated in auctions. Moreover, managing a portfolio bought via reverse Dutch auctions susceptible to adverse selection could present financial risks to the federal government. While adverse selection could push prices down (relative to prices appropriate for the average of all assets of a given category), the quality of assets accepted by the Treasury through the reverse auction mechanism could also be lower (relative to average quality of all assets of a given category). To the extent that Treasury overpays for assets relative to their quality due to adverse selection, costs to the taxpayer rise. Whether this effect presents a significant financial risk to the taxpayer is difficult to determine before the reverse Dutch auctions have been running for some time. Auction mechanisms, however, might be designed that could mitigate these adverse selection problems. Analysts close to government auction design discussions have outlined a design in which several similar securities could be listed for an auction. Price offsets or "handicaps" could be applied relative to a benchmark security. For instance, an auction might encompass a specified set of MBSs, underwritten by the same investment bank in the same month. Bids offering a specific MBS issue with a higher average default rate on the underlying mortgages would be reduced by an offset calculated using a financial asset pricing model. Other auction mechanisms might also mitigate these problems. For example, a firm could be required to let the government select an asset randomly from all of its holdings of a specific type of asset if its bid were successful. Or participating firms could be required to post a performance bond that could be used to compensate the government if a firm's assets sold in auctions turned out to be systematically worse than average. Charles Plott, a pioneer in auction design, has designed and tested a reverse Dutch auction that was able to mitigate adverse selection concerns in another context. Uncertainty about the composition of firms' holdings could be an additional source of adverse selection in the administration of the Troubled Asset Relief Program. Some claim that financial institutions have avoided offering to sell large amounts of subprime and other troubled assets out of a concern for the institution's reputation. Other market participants might infer that a would-be seller has a large inventory of subprime and other troubled assets and thus may be a risky counterparty. That inference could adversely affect a potential seller's stock price and its ability to raise capital, thus providing a reason for firms to hold troubled assets. In other words, some firms may worry that attempting to sell troubled assets may damage its reputation, market value, and ability to trade. However, many view the former investment bank Merrill Lynch's sale of troubled assets as a sound strategic move. If financial markets were to associate participation in the Troubled Asset Relief Program (TARP), including bidding in Treasury reverse auctions, with financial weakness, then firms might be less willing to participate. Reputational issues, in the view of many financial experts, have discouraged some firms from participating in certain federal government or Federal Reserve programs. For example, in recent years some have viewed firms using the Federal Reserve's discount window as "desperate." The Federal Reserve Term Auction Facility (TAF), in the view of some, was designed to provide liquidity to firms while avoiding the stigma that some might perceive to be associated with the discount window. U.S. Treasury, however, has stressed that TARP is "not targeted at failing firms," but instead is designed to attract broad participation among financial institutions. The effectiveness of the reverse auction asset purchase program could be reduced if reputational issues caused some firms to forego participation in TARP. Factors that reduce the number of active bidders in an auction can decrease expected revenues and can dampen competition among bidders. The choice of how auction results are released and how much detail is disclosed may affect firms' willingness to submit bids. For example, if firms believe that market analysts can observe or infer from announced auction results that the firm holds large inventories of troubled assets, then that firm may become reluctant to participate in the auction. Designing Treasury reverse auctions for troubled assets and associated announcements of results to avoid any such possible reputational effects may enhance firms' willingness to participate. The order or sequencing in which reverse securities auctions take place may affect the results of auctions. First, the initial reverse auctions might be a learning process for both bidders and the U.S. Treasury. This might imply that smaller, simpler auctions should precede larger and more complex auctions. In the past, new auction designs have sometimes presented unanticipated operational problems or unforeseen strategic vulnerabilities. Careful design and testing of auction mechanisms, however, can minimize such problems. Second, if the Treasury interventions in financial markets do start to unfreeze credit markets as intended, then asset prices will change. Bidders' anticipation that asset prices will rise after the initial auctions (or because of other types of government intervention) could induce bidders to submit fewer assets in earlier auctions. Third, sequencing may raise operational issues because of the large number of asset types, and because of the intrinsic complexity of some mortgage-related securities. The September 20, 2008, Treasury proposal suggested that reverse auctions would play a central role in restoring liquidity to credit markets. It argued that auctions could help stabilize asset and credit markets in two ways. First, firms with illiquid assets would sell them at prices determined by a competitive process, which would supply firms with liquid proceeds of those sales. Second, auction results could provide pricing benchmarks that might stimulate trading in other assets. Some believe that this could improve liquidity conditions in credit markets; others, however, are skeptical. The reverse auction program essentially swaps Treasury securities for troubled mortgage-backed securities. If the prices at which Treasury securities are exchanged for troubled assets are close to current market prices for those assets, then financial institutions may gain liquidity, but might not receive much additional capital. What prices the "troubled" mortgage-related assets will sell at is, therefore, a key question. Merrill Lynch, for example, sold a large stake of senior mortgage-related collateralized default obligations (CDOs) to Lone Star Funds, a private capital fund, for about 22 cents on the dollar. If other assets sold at Treasury reverse auctions at prices reflecting similar discounts, the solvency of some financial institutions might be put in doubt. Some commentators, however, have suggested that Treasury might believe that such assets are underpriced in current conditions. Assets might be underpriced, relative to fundamental factors, because of the rapid deleveraging of financial institutions, which increased the supply of assets and the demand for liquidity. As the price of liquidity rises, measured as the cost of overnight interbank borrowing relative to comparable Treasury rates, highly leveraged financial institutions may come under additional pressure to sell assets. Thus, deleveraging and falling asset prices may create a self-reinforcing spiral. To the extent that buying assets via a reverse auction process might strengthen the link between assets and their underlying values, more normal market conditions might be restored. But others argue that the low prices of "troubled" assets reflect their intrinsic value, and that previous prices were above those justified by fundamentals. Federal Reserve Chairman Ben Bernanke spoke of "hold to maturity" valuations of assets, which would seem to imply that prices above current market levels might be paid. While paying above-market prices for assets would inject capital into financial institutions, it would also increase the costs and risks to taxpayers. How auctions could be designed to ensure "hold to maturity" valuations of assets is unclear. One economist with knowledge of auction design discussions has said that reverse auctions would be designed in a hard-nosed manner to minimize taxpayer costs. But, if current asset prices accurately reflect fundamental value and if the Treasury reverse auctions are run efficiently, comparatively little capital would be injected into the financial sector. While this would minimize costs and risks to taxpayers, such an auction program might provide limited support for financial institutions. Some economists have argued that other means of injecting capital into the financial sector, such as purchases of preferred stock or capital injections balanced by equity warrants (i.e., options to claim an equity stake), might be a better strategy. On October 8, 2008, the U.S. Treasury emphasized that EESA gives it authority to directly inject capital into firms, and is developing strategies to do so. Asset purchases and direct capital injections may have different implications for affected firms. Proceeds of asset purchases would presumably be counted as trading profits, which firms can use without restriction. Capital injections, however, generally provide firms with financial resources that are subject to restrictions. For example, capital injections might provide the U.S. Treasury with the right to demand management changes or equity warrants. Treasury purchases of preferred equity shares would probably commit firms to make regular, specified payments back to the Treasury. Proceeds from asset purchases, however, might be available for dividends, executive compensation, reducing debt, or other purposes. Federal interventions to restore more normal conditions to financial markets would provide substantial benefits to those connected to the financial sector, either directly or indirectly. Of course, some may receive greater benefits than others from a resuscitation of the financial sector. A large-scale federal intervention could impose substantial costs and risks on taxpayers and federal program beneficiaries, although the scale and nature of those costs and risks may depend on how interventions are structured and administered. If Treasury reverse auctions were conducted in a hard-nosed and efficient manner, direct costs to taxpayers and beneficiaries could be minimized. Furthermore, the federal government might well eventually sell assets for more than their purchase price. Such auctions, however, might supply little extra capital to the financial sector, and thus may fail to achieve a normalization of market conditions. Other measures, such as debt/equity swaps, purchases of preferred stock, or trading stock warrants for capital injections, might present the taxpayer with greater financial risks, but might also be better suited to addressing current financial conditions. Auctions in recent years have been used to address a wide range of policy issues. Auctions may capture higher revenues for governments and can allocate scarce resources more efficiently than traditional methods. Different policy issues, however, may require different types of auctions to achieve reasonable results. To provide a basis for evaluating the reverse auction mechanisms that may be used in TARP, this section discusses potential problems that may arise in using auctions, and how those problems can be minimized by careful design of auction mechanisms. The most common auction mechanisms used to sell single items are the first-price sealed-bid auction, the English or ascending-price open-bid auction, and the Dutch or descending-price auction. In the first-price sealed-bid auction, bidders submit bids to the seller, who then selects the highest bid when selling an item or the lowest bid when buying an item. In the English or ascending-price auction, bidders announce prices that must exceed previous prices by a set amount. The last bidder to remain receives the object at her last announced price. In flower markets in Amsterdam and other trading centers in the Netherlands, bidders watch a price clock that starts at a high price and descends at a constant rate. The first bidder to press a button buys the lot of flowers at the price indicated on the price clock. Similar descending-price mechanisms are called Dutch auctions. Treasury auctions for government securities, which use sealed-bid rules, are often described as "Dutch" auctions even though they do not use a descending-price mechanism as in flower auctions. Treasury securities auctions, however, are strategically equivalent to a particular descending-price (Dutch) auction. An auction mechanism is strategically equivalent to another auction mechanism when bidders' incentives, the identity of the winner, and the final sale price are the same for both. Some auction rules, however, may be operationally easier to carry out. For example, bidders can mail in responses for a sealed-bid auction, while English auctions require bidders (or their agents) to gather in the same place. A descending-price (Dutch) auction, under certain conditions, is strategically equivalent to a sealed-bid, first-price auction. A rational bidder calculates what the item for sale is worth to her. If a bidder bid her value, however, she would make zero gain in a first-price auction because the price paid would exactly match the item's value to her. A rational bidder therefore shades her bid downwards, trading off a larger gain (value minus price paid if she wins the auction) against the possibility that she would lose the item by lowering her bid. The same calculation applies to both the sealed-bid, first-price auction and to the descending-price auction, so the two auctions may be considered strategically equivalent. An English (ascending-bid) is strategically equivalent to a second-price sealed-bid auction when bidders know what the object up for auction is worth to them. When bidders have imperfect information about the value of an item, an English or ascending-bid auction may force better-informed bidders to reveal valuable information to less well informed bidders. For example, the value of an antique may depend on who made it, how rare it is, and on who owned it before. A knowledgeable bidder, who may know more about an item's value, will attempt to use bidding strategies that conceal private information. The value to bidders of some auctioned items may be linked. For example, the value one energy company places on an Offshore Continental Shelf (OCS) lease that would allow exploration and extraction of oil and gas will correlate to the value other energy companies place on the same lease. Different companies might have strengths and weaknesses in exploration and extraction techniques, so the value of the lease will not be the same to each company. Any company that got the lease, however, would sell oil and gas on the same world markets. Auctions that sell items whose value to bidders is correlated are called common-value auctions. Bidders in a common-value auction may have different indications of an item's value. For example, many energy companies may have private information about the geological structures of areas covered by an OCS lease. A company holding an OCS lease in a nearby area that had run seismic tests might have more precise information about those geological structures, and thus would have a more precise estimate of the value of the OCS lease up for auction. When bidders have imperfect signals of value, bidders with overly optimistic signals are likely to win auctions. Such bidders, however, will suffer losses because the true value of the item is less than their optimistic estimate. This is the winner's curse: such auction winners would have been better off losing. Sophisticated bidders in common-value auctions shade their bids downward to account for the winner's curse. Sophisticated auction designers release as much information as possible about an item's value so that revenues are not reduced by bidders who shade their bids downwards. That is, bidders with better information bid more aggressively. Certain auction mechanisms, as noted above, are functionally equivalent to certain other auctions run using different rules. The auctions discussed above (Dutch, English, first-price and second-price sealed bid) in theory deliver the same profits to bidders and the same revenues to sellers. Moreover, any (independent private value) auction that awards the item to the highest bidders and attracts the same pool of participants also in theory provides the same profits to bidders and the same revenues to sellers. This result, known as the Revenue Equivalence Theorem, implies that to affect expected revenues requires changing who participates in an auction. For example, minimum bid rules can raise expected revenue, but may lower an auction's economic efficiency. Experimental research has found that some expected auction equivalences hold, while others do not. Experimental testing of revenue equivalence of auction mechanisms is an active research area. Auctions in which multiple units are sold simultaneously are more complex than single-unit auctions. Computing optimal bidding strategies in multiple-unit auctions may be complex and difficult. Designing multiple-unit auctions so that government revenue is maximized and so that scarce resources are likely to be assigned to those who value them the most can be challenging. The federal government, however, has successfully used complex multi-unit auctions to allocate electromagnetic spectrum for wireless communication and related uses. Bidders in some situations can benefit by strategically withdrawing bids on some items in order to lower prices on other items. The logic of this strategy is analogous to standard monopoly or oligopoly pricing models. A monopolist or a firm with some market power can raise profits by reducing output below the level that would prevail in a competitive market. Just as entry by new competitors can reduce the market power of existing firms, auction designs that encourage many bidders to participate can limit the effect of demand-reduction strategies. Auctions that sell complementary goods can be extraordinarily complex. Items are considered complements when groups of items are more valuable than the sum of individual items. For example, take-off rights from a specific airport that a government might auction off will be more valuable if the airline can obtain landing rights at a different airport. Federal Communications Commission auctions of electromagnetic spectrum involve complementarities because a license in one geographic area may be more valuable to a telecommunications firm that holds a license in an adjacent area. Complementarities among troubled assets may complicate current reverse auctions implemented as part of TARP. For instance, some assets backed by sub-prime loans were often linked to collateralized default obligations(CDOs), which provided something akin to insurance to investors holding those assets. In that case, the asset backed by a pool of sub-prime loans and the associated CDO would share a strong complementarity, which could affect behavior in a reverse auction. The U.S. Treasury, as noted above, uses a multi-unit Dutch auction mechanism to sell government securities to primary dealers. The federal government and some corporations have used reverse Dutch auctions for some procurements. Treasury auction mechanisms can, under certain circumstances, be vulnerable to manipulations related to the demand-reduction strategies discussed above. The U.S. Treasury and many entities that use auctions, however, have developed methods designed to detect or mitigate manipulation strategies. In some multiple-unit auctions, such as Dutch auctions, all successful bidders pay the same price. Such auctions are called uniform-price auctions. In other auctions, such as first-price auctions, in which successful bidders pay their bids, different bidders pay different prices for identical items. Such auctions are often called discriminatory or multiple-price auctions. A 2002 International Monetary Fund report found that 10 of 18 advanced industrial countries surveyed used uniform-price auctions, and 15 of 18 used multiple-price auctions. The U.S. Treasury claims that a uniform-price auction raises slightly more revenue than a multiple-price auction because it reduces winner's curse risks.

To address the turmoil in financial markets, the Emergency Economic Stabilization Act (EESA; H.R. 1424, P.L. 110-343), enacted on October 3, 2008, authorizes purchases of "troubled assets." The act passed the Senate on October 1, 2008, passed the House on October 3, 2008, and was signed into law the same day. While the last Bush Administration Treasury Secretary, Henry Paulson, initially proposed using reverse Dutch auctions to purchase troubled assets--primarily mortgage-related securities from financial institutions--he soon chose to shelve the reverse auction program. A "Financial Stability Plan" outlined by his successor, Secretary Timothy Geithner, may include reverse auctions, according to some experts. Much of this plan would require Congressional authorization. Auctions are especially useful for selling assets whose value to potential owners is unknown to the seller. Reverse auctions are useful when a buyer does not know what value sellers place on assets. Auction results could clarify the market value of troubled assets. The price discovery properties of auctions could stimulate trading by reducing private traders' uncertainty about the value of troubled assets. The EESA Congressional Oversight Board expressed concern over asset pricing in the Troubled Asset Relief Program (TARP). Well-designed auctions can reduce the chances of overpaying for assets. In reverse Dutch auctions, a buyer purchases multiple objects from private parties at a price set by the last accepted bid. The government has used reverse auctions since the Revolutionary War. Designing efficient reverse Dutch auctions may present some tradeoffs between enhancing competition among bidders and overpaying for assets relative to their quality. Careful auction design, however, can help minimize these problems. A reverse auction program essentially swaps Treasury securities for troubled mortgage-backed securities. If Treasury securities are exchanged for troubled assets at prices close to those assets' current market prices, costs to the taxpayer would be minimized. Financial institutions, however, may gain some liquidity, but might not receive much additional capital. Some economists argued that other means of injecting capital into the financial sector, such as purchases of preferred stock or capital injections balanced by equity warrants (i.e., options to claim an equity stake), would be a better strategy. Since passage of EESA, the U.S. Treasury has been working to design methods to inject capital into firms and restore market liquidity. In mid-January 2009, Congress declined to block release of the second tranche of $350 billion in TARP funds. The heterogeneity of troubled assets may present challenges to the Treasury auction program. The reverse Dutch auctions would need to be adapted to buy highly diverse and relatively small-volume securities, in a way that minimizes risks of trading manipulation. Reverse Dutch auctions may be vulnerable to adverse selection, meaning that the average credit quality of submitted assets of a given type may be systematically worse than the average credit quality of all assets of that type. Auction mechanisms might be designed that could mitigate these problems. Recent academic research in auction theory and in experimental economics has examined how various types of auctions work. Auctions may capture higher revenues for governments and can often allocate scarce resources more efficiently than traditional methods of selling or purchasing. Different policy problems, however, call for different types of auctions. Government economists involved in designing reverse auctions to buy troubled assets have drawn upon academic research and internal Treasury research. This report will be updated as events warrant.

Article I, Section 8, clause 7 of the Constitution grants Congress power to establish post offices and post roads. Pursuant to this power, Congress enacted the Postal Reorganization Act of 1970, which created the United States Postal Service as an independent establishment in the executive branch of the U.S. government. It enacted this statute to permit the Postal Service to operate more like a business than a government entity. Before the 1970 act became law, the Cabinet-level Department of the Post Office operated postal services. While Congress applied to the Postal Service some statutes, including those relating to veterans' preference and retirement, that apply to federal entities and prohibited postal employees, like other federal employees, from striking, it provided in Section 1209(a) of Title 39 of the United States Code that, "Employee-management relations shall, to the extent not inconsistent with the provisions of this title, be subject to the provisions of subchapter II of chapter 7 of Title 29." This language cites the National Labor Relations Act (NLRA), which governs private sector employee-management relations. These relations in most federal departments and agencies are regulated by chapter 71 of Title 5 of the U.S. Code, known as the Federal Labor-Management Relations Statute. Congress in the 1970 act, codified at Title 39 of the U.S. Code, also granted the U.S. Postal Service broader employee-management authority than exercised by most other federal departments and agencies. A provision of the act, 39 U.S.C. Section 1005(f), identifies subjects of Postal Service collective bargaining: compensation, benefits, and other terms and conditions of employment. This scope differs from the one that applies to most federal agencies, which is limited to conditions of employment. For those agencies, the phrase "conditions of employment" is defined in 5 U.S.C. Section 7103 expressly to exclude policies, practices, and matters relating to political activities prohibited under subchapter III of chapter 73 of Title 5 (i.e., the Hatch Act); classification of any position; and, significantly, conditions of employment that are specifically provided for in federal statute. This final exclusion precludes collective bargaining over conditions of employment such as Federal Employees Group Life Insurance (FEGLI) and the Federal Employees Health Benefits Program (FEHBP) because they are specifically provided for in 5 U.S.C. chapters 87 and 89, respectively. Addressing the transition from the Postal Office Department to the businesslike U.S. Postal Service, Congress in 39 U.S.C. Section 1005(f) indicated that compensation, fringe benefits, and other terms and conditions of employment that were in effect immediately prior to the effective date of the section (i.e., July 1, 1971) would continue to apply to officers and employees of the Postal Service in accordance with chapters 10 and 12 of Title 39, which relate to employment and employee-management relations, respectively. The final sentence of Section 1005(f) states the following: No variation, addition, or substitution with respect to fringe benefits shall result in a program of fringe benefits which on the whole is less favorable to the officers and employees in effect on the effective date of this section, and as to officers and employees for whom there is a collective-bargaining representative, no such variation, addition, or substitution shall be made except by agreement between the collective bargaining representative and the Postal Service. Congress provided procedures for terminating collective bargaining agreements in Section 1207 of Title 39. This section states that a party wishing to terminate or modify an agreement while it is in effect must serve timely written notice on the other party. If parties cannot agree on a resolution or adopt a procedure for a binding resolution of a dispute, the Director of the Federal Mediation and Conciliation Service must appoint a mediator. This section also grants authority to establish an arbitration board under certain circumstances and provides that a board decision is conclusive and binding on the parties. Collective bargaining agreements are contracts between the Postal Service and unions that prescribe employee-management relations on subjects that Congress has permitted to be collectively bargained. Can Congress through legislation modify the scope of bargaining or terms of collective bargaining agreements? Congress has authority prospectively to modify the scope of bargaining or terms of collective bargaining agreements after they expire. In the 1970 act, Congress granted the Postal Service and collective-bargaining representatives authority to bargain collectively over compensation, fringe benefits such as health insurance and life insurance, and other conditions of employment, but it could amend that statute to limit the scope of bargaining subjects in the future. For example, Congress could mandate that rates of employee premiums for health or life insurance no longer will be subjects of collective bargaining. Enacting a statute to modify the scope of bargaining or terms of agreements before they expire, however, may present legal questions to be resolved by a court. For example, a court may have to determine whether such a statute may cause the Postal Service to breach a contract or exceed constitutional limits under the Takings and/or Due Process Clauses of the Fifth Amendment. Some sections of Title III "Postal Service Workforce" as reported favorably to the full House by the House Committee on Oversight and Government Reform on October 13, 2011, would directly modify some provisions of Title 39 of the U.S. Code that relate to Postal Service collective bargaining agreements and employee-management relations. Many of these sections appear to have been based on recommendations of the President's Commission on the United States Postal Service issued in 2003. Section 301(a), "Modifications Relating to Pay Comparability," of H.R. 2309 would amend the first sentence of 39 U.S.C. Section 101(c), which states that, "As an employer, the Postal Service shall achieve and maintain compensation for its officers and employees comparable to the rates and types of compensation paid in the private sector of the economy of the United States." This subsection would insert "total" before "rates and types of compensation" and insert "entire" before "private sector." Section 301(b) would make a corresponding change to the second sentence of 39 U.S.C. SS1003(a), which provides that, "It shall be the policy of the Postal Service to maintain compensation and benefits for all officers and employees on a standard of comparability to the compensation and benefits paid for comparable levels of work in the private sector of the economy." "Total" would be inserted before "compensation and benefits" each place it appears and "entire" would be inserted before "private sector." Section 301(c) would provide that for purposes of amendments made by Section 301, any determination of total rates and types of compensation or total compensation and benefits "... shall, at a minimum, take into account pay, health benefits, retirement benefits, life insurance benefits, leave, holidays, and continuity and stability of employment." The President's Commission Report explained that amendments to this effect would clarify that the 1970 act's commitment to comparability with the private sector should apply to total compensation packages that are available to Postal Service officers and employees and should take into account the value of federal benefits such as cost of living increases in retirement that may not be widely available to private sector workers. Section 302 of H.R. 2309 , "Limitations under FEGLI and FEHBP," would amend 39 U.S.C. Section 1003 by adding at the end a new subsection (e) to provide that Postal Service employer contributions for government life insurance and health insurance benefit programs shall be the same as those for government departments and agencies. This amendment would take effect for each fiscal year after September 30, 2013, the end of FY2013. For employees covered by collective bargaining agreements, however, this change would not take effect for any fiscal year until after these agreements expire, including any portion that remains of a fiscal year if those agreements expire before the end of a fiscal year. Section 8707(c)(2) of Title 5 of the U.S. Code provides that 66.66% of premium costs shall be withheld for employees who participate in the Federal Employees Group Life Insurance (FEGLI) program. Section 8708(a) states that the government agency contribution is one-half of the share paid by employees. According to the committee report, Postal Service employees currently pay nothing for life insurance premiums compared to over 66% that other federal employees pay. Because employees pay nothing for these premiums, the Postal Service as the employing agency pays 100% of them. Section 8906(b)(1) of Title 5 provides that the biweekly government contribution rate in the Federal Employees Health Benefits Program (FEHBP) for most federal employees can be adjusted to 72% of the Office of Personnel Management-determined weighted average of subscription charges for individual only and for individual and family health insurance coverage. Under current law, bargaining representatives can and have negotiated higher Postal Service employer contributions for employees that have resulted in lower employee contributions. The committee report observes that postal employees currently pay 21% of health care premiums compared to 28% that other federal employees pay. As a consequence of these agreement terms, the Postal Service as the employing agency pays an average of 79% of health insurance premiums for its employees. Section 303 of H.R. 2309 , "Repeal of Provision Relating to Overall Value of Fringe Benefits," would repeal the last sentence of 39 U.S. Section 1005(f), which constrains the ability of the Postal Service to modify fringe benefits. As noted above, this subsection states that compensation, benefits, and other terms and conditions of employment that were in effect before the effective date of the Postal Reorganization Act of 1970, July 1, 1971, shall continue to apply to Postal Service officers and employees unless changed by the Postal Service in accordance with chapters 10 and 12 of Title 39 of the U.S. Code. The final sentence of Section 1005(f) that would be repealed by Section 303 of H.R. 2309 provides that No variation, addition, or substitution with respect to fringe benefits shall result in a program of fringe benefits which on the whole is less favorable to the officers and employees in effect on the effective date of this section, and as to officers and employees for whom there is a collective bargaining representative, no such variation, addition, or substitution shall be made except by agreement between the collective bargaining representative and the Postal Service . (Emphasis supplied.) This section would implement a recommendation of the President's Commission Report. It would appear to permit the Postal Service to vary, add to, or substitute fringe benefits which on the whole could be less favorable to officers and employees than those that were in effect in 1971. Moreover, the Postal Service would appear to be able to modify fringe benefits for officers and employees who have a collective bargaining representative without achieving agreement between that representative and the Postal Service. Section 304, "Applicability of Reduction-in-Force Procedures," would amend 39 U.S.C. Section 1206, which relates to collective bargaining agreements, by adding at the end new subsections (d) through (f). As amended by Section 304, 39 U.S.C. Section 1206(d) would prohibit any provision that would bar reduction-in-force procedures under Title 5 of the United States Code for collective bargaining agreements between the Postal Service and bargaining representatives that are ratified after subsection (d) is enacted. For collective bargaining agreements between the Postal Service and bargaining representatives that were ratified before the enactment date of H.R. 2309 , Section 1206(e), as amended by Section 304, would require renegotiating any provision that restricts applying Title 5 reduction-in-force procedures. The new Section 1206(f) would provide that if a collective bargaining agreement ratified after the enactment date of H.R. 2309 includes reduction-in-force procedures that can be applied in lieu of those in Title 5, the Postal Service may, in its discretion, apply to members of that bargaining unit the alternative procedures or the Title 5 procedures. If procedures for resolving a dispute or impasse are invoked, however, the award of an arbitration board or other resolution reached could not provide for eliminating or substituting any alternative procedures in lieu of Title 5 reduction-in-force procedures. The intent of Section 304 is to prohibit no-layoff clauses in future collective bargaining agreements and require renegotiating any agreements that currently have them. The President's Commission Report observed that protection from layoffs had been included in collective bargaining agreements since around 1978 and that as of February of 2003, when that report was written, these clauses protected from layoffs an average of about 89% of Postal Service union employees with some variation from union to union. Referring to collectively bargained restrictions on the Postal Service's ability to use Title 5 reduction-in-force procedures, the House committee report states that, "... postal employees are virtually the only federal workers who enjoy such protections." Title 5 procedures generally take into account tenure of employment including type of appointment (e.g., career or career-conditional); veterans' preference; length of service; and efficiency or performance ratings. The report adds that, "This is no longer tenable, since the Postal Service is now in a position where it is unable to achieve workforce reductions through attrition alone. The bill specifically allows unions to negotiate alternative reduction-in-force methods that achieve needed rightsizing." The report continues that this alternative authority was granted to permit postal unions to negotiate other forms of reduction-in-force such as retirement conversion as alternatives to the last-in-first-out method prescribed under Title 5. Section 305 of H.R. 2309 , "Modifications Relating to Collective Bargaining," would strike subsections (c) and (d) of 39 U.S.C. Section 1207, which relate to procedures for resolving labor disputes. It would replace them with new subsections (c) and (d) to require neutral arbitrators, impose and/or shorten time limits on mediation and arbitration, and specify factors that arbitration boards must consider. Subsection (c) would be amended to change the manner of selecting members of each three-member arbitration board which is established if parties cannot resolve a dispute within 30 days after a mediator was appointed or if they decide upon arbitration before that 30-day period expires. The board would consist of one member appointed by the Postal Service and one member appointed by the bargaining representative of employees and a third member who had been appointed as a mediator pursuant to 39 U.S.C. Section 1207(b). Section 1207(c)(1) of current law provides that the Postal Service and the collective bargaining representative of employees each shall select one board member and that the two members who were selected by the parties shall choose the third board member. Currently, these parties are not required to select neutral arbitrators. If either of the parties fails to select a member or if the two parties cannot agree on a third member, however, the Director of the Federal Mediation and Conciliation Service selects a party's member or third member from a list of nine neutral arbitrators. While the amendment in Section 305 of H.R. 2309 would retain each party's opportunity to select one arbitration board member, it would require that the parties select an arbitrator from a list of nine neutral arbitrators provided by the Director rather than anyone each party selects as under current law. This amendment would retain current law regarding the Director's selection of a party's board member from that list if a party fails to select a neutral arbitrator from it within seven days after the list is made available. It would change current law by making the mediator who had been selected from that list by the Director pursuant to Section 1207(b) the third arbitration board member. The parties no longer jointly would select the third member. The President's Commission Report indicated that by putting the mediator on an arbitration board, progress that had been made during the negotiation and mediation phases would not be lost, arbitrators would be made aware of earlier concessions that each party had made, and the parties would be less likely to revert to earlier bargaining positions. The report said that the entire process would not have to "start from scratch." Pursuant to 39 U.S.C. Section 1207(c)(3), as amended by Section 305 of H.R. 2309 , an arbitration board would be required to give the parties a full and fair hearing no more than 40 days after it is established. No more than seven days after the hearing is concluded, each party would have to present two offer packages, each of which would specify the terms of a proposed final agreement. No later than three days after submission of final offer packages, the arbitration board would select one of them as its tentative award. The board, however, could not select a final offer package unless the offer complies with each of the following: (1) it has comparability with the private sector in 39 U.S.C. Sections 101(c) and 1003(a); (2) it takes into account the current financial condition of the Postal Service; and (3) it takes into account the long-term financial condition of the Postal Service. If the board unanimously determines, based on clear and convincing evidence presented during the hearing, that neither final offer satisfies these three conditions, the board by majority vote would be required to select a tentative award (i.e., the package that best meets these conditions) and modify it to the minimum extent to satisfy them. The parties could negotiate a substitute award to replace the tentative award selected by the arbitration board from the final offers that had been submitted by the parties or rendered by the board after it selects a final offer package that best meets the three conditions and modifies it. If no agreement on a substitute award is reached by the parties within 10 days after the date on which the tentative award is selected or rendered, the tentative award would become final. If neither party submits a final offer package by the seventh day after a hearing is concluded, the arbitration board would have to develop and issue a final award no later than 20 days after the seventh day. A final award or agreement would be conclusive and binding upon the parties. Costs of the arbitration board and mediation would be shared by the Postal Service and the bargaining representative. Section 1207(d) of Title 39 of the U.S. Code would be amended by Section 305 of H.R. 2309 to require appointing a mediator if a bargaining unit whose recognized collective bargaining representative does not have a collective bargaining agreement with the Postal Service and if the parties fail to reach agreement on such an agreement within 90 days after bargaining commences. A mediator would have to be appointed unless the parties previously have agreed to another procedure for binding resolution of their differences. If parties fail to reach agreement within 180 days after collective bargaining commences, an arbitration board would be established to provide conclusive and binding arbitration in accordance with subsection (c). The committee report explains that Section 305 Reforms the collective bargaining process to contain a mediation-arbitration process with a defined timeline model after recommendations of the 2003 President's Commission on the Postal Service. Creates an arbitration board of three neutral individuals. Any arbitration award is required to take into account both pay comparability with the private sector and the financial condition of the Postal Service. Further, once the arbitration stage has been reached, any agreement reached by the Postal Service and a union independent of the arbitration panel must also satisfy these same requirements. If such an agreement fails to do so, the arbitration panel is required to amend the agreement in a manner that does satisfy the requirement. As this excerpt reveals, this mediation-arbitration process is based on recommendations in the 2003 President's Commission on the Postal Service. The commission asserted that the current process took too long and encouraged parties to revert to entrenched positions rather than seek to resolve their differences. Section 202, "Establishment of the Authority," in Title II of H.R. 2309 would create the Postal Service Financial Responsibility and Management Assistance Authority (the Authority) to assume all authorities and responsibilities of the Postal Service Board of Governors, individual governors, and the Postal Service during a "control period." The Authority would be a receiver-like body of five non-salaried members appointed by the President from recommendations made by congressional leaders. According to the committee report, this proposal "... drew on the highly successful D.C. Control Board, formally known as the District of Columbia Financial Responsibility and Management Assistance Authority, ... a receiver-like body put in place during the 1990s in order to restore D.C.'s solvency during a period of financial mismanagement." A control period would commence whenever the Postal Service has been in default to the United States Treasury for a period of 30 days. For the first control period, the Authority would operate solely in an advisory capacity. At the end of the second full fiscal year or any year thereafter during the length of a control period if the Postal Service's annual deficit is greater than $2 billion, however, the Authority would be fully in force. During an advisory period, the Authority could not employ any staff, and any provision that requires it or the Postal Service to take any action only would take effect in the event that the Authority comes into full force. The date that the Authority comes into full force would be considered the commencement date of the control period. During a control period when fully in force, the Authority would direct the exercise of the Postal Service's powers, including, among other things, "human resource strategies, collective bargaining strategies, negotiation parameters, and collective bargaining agreements, and the compensation structure for nonbargaining employees." Section 224(b) of H.R. 2309 , "Responsibilities of the Authority," would direct the Postmaster General to submit to the Authority any proposal that has a substantial effect on these quoted items. If the Authority determines that a proposal is consistent with a financial plan and budget, it would notify the Postmaster General that the proposal is approved. If it determines that a proposal significantly is inconsistent with that plan and budget, the Authority would be required to notify the Postmaster General of its finding with an explanation of its reason for that finding and, to the extent it considers appropriate, provide the Postmaster General with recommendations for modifying the proposal. The Authority's failure to notify the Postmaster General of approval or disapproval within a prescribed time would be deemed approval. When in full force, the Authority would be empowered to review each contract, including each labor contract entered into through collective bargaining, that the Postal Service proposes to enter into, renew, modify, or extend during a control period. The Postal Service could not enter into such a contract unless the Authority determines that it is consistent with the financial plan and budget for the fiscal year. Other contracts, after execution, including collective bargaining agreements entered into by the Postal Service that are in effect during a control period, would have to be submitted to the Authority when any control period commences and at such other times as it may require. The bill would direct the Authority to review these contracts after execution to determine whether they are consistent with the financial plan and budget for the fiscal year. If the Authority determines that a contract is not consistent, the Authority would have to take such actions that are within its powers to revise it. The Authority and its members would not be liable for any obligation or claim against the Postal Service resulting from actions to carry out Title II of H.R. 2309 , entitled "Postal Service Financial Responsibility and Management Assistance Authority." The bill expresses the sense of Congress that, in making determinations that affect prior collective bargaining agreements and prior agreements on workforce reduction, any rightsizing effort within the Postal Service that results in a decrease in the number of postal employees should ensure that such employees can receive their full pensions, are fully compensated, and that agreements on workforce reduction which were entered into with the Postal Service be fully honored. When fully in force, the Authority could seek judicial enforcement of its Authority to carry out its responsibilities. Any Postal Service officer or employee who, by action or inaction, fails to comply with any Authority directive or other order under Section 226(c) of H.R. 2309 , "Recommendations Regarding Financial Stability," would be subject to appropriate administrative discipline, including suspension from duty without pay or removal from office, by order of either the Postmaster General or the Authority. Whenever a Postal Service officer or employee takes or fails to take any action in a manner which is noncompliant with such a directive or order, the Postmaster General would be required immediately to report to the Authority all pertinent facts, together with a statement of any administrative disciplinary actions that the Postmaster took or proposes to take. Section 226(c) would empower the Authority to implement recommendations regarding financial stability that it has submitted to the Postal Service, but that were rejected by the Postal Service. The Authority's recommendations could include, among others, establishing alternatives to meet obligations to pay for pensions and retirement benefits of current and future Postal Service employees and increasing use of an employee personnel system based upon performance standards. This subsection would apply with respect to Authority recommendations made after the expiration of the six-month period beginning on the date a control period commences. Section 213(a) of H.R. 2309 , "Treatment of Actions Arising Under This Title," would authorize a person, including the Postal Service, adversely affected or aggrieved by an Authority order or decision to institute proceedings within 30 days after a decision or order becomes final by filing a petition with the Court of Appeals for the District of Columbia. It would direct the court to review the order or decision in accordance with 5 U.S.C. Section 706 and 28 U.S.C. chapter 158 and Section 2112. This subsection states that, "Judicial review shall be limited to the question of whether the Authority acted in excess of its statutory authority, and determinations of the Authority shall be upheld if based on a permissible construction of the statutory authority." The bill would permit Supreme Court review of a D.C. Circuit decision only if a petition for review is filed within 10 days after a decision is entered. No order of any court granting declaratory or injunctive relief against the Authority, including relief that permits or requires obligating, borrowing, or expending funds, could take effect while an action is pending in court, during the time an appeal may be taken, or, if an appeal is taken, during the period before the court has entered its final order disposing of the action. The bill states that the U.S. Court of Appeals for the District of Columbia and the Supreme Court have a duty to advance on the docket and expedite to the greatest possible extent the disposition of any matter brought by an affected or aggrieved person. The Senate passed S. 1789 on April 25, 2012, by a vote of 62 to 37. Section 106, "Arbitration: Labor Disputes," would amend 39 U.S.C. Section 1207(c)(2), which relates to arbitration proceedings to resolve labor disputes. It would add a requirement that, "In rendering a decision under this paragraph, the arbitration board shall consider such factors as the financial condition of the Postal Service." It also would add the following language: "Nothing in this section may be construed to limit the relevant factors that the arbitration board may take into consideration in rendering a decision under paragraph (2)." This Senate-passed language is similar but not identical to language in Section 105 of S. 1789 that was reported to the Senate by the Committee on Homeland Security and Governmental Affairs. The committee report observed that two successive Postmasters General requested a statutory amendment requiring arbitration boards to consider the Postal Service's financial condition and that the Government Accountability Office favored such an amendment, but that some postal union presidents opposed it. This report added that The Committee decided that, at this period when the Postal Service faces such dire financial difficulties, arbitrators must consider the financial condition of the Postal Service, and S. 1789 should say so explicitly. However, the Committee was determined to include a balanced provision in S. 1789 , making it clear that Congress does not believe that the financial condition of the Postal Service, or any other objectives put forward by the Postal Service or one of its unions, are the only factors that arbitrators must consider. Another provision of S. 1789 , as passed by the Senate, Section 104, states that consistent with 39 U.S.C. Section 1005(f), which provides that the program of fringe benefits must not be less favorable than the one in effect in 1971, the Postal Service may enter into a joint collective bargaining agreement with bargaining representatives to establish the Postal Service Health Benefits Program as a substitute for the Federal Employees Health Benefits Program. Any dispute in negotiating this program would not be subject to arbitration. Authority for this joint negotiation would extend until September 30, 2012. During floor consideration of S. 1789 , the Senate by a vote of 23 to 76 rejected an amendment offered by Senator Rand Paul to amend Section 1206, "Collective bargaining agreements," of title 39 of the U.S. Code. This amendment would provide that, "The Postal Service may not enter into any collective bargaining agreement with any labor organization." It also made technical and conforming changes to other sections in chapter 12, "Employee-Management Agreements," of Title 39 that relate to collective bargaining. This report has described the scope of Postal Service collective bargaining and authority of Congress to modify employee-management relations by altering the scope of collective bargaining or terms of collective bargaining agreements. It also has summarized changes to collective bargaining proposed in H.R. 2309 , the Postal Reform Act of 2011, as reported to the House by the Committee on Oversight and Government Reform, and in S. 1789 , 112 th Congress, as passed by the Senate Congress created the United States Postal Service as an instrumentality in the executive branch of the federal government in the Postal Reorganization Act of 1970, P.L. 91-375, to permit it to operate more like a business than a government department or agency. Postal Service employee-management relations were made subject to the National Labor Relations Act, which governs private sector relations, rather than the Federal Labor-Management Relations Statute in chapter 71 of the United States Code, which applies to most federal entities. Congress granted the Postal Service broader authority to bargain collectively over compensation, benefits, and other conditions of employment. Most federal departments and agencies may bargain collectively only over conditions of employment, excluding conditions that are subjects of federal statute such as life insurance and health insurance and position classification. The Postal Service Reform Act of 2011, H.R. 2309 , would modify some provisions of Title 39 of the U.S. Code regarding collective bargaining and employee-management relations. These provisions would seek to broaden the measures of pay comparability between Postal Service officers and employees and private sector employees as well as the overall value of fringe benefit packages by taking into account some benefits that are not widely available in the private sector. They also would reduce the employing agency share that the Postal Service now pays for government life insurance and health insurance premiums for its employees. These changes also would prohibit including no-layoff clauses in collective bargaining agreements not yet ratified when H.R. 2309 is enacted and require renegotiating already ratified agreements that have them, and modify procedures for resolving collective bargaining disputes by requiring parties to appoint neutral arbitrators and by including mediators in arbitration boards. H.R. 2309 also would create a receiver-like Postal Service Financial Responsibility and Management Assistance Authority to assume all authorities and responsibilities of the Board of Governors of the Postal Service during a control period (i.e., any period when the Postal Service has been in default to the Treasury of the United States). The Authority would be advisory only during the first two years of a control period, but would become fully in force at the completion of the second full fiscal year or any year thereafter during the length of a control period if the Postal Service's annual deficit is greater than $2 billion. When fully in force, the Authority, among other responsibilities, could approve human resources strategies, collective bargaining strategies, negotiation parameters, and collective bargaining agreements. The Postmaster General could not enter into, renew, modify, or extend a contract, including a labor contract entered into through collective bargaining, unless the Authority determined that doing so is consistent with the financial plan and budget for the fiscal year. The Authority also could take such actions within its responsibilities to revise a contract, including a collective bargaining agreement that is in effect during a control period, which it determines to be inconsistent with the financial plan and budget for the fiscal year. S. 1789 , the 21 st Century Post Office Act of 2012, as passed the Senate, would amend 39 U.S.C. Section 1207(c) to require an arbitration board to consider the financial condition of the Postal Service when it issues a final decision, but this requirement would not preclude a board from considering any other relevant factors. It also would authorize the Postal Service until September 30, 2013, to enter into a joint collective bargaining agreement with bargaining representatives to establish the Postal Service Health Benefits Program. During floor consideration of S. 1789 , the Senate rejected an amendment to eliminate Postal Service collective bargaining by a vote of 23 to 76.

This report describes the scope of the collective bargaining authority that Congress has granted to the Postal Service and authority of Congress to modify employee-management relations by altering that scope or the terms of collective bargaining agreements. It also summarizes some provisions--H.R. 2309, the Postal Reform Act of 2011, and S. 1789, the 21st Century Postal Service Act of 2012, both of the 112th Congress--that relate to collective bargaining. This report will be updated to reflect changes in relevant developments.

Challenges to Russia's democratic development have long been of concern to Congress as it has considered the course of U.S.-Russia cooperation. The Obama Administration has been critical of the apparently flawed Russian presidential election which took place on March 4, 2012, but has called for continued engagement with Russia and newly elected President Vladimir Putin on issues of mutual strategic concern. Some in Congress also have criticized the conduct of the election, but have endorsed continued engagement, while others have called for stepping back and reevaluating the Administration's engagement policy. Congress may consider the implications of another Putin presidency, lagging democratization, and human rights abuses in Russia as it debates possible future foreign assistance and trade legislation and other aspects of U.S.-Russia relations. Former Russian President Vladimir Putin served two elected terms from 2000 to 2008, after which he was required to step down due to a constitutional limit to two successive terms. He endorsed his then-First Deputy Prime Minister Dmitriy Medvedev as his choice to be the next president. Medvedev was elected by a wide margin in March 2008, and upon taking office nominated Putin to be his prime minister. In September 2011, Prime Minister Putin and President Medvedev announced that they would exchange places so that Putin could re-assume the presidency. The two leaders claimed that they had agreed to consider this switch before Medvedev had been elected in 2008. This announcement created a great deal of resentment among many Russians who felt that a backroom deal had been foisted on them. The resentment was mostly low-key at first, but signs included polls showing growing dissatisfaction with Putin and Medvedev. The trigger for wider open discontent was a December 2011 election to Russia's legislature, the Duma, that was widely viewed by many Russians as not free and fair. Demonstrations against the election began even before the polls closed, and over the next few weeks, several protests of up to 100,000 or more people were held in Moscow and many other cities, the largest since before the collapse of the Soviet Union over 20 years ago. These protesters demanded that a new Duma election be held, but also called for a scheduled March 4, 2012, presidential election to be free and fair. At first, these protests appeared to shock the Putin government, leading to some arrests, but the government soon decided to permit the protest rallies as a means to "let off steam," and President Medvedev introduced some legislation that he claimed would enhance democratization in Russia in the future. Five candidates were able to register for the March 4, 2012, presidential election. Four of the five candidates--Putin, Gennadiy Zyuganov, Vladimir Zhirinovskiy, and Sergey Mironov--were nominated by parties with seats in the Duma. According to the election rules, other prospective candidates from minor parties not represented in the Duma or self-nominated individuals were required to gather 2 million signatures of support, with no more that 50,000 in each of at least 40 regions nationwide, within about one month. Many analysts have viewed these and many other requirements imposed on prospective minor party and independent candidates as too restrictive and as limiting political participation. Of the 17 individuals who initially announced they would run for the presidency, some dropped out and many were disqualified on technical grounds by the Central Electoral Commission (CEC), and only three managed to submit signatures. Two out of the three--regional governor Dmitriy Mezentsev and opposition Yabloko Party head Grigoriy Yavlinskiy--were disqualified by the CEC on the grounds that over 5% of their signatures were invalid. The signatures of the third prospective candidate, businessman Mikhail Prokhorov, were deemed valid and he was placed on the ballot. According to some critics, Mezentsev was a "technical candidate," who was nominated only to ensure that if all other candidates withdrew from the election, Putin would still have an opponent as required under the electoral law. After Prokhorov was registered, however, Mezentsev was no longer needed and he was eliminated as a candidate, these critics claim. Yavlinskiy was deemed ineligible on the grounds that some signatures gathered electronically were not handwritten in ink and therefore were invalid. Many observers argued that he was eliminated because he would have been the only bona fide opposition candidate on the ballot. Of the registered candidates, all but Prokhorov had run in previous presidential elections and lost badly. Zyuganov and Zhirinovskiy had run several times. While he was speaker of the Federation Council (the upper legislative chamber), Mironov ran in the 2004 presidential election, where he praised Putin's policies. Prokhorov announced his candidacy just two days after a large opposition demonstration on December 10, 2011, raising speculation by some critics that he was urged to run by the government as a candidate who might attract the votes of some of the liberal protesters. According to polling, substantial percentages of prospective voters viewed all these candidates in a negative light and would never vote for them. For instance, over one-quarter of those polled stated that they would never vote for an "oligarch" like Prokhorov (he is said to be the third-richest man in Russia). These negative views greatly hampered the effectiveness of these candidates' campaign efforts, and many voters may well have voted for Putin as the "lesser evil," according to some observers. Besides permitting protests "for free elections" as well as opposition presidential candidate meetings, the Medvedev-Putin government launched efforts to appeal to wavering if not disgruntled voters, including by offering opposition figures jobs and by making some changes in government postings. Among the latter, Russia's ambassador to NATO, the nationalist Dmitriy Rogozin, was elevated to deputy prime minister in a seeming effort to attract the nationalist vote, according to some observers. Also, the Putin campaign orchestrated large-scale rallies, the most prominent of which was a pro-Putin demonstration on February 4 in Moscow aimed at rivaling the attendance at a "for free elections" rally, and a campaign rally in the Luzhniki stadium in Moscow on February 26, 2012. At this final campaign rally of the Putin campaign, some individuals reportedly had arrived by bus or train after trips lasting more than 24 hours, even though Putin's attendance at the rally was uncertain. The government claimed that over 130,000 supporters attended the rally, although the stadium's capacity is about 84,000. In addition to these pro-Putin events, a wave of television shows was launched extolling Putin's rule and condemning alleged U.S. and opposition "subversion" against Russia. At the same time, authorities moved to harass and suppress independent vote monitoring groups, the Internet, and certain "old media" newspapers and broadcasters that the opposition relied on. Putin refused to participate in televised debates with the other candidates, but appeared extensively on television in the guise of carrying out his duties as prime minister. Also, from mid-January through late February, he published seven long articles in major newspapers. These "election manifesto" articles covered such policy issues as ethnicity, the economy, democracy, socioeconomic problems, national security, and foreign policy. In the first overview article, Putin boasted that during his rule, he helped "deliver Russia from the blind alley of civil war, break the back of terrorism, restore the country's territorial integrity and constitutional order, and spark economic revival, giving us a decade distinguished by one of the world's fastest economic growth rates." In the democracy article, he argued that there was no democracy in Russia in the 1990s, only "anarchy and oligarchy," but that under his rule in the 2000s, democracy had been established. He defined this democracy in terms of the rights of Russians to employment, free healthcare, and education, although he admitted that civil society recently had demanded more political participation. However, he warned against creating a contentious electoral environment of "buffoons" rather than one where "responsible" people are elected, and called for retaining a strong federal government if gubernatorial elections are reinstated. He also called for greater efforts to combat corruption, which he claimed had strengthened when young greedy people had moved into the civil service. In general, the articles appeared to be a reiteration of existing policies and sentiments, rather than a forum for launching new initiatives, according to many observers. Besides these efforts, Putin boosted or promised large increases in military and government pay, pensions, and student stipends. These benefits may have made many voters very receptive to his argument that they should elect him in order to preserve their benefits. A major aspect of the shift in tactics by the Putin campaign involved blaming the United States and the West for the protests. This anti-Americanism aimed to define the election as a patriotic vote for Putin. After Secretary Clinton voiced criticism of the Duma election in early December 2011, Putin accused her of "giving orders" for the launch of protests. Rogozin even asserted that Secretary Clinton and former Secretary Madeleine Albright wanted to destroy Russia in order to take over Siberia's mineral resources. At the campaign rally at the Luzhniki stadium on February 23, Putin urged voters "not to look abroad ... and not betray their motherland, but to stay with us, to work for [Russia's] benefit and its people. And love it the way we do." This anti-American theme also was prominent in a number of supposedly non-partisan talk shows and "documentaries" aired on state-owned or controlled television. Several major Russian polling organizations are owned by the government or receive government contracts, so their objectivity was of concern, according to some observers. In particular, the prominent All-Russian Center for the Study of Public Opinion (known by its Russian acronym, VTsIOM), is state-owned. Some critics have argued that VTsIOM's polls were an announcement of what results the government planned for on election day. The government pointed to the polls as evidence that the results were valid and not due to ballot-box stuffing, according to these critics. They point to Putin's award of the Order for Services to the Fatherland to VTsIOM after the 2007-2008 election cycle as evidence of this collusion between the government and VTsIOM. On February 27, the last permitted day to release polling results, VTsIOM estimated that Putin would garner nearly 59% of the vote, so that a second round of voting would not be necessary. During the last few days before the election, the Putin government and campaign made several accusations that opposition politicians and other enemies of Putin were involved in criminal conspiracies. The most sensational was an announcement in late February that Ukrainian police had uncovered a plot by Chechen terrorists to assassinate Putin after the election. Other sensational accusations included those by Putin that oppositionist politicians planned to kill one of their own in order to blame the death on him, and another that oppositionists planned to stuff ballots marked with Putin's name into ballot boxes in order to declare that the election was illegitimate. The privately owned REN TV showed a program warning that if Putin was not elected, Russia would descend into civil war and destruction within a few months at the hands of the opposition. In an attempt to convince the public that the election would be free and fair, Prime Minister Putin announced in mid-December 2011 that two webcams would be placed in each of about 94,500 polling places. Most of these were installed. Individuals who pre-registered were permitted to view the voting and vote-counting on-line (the latter after a delay until all polls were closed). Putin declared victory two hours after the polls closed and after about one-third of polling precincts had reported that he had received a sufficient vote for a first-round win. He and Medvedev hosted a large pre-planned outdoor victory rally and concert in Moscow (the pro-Putin crowds had gathered well before the last polling places in Russia had closed, which ostensibly is illegal). Putin proclaimed that the voters had rebuffed attempts to "break up the state and usurp power.... We proved that no one can impose on us.... We have won in open and honest battle." Even before receiving or reviewing most reports of electoral violations, CEC head Vladimir Churov proclaimed just after the polls closed that only a tiny percentage would prove valid. He also declared that the election was the most "open, fair, transparent and decent presidential campaign" in the world. Zhirinovskiy and Mironov immediately congratulated Putin for what they termed an honest win, but Zyuganov and Prokhorov alleged that electoral irregularities meant that the election was not free and fair. All but Zyuganov met with Putin on March 5, where a discussion of each candidate's platform proposals took place. According to the final report of the CEC, Putin won 63.6% of 71.8 million votes cast, somewhat less than the 71.3% he had received in his last presidential election in 2004. Some of Mironov's expected supporters instead may have voted for Prokhorov, reducing his result below that gained by his A Just Russia Party in the Duma election. Moscow was the only major city where Putin failed to get over 50% of the vote, even though there may have been a concerted effort to inflate Putin's vote count in the city, according to some reports. Chechnya continued its tradition of reporting a high turnout (99.6%) and vote (99.8%) for Putin. Thousands of irregularities were reported by independent Russian activists, including video of individuals allegedly admitting that they had been paid to vote repeatedly, and "hundreds" of buses parked in Moscow that allegedly had carried Putin's supporters into the city to inflate the voting results there for Putin. The performance of the webcams was uneven. Many were not focused on the ballot boxes or views were blocked, or they malfunctioned. The independent Golos (Voice) monitoring group reported the heavy use of "carousel voting," in which buses carried groups that voted at several polling places. Golos also reported the use of absentee ballots in government offices, institutions, and businesses that were gathered up and checked by supervisors to make sure that the employees had voted for Putin. Golos concluded in its preliminary report on the election that although there appeared to be somewhat fewer irregularities than during the Duma election, the presidential election was not free and fair. At a press conference, Golos also stated that its ballot count had given Putin just over 50% of the vote, giving him a win in the first round. Russian physicist Sergey Shpilkin estimated that Putin may actually have received about 58% of the vote, with the official result inflated by ballot box stuffing, by inflating the voter turnout and allocating these votes to Putin, and by other means. In their preliminary report, the 262 monitors led by the Organization for Security and Cooperation in Europe (OSCE) concluded that the election was well organized but that there were several problems. Although the report did not state outright that the election was "not free and fair," some of the monitors at a press conference stated that they had not viewed it as free and fair. According to the report, Prime Minister Putin received an advantage in media coverage, and authorities mobilized local officials and resources to garner support for Putin. The report also raised concerns that precinct polling place chairpersons generally appeared to belong to the ruling United Russia Party or were state employees. On the positive side, the OSCE reported that the government did not hinder demonstrators calling for fair elections, permitted many monitors at polling places, and installed webcams in most polling places. On election day, the OSCE monitors assessed voting positively overall in the over 1,000 polling places they visited, but witnessed irregularities in vote-counting in nearly one-third of the 98 polling stations visited and in about 15% of 72 higher-level territorial electoral commissions. Putin (and outgoing President Medvedev) face rising dissatisfaction by many Russians with what are viewed as tainted elections, corruption, and other political and human rights problems. According to some Russian sociologists, about one-quarter of the Russian population belongs to the middle class and this portion could grow to one-third by the end of the decade. By this time, a majority of the working population will be middle class, they estimate. These individuals, including many business owners and private-sector employees, want a government that is not corrupt and follows the rule of law, these sociologists report. Putin and other observers have pointed to this growing middle class as major participants in the protests that began after the Duma election. The fact that a large segment of this growing middle class lives in and around Moscow where Putin reportedly garnered a relatively low 47% of the vote should also raise concern for the long-term effectiveness of a new Putin presidency. To some small degree, Putin and Medvedev have become cognizant that this rising middle class increasingly will demand reforms and have already offered some accommodative gestures since the Duma election protests (see below). A major question is whether a Putin presidency can implement substantial economic and democratic reforms. Some critics have argued that Putin is not attuned to making such reforms, and that he will face rising civil discontent during his third term in office. A few have warned darkly that he could be ousted. Most observers discount such a scenario, however, but argue that Russian political and economic institutions and civil society will face substantial strains to adapt to the long-term demands of a modern global economy. Some observers have speculated that Putin may not follow through on his announced plans to nominate Medvedev as his prime minister. Alternatively, some of Medvedev's supporters have urged him not to become prime minister. Medvedev supporter Igor Yurgens has warned that Medvedev will be "torn apart" by the more conservative Putin appointees in the government, and suggested that the constitution be changed to name Medvedev vice president so that he could maintain more independence from Putin's non-reformist policies. Most observers, however, believe that Medvedev will be confirmed as prime minister. On March 1, Putin stressed that he was running for president on the platform that Medvedev would be nominated as prime minister, and that voters would decide democratically on this "tandem." Some observers suggest that a Prime Minister Medvedev would have substantial authority as a former president, so that the "tandem" would continue to operate much as it has over the past four years. According to this view, Putin would be unlikely to fire Prime Minister Medvedev, at least in the short term. However, prime ministers have been replaced by Putin (and former President Yeltsin) when the economy has declined. Putin has stated that Medvedev as prime minister would continue to carry out initiatives he launched as president. Medvedev had announced several democratization initiatives in his state of the federation speech on December 22 that he stated were partly spurred by the protests (Putin, in contrast, has asserted that the protests had no bearing on these initiatives). These proposals have been submitted to the legislature for debate. One proposal was to restore gubernatorial elections, which Putin had abolished in 2004. Putin voiced qualms about this initiative, requesting that he retain control over who may run in such elections, and the draft bill reportedly contains such a provision. Another vague proposal by Medvedev was to increase the openness of legislative elections, which some observers had hoped would include the restoration of constituency races and the possibility of self-nominated candidates (Putin had abolished these in 2005). The bill submitted to the Duma, however, called for altering electoral procedures so that voters in 225 new districts would select a party list with identifiable local candidates. Golos researchers have termed these two bills disappointing "propaganda" exercises. Another bill may prove more reformist, however, by greatly reducing the registration requirements for new parties, which may permit many currently unrepresented interests in society to participate in political life. On March 5, Medvedev directed the prosecutor general to review businessman/oligarch Mikhail Khodorkovskiy's conviction and that of 30 other prisoners who had been highlighted by opposition politician Boris Nemtsov as "political prisoners" during a meeting with Medvedev on February 20. He also ordered the Prosecutor General to examine the mid-2011 denial of party registration to the Party of People's Freedom. The initial protests after Putin's election by those who view the electoral process as tainted appeared smaller in size and number than after the Duma election. Authorities approved a protest rally in Pushkin Square in central Moscow on March 5, along with Putin victory rallies elsewhere in the city. Some youth activists involved in the victory rallies reportedly stated that they were ready to fight against "provocations" by the protesters. After some of the protesters allegedly did not disperse after the time for the rally had elapsed, police forcibly intervened and reportedly detained up to 250 demonstrators, including activists Alexey Navalny, Sergey Udaltsov, and Ilya Yashin, who later were released. At a protest rally in St. Petersburg, reportedly 300 people were detained. Small protest rallies reportedly numbering up to several hundred people occurred in several other cities of Russia. Putin victory rallies reportedly attended by 1,000-7,000 people also were held in several cities across Russia on March 5. A "for free elections" protest rally was held in Moscow on March 10, attended by 10,000-25,000 people. After the rally some protesters attempted a march and were temporarily detained, including Udaltsov. Some other small protest rallies reportedly numbering 350 or less people took place elsewhere in Russia on the same day. The Communist Party has planned to hold protests against the election in coming weeks. Some observers have discerned a lessening turnout at the protests. Some advocates of "right wing" democratization among the protesters, such as Yavlinskiy, have called for shifting the focus from rallies to organizing new or revitalized opposition political parties. Udaltsov, who represents the "left wing" nationalists among the protesters, has disagreed, however, arguing that unauthorized protests should continue as one means to pressure the authorities. Among other initiatives, Mironov has called for a change in electoral law to again permit party blocs, so that A Just Russia Party could join with the Communist Party to form a new social democratic coalition. Business interests appeared to welcome Prokhorov's third-place showing and his indication that he would continue a role in politics by forming a party, a proposal that also was endorsed by Putin on March 5. It remains to be seen whether the impetus to create and strengthen civil society organizations will be sustained, particularly if a new Putin administration cracks down on such efforts. The day after the election, the State Department issued a statement that the United States "looks forward to working with the President-elect after ... he is sworn in." The statement pointed to the results of the preliminary report of the OSCE in stating that the "election had a clear winner with an absolute majority," but also urged the Russian government to address shortcomings mentioned in the report. The statement hailed the large number of Russian citizens who turned out to monitor the election, held rallies, and otherwise "express[ed] their views peacefully," and also praised the intentions of the government to improve the political system by re-introducing gubernatorial elections, simplifying party registration, and making other reforms. On March 9, 2012, President Obama telephoned President-elect Putin to congratulate him on his electoral victory, and stated that he looked forward to meeting him at Camp David, Maryland, in May 2012 (see below). Other Western governments appeared to take similar viewpoints. The European Union's High Representative Catherine Ashton on March 5 "took note" of Putin's "clear victory," and praised the significant level of civic engagement in the election. At the same time, she urged Russian authorities to address shortcomings mentioned in the OSCE report. She stated that the "EU looks forward to working with the incoming Russian President" to implement pledges of economic and political reforms. The Administration has pointed to successes of the U.S.-Russia "reset" of relations as including approval by Russia in 2009 for the land and air transit of military supplies to support U.S. and NATO forces in Afghanistan, and cooperation in approving a U.N. Security Council (UNSC) resolution in 2010 tightening sanctions on Iran, as well as the signing of the START Treaty and the work to gain Russia's invitation at the end of 2011 to join the World Trade Organization. It is possible that the anti-Americanism exhibited by Putin during the campaign could put a strain on future cooperation under the U.S.-Russia "reset," particularly if the opposition protests continue in Russia into the summer and are met by a government crackdown and continuing anti-American statements. Soon after he arrived in Moscow in December 2011, new U.S. Ambassador Michael McFaul was accused on state-owned television of providing orders and money to some opposition politicians with whom he had met. However, he has reported that he has had fruitful meetings with Russian officials since this criticism. One positive sign is that various meetings of the working groups of the U.S.-Russia Bilateral Presidential Commission have continued in recent weeks. Another positive sign is that Russian officials have stated that cooperation on the transit of supplies to support U.S. and NATO operations in Afghanistan will not be linked to other issues in U.S.-Russia relations. Russia continues to support this transit because U.S. and NATO efforts help stanch terrorist threats aimed at Russia emanating from Afghanistan. On other U.S.-Russia foreign policy issues, differences have remained or emerged in recent months. The United States, for example, continues to call for Russia to withdraw its troops from occupied areas of Georgia, to which Moscow thus far has failed to respond. In early 2011, Russia abstained on a UNSC resolution calling for a "no-fly zone" to protect civilians in Libya. The United States and Russia viewed this abstention as support for the U.S.-Russia reset, but almost immediately Russia denounced NATO actions in Libya as aimed at "regime change," and proclaimed that it would not support another UNSC resolution tightening sanctions on Iran, viewing it as a further "regime change" attempt. Russia has used the same rationale in vetoing UNSC resolutions on Syria. Secretary Clinton termed the February Russian veto "despicable." Russia is a major arms supplier to Syria and has a Mediterranean naval docking facility at Tartus (although it is seldom used). Although the Putin-Medvedev "tandem" defended the veto, it faced Russian domestic as well as international criticism. Members of Congress have criticized Russia's veto of the Syria resolution; and S.Res. 370 , introduced by Senator Robert Casey, condemns Russia for supplying arms to Syria. On February 24, Putin rejected an argument that U.S.-Russia relations were "cooling off," stating that "I don't think we are seeing a cooling.... We have a constant dialogue - we dislike some of the things our colleagues are doing, they don't like some things we are doing. But in general we have built a partnership over the key issues on the international agenda." Similarly, in an interview with Western media on March 1, Putin praised the U.S.-Russia reset as "useful," pointing to the START Treaty and WTO accession, and stated that he had warm relations with President Obama, whom he viewed as desiring good U.S.-Russia relations. During President Obama's March 9, 2012, telephone conversation with President-elect Putin, President Obama "highlighted achievements in U.S.-Russia relations over the past three years," and the two "agreed that the successful reset in relations should be built upon during the coming years." Soon after his inauguration on May 7, Putin is expected to attend the Group of 8 (G-8) industrialized nations meeting at Camp David, Maryland, on May 19-20, just before a NATO summit meeting, scheduled to be held in Chicago. The Administration has suggested that Obama and Putin may hold a summit on the sidelines of the G-8 meeting. Some observers have warned that if European missile defense issues remain contentious at the time of this NATO Summit, Putin may deliver a harsh anti-U.S. speech. On February 24, 2012, one Russian official appeared to urge Putin to indicate readiness before the Camp David and Chicago meetings for "serious talks" on missile defense and nuclear issues with the United States. Deputy Foreign Minister Sergey Ryabkov indicated on February 29 that a decision on attending the NATO Summit awaited the election and movement on missile defense issues. Russian media reported in early March that a lack of progress on missile defense made it unlikely that a NATO-Russia Council meeting would be held in Chicago, and speculated that Putin may not attend the NATO Summit. A mostly positive assessment of near-term U.S.-Russia relations was given by Director of National Intelligence James Clapper in testimony to Congress in late January on worldwide threats. Clapper suggested that there would be "more continuity than change" in Russian domestic and foreign policy over the next year under a Putin presidency. He projected that Putin would not reverse the course of U.S.-Russian relations, but they might be more "challenging" since Putin has an "instinctive distrust of U.S. intentions." Challenges to Russia's democratic development have long been of concern to Congress as it has considered the course of U.S.-Russia cooperation on matters of mutual strategic interest and as it has monitored problematic human rights cases. Among these concerns, many Members have condemned Russia's invasion of Georgia in 2008, the death of lawyer Sergey Magnitskiy after being detained and tortured in a Russian prison in 2009, and the re-sentencing of businessman/oligarch Mikhail Khodorkovskiy in 2010 to several more years in prison. Recent legislation includes the Senate and House versions of the Magnitskiy Rule of Law bills, which would impose a visa ban and an asset freeze on human rights abusers, and a provision in the National Defense Authorization Act of 2012 ( P.L. 112-81 ), signed into law on December 31, 2011, that calls for a plan to provide defensive weaponry to Georgia. The Administration's foreign assistance budget for FY2013 submitted to Congress in February 2012 requests $52 million for Russia, most of it aimed to continue support for democratization, and the Administration additionally has notified Congress of plans to create a $50 million fund to further support these efforts. Some observers have suggested that since Putin has condemned such aid as interference in Russia's internal affairs, he may tighten restrictions on such aid for non-governmental organizations or even ban some aid activities. Ongoing congressional concerns about democratization, human rights, and trade will continue and may have been heightened by the Russian election outcome. During his trip to Russia in late February 2012 to discuss U.S. trade prospects ahead of hearings on Russia's accession to the World Trade Organization (WTO), Senate Finance Committee Chairman Max Baucus stressed that the growth of U.S. trade and investment would be facilitated by further democratization. Russia's legislature will give approval for the ratification of WTO accession by mid-2012. Congress may consider whether to grant Permanent Normal Trade Relations (PNTR) to Russia and to lift the applicability of the so-called Jackson-Vanik provisions of the Trade Act of 1974 to Russia (concerning emigration from the former Soviet Union). Russia's human rights and democratization record may well be part of the debate. On March 5, 2012, Representative David Dreier, chairman of the House Democracy Partnership, congratulated Putin on his election victory, but objected to Putin's election night victory speech which appeared to characterize the United States as interfering in Russia's domestic affairs. Representative Dreier stated that the United States was not seeking to dictate to Russia, but suggested that the United States, "a country that has had a 223-year history of democracy, could provide a little bit of advice to a country that is just now beginning to enter its third decade of democracy and obviously has had more than a few challenges." He endorsed an idea that Putin not run again after his third term in office, call a new Duma election, and hold free and fair gubernatorial elections. Dreier also praised Medvedev's request for an examination of the sentence against Khodorkovskiy and suggested that former Russian Finance Minister Alexey Kudrin might make a good choice as prime minister. He stated that the United States wanted a "strong, vibrant, and growing Russia," and good U.S.-Russia relations.

Challenges to Russia's democratic development have long been of concern to Congress as it has considered the course of U.S.-Russia cooperation. The Obama Administration has been critical of the apparently flawed Russian presidential election which took place on March 4, 2012, but has called for continued engagement with Russia and newly elected President Vladimir Putin on issues of mutual strategic concern. Some in Congress also have criticized the conduct of the election, but have endorsed continued engagement, while others have called for stepping back and reevaluating the Administration's engagement policy. Congress may consider the implications of another Putin presidency, lagging democratization, and human rights abuses in Russia as it debates possible future foreign assistance and trade legislation and other aspects of U.S.-Russia relations. Five candidates were able to register for the March 4, 2012, presidential election. Of these, Prime Minister Putin had announced in September 2011 that he intended to switch positions with current President Dmitriy Medvedev, and return to the presidency for a third term. Three of the other four candidates--Communist Party head Gennadiy Zyuganov, Liberal Democratic Party head Vladimir Zhirinovskiy, and A Just Russia Party head Sergey Mironov--were nominated by parties with seats in the Duma. The remaining candidate, businessman Mikhail Prokhorov, was self-nominated and was required to gather 2 million signatures to register. Other prospective candidates dropped out or were disqualified on technical grounds by the Central Electoral Commission (CEC). Opposition Yabloko Party head Grigoriy Yavlinskiy was disqualified by the CEC on the grounds that over 5% of the signatures he gathered were invalid. Many critics argued that he was eliminated because he would have been the only bona fide opposition candidate on the ballot. Of the registered candidates running against Putin, all but Prokhorov had run in previous presidential elections and lost badly. According to the final report of the CEC, Putin won 63.6% of 71.8 million votes cast, somewhat less than the 71.3% he had received in his last presidential election in 2004. In their preliminary report, monitors led by the Organization for Security and Cooperation in Europe (OSCE) concluded that the election was well organized but that there were several problems. Although the report did not state outright that the election was "not free and fair," some of the monitors at a press conference stated that they had not viewed it as free and fair. According to the report, Prime Minister Putin received an advantage in media coverage, and authorities mobilized local officials and resources to garner support for Putin. The OSCE monitors witnessed irregularities in vote-counting in nearly one-third of the 98 polling stations visited and in about 15% of 72 higher-level territorial electoral commissions. The initial protests after Putin's election by those who view the electoral process as tainted appeared smaller in size and number than after the Duma election. Authorities approved a protest rally in Pushkin Square in central Moscow on March 5, along with Putin victory rallies elsewhere in the city. After some of the protesters allegedly did not disperse after the time for the rally had elapsed, police forcibly intervened and reportedly detained up to 250 demonstrators, including activist Alexey Navalny, who later was released.

RS21341 -- Credit Scores: Credit-Based Insurance Scores Updated January 19, 2005 An insurance score, a type of credit score, is a number produced by a proprietary computer scoring model that analyzes a person's credit history information,such as payment history, collection, balances, and bankruptcies. While credit scores are used by lenders to helpthem decide whether to offer a person a loan,insurance scores are used by insurers to determine what level of risk a person represents. The information used incredit and insurance score models is obtainedprincipally from credit reports, generated by the three major national credit reporting agencies (CRAs): Equifax,Experian, and Trans Union. (1) CRAs aresubject to the consumer protections set forth in the Fair Credit Reporting Act (FCRA). (2) Credit scores have been used widely for some time in credit-relatedbusinesses such as banks, home mortgage lenders, and credit card issuers, but the use of insurance scores by insurersis relatively new. FCRA allows CRAs tofurnish a credit report without the consumer's permission to an insurer when the report is to be used in connectionwith the underwriting of insurance. However, FCRA also provides that when any users of credit information from CRAs use such information to takeaction that is adverse to the consumer, thennotification of that action must be given to the consumer. Over the past several years, insurers increasingly have included credit information from credit reports as factors in insurance underwriting, especially inpersonal lines of insurance such as automobile and homeowners insurance. There is some indication, however, thatcredit information may also have somerelevance in commercial lines of insurance. (3) It hasbeen estimated that 90% of property insurers now use credit information in some way in their underwritingdecisions. (4) Insurers maintain that there is a clearstatistical connection between a person's insurance score and the likelihood of that person filing claims, aswell as how expensive such claims might be. Thus, even though a good insurance score does not necessarily meana person is a good driver or a moreresponsible homeowner, insurers contend that their research has shown that persons with better insurance scoresgenerally file fewer insurance claims and havelower insurance losses. Insurers maintain that as a result of using insurance scores, they can charge lower premiumsor give discounts to many customers whootherwise would pay more for insurance, and are also able to offer coverage to more consumers. Many insurers havedeveloped their own scoring models,while others contract with third parties to obtain their insurance scores. Either way, insurers say the link betweeninsurance scores and insurance losses is clear,and point to two possible explanations. The first explanation relates to stress -- that people under stress are morelikely to have auto accidents, and financialproblems are a known cause of stress. The second explanation relates to risk-taking behavior -- that people havedifferent aversions to risk, and people withpoor insurance scores are more likely to engage in risky behavior and, therefore, more likely to incur losses. State insurance laws generally provide that insurance rates cannot be unfairly discriminatory. Some state regulators and consumer advocates insist thatinsurance scores do in fact discriminate against low-income and minority consumers and that their use should bebanned or limited. Critics also say thatinsurance scores penalize poor people, immigrants, and seniors who may not have credit records. One consumeradvocate recently asserted that insurancescores are the most controversial new addition to the rate-setting process, that they allow insurers to doubleautomobile premiums even for drivers whoserecords are pristine, and that states should ban insurers from using them to set rates. (5) Another consumer advocate has created a separate website to informinsurance consumers about the use of insurance scores and to urge them to get involved in forcing insurers toabandon the practice. (6) FCRA allows CRAs to furnish a credit report to an insurer without the consumer's permission if the report is to be used in connection with the underwriting ofinsurance. However, if any user of credit information from CRAs uses such information to take any adverse action,the person so affected must be givennotification of that action. The provisions of FCRA fall under the enforcement jurisdiction of the Federal TradeCommission (FTC), which, in its commentaryon FCRA, stated that "An insurer may obtain a consumer report to decide whether or not to issue a policy to theconsumer, the amount and terms of coverage,the duration of the policy, the rates or fees charged, or whether or not to renew or cancel a policy, because these areall 'underwriting' decisions." (7) Subsequently, in an interpretative letter, the FTC opined that the term "underwriting decision" included the casewhere an insurer would be obtaining creditreports on existing policyholders to determine whether they would be entitled to a discount under a Good CreditDiscount Program upon renewal of existingpolicies. (8) The use of credit scores in the mortgage lending industry and its potential impact on mortgage applicants have been addressed by the Federal Reserve System'sMortgage Credit Partnership Credit Scoring Committee. The Federal Reserve Bank of Chicago published an articlein 2000 in which it outlined how creditscores are used in the mortgage application process and also addressed several related issues. (9) One such issue is that while credit scores can servean importantfunction to facilitate access to credit, their nature and usage could result in unlawful discrimination againstminorities and low income applicants. This isgenerally referred to as the "disparate impact" of the use of credit scores. Congress has continued to monitor the effectiveness of FCRA with interest peaking during the first session of the 108th Congress as portions of FCRA were setto expire at the end of 2003. Following a wide-ranging series of hearings and two markups, the House FinancialServices Committee reported H.R. 2622 amending the Fair Credit Reporting Act on July 25, 2003. While the FCRA's primary focus is onthe regulation of credit information,the usage of this information, particularly insurance scores, by insurers drew congressional interest. CongressmanGutierrez previously introduced H.R. 1473 to specifically regulate insurers' use of credit information and he offered an amendment at thesubcommittee markup of H.R. 2622 calling for a study of insurer usage of credit information. This amendment was accepted andincluded in the bill as reported from the fullcommittee. The Senate held hearings and passed a bill amending the FCRA, S. 1753 , after the House. Thisbill also included the requirement for aslightly different study on the usage of credit information in insurance. The conference committee made furtherslight changes to the study requirement and itwas included in the conference report as passed and signed by the President ( P.L. 108-159 ). Unlike banks and other financial institutions that are regulated primarily at the federal level, insurers are regulated primarily at the state level. (10) Most stateinsurance laws prohibit unfair trade practices, and also require that insurance rates not be unfairly discriminatory. Many states require prior approval ofinsurance premium rates, especially those for personal lines such as automobile and homeowners insurance. Statelawmakers are beginning to turn theirattention to the issue of insurers' using credit-based insurance scores in making underwriting, marketing, and ratingdecisions. According to the NationalAssociation of Mutual Insurance Companies (NAMIC), 48 states have taken legislative or regulatory actionaddressing insurer use of credit historyinformation. (11) Many of the state laws arefollowing a model law (12) recommended by theNational Conference of Insurance Legislators (NCOIL) and generallysupported by insurers. The law was described in congressional testimony (13) as requiring "insurers: to notify an applicant for insurance if credit information will be used in underwriting and rating; to notify a consumer in the event of an adverse action based on credit information, includingnotification of factors that were the primaryinfluences on the adverse action; to re-underwrite and re-rate a policyholder whose credit report was corrected; to indemnify insurance agents/brokers who obtained credit information and/or insurance scoresaccording to an insurer's procedures andaccording to applicable laws and regulations; to file its scoring models with the applicable state department of insurance; such filings are deemedtrade secrets." Although described by a prominent consumer group as improving upon the previous market practices, the NCOIL law is seen as far from the prohibition on useof credit scores that some would prefer. (14) State insurance regulators are also increasing their regulatory oversight over credit-based insurance scores. In some states, the regulators have already addressedthe issue, but in an effort to develop a more unified national approach, most regulators are working through theirtrade organization, the National Association ofInsurance Commissioners (NAIC). In March 2002, the NAIC appointed a credit scoring working group to focuson the various regulatory issues related to theuse of credit information in the insurance underwriting and rating process. The working group has drafteddocuments to aid insurance consumers, and to assistthe regulators in clarifying the issues and recommending a set of best practices. Two draft documents were citedin NAIC congressional testimony (15) andapproved by the full NAIC shortly thereafter: Consumer Brochure: Understanding How Insurers Use Credit Information : This is a question/answer brochure, addressing such mattersas the legality of an insurer's obtaining a credit report under FCRA without permission, why and how insurers usecredit information, and how to improve one'sinsurance score. Credit-Based Insurance Scoring: Regulatory Options : This document seeks to set forth thepros and cons of various regulation options,including a ban on the use of credit history for rating purposes. These two documents, however, did not complete the recommendations or policies some hoped would emanate from the working group and the NAIC. A studyon the possible disparate impact of credit scoring was proposed. This proposed study, however, provokedsignificant debate and opposition. The workinggroup cancelled a previously scheduled session at the regular NAIC summer national meeting that was held June21-24, 2003. (16) At the NAIC fall nationalmeeting, held September 13-16, 2003, this study was put off and it was suggested that concerned states should dostudies of their own. (17) Indiana, Louisiana,Maryland, Missouri, Montana, Nevada, Oregon and Washington planned such a study, eventually abandoned theeffort under the threat of litigation from theindustry. (18) More recently, the NAIC workinggroup produced a white paper with a set of "best practices" relating to the usage of credit scoring. A number of lawsuits have been filed alleging violations of either state or federal law relating to the usage of credit information. For example, a lawsuit againstAllstate was filed seeking class action status in U.S. District Court in San Antonio, Texas, by several minorityplaintiffs alleging that the insurer usedinformation from credit reports and improperly factored it into a secretive scoring formula to target non-whites formore expensive policies than similarlysituated whites. Allstate's motion to dismiss was denied, and the case as been allowed to proceed after successiveappeals to the 5th U.S. Circuit Court and theU.S. Supreme Court. Insurers are concerned that the case could lead to a determination of a new discriminationstandard over and above the state lawprohibiting unfair discrimination, and thus usurp the authority of state insurance regulators and state laws. (19) Allstate is not the only insurer who has been to court on such an issue. In Illinois, a suit alleged that State Farm had engaged in the practice of refusing to issueor renew insurance policies solely on the basis of a credit report, in violation of the Illinois Insurance Code. (20) In Texas, the attorney general sued FarmersInsurance Group, alleging, among other charges, that the insurer was "using credit history as a significant factor insetting premiums, without disclosing theadverse impact of doing so...." (21) A settlementwas reached in the Texas case in December 2002, but it was challenged by some Texas policyholders. (22)

An insurance score, a type of credit score, is a number produced by a computer scoringmodel that analyzes aperson's credit information (i.e., payment history, collections, balances, and bankruptcies) obtained principally fromthat person's credit reports. Increasingly,insurers have been using insurance scores as an underwriting factor to evaluate insurance applications, especiallyfor automobile and homeowners insurance, inpredicting possible future insurance claims an applicant might generate. Insurers maintain that there is a clearstatistical connection between a person'sinsurance score and the likelihood of that person filing claims, as well as how expensive such claims might be. Byusing insurance scores, insurers say that theyare able to charge lower premiums to most customers who are better risks. On the other hand, some consumeradvocates dispute the insurers' position andargue that the use of insurance scores has a disparate effect on minorities, and is merely a new method by whichinsurers can increase premium rates. Even though credit scores have been widely used for some time by credit-related businesses such as homemortgage lenders and credit card issuers, the use ofinsurance scores by insurers is relatively new. The growing discontent regarding the use of credit-based scoring hasbeen reflected in proposed legislationamending the Fair Credit Reporting Act to require additional consumer protections, and in increased litigation. Insurance scores, like other credit scores basedon credit reports, are regulated to some degree at the federal level. Unlike other credit scores, however, insurancescores used in the underwriting process arealso subject to state insurance laws and regulations. Most of the states have been active in recently reviewing theirlaws and regulations in this area. Federallegislation in the 108th Congress that would have affected insurance scoring included H.R. 1473,H.R. 2796, H.R. 2622,and S. 1753. The latter two were the House and Senate versions of what would become P.L. 108-159, whichmandated a study on the impact ofinsurance scoring. This report will be updated in the event of significant legislative or regulatory developments.

The House of Representatives has several different parliamentary procedures through which it can bring legislation to the chamber floor. Which will be used in a given situation depends on many factors, including the type of measure being considered, its cost, the amount of political or policy controversy surrounding it, and the degree to which Members want to debate it and propose amendments. According to the Legislative Information System of the U.S. Congress (LIS), in the 111 th Congress (2009-2010), 1,946 pieces of legislation received action. This report provides a statistical snapshot of the forms, origins, and party sponsorship of these measures, and of the parliamentary procedures used to bring them to the chamber floor during their initial consideration. Legislation is introduced in the House or Senate in one of four forms: the bill (H.R. / S.); the joint resolution (H.J.Res. / S.J.Res.); the concurrent resolution (H.Con.Res. / S.Con.Res.); and the simple resolution (H.Res. / S.Res.). Generally speaking, bills and joint resolutions can become law, but simple and concurrent resolutions cannot; they are used instead for internal organizational or procedural matters, or to express the sentiment of one or both chambers. In the 111 th Congress, 1,946 pieces of legislation received floor action in the House of Representatives. Of these, 885 were bills or joint resolutions and 1,061 were simple or concurrent resolutions, a breakdown between lawmaking and non-lawmaking legislative forms of approximately 45% to 55%, respectively. Of the 1,946 measures receiving House floor action in the 111 th Congress, 1,796 originated in the House and 150 originated in the Senate. It is generally accepted that the House considers more legislation sponsored by majority party Members than measures introduced by minority party Members. This was born out in practice in the 111 th Congress. As is reflected in Table 1 , 76% of all measures receiving initial House floor action in the last Congress were sponsored by Members of the Democratic Party, which had a majority of seats in the House. When only lawmaking forms of legislation are considered, 81% of measures receiving House floor action in the 111 th Congress were sponsored by Democrats, 19% by Republicans, and 1% by political independents. The ratio of majority to minority party sponsorship of measures receiving initial House floor action in the 111 th Congress varied widely based on the parliamentary procedure used to raise the legislation on the House floor. As is noted in Table 2 , 73% of the measures considered under the Suspension of the Rules procedure were sponsored by Democrats, 27% by Republicans, and less than 1% by political independents. That measures introduced by Members of both parties were considered under Suspension is unsurprising in that (as is discussed below) Suspension of the Rules is the parliamentary procedure which the House generally uses to process non-controversial measures for which there is wide bipartisan support. Additionally, passage of a measure under the Suspension of the Rules procedure requires the votes of at least some minority party Members. The ratio of party sponsorship on measures initially brought to the floor under a terms of a special rule reported by the House Committee on Rules and adopted by the House was far wider. Of the 103 measures CRS identified as being initially brought to the floor under the terms of a special rule in the 111 th Congress, all were sponsored by majority party Members. The breakdown in party sponsorship on measures initially raised on the House floor by unanimous consent was uneven, with majority party Members sponsoring three-quarters of the measures brought up in this manner. The following section documents the parliamentary mechanisms that were used by the House to bring legislation to the floor for initial consideration during the 111 th Congress. In doing so, it does not make distinctions about the privileged status such business technically enjoys under House rules. Most appropriations measures, for example, are considered "privileged business" under clause 5 of House Rule XIII (as detailed in the section on " Privileged Business " below). As such, they do not need a special rule from the Rules Committee to be adopted for them to have floor access. In actual practice, however, in the 111 th Congress, the House universally provided for the consideration of these measures by means of a special rule, which, in general, could also provide for debate to be structured, amendments to be regulated, and points of order against the bills to be waived. Thus, appropriations measures considered in the 111 th Congress are counted in this analysis as being raised by special rule, notwithstanding their status as "privileged business." In recent Congresses, most legislation has been brought up on the House floor by Suspension of the Rules, a parliamentary device authorized by clause 1 of House Rule XV, which waives the chamber's standing rules to enable the House to act quickly on legislation that enjoys widespread, even if not necessarily unanimous, support. The main features of the Suspension of the Rules procedure include (1) a 40-minute limit on debate, (2) a prohibition against floor amendments and points of order, and (3) a two-thirds vote of Members present and voting for passage. The suspension procedure is in order in the House on the calendar days of Monday, Tuesday, and Wednesday, during the final six days of a congressional session, and at other times by unanimous consent or special order. In the 112 th Congress (2011-2012), the House Republican leadership has announced additional policies related to their use of the Suspension of the Rules procedure which restrict the use of the procedure for certain "honorific" legislation, generally require measures considered under Suspension to have been available for three days prior to their consideration, and require the sponsor of the measure to be on the floor at the time of a measure's consideration. In the 111 th Congress, 1,525 measures, representing 78% of all legislation receiving House floor action, were initially brought up using the Suspension of the Rules procedure. This includes 760 bills or joint resolutions and 765 simple or concurrent resolutions. When only lawmaking forms of legislation are counted, 86% of bills and joint resolutions receiving floor action in the 111 th Congress came up by Suspension of the Rules. Ninety-two percent of measures brought up by Suspension of the Rules originated in the House. The remaining 8% were Senate measures. House rules and precedents place certain types of legislation in a special "privileged" category, which gives measures of this kind the ability to be called up for consideration when the House is not considering another matter. Bills and resolutions falling into this category that saw floor action in the 111 th Congress include the following: Order of Business Resolutions: Procedural resolutions reported by the House Committee on Rules affecting the "rules, joint rules, and the order of business of the House" are, themselves, privileged for consideration under clause 5 of House Rule XIII. Order of business resolutions are commonly known as "special rules," and are discussed below in more detail. Committee Assignment Resolutions: Under clause 5 of House Rule X and the precedents of the House, a resolution assigning Members to standing committees is privileged if offered by direction of the party caucus or conference involved. Correcting Enrollments: Under clause 5 of House Rule XIII, resolutions reported by the Committee on House Administration correcting errors in the enrollment of a bill are privileged. Providing for Adjournment: Under Article I, section 5, clause 4, of the Constitution, neither house can adjourn for more than three days without the consent of the other. Concurrent resolutions providing for such an adjournment of one or both chambers are called up as privileged. Questions of the Privileges of the House: Under clause 2 of House Rule IX, resolutions raising a question of the privileges of the House, affecting "the rights of the House collectively, its safety, dignity, and the integrity of its proceedings," are privileged under specific parliamentary circumstances described in the rule. Such resolutions would include the constitutional right of the House to originate revenue measures. Bereavement Resolutions: Under House precedents, resolutions expressing the condolences of the House of Representatives over the death of a Representative or of a President or former President, have been treated as privileged. Measures Related to House Organization: Certain organizational business of the House, such as resolutions traditionally adopted at the beginning of a session notifying the President that the House has assembled, as well as concurrent resolutions providing for a joint session of Congress, have been treated as privileged business. In the 111 th Congress, 269 measures, representing 14% of the measures receiving floor action, came before the House on their initial consideration by virtue of their status as "privileged business." All but six of these 269 measures were non-lawmaking forms of legislation, that is, simple or concurrent resolutions. Of the six bills or joint resolutions receiving action, one was a joint disapproval resolution privileged by statute, and five were Senate bills formally rejected by the House as a question of the privileges of the House. The most common type of measure brought up in the House as "privileged business" during the 111 th Congress was special orders of business (special rules) reported by the Rules Committee, followed by resolutions assigning Representatives to committee and questions of the privileges of the House. A special rule is a simple resolution that regulates the House's consideration of legislation identified in the resolution. Such resolutions, as noted above, are sometimes called "order of business resolutions" or "special orders." Special rules enable the House to consider a specified measure and establish the terms for its consideration. For example, how long the legislation will be debated, what, if any amendments may be offered to it, and whether points of order against the measure or any amendments are waived. Under clause 1(m) of House Rule X, the Committee on Rules has jurisdiction over the "order of business" of the House, and it reports such procedural resolutions to the chamber for consideration. In current practice, although a relatively small percentage of legislation comes before the House via special rule, most measures that might be characterized as significant, complicated, or controversial are brought up in this way. In the 111 th Congress, 103 measures, or 5% of all legislation receiving House floor action, were initially brought before the chamber under the terms of a special rule reported by the Rules Committee and agreed to by the House. Of these, 97 (94%) were bills or joint resolutions and 6 (6%) were simple or concurrent resolutions. When only lawmaking forms of legislation are counted, 11% of bills and joint resolutions receiving floor action in the 111 th Congress came up by Special Rule. Ninety-six percent of the measures considered under a special rule during the 111 th Congress originated in the House, 4% being Senate legislation. As is noted above, every measure brought before the House using this mechanism was sponsored by a majority party Member. In current practice, legislation is sometimes brought before the House of Representatives for consideration by the unanimous consent of its Members. Long-standing policies announced by the Speaker regulate unanimous consent requests for this purpose. Among other things, the Speaker will recognize a Member to propound a unanimous consent request to call up an unreported bill or resolution only if that request has been cleared in advance with both party floor leaders and with the bipartisan leadership of the committee of jurisdiction. In the 111 th Congress, 48 measures, or 2% of all legislation identified by LIS as receiving House floor action, were initially considered by unanimous consent. Of these, 21 (44%) were bills or joint resolutions and 27 (56%) were simple or concurrent resolutions. When only lawmaking forms of legislation are counted, 2% of bills and joint resolutions receiving floor action in the 111 th Congress came up by unanimous consent. Of the measures initially considered by unanimous consent during the 111 th Congress, 65% originated in the House. As adopted in the 111 th Congress, House Rule XXVIII provided that, upon the final adoption of a congressional budget resolution necessitating a change in the statutory limit on the public debt, a House joint resolution altering that limit will be deemed to have passed the chamber, and be engrossed and transmitted to the Senate for consideration without separate House action. The rule was commonly referred to as the "Gephardt Rule," after its original sponsor, Representative Richard A. Gephardt (D-MO). The Gephardt Rule was repealed at the beginning of the 112 th Congress. During the 111 th Congress, one House joint resolution was engrossed and deemed to have been passed by virtue of the automatic procedures established by the so-called Gephardt Rule. When only lawmaking forms of legislation are counted, less than 1% (.001%) of bills and joint resolutions receiving floor action in the 111 th Congress came up under the Gephardt Rule. Clause 5 of House Rule XV establishes special parliamentary procedures to be used for the consideration of private legislation. Unlike public legislation, which applies to public matters and deals with individuals only by classes, the provisions of private bills apply to "one or several specified persons, corporations, [or] institutions." When reported from House committee, private bills are placed on a special Private Calendar established by House Rule XIII. The consideration of Private Calendar measures is in order on the first and (if the Speaker of the House so chooses) third Tuesday of a month. On those days, the Private Calendar is "called" and each measure on it is automatically brought before the House in order. Private bills are considered under a set of procedures known as the "House as in Committee of the Whole," which is a hybrid of the procedures used in the full House and those used in the Committee of the Whole. Under these, private bills may be debated and amended under the five-minute rule, although in practice, they are almost always passed without debate or record vote. In the 111 th Congress, no measures were brought to the floor via the call of the Private Calendar. Two private laws were enacted in the Congress, but the House processed these measures by Suspension of the Rules rather than by using the call of the Private Calendar. The House of Representatives has established special parliamentary procedures which might be used to bring legislation to the chamber floor dealing with the business of the District of Columbia, by a discharge petition filed by a numerical majority of the House, and by a procedure known as the Calendar Wednesday procedure. These procedures are rarely used, and no legislation was brought before the House in the 111 th Congress by any of these parliamentary mechanisms.

The House of Representatives has several different parliamentary procedures through which it can bring legislation to the chamber floor. Which of these will be used in a given situation depends on many factors, including the type of measure being considered, its cost, the amount of political or policy controversy surrounding it, and the degree to which Members want to debate it and propose amendments. This report provides a snapshot of the forms and origins of measures which, according to the Legislative Information System of the U.S. Congress (LIS), received action on the House floor in the 111th Congress (2009-2010) and the parliamentary procedures used to bring them up for initial House consideration. In the 111th Congress, 1,946 pieces of legislation received floor action in the House of Representatives. Of these, 885 were bills or joint resolutions and 1,061 were simple or concurrent resolutions, a breakdown between lawmaking and non-lawmaking legislative forms of approximately 45% to 55%. Of these 1,946 measures, 1,796 originated in the House and 150 originated in the Senate. During the same period, 78% of all measures receiving initial House floor action came before the chamber under the Suspension of the Rules procedure; 14% came to the floor as business "privileged" under House rules and precedents; 5% were raised by a special rule reported by the Committee on Rules and adopted by the House; and 2% came up by the unanimous consent of Members. One measure, representing a small fraction (less than 1%) of measures receiving House floor action in the 111th Congress, was processed through the parliamentary mechanism formerly contained in House Rule XXVIII, popularly known as the "Gephardt Rule." When only lawmaking forms of legislation (bills and joint resolutions) are counted, 86% of measures receiving initial House floor action in the 111th Congresses came before the chamber under the Suspension of the Rules procedure; 11% were raised by a special rule reported by the Committee on Rules and adopted by the House; and 2% came up by the unanimous consent of Members. Less than 1% of bills or joint resolutions received House floor action in the 111th Congress by virtue of being business "privileged" under House rules and precedents or through the provisions of the Gephardt Rule. The party sponsorship of legislation receiving initial floor action in the 111th Congress varied based on the procedure used to raise the legislation on the chamber floor. Seventy-three percent of the measures considered under the Suspension of the Rules procedure were sponsored by majority party Members. All measures brought before the House under the terms of a special rule reported by the House Committee on Rules and adopted by the House were sponsored by majority party Members. This report will be periodically updated to reflect legislative action taken in a full Congress.

Much attention has been focused on the use of water to grow certain agricultural crops in California, given current drought conditions in the state and mandatory cutbacks for non-agricultural water users. This attention has been twofold. First, media reports have highlighted how much water is used overall by California's agricultural sectors. Second, media reports have highlighted how much water is used to grow certain types of crops. Most media attention has focused on certain orchard crops, such as tree nuts and vineyard crops, as well as some grain and pasture crops used to support California's meat and dairy industries. These reports frequently conflict with primary data sources, resulting in confusion over the state of agricultural production and irrigated water use in the California. Regarding overall water use for California's agricultural production, media reports have widely cited estimates claiming that 80% of the state's available water supplies are used annually for agricultural use. Federal and state sources indicate that the state's agricultural sector uses less available water than many media reports claim. The U.S. Geological Survey (USGS) indicates that roughly 60% is used for the state's agricultural sectors; the California Department of Water Resources (DWR) indicates roughly 40%. The difference between these two estimates is largely based on different survey methods and assumptions, including the baseline amount of water estimated for use, including what constitutes "available" supplies. Some reports, including information posted by the California Department of Food and Agriculture (CDFA), have tried to clarify and highlight differences between various water use estimates. Regarding water used to produce specific crops, news outlets across the country have, on numerous occasions, reported estimates of the amount of water California farmers use to produce a single serving of certain foods. For example, according to these reports, it takes nearly one gallon of water to produce one almond and 450 gallons of water to produce a quarter-pound hamburger patty. Such statistics can be misleading and further raise questions about the usefulness of quantifying the inputs and resources required to produce a single serving of a specific crop or a single serving of meat or dairy products. Most fruit and nut trees require water year-round and often take several years before the plant reaches fruiting maturity. At maturity, a fruit orchard can produce food capable of feeding many people. Other crops--such as feed grains and pasture crops--are grown, in some cases, mainly to feed livestock, poultry, and dairy cows. The cumulative amount of resources and inputs needed to raise a single farm animal to maturity adds up quickly. Growing consumer and market demand for these food commodities is also a major factor in their production. Moreover, some agricultural products are grown in areas where water is more accessible. Also, not all of the water used by the agriculture sector is captured by the plant; some is returned to the soil or atmosphere. Congressional interest in California agricultural water use centers largely on the operation of the Bureau of Reclamation's Central Valley Project, which supplies water to numerous agricultural and municipal contractors, some or much of it at a low cost, as well as on U.S. Department of Agriculture (USDA) support for individual crops and farmers. Congress may also be interested in broader implications of decreased agricultural production and/or lack of water availability throughout the state under certain water supply scenarios. ( Figure 1 provides a map of California's counties and agricultural districts.) Agriculture and related industries are important to California's economy. The total value of the agricultural production and processing sector was estimated at more than $100 billion in 2012-2013, including the farm, wholesale, and retail levels for agriculture and agriculture-related industries ( Table 1 ). As a share of the total California economy, direct agricultural production and processing output (sales) accounted for nearly 3% of total state output. Considering the broader economic contribution of the state's food and beverage sectors, the industry's share of the California economy was estimated at nearly 5% ( Table 1 ). Several studies have been conducted by researchers at the University of California estimating the contribution of some of the state's major farming sectors to the overall state economy. For example, California's dairy industry, including dairy farming and milk processing, contributed an estimated $20.8 billion in 2014 to the state in terms of economic value added (direct plus so-called indirect and induced effects). California's almond industry generated an estimated $21.5 billion in 2014 in total economic impacts for the state. Overall, these researchers estimate that a "$1 billion increase of the value added from agricultural production and processing results in a total of $2.63 billion of [gross state product] GSP," or the value added by all industries in the state. Other estimates are even greater. Employment within California's agricultural sector averaged more than 412,000 jobs during 2014, accounting for more than 2% of overall employment. Including other closely related processing industries, researchers at the University of California estimate that the state's agricultural sectors accounts for as much as 6.7% of California's private sector labor force (including part-time workers). Other estimates place this estimate even higher. These researchers further estimate that "each job in agricultural production and processing accounts for 2.2 jobs in the California economy as a whole." Agricultural production and processing employment in some parts of California, such as the Central Valley, are estimated to be greater in percentage terms. The U.S. Department of Agriculture (USDA) reports that based on the value of agricultural sales, California ranks as the leading state nationwide. In 2012, California's farm-level sales totaled nearly $45 billion and accounted for nearly 11% of total U.S. farm-level sales ( Figure 2 ). USDA ranks five counties--Tulare, Kern, Fresno, Monterey, and Merced--as among the leading agricultural counties in the United States, with a reported $28.7 billion in farm sales. Four of these counties receive water from the federal Central Valley Project (CVP), which has reduced deliveries in recent years due to drought and environmental factors. Whereas most farm states specialize in producing a few agriculture commodities, California's farm sector is diverse and produces more than 400 commodities. Still, the leading 20 agricultural commodities comprise about 80% of total farm cash receipts, and the leading 50 commodities account for more than 90% of all farm receipts. In 2013, California's top-10 valued commodities (ranked by total farm-level sales) included milk ($7.6 billion), almonds ($5.8 billion), grapes ($5.6 billion), cattle and calves ($3.05 billion), strawberries ($2.2 billion), walnuts ($1.8 billion), lettuce ($1.7 billion), hay ($1.6 billion), tomatoes ($1.2 billion), and nursery plants ($1.2 billion). Alfalfa production and other forage crops, while not high in overall market value, provide an important input to the state's dairy and other animal agriculture production. More than 60% of California's farm-level sales are attributed to specialty crops, defined as "fruits and vegetables, tree nuts, dried fruits, and horticulture and nursery crops (including floriculture)." California's agricultural sectors are an important leader in agricultural production nationwide. Nationally, California accounts for more than one-third of the value of all specialty crops sold; also, nearly one-half of all irrigated acres growing specialty crops are located in California. For some crops, such as raisins, almonds, walnuts, nectarines, and pistachios, California supplies the majority of U.S. production each year. Many of these crops--including almonds and other nuts, wine and table grapes, processed tomatoes, and other fruits and vegetables--are also important U.S. agricultural exports. Exports of all U.S. fresh and processed fruits, vegetables, and tree nuts totaled $21.7 billion in 2014 ( Figure 3 ). Given California's predominance in growing specialty crops, the share of California farms receiving federal farm support payments is low compared to the national average, as specialty crop producers generally do not directly benefit from a commodity-specific farm program. About 10% of California farms receive federal support, compared to 40% of all farms in the United States. Historical acreage trends in California show a shift toward high-value crops, such as fruits, vegetables, tree nuts, and other specialty crops, and away from traditional, lower-value field crops (e.g., corn, soybeans, wheat, cotton, rice, and other oilseeds and feed grains). For example, harvested acres of field crops declined from 6.5 million to 4.0 million acres from 1960 to 2009 ( Table 2 ). (See text box for definitions of crop acreage and land use categories.) During this same time period, acres in fruits, nuts, and vegetables almost doubled, from a combined total of 1.9 million acres to 3.7 million acres. Total harvested and bearing acres rose from 8.5 million acres in 1960 to 9.5 million acres in the 1970s and declined to 7.7 million acres in 2009. More recent data disaggregated by these crop categories--"Field Crops," "Fruits and Nuts," and Vegetables and Melons"--are not readily available. Other data from California's County Agricultural Commissioners' Reports and USDA's Farm and Ranch Irrigation Survey indicate that, in 2013, total harvested acres were 7.9 million acres. Both 2009 and 2013 were drought years in California, which may in part explain why harvested acres during those years were lower. In other years of drought and low rainfall, such as in 1987-1992 and 2000-2001, overall acreage declined, with total acres dropping in recent years. The 1987-1992 drought preceded various environmental restrictions that resulted in less water made available to some farming operations, particularly operations in some parts of California. Among individual crops, there has been a continued shift toward growing more permanent orchard crops in some parts of California. Among specialty crops, orchard crops refer to crops, such as fruit trees, that are sown or planted once and are not replanted after each annual harvest. Orchard crops, such as fruit and nut trees and vineyard, berry, and nursery crops, often require long periods of maturation before the crop bears fruit or can be harvested and thereby generate returns for the agricultural producer. Orchard crops cannot be fallowed in dry years without loss of investment. In contrast, most vegetables and other row crops are annual crops that are both sown and harvested during the same production year, sometimes more than once. Annual crops can be fallowed in dry years. From 2004 to 2013, overall harvested acres increased for almonds, walnuts, pistachios, raisins, grapes, berries, cherries, pomegranates, and olives, but also for certain grain and feed crops ( Table 3 ). During the same period, overall harvested acreage decreased for some field crops (cotton, alfalfa, rice, wheat) but also for certain orchard crops (wine grapes and some citrus and tree fruits). In some cases, by 2013, the number of harvested acres for some orchard crops had risen to nearly twice that of harvested acres in 2004 (e.g., almonds, pistachios, olives, cherries, grapes, and berries) ( Table 3 ). Approximate shares of harvested acres for selected crops in 2013 based on annual California County Agricultural Commissioners' Reports are shown in Figure 4 . Actual acreage levels shown in Table 3 often differ widely from projections by DWR reported in the 1990s. For example, DWR projected in 1994 that almond and pistachio acres would grow to reach 600,000 acres by 2020, but the number of acres has instead greatly exceeded predictions, with actual levels reaching more than 900,000 acres in 2013. DWR also projected cotton would cover 1.2 million acres by 2020, whereas actual levels have dropped to under 300,000 acres in 2013; corn acreage was expected to reach more than 400,000 acres in 2020 but has also dropped to about 200,000 acres. The shift to growing more permanent orchard crops appears to be largely market-driven. In recent years, farmers have responded to higher prices for relatively higher-value fruits and vegetables (compared to commodity crops or other row crops) as well as rising demand for these crops or for specific varieties in response to changes in consumer tastes and preferences. This trend has persisted since the 1960s despite the continued availability of federal farm support for commodity crops. Other reasons for this shift might be in response to rising input costs or reliability of water deliveries. Some producers may switch to relatively less water-intensive crops, particularly when water supplies are more scarce (such as growing forage and oilseed crops, which tend to have relatively lower per-unit water costs and usage requirements). Where crop water demands are similar, and all other factors being equal, producers may invest in higher-value crops, such as fruits, nuts, and vegetables. Overall, while total crop acreage throughout California remained more or less constant at roughly 8 million acres in production, the volume of total crop production rose from nearly 33 million in 1960 to more than 73 million tons of product in 2009 ( Table 2 ). Such gains are attributable to improved productivity and efficiency gains at the farm level and are consistent with general national trends in agricultural production. Despite overall declines in field crop acres, total volume production increased significantly, rising from an estimated 19 million tons in 1960 to 32 million tons in 2009. Increases in fruit and vegetable acreage, however, corresponded with even greater increases in volume production of these crops: total volume production of fruits and nuts more than doubled, while vegetables and melons increased fourfold. In addition to growing market demand, the availability of irrigation water has been a factor in the development of California's agricultural production, particularly in areas where annual rainfall is inadequate to produce desired crop yields. Estimates of total water use in California and the amount and share of water used for irrigation agriculture vary depending on the data source and methodology used. Estimates of water use in California vary widely. Two primary sources of information on California water supplies include: U.S. Geological Survey data on water withdrawals and use, and California Department of Water Resources data on "dedicated and developed" water supplies and use. Federal and state sources indicate that the state's agricultural sector uses less available water than many media reports claim. USGS indicates that roughly 60% of water withdrawals and use is used for the state's agricultural sectors, whereas DWR indicates roughly 40% of water supplies and use is used for irrigated agriculture. USGS estimates of water use in California totaled 42.6 million acre-feet (MAF) or 38 billion gallons per day in 2010. These estimates reflect water withdrawn from surface and groundwater sources, thus excluding water left in rivers, lakes, and streams or dedicated to environmental, aesthetic, or recreational purposes. USGS's estimate represents the amount of water withdrawn from natural and developed sources and applied to different uses and thus includes water that might be returned to other surface and groundwater sources. It does not include an estimate of the amount of water consumed by agricultural uses. An estimated 61% (25.8 MAF) of total water withdrawn for use in California (i.e., from surface and groundwater) in an average water year is used for agricultural irrigation, according to USGS ( Figure 5 ). This estimate is based on available data for 2010. DWR's 2013 California Water Plan reported 80 MAF in total estimated water use in California in an average water year. DWR's estimate reflects water applied to particular uses from surface and groundwater sources, similar to USGS estimates of water withdrawals ; however, DWR's total is the total amount estimated as "dedicated and developed water supply" and includes water in streams, including those dedicated as wild and scenic rivers. It also includes water returned to groundwater and surface (using total water available under this definition) but does not include water consumed for a particular use. Water use for agricultural irrigation is estimated at 33 MAF, or about 41% of total use in a normal water year ( Figure 6 ). This estimate is also based on available data for 2010. These estimates differ from other widely cited estimates that 80% of California's available water supplies are for agricultural use as reported in media and news reports. The origin of 80% agricultural water use is unclear, but it may derive from other DWR or USGS publications. Differences among the various estimates of water supply and use are largely based on different survey methods and assumptions, including the baseline amount of water estimated for use (e.g., what constitutes "available" supplies). In general, some agencies calculate water use by estimating the amount of water that is withdrawn from natural sources and put to particular uses--these typically include developed or readily available supplies--while other agencies estimate water use using total water supplies in the state as a baseline, whether immediately available for use or not. Additionally, water uses can be defined in many ways. While some agencies estimate water withdrawn for use, others might estimate water consumed or total water withdrawn and used, minus evaporation and other factors resulting in water not being available for use or reuse. When reviewing information about total water use and percentages used for different purposes, it is important to consider whether the source is reporting gross water use or application (including water that may eventually be used and reused) or water consumed in different uses. Because of the manner in which agencies estimate water supply and use--namely, some use models while others use surveys--many different numbers are reported for California water supply and water uses. Historically, water remaining in rivers and streams was not counted as a "use." In recent years, however, DWR has begun to account for such natural flows, as well as for increased environmental allocations (e.g., for fish and wildlife and for water quality purposes) from developed supplies. DWR reports total state water supply as "dedicated and developed water supply" and reports uses as a percentage of this total supply. In contrast, USGS estimates the total amount of water withdrawn from natural and developed supplies and put to use and reports specific uses as a percentage of total water "withdrawals." Some stakeholders in California's agricultural sectors have complained that the 80% water use estimate cited in many media accounts is inaccurate, and they further contend DWR's estimate of 41% is more appropriate. Others have observed that much of the water deemed as dedicated and developed according to DWR is from North Coast rivers and streams, which are hydrologically distinct from the developed infrastructure of the Central Valley of California and thus not readily available for use other than for environmental purposes. Figure 7 provides an overview of water uses in various regions. As shown in the figure, most of the "environmental" water use occurs in the North Coast area. USDA's 2013 Farm and Ranch Irrigation Survey reports that, nationally, California has the largest number of irrigated farmed acres compared to other states and accounts for about one-fourth of total applied acre-feet of irrigated water in the United States. Of the reported 7.9 million irrigated acres in California, nearly 4 million acres were irrigated with groundwater from wells and about 1.0 million acres were irrigated with on-farm surface water supplies. Another roughly 4.0 million acres in California were irrigated with off-farm surface water from all suppliers. Overall, some reports indicate that the total amount of agricultural water use in California ("total crop applied water") has "held steady since 2000 and actually declined over a longer period." Figure 8 shows California water use as it compares to other states (arranged west to east), as reported by USGS. Relatively arid western states, for the most part, are the largest irrigators, with California and Texas being the largest water users. California and Texas are also the largest states in terms of land mass and population and have relatively arid areas compared with eastern states. Irrigation has been a major factor in the development of California's agricultural production, particularly in the San Joaquin Valley, where annual rainfall is inadequate to produce desired crop yields. California's water use per acre is also among the highest compared to other states, averaging 3.1 acre-feet per acre, nearly twice the national average (1.6 acre-feet per acre) in 2013. Irrigated agriculture in the San Joaquin Valley--an area served by the federal Central Valley Project --accounts for the majority (about 90%) of the region's applied water uses. Irrigation water demand is greatest in the spring and summer months. Table 4 shows available data for selected categories of California crops in terms of the quantity of water applied on irrigated acres harvested from all sources (including groundwater from wells, on-farm surface water, and off-farm water from all suppliers). Across categories of selected crops (as categorized and named by USDA), irrigation water application rates range from an average of 0.6 acre-feet applied per acre (berries) to an average of 4.5 acre-feet applied per acre (rice). With few exceptions (e.g., tomatoes, lettuces, and berries), only aggregated data are available for total "land in orchards" and "land in vegetables." Irrigation water application rates are not available from USDA's survey data for some individual orchard crops, such as almonds and other tree nuts, or vineyard crops and stone fruit. Estimates are available for most commodity crops (e.g., corn, rice, cotton, alfalfa, pastureland, and other grains). These data indicate that of total irrigated acres harvested in California about 31% of irrigated acres were land in orchards and 18% were land in vegetables. Another 46% of irrigated acres harvested were land in alfalfa, hay, pastureland, and grain crops (including rice, corn, and cotton). Figure 9 shows the allocation of California's irrigated acres harvested across selected crops from USDA's 2013 survey. Researchers at the University of California have reported data indicating water application rates across a wider range of California crops. According to these estimates, some crops require more than 5 AF of irrigation water per acre (alfalfa, sugar beets), others between 4 and 5 AF per acre (rice, pasture), and some crops between 3 and 4 AF per acre (tree nuts, tree fruit, cotton). Most vegetables are estimated to apply under 2 AF per acre ( Table 5 ). Adjusting irrigation water rates and acreage for individual crops, Figure 10 shows estimated shares of net water use in the state across a range of crops. The analysis estimates a total estimated net water use of about 20 MAF. Leading California crops account for about three-fourths of all agricultural water use. Use varies by crop category: irrigated pasture, alfalfa, and hay (19%); commodity crops such as corn, wheat, rice, and cotton (19%); tree nuts such as almonds, pistachios, and walnuts (19%); vine crops (11%); and citrus or other tree fruit (8%). In addition, according to these researchers, "crops with the highest economic ... revenue per net unit of water--also usually have the highest employment per land area and water use" ( Figure 11 ). Compared to the national average, California's relatively high per-acre irrigation water use may, in part, be explained by lower annual rainfall, few unused sources of freshwater, longer growing seasons, and generally drier conditions. However, California's high per-acre use of water might also stem from irrigation inefficiencies, given current market signals (namely, artificially low water costs given existing irrigation water policies) that might not encourage farmers to conserve water or improve irrigation. The arid climate in some producing regions might also contribute to overall irrigation water losses from evaporation. Despite ongoing investment in more efficient on-farm irrigation systems, flood and furrow irrigation still accounted for 43% of all irrigated acres in 2010 and continues to be the predominant irrigation method ( Table 5 ). However, between 1991 and 2010, adoption of drip and microsprinkler irrigation systems more than doubled and accounted for 39% of all irrigated acres in 2010. This shift to more efficient irrigation methods may in part be attributable to a reduction in irrigation water supplies in response to periodic drought conditions and other water supply constraints, as well as reduced costs and available federal assistance for adopting improved technologies. The text box below describes the different types of irrigation systems in use. Drip and microsprinkler irrigation systems are reported to have the highest irrigation efficiency rating of 87.5%-90.0%, compared to traditional sprinkler systems of 70.0%-82.5%, depending on the type of system. Irrigation efficiency for most surface irrigation systems can range widely, with furrow and gravity systems having a reported 67.5%-75.0% efficiency rating. The type of irrigation system adopted can depend on financing available to update a farm's irrigation system but may also depend on site-specific conditions at the farm, including soil type and topography, as well as the type of crop grown. Sprinkler systems may be suitable for sandy light soils where there is rapid percolation; some systems are not suitable if the slope of the land exceeds 5%-10% or in areas with high saline soils, such as in some areas on the westside of the San Joaquin Valley. Economic factors such as market demand for high-value crops or the ability to sell or lease surplus water may also influence investment in more efficient irrigation technology. Figure 12 shows differences among hydrologic regions in terms of irrigation methods used and trends in methods used from 1991 to 2011. Cost is often the main limiting factor for more widespread adoption of drip irrigation systems. Media reports cite estimates that a permanent drip irrigation system can cost $1,000 to $3,000 per acre, not including installation; maintenance and/or repair costs can add another $100 to $300 an acre per year. Actual costs will depend on the type of crop grown. In 2013, USDA reported that California farmers with irrigated land invested an estimated $600 million in irrigation equipment, covering investments in facilities, land improvement, and computer technology. The California Farm Water Coalition reports that between 2003 and 2008, California farmers invested more than $1.5 billion on drip and microsprinkler irrigation technology, with about 1.3 million acres installed with high-technology irrigation systems. Some have suggested that, because of steady advances in technology and efficiency gains made in response to previous water shortages and drought conditions, additional gains in irrigation efficiency will be difficult to obtain. However, others have noted that, in response to the current and ongoing situation, there continues to be ongoing efforts and increasing investment in irrigation technology. The California Farm Bureau Federation (CFBF) claims, "Experts suggest California farmers and ranchers have invested hundreds of millions of dollars in irrigation technology in recent years, and there's general agreement that the pace of investment and technological advancement is increasing." CFBF notes that farmers are continuing to invest in new and also improved technologies, including subsurface drip irrigation, as well as better emitters, valves, gauges, and management. Many farmers also engage in certain water and resource conservation practices, such as use of cover crops, minimum tillage, water recycling, and mulching. CFBF claims this investment and management has allowed California producers to grow more on increasing acreage using roughly the same amount of water. Studies claim there is the potential to reduce agricultural water use from improved technology and water management, and changes in cropping patterns. A 2009 study by the Pacific Institute reported potential water savings of 4.5 million acre-feet in a wet year and 6.0 million acre-feet in a dry year, or reductions of 17% from improved technology and water management. A 2014 follow-up analysis by the Natural Resources Defense Council (NRDC) reported potential savings of between 5.6 million and 6.6 million acre-feet per year, or about 17% to 22% water savings from current levels "while maintaining productivity and total irrigated acreage." Many groups have criticized the findings of these studies. Some point out that previous studies conducted by university researchers indicate that on-farm changes by California farmers would result in water savings that are significantly lower than those reported by the Pacific Institute and NRDC. Some claim these estimated water savings far exceed recent water delivery reductions. Others object to the study's assumptions that producers will shift away from growing certain crops, claiming they ignores market demand, which influences what farmers grow, among other types of methodological concerns. Others also object to claims that agricultural productivity will not be affected by irrigation reductions, pointing out numerous studies over the years estimating significant economic losses to the state's agricultural sectors as a result of ongoing drought conditions. The most recent estimates by researchers at UC-Davis project the total direct economic costs of the drought to the agricultural sectors will total $1.8 billion in 2015, or about 4% of the state's 2012 agricultural gross cash receipts, covering estimated revenue losses to crop, dairy, and livestock producers, as well as additional water pumping costs. The debate about water savings from improved irrigation efficiency further raises the question about what is the net outcome of such efficiency gains in the farming sectors: namely, will water use reductions through the adoption of more efficient irrigation systems result in overall water savings, or will these reductions be used to support additional expansion in agricultural production? California's agricultural industry is an important part of the state's economy and a significant contributor to the nation's food supply for certain crops such as fruits, vegetables and tree nuts. Agricultural production has shifted from traditional field crops in recent decades to higher value fruit, vegetable, tree nuts and other specialty crops. This shift appears to be largely market driven. Confusion over how much water is used to grow crops in California stems largely from baseline differences in water use and supply definitions used by different agencies reporting such data.

California ranks as the leading agricultural state in the United States in terms of farm-level sales. In 2012, California's farm-level sales totaled nearly $45 billion and accounted for 11% of total U.S. agricultural sales. Five counties--Tulare, Kern, Fresno, Monterey, and Merced--rank among the leading agricultural counties in the nation. Given current drought conditions in California, however, there has been much attention on the use of water to grow agricultural crops in the state. Depending on the data source, irrigated agriculture accounts for roughly 40% to 80% of total water supplies. Such discrepancies are largely based on different survey methods and assumptions, including the baseline amount of water estimated for use (e.g., what constitutes "available" supplies). Two primary data sources are the U.S. Geological Survey (USGS) and the California Department of Water Resources (DWR). USGS estimates water use for agricultural irrigation in California at 25.8 million acre-feet (MAF), accounting for 61% of USGS's estimates of total withdrawals. DWR estimates water use withdrawals for agricultural irrigation at 33 MAF, or about 41% of total use. Both of these estimates are based on available data for 2010. These estimates differ from other widely cited estimates indicating that agricultural use accounts for 80% of California's available water supplies, as reported in media and news reports. Attention has also focused on trends in California toward growing more permanent orchard crops, such as fruit and nut trees and vineyard crops, as well as production of grain and pasture crops, much of which is used to support the state's meat and dairy industries. Orchard crops refer to tree or vineyard crops that are planted once, require continuous watering to reach maturation, and cannot be fallowed during dry years without loss of investment. In contrast, most vegetables and other row crops (including grain and pasture crops) are annual crops that are sown and harvested during the same production year, sometimes more than once, and may be fallowed in dry years. Between 2004 and 2013, overall harvested acres in California increased for almonds, walnuts, pistachios, raisins, grapes, berries, cherries, pomegranates, and olives, but also for corn. During the same period, overall harvested acreage decreased for some field crops (cotton, alfalfa, rice, wheat), but also for certain orchard crops (wine grapes and some citrus and tree fruits). This shift to growing more permanent crops, especially tree nuts, appears to be largely market-driven. The availability of irrigation water has been a major factor in the development of California's agricultural production. California has the largest number of irrigated farmed acres compared to other states and accounts for about one-fourth of total applied acre-feet of irrigated water in the United States. Water use per acre in California is also high compared to other states. Available data for 2013 indicate that, of total irrigated acres harvested in California, about 31% of irrigated acres were land in orchards and 18% were land in vegetables. Another 46% of irrigated acres harvested were land in alfalfa, hay, pastureland, rice, corn, and cotton. Congressional interest in California agriculture and water use centers largely on the Bureau of Reclamation's Central Valley Project (CVP), which supplies water to numerous agricultural and municipal contractors. In recent years, the CVP has cut back water deliveries due to drought and environmental factors. Congress also authorizes and oversees U.S. Department of Agriculture support for individual crops and farmers, and some Members have expressed concern over the broader implications of decreased agricultural production and/or lack of water availability throughout the state.

In 2008 and 2009, collapsing world credit markets and a slowing global economy combined to create the weakest market in decades for production, financing, and sale of motor vehicles in the United States and many other industrial countries. The production and sales slides were serious business challenges for all automakers, and rippled through the large and interconnected motor vehicle industry supply chain, touching suppliers, auto dealers, and the communities where automaking is a major industry. Old GM and Old Chrysler, in addition to being affected by the downdraft of the recession, were in especially precarious financial positions. As the supply of credit tightened, they lost the ability to finance their operations through private capital markets and sought federal financial assistance in 2008. The separate companies that financed GM and Chrysler vehicles, GMAC and Chrysler Financial, were also experiencing financial difficulties, with GMAC suffering from large losses in the mortgage markets as well. With 91% of U.S. passenger vehicle sales depending upon financial intermediaries to provide loans or leases, the auto financing companies' inability to lend damaged the prospects of Old GM and Old Chrysler pulling out of the slump, particularly because other sources of credit, such as banks and credit unions, were also reluctant to lend due to ongoing financial market disruptions. When Congress did not pass auto industry loan legislation, the George W. Bush Administration turned to the Troubled Asset Relief Program (TARP) to fund assistance for both automakers and for GMAC and Chrysler Financial. TARP had been created by the Emergency Economic Stabilization Act (EESA) in October 2008 to address the financial crisis. This statute specifically authorized the Secretary of the Treasury to purchase troubled assets from "financial firms," the definition of which did not specifically mention manufacturing companies or auto financing companies. The authorities within EESA were very broad, and both the Bush and Obama Administrations used TARP's Automotive Industry Financing Program to provide financial assistance ultimately totaling more than $80 billion to the two manufacturers and two finance companies. This assistance was not without controversy, and questions were raised about the legal basis for the assistance and the manner in which it was carried out. The financial assistance provided to private companies by the government during the financial crisis can broadly be divided into (1) assistance for solvent companies facing temporary difficulties due to the upheaval in financial markets and (2) assistance for more deeply troubled firms whose failure was thought likely to cause additional difficulties throughout the financial system and broader economy. As a large financial institution, GMAC might have been eligible for various programs and loan facilities intended for solvent institutions, particularly after its conversion to a bank holding company. Whether or not GMAC was actually solvent, however, remains unclear. Ultimately, the TARP assistance provided to the company came from the Auto Industry Financing Program, not the programs for assisting banks. GMAC/Ally Financial also received assistance from Federal Reserve (Fed) and Federal Deposit Insurance Corporation (FDIC) programs intended for healthy banks facing temporary funding issues. Table 1 below summarizes the TARP assistance given to the U.S. motor vehicle industry. Of the two auto financing companies, Chrysler Financial received relatively minor amounts of TARP assistance ($1.5 billion) and repaid this loan relatively quickly with interest. GMAC, however, ultimately required much more extensive assistance which resulted in the federal government taking a majority ownership stake in the company. In addition, during the crisis, GMAC converted from an industrial loan company into a bank holding company, an expedited conversion permitted by the Fed due to emergency conditions in the financial markets. This conversion allowed access to Fed lending facilities and also increased regulatory oversight of the company. In March 2011, the company, now renamed Ally Financial, filed with the Securities and Exchange Commission (SEC) for an initial public offering (IPO) of shares. The IPO was a major step in unwinding the government involvement in GMAC/Ally Financial. The price at which the government was able to sell shares during and after an IPO was instrumental in determining whether the government was able to recoup its assistance for GMAC/Ally Financial. In July 2011, Ally put its IPO on hold because of what one news story called the "near shutdown in global equity capital markets." The IPO process was ultimately completed in May 2014. Sales of government shares during the IPO reduced the government ownership to 15.6% of the company. In addition to auto financing, GMAC was a large participant in the mortgage markets, particularly through subsidiaries known as ResCap. The bursting of the housing bubble and the 2008-2009 financial crisis resulted in substantially negative returns from the company's mortgage operations with prospects of future losses. The financial status of ResCap was a factor in Ally not undertaking an IPO in 2011 as the uncertainty surrounding future losses from mortgages had been a drag on the company. Ultimately the ResCap subsidiaries filed for Chapter 11 bankruptcy in May 2012. This bankruptcy was possible because the ResCap operations were legally separate from Ally Financial. Ally Financial took an approximately $1.3 billion charge due to the bankruptcy. The authority to purchase assets under TARP expired during the 111 th Congress, as did the TARP Congressional Oversight Panel, a temporary panel created in the TARP statute. Congress, however, conducted TARP oversight hearings in the House during 113 th Congress. Auto financing companies have a dual role in auto retailing. Because of the high price of motor vehicles, more than 90% of customers finance or lease their vehicle. While outside financial institutions such as credit unions and banks also lend to finance such purchases, the automobile companies themselves have long offered financing and leasing to consumers through related finance companies (such as GMAC, Chrysler Financial, Ford Motor Credit, and Toyota Motor Credit). In addition to the financing of retail auto purchases, dealers have traditionally used the manufacturers' finance arms to purchase the automobile inventory from the manufacturers. These loans are called floor plan financing. As the banking crisis intensified in 2008-2009, floor plan and retail financing were seriously affected as the financing companies were unable to raise the capital to fund the manufacturer-dealer-consumer pipeline. Thus, in order to assist the auto manufacturers, it was deemed important to assist the auto financing companies. General Motors Acceptance Corporation (GMAC) was created by Old GM in 1919 to provide credit for its customers and dealers. Over the decades, GMAC expanded into providing other financial products, including auto insurance (beginning in 1939) and residential mortgages (beginning in 1985), but remained a wholly owned subsidiary of Old GM. GMAC's operations were generally profitable over the years. In 2003, for example, the company contributed $2.8 billion to Old GM's bottom line with total assets of $288 billion. In 2006, Old GM spun off GMAC into an independent company, with Cerberus Capital Management purchasing 51% of GMAC for approximately $14 billion; GM retained a 49% share. At the time the automaker was under financial pressure to locate additional capital. In 2005, Old GM had recorded its largest annual loss since 1992, stemming primarily from its auto business. GM's overall corporate credit rating declined and caused GMAC's credit rating to be lowered to junk status, making it more difficult for the finance unit to raise capital. In turn, the lower credit rating increased GMAC's cost of financing GM vehicle sales. It was reported that GMAC paid interest rates of up to 5.4 percentage points above comparable Treasury securities on its debt, versus 1.7 to 2.7 percentage points above in 2004. It was thought that selling the controlling stake to Cerberus would provide GMAC with lower credit costs through better access to capital markets. After the spinoff, providing financing for Old GM customers and dealers remained a large portion of GMAC's business, and the two companies remained linked through numerous contracts and through Old GM's continued 49% ownership stake in GMAC. As the early 2000s housing boom turned to the late 2000s housing bust, the previously profitable GMAC mortgage operations began generating significant losses. GMAC was exposed to the mortgage markets both as an investor and as a participant. For example, in 2006, GMAC held approximately $135.1 billion in mortgage assets. GMAC's ResCap subsidiary was the country's sixth-largest mortgage originator and fifth-largest mortgage servicer in 2008. GMAC as a whole produced more than $51 billion in mortgage-backed securities in that year. At the same time the housing market was encountering difficulties, automobile sales were dropping, which negatively affected GMAC's core auto financing business. In addition, GMAC, along with nearly all financial firms, faced difficulties in accessing capital markets for funding that previously had been relatively routine. Prior to the crisis, GMAC's banking operations had been operating as an industrial loan corporation (ILC) rather than under a federal bank holding company charter. Much of the federal government support offered in response to the financial crisis at the time, particularly the initial assistance provided under the TARP Capital Purchase Program, was not available to GMAC because it was organized as an ILC. GMAC applied for federal bank holding company status in November 2008, and the Federal Reserve approved the application in an expedited manner in December 2008. As part of the approval, neither Old GM nor Cerberus was allowed to maintain a controlling interest in GMAC and some of the links between Old GM and GMAC were gradually unwound. Since the transformation into a bank holding company, GMAC renamed itself Ally Financial, Inc. and expanded its depository banking operations under the name Ally Bank. In December 2013, the Fed approved Ally Financial's application for financial holding company status, which allows the company to engage in a broader range of businesses, such as insurance, than would have been permissible as a bank holding company. At the time, Ally faced increasing competition. According to a Government Accountability Office report issued in October 2013, Ally Financial faces growing competition in both consumer lending and dealer financing from Chrysler Capital, GM Financial, and other large bank holding companies. This competition may affect the future profitability of Ally Financial, which could influence the share price of Ally Financial once the company becomes publicly traded and thus the timing of Treasury's exit. Following the government assistance and restructuring of the auto industry, GMAC/Ally Financial provided much of the floor plan and retail financing for New GM and New Chrysler. The relationship among the companies, however, has been in flux. In 2010, New GM acquired AmeriCredit Corporation, and renamed it General Motors Financial Company, a subsidiary now competing with GMAC/Ally Financial. GM added to the rebuilding of its own lending business when GM Financial purchased Ally's international auto lending operations in 2013, reportedly doubling the size of GM's in-house lender. According to GM, GM Financial offers financing for about 80% of GM's worldwide sales. Similarly, Chrysler re-established a unit that provides floor plan financing to its dealers, instead of using Ally Financial. In 2013, it established Chrysler Capital for that purpose, in conjunction with Spanish lender Banco Santander. Ally previously had preferred lender agreements with Chrysler and GM, but these expired in April 2013 and February 2014, respectively. It continues to support auto financing with the two Detroit automakers, but without an exclusive agreement to finance their respective vehicle sales incentive programs. As of September 30, 2014, Ally Financial was the 19 th -largest U.S. bank holding company, with approximately $149.2 billion in total assets. In its annual filing with the SEC in early 2014, Ally reported three major lines of business: Dealer Financial Services. These services include automotive finance and insurance, providing loans, leases, and commercial insurance to 16,000 auto dealers and 4 million retail customers. These operations had $116.4 billion of assets and generated $4.7 billion of total net revenue in 2013. Mortgages . GMAC/Ally Financial historically had significant mortgage operations, but Ally Financial exited the large portions of their residential mortgage operations with the ResCap bankruptcy filing and with the divestment of other mortgage financing activities. The bankruptcy court confirmed the bankruptcy plan in December 2013. Ally's mortgage operations had $8.2 billion of assets on December 31, 2013, and generated $76 million of total net revenue in 2013. Depository banking . Ally Bank raises deposits through the Internet, telephone, mobile, and mail channels. Its consumer banking activities include savings and money market accounts, certificates of deposit, interest-bearing checking accounts, and individual retirement accounts. At the end of 2013, it had $52.9 billion of deposits, including $43.2 billion of retail deposits. GMAC/Ally Financial's past role as a mortgage servicer led to further interactions with TARP as the company participated in the TARP Home Affordable Modification Program (HAMP). GMAC/Ally Financial has received approximately $96 million in servicer incentive payments for participating in HAMP. The company faced criticism for documentation issues in its foreclosure proceedings and reported a $230 million charge to the company's 2011 earnings due to foreclosure-related complaints. GMAC/Ally Financial benefited from both general and specific government assistance during the financial crisis. Such assistance included (1) Federal Reserve lending facilities, where an institution could borrow cash from the Fed in return for less liquid securities; (2) the FDIC's Temporary Liquidity Guarantee Program (TLGP), which guarantees debt issued by banks; and (3) the TARP, which primarily provided additional capital to strengthen the company's balance sheet. Historically, the Fed declined to identify individual institutions to which it lent funds. GMAC itself, however, reported that at the end of 2008, it had $7.6 billion outstanding from the Fed's Commercial Paper Funding Facility (CPFF). The Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in July 2010, required the Fed to detail its emergency lending through the financial crisis; details of such lending were released in late 2010. This release did not include borrowing from non-emergency facilities, such as the discount window. Table 2 summarizes the information released by the Federal Reserve regarding GMAC/Ally Financial's borrowing from the CPFF and the Term Auction Facility (TAF). As part of its response to the then-ongoing financial crisis, the FDIC created the TLGP to encourage liquidity in the banking system. One component of this program guarantees senior unsecured debt issued by banks before October 31, 2009, with coverage until December 31, 2012. Based on its size, GMAC/Ally Financial was eligible to issue up to $7.4 billion of debt under the program and it did so in three tranches: $2.9 billion in October 2009 and $3.5 billion and $1 billion in December 2009. This debt matured in October and December 2012. In return for the guarantee, the FDIC received approximately $393 million in fees from GMAC/Ally Financial. GMAC applied for the Treasury's TARP Capital Purchase Program in 2008 at the same time as it applied to the Fed for permission to convert to a bank holding company. By the time the application was approved, Treasury had announced the Auto Industry Financing Program (AIFP) and the assistance received by GMAC/Ally Financial came under this program rather than the TARP bank assistance programs. GMAC received three large rounds of assistance through TARP: (1) $5.25 billion on December 30, 2008, (2) $7.5 billion on May 21, 2009, and (3) $3.98 billion on December 30, 2009. This assistance was provided through the purchase of various types of preferred equity in GMAC, including mandatory convertible preferred stock and trust preferred securities. Holders of preferred equity are entitled to dividends before any dividend is paid to holders of common stock, but they have no voting rights in the company. The Treasury received warrants for approximately $825 million in additional preferred equity in conjunction with these transactions and the preferred stock has paid dividends. In addition to the direct assistance for GMAC/Ally Financial, the company also received indirect TARP assistance in the form of an $884 million loan to Old GM for participation in a December 2008 rights offering for GMAC common stock. In early 2009, the Treasury and banking regulators conducted stress tests on large banks, including on GMAC. These tests were intended to identify financial institutions that needed additional capital. Such banks were to be eligible for the new TARP Capital Assistance Program if they proved unable to raise needed capital from the private markets. However, the Capital Assistance Program was never used because, other than GMAC, the banks, which were judged to need additional capital, were able to raise this capital from the private market. GMAC was unable to raise capital from the private market and instead received the two additional rounds of assistance from the Auto Industry Financing Program as detailed above. Since the initial assistance in 2008, the government not only injected additional capital into GMAC/Ally Financial, but also changed the form of the government investment. The $884 million loan to Old GM was converted in May 2009 into approximately 35% of common equity in GMAC/Ally held by the U.S. Treasury. In December 2009, $3 billion of preferred shares was converted into an additional 21% of common equity, raising the federal ownership to more than 56%. The warrants that came along with the assistance were also exercised. In December 2010, $5.5 billion of preferred equity was converted into approximately 17.5% of the company's common equity, raising federal ownership to 73.8%. The other large shareholders at that time were the GM Trust, 9.9% Cerberus Capital, 8.7% and other investors, 7.6%. The 73.8% government ownership stake was reduced to 63.4% through a share dilution in November 2013. Following this, the share eventually was reduced to 0% through both private and public equity sales by the government from January 2014 to December 2014. In total, the U.S. Treasury recouped $14.7 billion of the assistance principal and received $4.9 billion in dividends and other income from its involvement with GMAC/Ally between 2008 and 2014. The TARP assistance for GMAC/Ally Financial, like most of the TARP assistance, was initially provided through financial instruments that were expected to be repaid or repurchased by the recipients. In some cases, including GMAC/Ally Financial, the U.S. Treasury converted all or some of TARP assistance into common equity in the company. Assistance converted to common equity was not subject to repayment by the company, but represented an ownership stake in the company. Conversion into common equity meant that the government's ability to recoup its assistance depended on the price received when the government sold its shares. If the value of the shares when sold was less than the amount of the government's assistance, Ally Financial had no obligation to compensate the government for the difference. Conversely, if the common equity stake were sold for more than the amount of the assistance, the government would retain any excess. In addition to the funds repaid through asset sales, the TARP assistance also produced other income, such as interest, dividends, or capital gains, which could be considered as offsetting losses on common equity sales should such losses occur. As specified by the TARP statute, proceeds from TARP assistance "shall be paid into the general fund of the Treasury for reduction of the public debt." The outcomes of the government's holdings of common equity in other large TARP recipients varied: Citigroup. Early in 2009, $25 billion of TARP assistance to Citigroup was converted into approximately 34% of the equity in the company, which was then sold to private investors. This conversion proved beneficial for the government, with a capital gain of approximately $6.9 billion from the stock sale and nearly $1 billion in dividends and warrants sales. Other cases, however, have not provided similar gains. General Motors. In the case of New GM, approximately $40 billion out of a total of $50.2 billion in loans was converted into 60.8% of the common equity in the company. The Treasury sold off these shares between December 2010 and December 2013. The assistance for GM realized an $11.2 billion loss with additional income of $0.7 billion. AIG. In early 2011, $49.1 billion of TARP preferred share holdings was converted into common equity in AIG, with the government holdings peaking at more than 92% due to both TARP and Fed assistance for the company. This equity was sold over time, with sales finishing in December 2012. The loss recorded by the Treasury on the TARP portion of the AIG assistance amounted to $13.5 billion, although this was offset by $17.6 billion recouped from the shares that resulted from Fed assistance. The Treasury also recorded $1.0 billion in income from the AIG assistance. Chrysler. Treasury's 6.6% common equity holding in New Chrysler was sold to Fiat in a direct sale for $500 million, with another $60 million paid for equity rights that were held by the U.S. Treasury. The government realized a $2.9 billion loss on the assistance principal with $1.7 billion in income received. The Treasury's 73.8% common equity holding in Ally Financial was sold partly to third party investors and partly to Ally itself. Through these sales and the sale of preferred equity that was not converted, the government was repaid $14.7 billion of the $17.2 billion of assistance principal, realizing a $2.5 billion loss. In addition, however, the government received a total of $4.9 billion in dividends and other income from its support for GMAC/Ally Financial. Thus, the government recouped a total of $19.6 billion, $2.4 billion more than the $17.2 billion in assistance originally provided. This gain is not correctly referred to as a "profit," as the calculation does not take into account factors, such as the Treasury's cost to borrow the funds extended to GMAC/Ally Financial, the time value of money, and an appropriate risk premium to compensate the taxpayers for the possibility that the assistance would not be recouped. Were those factors also included, the government's economic gain from TARP assistance would be lower.

Ally Financial, formerly known as General Motors Acceptance Corporation or GMAC, provides auto financing, insurance, online banking, and mortgage and commercial financing. For most of its history, it was a subsidiary of General Motors Corporation. Like some of the automakers, it faced serious financial difficulties due to a downturn in the market for automobiles during the 2008-2009 financial crisis and recession, while also suffering from large losses in the mortgage markets. With more than 90% of all U.S. passenger vehicles financed or leased, GMAC's inability to lend was particularly threatening to GM's retail sales and dealer-financing capabilities. The Bush and Obama Administrations used the Troubled Asset Relief Program (TARP) to provide assistance for the U.S. auto industry, concluding that the failure of one or two large U.S. automakers would cause additional layoffs at a time of already high unemployment, prompt difficulties and failures in other parts of the economy, and disrupt other markets. The decision to aid the auto industry was not without controversy, with questions raised as to the legal basis for the assistance and the manner in which it was carried out. The nearly $80 billion in TARP assistance for the auto industry included approximately $17.2 billion for GMAC, which changed its name to Ally Financial in 2010. The government's aid for GMAC was accomplished primarily through U.S. Treasury purchases of the company's preferred shares. Many of these preferred shares were later converted into common equity, resulting in the federal government acquiring a 73.8% ownership stake. This conversion from preferred to common equity significantly changed the outlook for the future government recoupment of the TARP assistance. After such a conversion, if the government's common equity were to end up being worth less than the assistance provided, the company would have no responsibility to compensate the government for the difference. Conversely, if the common equity were to be worth more than the assistance, the gain from this difference would accrue to the U.S. Treasury (and be used to pay down the national debt, as specified in the TARP statute). Beginning in November 2013, the government's stake in Ally Financial began dropping due to share dilution and the sale of the government's stock through both private placements and open market sales. The final sale of the government's Ally stock was completed in December 2014. With the completion of the sale, the government received a total of $14.7 billion in repayment for its assistance, leading the Treasury to recognize a loss of $2.5 billion. However, the government also received $4.9 billion in dividends and other income due to the TARP assistance to GMAC/Ally Financial. In addition to TARP assistance, during the financial crisis in 2008, GMAC converted from an industrial loan company into a bank holding company, an expedited conversion that was permitted by the Federal Reserve (Fed) due to prevailing emergency conditions in the financial markets. This change increased access to government assistance, including Fed lending facilities and Federal Deposit Insurance Corporation (FDIC) guarantees, and also increased regulatory oversight of the company.

Are oil speculators the messengers bearing bad news, or are they themselves the bad news? The Commodity Futures Trading Commission (CFTC), which regulates speculative trading in energy commodities, has found no evidence that prices are not being set by the economic fundamentals of supply and demand. Many analysts agree, arguing that long-term supply growth will have difficulty keeping up with demand. Others, however, believe that changes in the fundamentals do not justify recent increases in energy prices, and seek the cause for soaring prices in the futures and derivatives markets, which are used by financial speculators as well as producers and commercial users of energy commodities. The energy futures markets, which date from the 1980s, involve two kinds of traders. Hedgers--producers or commercial users of commodities--trade in futures to offset price risk. They can use the markets to lock in today's price for transactions that will occur in the future, shielding their businesses from unfavorable price changes. Most trading, however, is done by speculators seeking to profit by forecasting price trends. Together, the trading decisions of hedgers and speculators determine commodity prices: there is no better mechanism available for determining prices that will clear markets and ensure efficient allocation of resources than a competitive market where hedgers and speculators pool information and trade on their expectations of future prices. Since many transactions in the physical markets take place at prices generated by the futures markets, speculators clearly play a large part in setting energy prices. In theory, this should not drive prices away from the fundamental levels: if financial speculators trade on faulty assumptions about supply and demand, other traders with superior information--including those who deal in the physical commodities--should be able to profit at their expense. In other words, there is no reason why speculation in and of itself should cause prices to be artificially high. Theory says increased speculation should produce more efficient pricing. In practice, however, some observers, including oil company CEOs, OPEC ministers, and investment bank analysts, now speak of a "speculative premium" in the price of oil. This view implies that without speculation, prices could fall significantly without disrupting current patterns of consumption and production. How could the price discovery function of the energy derivatives market have broken? Several explanations are possible. First, the market could be manipulated. Price manipulation, which is illegal under the Commodity Exchange Act, involves deliberate strategies by a trader or group of traders to push prices to artificial levels. Since derivatives markets reward correct predictions about future prices, manipulation can be very profitable. Most manipulations in the past have involved short-lived price spikes, brought about by spreading false information, or concerted buying or selling. Since 2002, the CFTC has brought 40 enforcement cases involving manipulation, but these usually have involved attempts to generate short-term price spikes, which may be very profitable for the manipulators, but do not appear to explain the long-term energy price trends observed in recent years. It is rare, but possible, for a market to be rigged over a longer period of time when a single trader or group amasses a dominant position in both physical supplies and futures contracts and obtains enough market power to dictate prices. Examples include the Hunt brothers' attempt to corner the silver market in 1979-1980 and the manipulation of the copper market by Yasuo Hamanaka of Sumitomo in the mid-1990s. The CFTC has not produced any evidence that such a grand-scale manipulation of energy prices is underway and has testified before Congress repeatedly that prices are being set competitively. In the absence of manipulation, another explanation for prices above fundamental levels is a speculative bubble. If, as was the case in the dot-com stock boom, a majority of traders become convinced that a "new era" of value has arrived, they may bid up prices sharply in defiance of counter-arguments based on fundamentals. Eventually, prices return to fundamental levels, often with a sudden plunge. This is what many forecast for energy prices, including George Soros, perhaps the best known speculator of the day. The bubble explanation is the same as the speculative premium argument. If market participants are trading on mistaken ideas about the fundamentals, they may set a price that is above the true price (which is the current market price minus the speculative premium). However, there is no sure method for determining what the true price is; the only observable price is the one the market generates. Policy options to discourage speculation driven by irrational exuberance are limited. Actions to reduce the amount of speculative trading, such as increasing the margin requirements on futures contracts or restricting access to the markets, may not produce the desired outcome. Higher margins raise trading costs, which should reduce trading volumes, but the final effect on prices is uncertain. Empirical studies have not found a link between higher margins and lower price volatility, or any evidence that would suggest that prices would fall. Apart from the possibility that traders in general are getting the price wrong, there is an argument that prices have been driven up by a change in the composition of traders. In recent years, institutional investors--like pension funds, endowments, and foundations--have increasingly chosen to allocate part of their portfolios to commodities. This is rational from the point of view of the individual fund, as it may increase investment returns and diversify portfolio risks; but when many institutions follow the same strategy at the same time, the effect can be that of a bubble. A number of bills are aimed at reducing the incidence or impact of institutional investment on the energy markets. These, and other proposals to improve the regulation of derivatives markets, are summarized below. Legislative approaches to ensuring that commodity prices are not manipulated or distorted by excessive speculation focus on (1) extending regulatory control to previously unregulated markets, (2) ensuring that speculators cannot use foreign futures markets to avoid U.S. regulation, and (3) restraining the ability of institutional investors (and others who do not deal in the physical commodities themselves) to take large positions in commodities. These three areas are known respectively as the "Enron loophole," the "London loophole," and the "swaps loophole." The "Enron loophole" refers to a range of transactions that occur off the regulated futures exchanges, in an "over-the-counter" (OTC) market where the CFTC has had little regulatory jurisdiction, and from which it does not receive comprehensive information about who is trading, in what volumes, and at what price. The Commodity Futures Modernization Act of 2000 (CFMA, P.L. 106-554 ) created a statutory exemption from CFTC regulation for certain contracts based on "exempt commodities," defined in the legislation as commodities that are neither agricultural nor financial. Two types of energy derivative markets were thereby exempted: (1) bilateral, negotiated transactions between two counterparties that are not executed on a trading facility, and (2) trades done on an "electronic trading facility." The CFMA specified that these markets must not be accessible to small investors; all traders must be "eligible contract participants" (financial institutions, units of government, or businesses or individuals with substantial financial assets) or, in the case of the electronic trading facility exemption, "eligible commercial entities" (eligible contract participants who either deal in the physical commodity or regularly provide risk management services to those who do). A substantial volume of over-the-counter energy trading makes use of these exemptions. There is a large market in energy swaps, where investment banks like Goldman Sachs and Morgan Stanley offer contracts linked to energy prices. The OTC market in swaps has also evolved towards an exchange model, where contracts are traded rapidly over an electronic network, and may be backed by a clearing house. The best known of these electronic trading facilities is operated by Intercontinental Exchange Inc. (ICE). The ICE over-the-counter market handles a volume of natural gas contracts roughly equal in size to that handled by Nymex, the largest energy futures exchange. A Government Accountability Office report in October 2007 noted the growth of the OTC market and raised questions about whether the federal regulator had the information it needed to ensure that markets were free of fraud and manipulation. In the same month, the CFTC issued a report recommending legislative action to increase the transparency of energy markets. In May 2008, with the Farm Bill ( H.R. 2419 , P.L. 110-234 ), Congress passed legislation that generally follows the CFTC's recommendations and potentially brings part of the OTC market under CFTC regulation. The new law affects electronic trading facilities handling contracts in exempt commodities (primarily energy or metals). If the CFTC determines that a contract traded on such a facility plays a significant price discovery role, that is, if the prices it generates are used as reference points for other transactions and markets, the facility will come under CFTC regulation. The market will have to register with the CFTC and demonstrate its capacity to comply with several core principles. The principles and requirements include maintaining and enforcing rules against manipulation, establishing position limits or accountability levels to prevent excessive speculation, and providing the CFTC with daily reports on large traders' positions. The provisions of the Farm Bill, however, do not affect the unregulated status of energy contracts that are not entered into on a trading facility, in other words, the swap market in exempt commodities. Thus, the argument is made that the Enron loophole has been only partially closed. A number of bills propose to end the statutory exemption for OTC energy trades altogether, by putting energy commodities on the same regulatory basis as agricultural commodities. Under current law, derivatives contracts based on farm commodities may only be traded on a regulated exchange, unless the CFTC issues an exemption. The CFTC is authorized to grant such exemptions on a case-by-case basis, after determining that the contract would not be against the public interest. Other bills, including H.R. 6244 and S. 3268 , would authorize the CFTC to impose reporting requirements and position limits on energy swap markets. Unlike the Enron loophole, which addresses the distinction between the regulated exchange markets and the unregulated OTC market, the "London loophole" refers to differences in the oversight of regulated markets in different countries. The U.K. counterpart to Nymex, the leading U.S. energy futures market, is ICE Futures Europe, which is regulated in the U.K. by the Financial Services Authority (FSA). For several years, the U.K. exchange has been offering energy futures contracts in the United States, via electronic terminals. Ordinarily, an exchange offering futures contracts to U.S. investors is required to register with the CFTC as a "designated contract market," and to comply with all applicable laws and regulations. However, in the case of ICE Futures Europe, the CFTC has waived that requirement, by means of a series of no-action letters, on the grounds that the U.K. market is already regulated at home, and that requiring it to register with the CFTC would be duplicative and add little in terms of market or customer protections. Initially, the U.K. market offered electronic access to U.S. traders to its most popular contract, a futures contract based on the price of Brent Crude oil, produced in the North Sea. After the market was acquired by ICE, however, it introduced a "look-alike" contract that was identical to Nymex's West Texas Intermediate crude oil future. This contract, which could be settled by making or taking delivery of physical crude oil in the United States, now trades in significant volumes--transactions that would presumably take place on the Nymex otherwise. With concern over high and volatile energy prices, there has been more scrutiny of ICE Futures Europe's activities in the United States. Can traders avoid speculative position limits by trading on ICE, in addition to (or instead of) Nymex? Does the CFTC receive the same information from ICE Futures Europe about large trading positions that could be a source of manipulation or instability (if they were liquidated suddenly)? A number of bills propose to close the London loophole, either by requiring foreign boards of trades (exchanges) to comply with all U.S. registration and regulatory requirements if they offer contracts that can be settled by physical delivery within the United States, or by making CFTC relief from such requirements and regulation contingent upon a finding that (1) it will receive from the foreign market information that is comparable or identical to what it receives from domestic exchanges and (2) the foreign market is subject to a regulatory regime that is comparable to the CFTC's. In the case of ICE Futures Europe, the CFTC announced that it had amended the "no-action relief letter" under which ICE Futures Europe is permitted direct access to U.S. customers. The amended letter conditions direct access on ICE Futures Europe's adoption of equivalent U.S. position limits and accountability levels on its West Texas Intermediate crude oil contract, which is linked to the New York Mercantile Exchange crude oil contract. This agreement complements a 2006 memorandum of understanding with the FSA providing for sharing of trading information. The CFTC's agreement with ICE appears to fulfill the purposes of several of the bills, but only with respect to the London market. The CFTC has issued other no-action letters granting regulatory waivers to foreign markets, including the Dubai Mercantile Exchange (a joint venture with Nymex), permitting it to offer contracts in the United States (to be cleared by Nymex). On July 7, 2008, the CFTC announced that it would modify the no-action letter to the Dubai exchange on terms similar to the agreement with ICE Futures Europe. The view that excessive speculation is driving up energy prices is widely held, but controversial. The question of whether current prices are justified by fundamental factors of supply and demand, or whether irrational exuberance has created a bubble in energy prices (similar to what was observed in dot-com stocks in the late 1990s), is beyond the scope of this report. However, testimony presented to Congress has identified a recent trend in financial markets that some argue may be putting upward pressure on prices: decisions by institutional investors, such as pension funds, foundations, or endowments, to allocate a part of their portfolio to commodities. From the point of view of a fund manager, investment in commodities may be very attractive under current market conditions. Average returns on stocks and bonds have been relatively low for the past few years, and there is little optimism that they will improve in the near term. Commodities, on the other hand have been the "hot sector." While commodity investment is recognized as being highly risky, a risky asset in a large, diversified portfolio does not necessarily increase overall portfolio risk. The risk of a downturn in commodity prices is not generally correlated with risks in stocks or bonds; in some cases, there may be an inverse relationship. For example, if the price of oil drops suddenly, an institution may lose money on its commodity investment, but the price change will be good for its transportation stocks. Institutional investors may take positions in commodities in a number of ways, but they do not generally trade on the futures exchanges directly. Instead, they use an intermediary, such as a commodity index fund or an OTC swap contract that is structured to match the return of a published index of commodity prices. As a result of this investment strategy, institutional investors in commodities are often called "index traders." While the decision of an individual pension fund to put 3%-4% of its portfolio in commodities may appear entirely rational, some observers argue that the aggregate impact of institutional index trading has been to overwhelm the commodity markets, because of the disproportion between the amount of money held by pension funds, foundations, and other institutions and the amounts that have traditionally been traded in the energy futures market. In other words, index investing is seen as excessive speculation. One particular feature of index trading is the focus of several legislative proposals: the "swaps loophole." The CFTC and the exchanges maintain position limits or accountability levels that apply to speculative traders. Speculators either face a ceiling on the number of contracts they may own, or, if they breach a position accountability level, they must explain to the exchange why they are accumulating such a large position. The purpose of the speculative limits is to prevent manipulation by speculators with very large positions, and to limit the market impact in cases where losses force speculators to liquidate their positions suddenly. Hedgers, those who use the futures markets to offset price risk arising from their dealings in the underlying commodity, are generally exempt from position limits. Hedgers are allowed to take futures positions of any size, provided those positions are commensurate with their commercial interests. The rationale for exempting them from position limits is that when they have a hedged position, they have no incentive to manipulate the market: any gains in their futures position will be offset by losses in their physical transactions, and vice versa. (They use the futures markets to lock in today's price, meaning that subsequent price changes do not affect them.) Traditionally, hedgers have been thought of as those who are active in the physical commodity market; in the energy market, these would be oil producers, refiners, transporters, and industrial users such as airlines and utilities. With the rise of index trading, however, the definition of hedger has broadened. Both the CFTC and Nymex now extend exemptions from speculative position limits to swaps dealers who are using the futures exchanges to hedge price risk arising from a financial contract with an institutional investor. In other words, a pension fund wishing to invest in commodities may go to a swaps dealer and enter into a contract that will pay returns equal to the percentage increase in an index of commodity prices. In economic terms, this is equivalent to a long position in futures, which will gain value if the underlying commodity price rises. The swap dealer has, in effect, taken the short side of the trade: it will lose money if prices rise. The swap dealer is exposed to price risk, and may wish to offset that risk by purchasing exchange-traded futures contracts. Because the dealer is using the futures market to hedge the risk of the swap, the exchanges and the CFTC exempt it from position limits, even though it does not deal in the physical commodity. The rationale is the same as for traditional hedgers: since the swap dealer will gain on its futures position whatever it loses on the swap, and vice versa, it has no incentive to manipulate futures prices. The effect of this "swaps loophole," however, is to permit the ultimate customers--the institutional investors who are clearly speculating on commodity prices--to take larger positions than they would be able to do if they traded directly on the futures exchanges, where they might be constrained by speculative position limits. Hence the description of institutional investors' index trading as excessive speculation. A number of bills propose to constrain the ability of institutional investors to use the swaps loophole. They would limit the definitions of "bona fide hedger" or "legitimate hedge trader" to those who deal in the physical commodity, or they would prohibit trading in OTC energy contracts by those who do not deal in the physical commodity. Three bills ( H.R. 2991 , S. 3044 , and S. 3183 ) call for the CFTC to raise margins on oil futures. The margin requirement is the minimum amount of money per futures contract that traders must deposit with their brokers. Margin requirements are set by the exchanges, and are intended to cover losses. At the end of each day, the exchange credits or debits every trader's margin account with the amount of gains or losses. Traders whose margin accounts fall below the minimum requirement will be required to post additional margin before the market opens next day, or their positions may be closed out at a loss. The exchanges tend to raise margins during periods of price volatility, when the probability of large price swings increases the risk of loss. Nymex has raised the initial margin requirement for crude oil futures contracts (each of which represents 1,000 barrels of oil) several times in 2008. Since everyone in futures markets trades on margin, raising margins means higher trading costs, which should cause some traders to reduce the size of their positions and reduce trading volume overall. However, as noted above, there is no empirical evidence that higher margins dampen price volatility, making the effect on price uncertain. Several bills call for supplemental appropriations to permit the CFTC to hire 100 new employees to monitor the energy or agricultural derivatives markets. H.R. 6377 , passed by the House on June 26, 2008, and other bills direct the CFTC to use its existing powers, including its emergency authority, to curb immediately the role of excessive speculation in energy and to eliminate price distortion, unreasonable or unwarranted price fluctuations, or any unlawful activities that prevent the market from accurately reflecting the forces of supply and demand for energy. (CFTC's emergency authority includes the power to change margin levels or order the liquidation of trading positions.) A number of bills call for studies of various aspects of the market, including the effects of raising margin, the adequacy of international regulation, the effects of speculation, and the impact of index trading on prices. Table 1 below provides summaries of all legislation that bears on the regulation of energy speculation. Table 2 provides a more detailed comparison of H.R. 6604 and S. 3268 , two bills that were brought to the floor in their respective chambers in July 2008 but failed on procedural votes.

While most observers recognize that the fundamentals of supply and demand have contributed to record energy prices in 2008, many also believe that the price of oil and other commodities includes a "speculative premium." In other words, speculators who seek to profit by forecasting price trends are blamed for driving prices higher than is justified by fundamentals. In theory, this should not happen. Speculation is not a new phenomenon in futures markets--the futures exchanges are essentially associations of professional speculators. There are two benefits that arise from speculation and distinguish it from mere gambling: first, speculators create a market where hedgers--producers or commercial users of commodities--can offset price risk. Hedgers can use the markets to lock in today's price for transactions that will occur in the future, shielding their businesses from unfavorable price changes. Second, a competitive market where hedgers and speculators pool their information and trade on their expectations of future prices is the best available mechanism to determine prices that will clear markets and ensure efficient allocation of resources. If one assumes that current prices are too high, that means that the market is not performing its price discovery function well. There are several possible explanations for why this might happen. First, there could be manipulation: are there traders in the market--oil companies or hedge funds, perhaps--with so much market power that they can dictate prices? The federal regulator, the Commodity Futures Trading Commission (CFTC), monitors markets and has not found evidence that anyone is manipulating prices. The CFTC has announced that investigations are in progress, but generally manipulations in commodities markets cause short-lived price spikes, not the kind of multi-year bull market that has been observed in oil prices since 2002. Absent manipulation, the futures markets could set prices too high if a speculative bubble were underway, similar to what happened during the dot-com stock episode. If traders believe that the current price is too low, and take positions accordingly, the price will rise. Eventually, however, prices should return to fundamental values, perhaps with a sharp correction. One area of concern is the increased participation in commodity markets of institutional investors, such as pension funds, foundations, and endowments. Many institutions have chosen to allocate a small part of their portfolio to commodities, often in the form of an investment or contract that tracks a published commodity price index, hoping to increase their returns and diversify portfolio risk. While these decisions may be rational from each individual institution's perspective, the collective result is said to be an inflow of money out of proportion to the amounts traditionally traded in commodities, with the effect of driving prices artificially high. This report summarizes the numerous legislative proposals for controlling excessive speculation, including H.R. 6604 and S. 3268, which received floor action in their respective chambers in July 2008. It will be updated as events warrant.

The reason that Congress has sometimes declared private organizations or individuals federal employees for FTCA purposes is generally that it has concluded that potential liability, or the high cost of liability insurance, could discourage an organization, or its employees or volunteers, from doing the work it does. Thus, the basic argument in favor of these statutes is that, by immunizing potential defendants from tort liability, they encourage work that Congress deems to be in the public interest. In addition, because the United States has "deep pockets," these statutes can also benefit some plaintiffs. An injured party who prevails in an action against the United States is more likely to be compensated fully than one who prevails against a private party. In general, however, these statutes probably leave injured parties worse off. First, they arguably remove an incentive for individuals protected by them to exercise due care in the performance of their duties. Second, they leave some injured parties with no remedy, because the FTCA makes the United States liable for only some of the torts of its employees. In general, the FTCA makes the United States liable for the torts of its employees to the extent that a private employer would be liable for the torts of its employees, under the law of the state where the tort occurred. However, the FTCA has exceptions under which the United States may not be held liable even though a private employer could be held liable under state law. These exceptions include suits by military personnel for injuries sustained incident to service, suits based on the performance of a discretionary function, intentional torts, claims arising out of combatant activities, claims arising in a foreign country, and others. In addition, the FTCA does not permit awards of punitive damages, and does not allow jury trials (and plaintiffs in tort cases tend to prefer jury trials). The Supreme Court has held that the FTCA makes federal employees immune from suit under state law for torts committed within the scope of employment even when an FTCA exception precludes recovery against the United States. United States v. Smith , 499 U.S. 160 (1991). The same apparently would be the case with respect to organizations or individuals who are not federal employees but who are declared federal employees for FTCA purposes. Consequently, in considering whether to make a private organization or individual a federal employee for FTCA purposes, Congress may wish to balance the benefits of immunizing the organization or individual from liability against the likelihood of leaving potential plaintiffs without a remedy. A way that Congress might protect both plaintiffs and defendants would be to allow the defendants to be sued but provide for the United States to take over the defense of the suit and to pay any damages for which the defendants are held liable. This way, plaintiffs would not be precluded by the exceptions in the FTCA from recovering against the United States. A partial precedent for this approach was the National Swine Flu Immunization Program, P.L. 94-380 (1976), which made an action against the United States under the FTCA the exclusive remedy for persons having claims in connection with the swine flu immunization program of the 1970s against vaccine manufacturers, but it removed or relaxed several of the FTCA exceptions that might have precluded recovery in some cases. A statute may declare the employees of a private entity to be federal employees for purposes of the FTCA, but not declare the entity itself to be a federal employee for purposes of the FTCA. It may instead declare the entity to be a federal agency for purposes of the FTCA, or it may remain silent as to the status of the entity. If it declares the entity to be a federal agency for purposes of the FTCA, then the entity would be immune from tort liability, because, under the FTCA, only the United States may be sued. If it remains silent as to the status of the entity, then the entity presumably could be sued in addition to the United States (and would not have the benefit of the exceptions, such as the discretionary function exception, that protect the United States from liability). Perhaps, however, the entity could argue that, since its employee is a federal employee for purposes of the FTCA, its employee should not be deemed its employee for purposes of state tort law. If an entity's employees are not deemed its employees for purposes of state tort law, then the entity would not be responsible for its employees' torts. In deciding this question, a court would of course consider the language and legislative history of the particular statute involved. The following are examples of statutes that make private organizations or individuals federal employees for FTCA purposes, and thus immune from liability under state tort law: (1) "[T]he Administrative Assistant, with the approval of the Chief Justice, may accept voluntary personal services to assist with public and visitor programs.... No person volunteering personal services under this subsection shall be considered an employee of the United States for any purpose other than for purposes of [the FTCA]." 28 U.S.C. SS 677(c). (2) The Commission on the Advancement of Women and Minorities in Science, Engineering, and Technology Development Act, 42 U.S.C. SS 1885a note, SS 5(i), provides: "Members of the Commission shall not be deemed to be employees of the Federal Government by reason of their work on the Commission except for purposes of--(1) the tort claims provisions of chapter 171 of title 28, United States Code." (3) The Domestic Volunteer Service Act of 1973, 42 U.S.C. SS 5055(f)(3), provides, with respect to volunteers in the ACTION Agency (including the Volunteers in Service to America (VISTA) program and the Older American Volunteer Programs): "Upon certification by the Attorney General that the defendant was acting in the scope of such person's volunteer assignment at the time of the incident out of which the suit arose, any such civil action or proceeding shall be ... deemed a tort action brought against the United States under the provisions of title 28...." (4) The Federal Land Policy and Management Act of 1976, 43 U.S.C. SS 1737(f), provides: "Volunteers shall not be deemed employees of the United States except for purposes of--(1) the tort claims provisions of title 28...." (5) The Federally Supported Health Centers Assistance Act of 1992, 42 U.S.C. SS 233(g), provides that such centers, and their officers, employees, and contractors, shall be deemed employees of the Public Health Service, and the FTCA shall be the exclusive remedy with respect to any medical malpractice they may commit. (6) The Health Insurance Portability and Accountability Act of 1996, 42 U.S.C. SS 233( o ), extended the same protection as the Federally Supported Health Centers Assistance Act of 1992 to a "free clinic health professional" providing a "qualifying health service," which means an unpaid volunteer providing "any medical assistance required or authorized to be provided in the program under title XIX of the Social Security Act," commonly called "Medicaid." (7) The Fish and Wildlife Act of 1956, 16 U.S.C. SS 742f(c)(4), provides that volunteers for, or in aid of programs conducted by the Secretary of the Interior through the Fish and Wildlife Service or the Secretary of Commerce through the National Oceanic and Atmospheric Administration shall be considered a federal employee "[f]or the purpose of the tort claim provisions of title 28." (8) The Glass Ceiling Act of 1991, 42 U.S.C. SS 2000e note, SS 203(h)(3). This statute, which was enacted by the Civil Rights Act of 1991, provides: "A member of the [Glass Ceiling] Commission, who is not otherwise an employee of the Federal Government, shall not be deemed to be an employee of the Federal Government except for purposes of--(A) the tort claims provisions of chapter 171 of title 28, United States Code." (9) The Indian Health Care Improvement Act, 25 U.S.C. SS 1680c(d), provides that non-Indian Health Service health care practitioners who provide services to individuals eligible for health services under the act may be regarded as employees of the Federal Government for purposes of the FTCA. (10) The Indian Self-Determination and Education Assistance Act, 25 U.S.C. SS 450f(d), provides that [A]n Indian tribe, a tribal organization or Indian contractor carrying out a contract, grant agreement, or cooperative agreement under this section or section 450h of this title is deemed to be part of the Public Health Service in the Department of Health and Human Services while carrying out any such contract or agreement and its employees (including those acting on behalf of the organization or contractor as provided in section 2671 of Title 28 [the FTCA] are deemed employees of the Service while acting within the scope of their employment in carrying out the contract or agreement.... (11) The National Gambling Impact Study Commission Act, 18 U.S.C. SS 1955 note, SS 6(e), provides that, for purposes of the FTCA "the Commission is a 'Federal agency' and each of the members and personnel of the Commission is an 'employee of the Government.'" (12) The National Guard Challenge Program of opportunities for civilian youth, 32 U.S.C. SS 509(i)(1)(B), provides that a person receiving training under the National Guard Challenge Program shall be considered an employee of the United States for purposes of the FTCA. (13) The National Guard Technicians Act of 1968, 32 U.S.C. SS 709(d), provides that a technician employed under the act is "an employee of the United States." The act does not mention the FTCA, but apparently does make these individuals federal employees for FTCA purposes. See, Proprietors Insurance Co. v. United States , 688 F.2d 687 (9 th Cir. 1982). (14) The National Service Trust Act, 42 U.S.C. SS 12651b(f), provides: "For purposes of the tort claims provisions of chapter 171 of title 28, United States Code, a member of the Board [of Directors of the Corporation for National and Community Service] shall be considered to be a Federal employee." It also provides that Corporation volunteers "shall not be subject to the provisions of law relating to Federal employment ... except that--(i) for the purposes of the tort claims provisions of chapter 171 of Title 28, a volunteer under this division shall be considered to be a Federal employee." 42 U.S.C. SS 12651g(a)(B). (15) The Peace Corps Act, 22 U.S.C. SS 2504(h), provides: "Volunteers shall be deemed employees of the United States Government for the purposes of the Federal Tort Claims Act and any other Federal tort liability statute...." (16) The Strom Thurmond National Defense Authorization Act for Fiscal Year 1999, 16 U.S.C. SS 670c(d), provides: In connection with the facilities and programs for public outdoor recreation at military installations ..., the Secretary of Defense may accept--(1) the voluntary services of individuals and organizations.... A volunteer ... shall not be considered to be a Federal employee ... except that--(1) for the purposes of the tort claims provisions of chapter 171 of title 28, United States Code, the volunteer shall be considered to be a Federal employee. (17) The Support for East European Democracy (SEED) Act of 1989, 22 U.S.C. SS 5422(c)(2), provides that a volunteer providing technical assistance to Poland or Hungary through the Department of Labor shall be deemed an employee of the United States for purposes of "the tort claims provisions of Title 28...." (18) The Take Pride in America Act, 16 U.S.C. SS 4604(c)(2), provides that, for purposes of the FTCA, "a volunteer under this subsection shall be considered an employee of the government...." (19) "[T]he United States Geological Survey may hereinafter contract directly with individuals or indirectly with institutions or nonprofit organizations ... for the temporary or intermittent services of science students or recent graduates, who shall be considered employees for purposes of [the FTCA]." 43 U.S.C. SS 50d. (20) The Volunteers in the National Forests Act of 1972, 16 U.S.C. SS 558c(b), provides: "For the purpose of the tort claim provisions of Title 28, a volunteer under sections 558a to 558d of this title shall be considered a Federal employee." (21) The Volunteers in the Parks Act of 1969, 16 U.S.C. SS 18i(b), provides: "For the purpose of the tort claim provisions of title 28 of the United States Code, a volunteer under this Act shall be considered a Federal employee." The following 32 additional statutory provisions listed in this paragraph also cause non-federal employees or entities to be treated as federal employees for purposes of liability: 5 U.S.C. SS 3161(i)(4) (temporary organizations), 7 U.S.C. SS 2279c(b)(8) (Department of Agriculture), 10 U.S.C. SS 1588(d) (Armed Forces), 10 U.S.C. SS 2113(j)(4) (Uniformed Services University of the Health Sciences), 10 U.S.C. SS 2360(b) (Secretary of Defense), 10 U.S.C. SS 2904(c) (Strategic Environmental Research and Development Program Scientific Advisory Board), 14 U.S.C. SS 93(t)(2) (Coast Guard), 15 U.S.C. SSSS 4102(d), 4105(5) (Arctic Research Commission), 16 U.S.C. SS 450ss-3(b)(5) (Oklahoma City National Memorial Trust), 16 U.S.C. SS 565a-2 (Forest Service), 16 U.S.C. SS 932(a)(3) (Great Lakes Fishery Commission), 16 U.S.C. SS 952 (International Commission for the Scientific Investigation of Tuna, and Inter-American Tropical Tuna Commission), 16 U.S.C. SS 971a(1) (International Commission for the Conservation of Atlantic Tunas), 16 U.S.C. SS 1421e (Secretary of Commerce), 16 U.S.C. SS 1703(a)(3) (Youth Conservation Corps), 16 U.S.C. SS 3602(c) (North Atlantic Salmon Conservation Organization), 16 U.S.C. SS 5608(c) (Northwest Atlantic Fisheries Organization), 20 U.S.C. SS 76 l (e)(2) (Trustees for the John F. Kennedy Center for the Performing Arts), 20 U.S.C. SS 4420(b) (Institute of American Indian and Alaska Native Culture and Arts Development), 22 U.S.C. SS 2124c(i)(3) (Rural Tourism Development Foundation), 22 U.S.C. SS 3508(d) (Institute for Scientific and Technological Cooperation), 24 U.S.C. SS 421(b) (Armed Forces Retirement Board), 24 U.S.C. SS 422(d) (Retirement Home Board), 33 U.S.C. SS 569c (Army Corps of Engineers), 36 U.S.C. SS 2113(f)(2) (American Battle Monuments Commission), 42 U.S.C. SS 233(p) (persons who manufacture, distribute, or administer smallpox countermeasures, or who transmit vaccinia after receiving a smallpox countermeasure), 42 U.S.C. SS 7142(b) (National Atomic Museum), 42 U.S.C. SS 7142c(b)(2) (American Museum of Science and Energy), 42 U.S.C. SS 12620(c) (Civilian Community Corps), 42 U.S.C. SS 12655n(b)(3) (American Conservation and Youth Service Corps), 49 U.S.C. SS 106( l )(5)(C) (Federal Aviation Administration), 49 U.S.C. SS 20107(b) (Secretary of Transportation). The most recent statute that provides that non-federal employees shall be deemed federal employees under the FTCA is the Project BioShield Act of 2004, P.L. 108-276 , which enacted SS 319F-1 of the Public Service Health Act. Section 319F-1(d)(2) (42 U.S.C. SS 247d-6a(d)(2)) provides that a person carrying out a personal service contract under the statute, "and an officer, employee, or governing board member of such person shall, subject to a determination by the Secretary, be deemed to be an employee of the Department of Health and Human Services for purposes of [the FTCA]." Section 319F-1(d)(2), however, contains exceptions to the immunity from liability that the FTCA otherwise grants to federal employees: Should payment be made by the United States to any claimant ..., the United States shall have ... the right to recover against [the person deemed a federal employee] for that portion of the damages so awarded or paid, as well as interest and any costs of litigation, resulting from the failure ... to carry out any obligation or responsibility ... under a contract with the United States or from any grossly negligent or reckless conduct or intentional or willful misconduct....

The Federal Tort Claims Act (FTCA), 28 U.S.C. SS 1346(b), 2671-2680, makes the United States liable, in accordance with the law of the state where a tort occurs, for some of the torts of its employees committed within the scope of their employment. It also makes federal employees immune from all lawsuits arising under state law for torts committed within the scope of their employment. (The FTCA does not prevent a federal employee from being sued for violating the Constitution or a federal statute that authorizes suit against an individual.) Sometimes, Congress wishes to immunize a private organization, or its employees or volunteers, from tort liability. One way it may do so is to enact a statute declaring that the organization or its employees or volunteers shall be deemed federal employees for purposes of the FTCA. This report discusses the pros and cons of this type of statute, and then provides examples of more than 50 such statutes.

On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002, P.L. 107-204 . This law has been described by some as the most important and far-reaching securities legislation since passage of the Securities Act of 1933 and the Securities Exchange Act of 1934, both of which were passed in the wake of the Stock Market Crash of 1929. Sarbanes-Oxley had its genesis early in 2002 after the declared bankruptcy of the Enron Corporation, but for some time it appeared as though its impetus had slowed. However, when the WorldCom scandal became known in late June, the Congress showed renewed interest in enacting stiffer corporate responsibility legislation, and Sarbanes-Oxley quickly became law. The act established the Public Company Accounting Oversight Board (PCAOB or Board), which is supervised by the Securities and Exchange Commission (SEC or Commission). The act restricts accounting firms from performing a number of other services for the companies which they audit. The act also requires new disclosures for public companies and the officers and directors of those companies. Among the other issues affected by the legislation are securities fraud, criminal and civil penalties for violating the securities laws and other laws, blackouts for insider trades of pension fund shares, and protections for corporate whistleblowers. Currently, one of the most controversial provisions of the act is Section 404, Management Assessment of Internal Controls. The provision states: (a) Rules Required--The Commission shall prescribe rules requiring each annual report required by section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) to contain an internal control report, which shall-- (1) state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and (2) contain an assessment, as of the end of the most recent fiscal year of the issuer, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting. (b) Internal Control Evaluation and Reporting--With respect to the internal control assessment required by subsection (a), each registered public accounting firm that prepares or issues the audit report for the issuer shall attest to, and report on, the assessment made by the management of the issuer. An attestation made under this subsection shall be made in accordance with standards for attestation engagements issued or adopted by the Board. Any such attestation shall not be the subject of a separate engagement. The provision's controversy stems from charges that some aspects of Sarbanes-Oxley, particularly Section 404, are overly burdensome and costly for small and medium-sized companies. For example, one critic has stated that the costs of Section 404 are "extreme." "As one of our members testified before the House Small Business Committee, his company's efforts to comply with Section 404 in preparation to go public were simply too excessive to justify the effort--10% to 15% of gross revenues.... Well-published studies and hard data demonstrate similar cost percentages for small firms." The SEC over the years has taken various steps to delay compliance with Section 404 by defined small companies. For example, on May 17, 2006, the SEC issued a press release which, among other actions, announced that it would briefly postpone application of Section 404 to the smallest companies but that ultimately all public companies would be required to comply with the internal control reporting requirements of Section 404. This view taken by the Commission conflicted with several recommendations in a report issued by the Commission's Advisory Committee on Smaller Public Companies on April 23, 2006, which would exempt small companies from many of the internal reporting requirements of Section 404. On December 15, 2006, the SEC adopted rule changes which give smaller firms, referred to as non-accelerated filers, more time to comply with Section 404's internal controls reporting requirements. Under the extension, a non-accelerated filer must provide management's assessment concerning internal control over financial reporting in its annual reports for fiscal years ending on or after December 15, 2007. On April 4, 2007, the SEC's commissioners endorsed the recommendations of its staff to work closely with the PCAOB to issue auditing standards intended to ease the burden on small companies in complying with Section 404. Additionally, on May 23, 2007, the SEC commissioners voted unanimously to approve a relaxed set of guidelines for the internal accounting controls required by Section 404 for smaller public companies, defined in most cases as those with a public float below $75 million. The perceived problem of compliance with Section 404 reporting requirements faced by small and medium-sized companies was an issue in both the 109 th and 110 th Congresses and continued to be an issue in the 111 th Congress. Virtually identical bills addressing this issue were introduced in both houses of the 109 th Congress: H.R. 5405 in the House and S. 2824 in the Senate. Each bill was titled the Competitive and Open Markets that Protect and Enhance the Treatment of Entrepreneurs (COMPETE) Act. The bills would have permitted an issuer to elect voluntarily not to be subject to much of Section 404 of Sarbanes-Oxley if the issuer has a total market capitalization for the relevant reporting period of less than $700 million; has total product revenue for that reporting period of less than $125 million; has fewer than 1,500 record beneficial holders; has been subject to the various reporting requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934 for a period of less than 12 calendar months; or has not filed and was not required to file an annual report under Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The bills would have set forth a de minimus standard for implementing the requirements of Section 404. The bills would also have required the SEC and the PCAOB to conduct a study assessing the principles-based Turnbull Guidance under the securities laws of Great Britain to the implementation of Section 404 of Sarbanes-Oxley and to submit the report to Congress within one year of enactment of the COMPETE Act. Bills introduced in the 110 th Congress continued the attempt to correct the perceived problems created by Section 404. H.R. 1049 , referred to the Committee on Financial Services, was titled the Amend Misinterpreted Excessive Regulation in Corporate America Act (AMERICA). The bill would have created an ombudsman for the Public Company Accounting Oversight Board (PCAOB or Board). The ombudsman would have been appointed by the Board and would have acted as a liaison between the PCAOB and any registered public accounting firm or issuer concerning issues or disputes related to the preparation or issuance of any audit report of that issuer, especially with respect to the implementation of Section 404; assured that safeguards existed to encourage complainants to come forward and to preserve confidentiality; and carried out other activities in accordance with guidelines prescribed by the Board. The bill would have required the SEC and the PCAOB to adopt revisions to their rules or standards under Section 404 of Sarbanes-Oxley so that the costs of implementation of Section 404 would not significantly increase the costs of complying with the annual audits required by the Securities Exchange Act. Further, the bill would have prohibited a private right of action to be brought against any registered public accounting firm in any federal or state court on the basis of a violation or alleged violation of the requirements of Section 404 or of the standards issued by the Board for the purposes of implementing the provisions of Section 404. H.R. 1508 , referred to the Committee on Financial Services, and S. 869 , referred to the Committee on Banking, Housing, and Urban Affairs, were titled the COMPETE Act of 2007 and were comparable. They were similar to H.R. 5405 and S. 2824 , introduced in the 109 th Congress. They would have amended Section 404 so that each registered public accounting firm preparing or issuing an audit report for an issuer would have been required to attest to and report on the management assessment of the issuer. The attestation and report on the assessment made by the management of the issuer would not have included a separate opinion on the outcome of the assessment. This attestation and report would have been required to be performed at three-year intervals. The attestation would have been required to be made in accordance with standards adopted by the Board. The SEC would have had to develop a standard of materiality for the conduct of the assessment and report on an internal control based upon whether the internal control had a material affect on the company's financial statements and was significant to the issuer's overall financial status. The bills would have permitted a smaller public company not to be subject to Section 404. A "smaller public company" was defined as having a total market capitalization for the relevant reporting period of less than $700 million and total product and services revenue for the reporting period of less than $125 million or at the beginning of the reporting period fewer than 1,500 record beneficial owners. The SEC and the Board would have had to conduct a study examining the lack of and impediments to robust competition for the performance of audits for issuers. The SEC and the Board would have also been required to conduct a study comparing and contrasting the principles-based Turnbull Guidance under the securities laws of Great Britain to the implementation of Section 404 of Sarbanes-Oxley. Several other bills affecting compliance with Section 404 were introduced in the 110 th Congress. Bills introduced in the 111 th Congress to provide an exemption for small companies from the requirements of Section 404 included H.R. 1797 and H.R. 3775 . On November 4, 2009, the House Financial Services Committee recommended H.R. 3817 , the Investor Protection Act, which contained a clause, inserted as a bipartisan amendment, permanently exempting businesses with a market capitalization up to $75 million from complying with the auditing requirements of Section 404. The SEC and others would study how the burden of compliance with Section 404 could be reduced for companies valued between $75 million and $250 million and whether reducing or eliminating their compliance with Section 404 would encourage these companies to offer their shares to the public on United States exchanges. This bill was included in H.R. 4173 , the Wall Street Reform and Consumer Protection Act of 2009, as Section 7606, passed by the House on December 11, 2009. The Senate-passed bill on financial regulatory reform, S. 3217 , did not have a comparable provision. House and Senate conferees on Wall Street reform approved a conference report, H.Rept. 111-517 , which has a provision exempting businesses with a market capitalization of $75 million or less from complying with the auditing requirements of Section 404. The provision also requires the Securities and Exchange Commission to determine how it can reduce the burden of complying with Section 404 for companies whose market capitalization is between $75 million and $250 million while maintaining investor protections. Both the House and the Senate agreed to the conference report. The President signed the bill, known as the Dodd-Frank Wall Street Reform and Consumer Protection Act, into law as P.L. 111-203 on July 21, 2010. Bills were introduced in the 112 th Congress which would allow, at least temporarily, certain companies capitalized at more than $75 million to have an exemption from complying with parts of Section 404 of Sarbanes-Oxley and other provisions of the federal securities laws. One of these bills, H.R. 3606 , eventually a combination of several House bills, passed both the House and the Senate and is titled the Jumpstart Our Business Startups Act (JOBS Act). The bill's Section 103 exempts certain companies with annual gross revenues of less than $1 billion, called emerging growth companies, from complying with the auditing requirements of Section 404(b) for up to five years. The President signed the bill on April 5, 2012.

Section 404 of the Sarbanes-Oxley Act of 2002 requires the Securities and Exchange Commission (SEC) to issue rules requiring annual reports filed by reporting issuers to state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting and for each accounting firm auditing the issuer's annual report to attest to the assessment made of the internal accounting procedures made by the issuer's management. There have been criticisms that this provision is overly burdensome and costly for small and medium-sized companies. On December 15, 2006, the SEC adopted rule changes giving smaller firms more time to comply with Section 404's reporting requirements. Compliance with Section 404 by small and medium-sized companies was an issue in both the 109th and 110th Congresses and continued as an issue in the 111th Congress. On November 4, 2009, the House Financial Services Committee recommended H.R. 3817, the Investor Protection Act, which contained a clause, inserted as a bipartisan amendment, permanently exempting businesses with a market capitalization up to $75 million from complying with the auditing requirements of Section 404. This bill was included in H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009, as Section 7606, passed by the House on December 11, 2009. The Senate-passed bill on financial regulatory reform, S. 3217, did not have a comparable provision. House and Senate conferees on Wall Street reform approved a conference report, H.Rept. 111-517, which had a provision exempting businesses with a market capitalization of $75 million or less from complying with the auditing requirements of Section 404. Both the House and the Senate agreed to the conference report. The President signed the bill, known as the Dodd-Frank Wall Street Reform and Consumer Protection Act, into law as P.L. 111-203 on July 21, 2010. Bills were introduced in the 112th Congress which would allow, at least temporarily, certain companies capitalized at more than $75 million to have an exemption from complying with parts of Section 404 of Sarbanes-Oxley and other provisions of the federal securities laws. One of these bills, H.R. 3606, eventually a combination of several House bills, passed both the House and the Senate and is titled the Jumpstart Our Business Startups Act (JOBS Act). The bill has a provision which would exempt certain companies with annual gross revenues of less than $1 billion from complying with the auditing requirements of Section 404(b) for up to five years. The President signed the bill on April 5, 2012.

The Fourth Amendment to the U.S. Constitution governs all searches and seizures conducted by government agents. The Amendment contains two separate clauses: a prohibition against unreasonable searches and seizures, and a requirement that probable cause support each warrant issued. The issue of "reasonableness" is generally determined by a balancing test that weighs the degree to which the search intrudes on an individual's legitimate expectation of privacy and the degree to which it is needed for the promotion of legitimate governmental interests, such as crime prevention. In United States v. Katz , the U.S. Supreme Court adopted a two-part test to determine whether a person's expectation of privacy is legitimate. First, the court will determine whether the individual has an actual subjective expectation of privacy. Second, society must be prepared to recognize that expectation as objectively reasonable. The Court has found warrantless searches to be "reasonable" under some circumstances, including those in which consent was given and in which exigent circumstances existed. During the October 2005 term, the Court addressed some of the lingering questions regarding the "reasonableness" of warrantless searches. In Georgia v. Randolph , the Court held that the warrantless search of a defendant's residence based on his wife's consent to the police was unreasonable and invalid as to the defendant, who was physically present and expressly refused to consent. In Brigham City Utah v. Stuart , the Court clarified the appropriate Fourth Amendment standard governing warrantless entry by law enforcement in an emergency situation by holding that police officers may enter a home without a warrant when they have an objectively reasonable basis for believing that an occupant is seriously injured or imminently threatened with such an injury. In Samson v. California , the Court found that a parolee has a reduced expectation of privacy, which fails to outweigh the State's interests in protecting the community. Finally, in United States v. Grubbs , the Court addressed the issue of anticipatory search warrants when it found that an anticipatory search warrant authorizing the search of the defendant's residence on the basis of an affidavit stating that the warrant would be executed upon delivery of a videotape containing child pornography was supported by probable cause. In Katz v. United States , the Supreme Court stated that warrantless searches "are per se unreasonable under the Fourth Amendment subject only to a few specifically established and well-delineated exceptions." One of these exceptions occurs when police obtain voluntary consent of an occupant who shares, or is reasonably believed to share, authority over an area. Generally, anyone who has a reasonable expectation of privacy in the place being searched can consent to a warrantless search, and any person with common authority over, or other sufficient relationship to, the place or effects being searched can give valid consent. The Court has concluded that an individual "assumes a risk" when he or she shares authority over an area. In both United States v. Matlock and Illinois v. Rodriguez , the Court ruled that consent by co-occupants eliminated subsequent Fourth Amendment objections to the admission of seized evidence by an occupant who was not immediately present and therefore did not object at the time to the search. In assessing the "reasonableness" of such searches, the Court looked to the widely shared social expectations, which are generally influenced by property law. However, in Georgia v. Randolph , the Supreme Court found such a search unreasonable as it applies to a physically present occupant who expressly objects to the search. After a domestic dispute, the wife complained to the police that her husband took their son away. When police arrived at the house, she told them that her husband was a cocaine user and there was drug evidence in the home. One officer asked the defendant for permission to search the house, which the defendant expressly refused. That officer then went to the wife for consent to search, which she readily gave. The wife led the officer to an upstairs bedroom, where the officer noticed a drinking straw with a powdery residue, which ultimately proved to be cocaine. The police took the straw to the police station, along with the couple. After getting a search warrant, the police returned to the house and seized further evidence of drug use, which was used to indict the defendant for possession of cocaine. The defendant moved to suppress the evidence as the product of a warrantless search of his house, unauthorized by his wife's consent over his expressed refusal. The trial court denied the motion, ruling that his wife had common authority to consent to the search as established in Matlock . The Georgia appellate court reversed, and the Georgia Supreme Court affirmed, finding that the consent was invalid because, at the time of the warrantless search the defendant was physically present and had clearly refused to consent to the search. The U.S. Supreme Court decided to take the case to resolve a split of authority on whether one occupant may give law enforcement effective consent to search shared premises, as against a co-tenant who is present, but refuses to permit the search. In its 5-3 decision, written by Justice Souter, the Court held that the warrantless search of a defendant's residence based on his wife's consent to the police was unreasonable as to a physically present defendant who expressly refused to consent. The Court built on its previous decision in Minnesota v. Olson , wherein it found that overnight houseguests have a legitimate expectation of privacy in their temporary quarters. The Court concluded that if, as was found in Olson , the "customary expectation of courtesy or deference is a foundation of Fourth Amendment rights of a houseguest," it should follow that a co-inhabitant should have even a stronger claim. The Court found that there is no societal or common understanding that one co-tenant generally has a right or authority to prevail over the express wishes of another. In reaching its decision, the Court noted that there were alternatives available to bring the criminal activity to light. For example, the co-tenant could bring evidence to the police on her own initiative. Or, exigent circumstances could justify immediate action on the police's part, if the objecting tenant cannot be incapacitated from destroying easily disposable evidence during the time required to get a warrant. The majority distinguished Randolph from Matlock/Rodriguez based on the fact that in Randolph the defendant expressly denied consent to search, whereas in Matlock/Rodriguez the defendants were silent. The Court stated: "In sum, there is no common understanding that one co-tenant generally has a right or authority to prevail over the express wishes of another, whether the issue is the color of the curtains or invitations to outsiders." The Court acknowledged that the line drawn between Matlock and Illinois v. Rodriguez , where the defendants in both cases were nearby but simply not asked for their permission, and Randolph was a fine one. Nevertheless, the Court refused to require police who have obtained consent from one resident to take "affirmative steps" to find out whether another resident objects. Instead, the Court adopted a simpler rule that "a physically present inhabitant's express refusal of consent to a police search is dispositive as to him, regardless of the consent of a fellow occupant." In a dissenting opinion, Chief Justice Roberts, joined by Justice Scalia, criticized the Court's reliance on its understanding of social expectations and argued that a straightforward application of Matlock ' s "assumption-of-the-risk" principle should allow police to rely on one resident's consent over another resident's objection. The dissenters argued that the majority ruling "provides protection on a random and happenstance basis," which may protect the occupant at the door, but not one "napping or watching television in the next room." It is a general rule that searches and seizures inside a home without a warrant are presumptively unreasonable for Fourth Amendment purposes. However, this search warrant requirement is subject to certain exceptions, such as in cases where the exigencies of the situation make the needs of the law enforcement so compelling that a warrantless search is objectively reasonable under the Fourth Amendment. The Supreme Court addressed such a circumstance in Brigham City v. Stuart where, in reversing the Utah Supreme Court's decision, the Court held that police may enter a home without a warrant when they have an objectively reasonable basis for believing that an occupant is seriously injured or imminently threatened with such injury. This case arose when police officers responded to a call regarding a loud party at a residence. Upon arriving on the scene, the officers observed two juveniles drinking beer in the backyard. They entered the backyard, looked into the window and saw an altercation taking place in the kitchen. The officers testified that they saw four adults attempting to restrain a juvenile, and that the juvenile struck one of the adults, who was then spitting blood. The officers announced their presence and the altercation ceased. The officers subsequently arrested each of the adults for contributing to the delinquency of a minor, disorderly conduct, and intoxication. The adults argued that the warrantless entry violated the Fourth Amendment, and the Utah courts agreed. Writing for a unanimous Court, Chief Justice Roberts noted that one exigency obviating the warrant requirement is the need to assist individuals who are seriously injured or threatened with such injury. The petitioners did not take issue with this principle, but instead advanced two reasons why the officers' entry was unreasonable. First, they argued that the officers were more interested in making arrests than quelling violence. The Court noted that the officers' subjective motivation was irrelevant. Relying on the Court's previous ruling in Welsh v. Wisconsin , the petitioners further contended that their conduct was not serious enough to justify the warrantless intrusion. Distinguishing the facts in Welsh , the Court responded that the officers were confronted by ongoing violence occurring within the home, as opposed to a mere potential emergency, such as the need to preserve evidence. The Court concluded that the officers' entry to the home was reasonable under the totality of the circumstances. Given the tumult at the house upon their arrival, it was obvious that a knock on the front door would have been futile. Moreover, in light of the chaos they observed in the kitchen, the officers had an objectively reasonable basis for believing both that the injured adult might need help and that the violence could escalate. The Court concluded that "nothing in the Fourth Amendment required the officers to wait until the altercation escalated to the point that another blow rendered someone unconscious, semiconscious, or worse before entering." The Court also found that the officers' manner of entry was also reasonable. Since the first announcement of their presence went unheard and it was only after the announcing officer stepped into the kitchen and announced himself again that the tumult subsided, that announcement was at least equivalent to a knock on the screen door. Furthermore, the Court concluded that once the announcement was made, the officers were free to enter. The Court noted that it would serve no purpose to make the officers stand dumbly at the door awaiting a response while those within fought on, oblivious to the officers' presence. The question of whether a search is "reasonable" under the Fourth Amendment is generally determined by a balancing test that weighs the degree to which the search intrudes on an individual's privacy against the degree to which it is needed for the promotion of legitimate governmental interests. In United States v. Knights , the Court upheld a warrantless search of a probationer based on reasonable suspicion and his probationary status. In doing so, the Court noted that probationers have a diminished expectation of privacy, given that probation is on the continuum of punishments ranging from solitary prison confinement to community service. Utilizing a balancing test, the Court found that probation searches were necessary to promote legitimate governmental interests of integrating probationers back into the community, combating recidivism, and protecting potential victims, thus outweighing the privacy interests of the probationer. However, the Court's decision in Knights did not address the reasonableness of a search solely predicated on the probation condition regardless of reasonable suspicion. In Samson v. California , the defendant was stopped by a police officer while walking down the street. The officer conducted a search solely on the basis of his status as a parolee, which the officer knew. The search subsequently uncovered a bag of methamphetamines, and the defendant was charged with possession. At trial, the defendant moved to suppress the evidence, arguing that the search violated the Fourth Amendment. The motion was denied. The California Court of Appeals affirmed, finding that suspicionless searches of parolees are permitted under California law and "reasonable" within the meaning of the Fourth Amendment. In a 6-3 decision, written by Justice Thomas, the Court in examining the totality of the circumstances found that the parolee did not have an expectation of privacy "that society would recognize as legitimate" because on the continuum of punishments, parole is closer to prison that probation. The Court noted that a parolee remains in the legal custody of the Department of Corrections through the remainder of his parole term. Moreover, the parolee signed an order submitting to the condition. Further, the Court found that the State's interest in reducing recidivism is substantial and warrants privacy intrusions not otherwise tolerated. The Court noted that requiring individualized suspicion would undermine the State's ability to effectively supervise parolees. Justice Stevens, joined by Justices Souter and Breyer, dissented, arguing that the Fourth Amendment provides at least some protection to parolees and, therefore, suspicionless searches by police with no special relationship to the parolee cannot be considered "reasonable." The dissenters argued that this is the first time the Court has ever found a search reasonable in the absence of either individualized suspicion or "special needs." Further, the dissenters contended that the majority's near-equating of parolees to prisoners was unsupported by precedent. In addition, the dissenters felt that a "special needs" search by parole officers, who have a close relationship to a parolee, might be acceptable, but a blanket authorization allowing a parolee to be searched by any police officer is not. Moreover, the dissenters were concerned that there are no procedural protections in California law to ensure that such searches were performed evenhandedly. Probable cause is required to justify certain governmental intrusions upon interests protected by the Fourth Amendment. Generally, probable cause is defined as "a fair probability that contraband or evidence of a crime will be found in a particular place." To satisfy the warrant requirement, an impartial judicial officer must assess whether the police have probable cause to make an arrest, to conduct a search, or to seize evidence, instrumentalities, fruits of a crime, or contraband. Generally, the magistrate must consider the facts and circumstances presented in the warrant application, including the supporting affidavit, in a practical, common-sense manner, and make an independent assessment regarding probable cause. Moreover, the Fourth Amendment requires that a warrant describe with "particularity ... the place to be searched and the persons or things to be seized." This limitation safeguards the individual's privacy interest against "the wide-ranging exploratory searches the Framers [of the Constitution] intended to prohibit." In United States v. Grubbs , the Court found that an anticipatory warrant satisfied the Fourth Amendment's probable cause requirement so long as there is a fair probability that the condition precedent to execution will occur and that, once it has, evidence of a crime will be found. In addition, the Court held that the particularity requirement in the Fourth Amendment does not require that the warrant itself state the condition precedent. The defendant purchased a videotape containing child pornography from a website operated by U.S. postal inspectors. The inspectors arranged a controlled delivery of the tape and obtained a search warrant for the defendant's home to be executed once the tape was "physically taken into the residence." The warrant itself did not contain the "triggering condition," though it was stated in an unincorporated affidavit. After the package was delivered, the inspectors executed the warrant and seized the evidence. Although they provided the defendant with a copy of the warrant, the inspectors did not give him a copy of the supporting affidavit. The U.S. Court of Appeals for the Ninth Circuit held that the fruits of the search had to be suppressed, concluding that the warrant was invalid because it failed to state the triggering condition. In an 8-0 decision, written by Justice Scalia, the Court held that the warrant was supported by probable clause and met the Fourth Amendment's requirement of particularity. Before addressing the merits of the appellate court's holding, the Court declared that anticipatory search warrants are constitutional. The Court reasoned that there is no difference between anticipatory warrants and ordinary warrants, as both require a magistrate to determine that it is now probable that contraband, evidence of a crime, or a fugitive will be on the described premises when the warrant is executed. When the anticipatory warrant places a condition (other than the mere passage of time) on its execution, the first of these determinations goes not merely to what will be found if the condition is met, but also to the likelihood that the condition will be met, and thus a proper object of seizure will be on the premises described. The Court reasoned that the occurrence of the triggering condition--successful delivery of the videotape--would plainly establish probable cause for the search. Moreover, the affidavit established probable cause to believe the triggering condition would be satisfied. The Court also found that the warrant at issue did not violate the Fourth Amendment's particularity requirement because the Fourth Amendment requires that the warrant particularly describe only two things: the place to be searched and the persons or things to be seized. As such, the Court concluded that Fourth Amendment does not require that the triggering condition for an anticipatory warrant be set forth in the warrant itself. Justice Souter, joined by Justices Stevens and Ginsburg, wrote a concurring opinion to qualify some points specifically to caution that omitting the triggering condition off the face of an anticipatory warrant could lead to "several untoward consequences with constitutional significance." For example, an officer who is unfamiliar with the warrant might unwittingly execute it before the triggering condition has occurred, which could result in spoiling the fruits of the search. Moreover, Justice Souter left open the possibility for reconsideration of this issue should the Court decide that the target of a warrant has a right to inspect it prior to its execution.

The Fourth Amendment to the United States Constitution provides that "[t]he right of the people to be secure in their person, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and 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." The Supreme Court has interpreted this language as imposing a presumptive warrant requirement on all searches and seizures predicated on governmental authority. However, the Court has carved out exceptions to the warrant requirement when obtaining such would be impractical or unnecessary. In crafting these exceptions, the Court has analyzed the "reasonableness" of the circumstances that gave rise to the warrantless search. During the October 2005 term, the Court addressed the "reasonableness" of such warrantless searches based on third-party consent, exigent circumstances, and parolee status. In Georgia v. Randolph (126 S.Ct. 1515 [2006]), the Court held that the warrantless search of a defendant's residence based on his wife's consent to the police was unreasonable and invalid as to the defendant, who was physically present and expressly refused to consent. The Court clarified the appropriate Fourth Amendment standard governing warrantless entry by law enforcement in an emergency situation in Brigham City Utah v. Stuart (126 S.Ct. 1943 [2006]), holding that the police officers may enter a home without a warrant when there exists an objectively reasonable basis for believing that an occupant is seriously injured or imminently threatened with such injury. Also, in Samson v. California (126 S.Ct. 2193 [2006]), the Court ruled that the a parolee's reduced expectation of privacy fails to outweigh the State's interests in protecting the community. In addition, the Court resolved two fundamental issues concerning the lawfulness of searches pursuant to anticipatory search warrants. In United States v. Grubbs (126 S.Ct. 1494 [2006]), the Court found that such warrants do not categorically violate the Fourth Amendment. Also, the Court held that an anticipatory search warrant authorizing the search of the defendant's residence on the occurrence of a condition precedent stated in an affidavit but not in the warrant itself was proper and supported by probable cause. This report summarizes the Court's decisions addressing these issues and will not be updated.

The five major integrated oil companies operating in the U.S. market have earned net incomes totaling $424 billion since 2004. In the previous four years, from 2000 to 2003, they earned net incomes of $171 billion. This 148% increase in profit has attracted public attention and raised the issue of whether "windfall" profits had accrued to the firms. At the same time that these oil companies were earning increased profits, U.S. gasoline consumers were facing prices that rose above $3.30 per gallon, raising concerns that the increased profits might be tied to price gouging by the oil companies. This report analyzes the uses of accrued profits by the five major integrated oil companies from 2004 through 2007. Although the oil industry is composed of thousands of firms involved in many different aspects of the business, these five firms represent the visible face of the oil industry to the American public. These companies also earned 90% of the total earnings of integrated oil companies, and 74% of the earnings of all the integrated oil companies, the independent oil and gas producers, and the independent refiners and marketers in 2007. Because of their size, the decisions they make with respect to utilizing profits will largely determine how the industry's use of profit is viewed by the public. How the industry uses its recent profits is important because the demand and supply balance, and hence petroleum product prices for the U.S. consumer, will be affected by the decisions made. For example, one of the commonly cited reasons for high gasoline prices in 2007 is that refinery capacity has been offline as a result of catching up on deferred maintenance and of accidents. If investments had been made in new refineries over the past 20 years, the balance between refinery capacity and product demand might not be as tight, thus reducing the pressure on gasoline prices. A primary source of the increased profits of the five oil companies has been the increased price of crude oil on the world market. The increased price of crude oil since 2004 has been attributed to the growth in demand from China, India, the United States, and other areas, as well as to hurricanes Katrina and Rita and a variety of other factors. Few if any of these factors could be influenced by the five companies. Crude oil prices began their rise toward the end of 2003, and although volatile, have remained at, or near, historically high levels since then. All five of the companies produce crude oil. Over the period 2004-2007, ExxonMobil produced an average of 2.6 million barrels per day (b/d), and was the leading producer among the five companies. Shell averaged 2.0 million b/d, BP averaged 2.5 million b/d, Chevron averaged 1.7 million b/d, and ConocoPhillips averaged 1.0 million b/d. Higher world prices for crude oil increased the revenue from this production in proportion to the increase in prices. In addition to the increasing price of crude oil, tightness in the refining industry contributed to the increase in petroleum product prices, notably gasoline. All five of the selected companies are active in the refining industry. In 2007, these five companies accounted for approximately 38% of total U.S. refining capacity. Although, historically, refining margins and profitability have tended to be volatile over time, profit margins have been at, or near, historic highs since 2004. During the fourth quarter of 2007 refining margins declined as the price of crude oil rose, and refiners were unable to quickly pass cost increases on to consumers because of the weakening demand growth of gasoline. For the five companies, operating in both the upstream (exploration and production) and downstream (refining, distribution, and marketing) segments of the oil market has led to growing profitability, as shown in Table 3 . Profits declined for the five companies from 2000 through 2002, then doubled in 2003. Profits rose by 39% in 2004, 34% in 2005, 8% in 2006, and declined by 1.3% in 2007. However, the two companies whose profits declined in 2007 each experienced singular losses, ConocoPhillips taking a writedown as a result of Venezuela nationalizing its Orinoco Basin investments, and BP experiencing pipeline problems in Alaska and refinery accidents in Texas. The magnitude of the profits earned, as well as the rapidity with which they accrued, has created a challenge for the oil companies: how to best utilize these resources and meet the varied demands of shareholders and the public. Private corporations, such as the five major integrated oil companies, operate for the purpose of maximizing shareholder value, that is, to enhance, as much as possible, the value of the shares held by investors and the returns earned by those shares. The goal of maximizing shareholder value can be achieved in various ways. The management may choose to reinvest profits in the business, deploying new technology and capital equipment or hiring more workers. The management might also acquire assets for the corporation through merger or acquisition. Another strategy might be to directly pay cash dividends to the shareholders, or to buy back the company's shares on the open market to enhance the price of outstanding shares. The management also might decide to alter the capital structure of the company by reducing the outstanding debt of the company. Finally, the management might decide to hold the profits as cash, or other short-term assets, to acquire the flexibility to implement resource allocation decisions in the future. Of course, the company may apply the profits to several or all of these uses. In principle, the expected rate of return on investments should be at least as great as the current rate of return earned by the company. If the management cannot identify investment opportunities that have expected rates of return in excess of the current rate of return, the profit is typically returned to the shareholders in the form of dividends or other payments. Many capital investment expenditures in the oil industry are allocated to projects that cost billions of dollars and will likely be online for decades. For example, an efficiently scaled refinery is likely to cost between $3 billion and $5 billion and operate for more than 30 years. When planning and investing in such facilities, the underlying variables that determine potential profits must not only be favorable now, but must also be forecast to be favorable for decades to come. Because of the magnitude of the funding required for such an investment, a mistake might cause damage to the company for years. These factors tend to create an investment philosophy in the oil industry that is characterized by a deliberate pace as well as a degree of conservatism in making capital expenditures. These characteristics have been observable in the oil industry during the recent period of high profits. Some might have expected the increased price of oil to lead to an immediate boom in exploration and refinery construction. A slower pace of capital investment is consistent with a view that the currently high price of oil might decline in the future, leading to an investment reference price below the currently observable price, or a forecast that demand growth might slow or even decline. Even if the decision had been quickly taken to invest in either upstream or downstream activities, there would likely be a lag between the decision to invest and substantial expenditures being made on the project. Many investment projects related to the oil industry require environmental permits from a number of federal, state, and local agencies, all of which might require studies to be undertaken and approvals to be granted. Several years in the permitting process might be expected. Capital expenditures included in Table 4 might not be for only new or expanded capacity. Environmental regulations affect both the petroleum product slate as well as refinery sites, and may require capital investment to maintain compliance. Table 4 shows that capital expenditures increased by less than 1/2% in 2004 compared to 2003, while net income rose by 39%. While capital expenditures rose by 17% from 2004 to 2005, profits rose by 34%. However, capital expenditures rose by 40% from 2005 to 2006, while profits rose by 8%. In 2007, capital expenditures rose by almost 8%, even though profits declined by 1.3%. The lag in capital expenditures might reflect a reassessment by the oil companies of future prices and profits, or it may reflect other factors that are less fundamental. While it is possible that oil firms might want to invest both upstream and downstream to take advantage of favorable business conditions, their actions run the risk of reducing the potential profit of the market. Economic theory suggests that industries adjust to tight markets through relatively small increases in supply. Because the efficient scale of the oil industry tends to be large, investments tend to have a large enough effect on production levels, or capacity, to materially affect the market. For example, if only two of the five major firms decided to build new refineries, this might result in more than 1 million barrels a day of refining capacity coming online, an almost 6% increment, which could be enough to change the relative market balance. Depending on the relative prices of known oil resources and exploration, and existing facilities and construction, it has, on occasion, in the past, been cheaper for a company that wishes to expand to acquire assets financially, rather than through exploration and/or construction. This, along with other reasons, like scaling the company to an appropriate size for international competition, has led to periods of merger and acquisition activity in the oil industry. Many of the major oil companies were involved in merger activity from 1998 to 2002. In 1999, Exxon and Mobil merged. BP followed its 1998 acquisition of Amoco with a takeover of Arco in 2000. Conoco and Phillips merged in 2002, and Chevron and Texaco combined in 2001. Recent years have seen few transactions on the scale of 1998-2002. Chevron acquired Unocal in 2005 in a deal that was reported to cost $18 billion. ConocoPhillips acquired Burlington Resources in 2006 for a reported $35.5 billion. If management has access to capital investment projects that are projected to earn more than the current rate of return for the company, carrying them out will increase the value of the company and can lead to capital appreciation for its outstanding shares. If such profitable projects cannot be identified, paying out dividends may be appropriate. Dividend payouts have positive and negative aspects. Shareholders may appreciate the immediate returns, but this payout is unlikely to lead to long-term capital appreciation of the shares. Taken in a positive light, the payout of dividends signals high earnings by the firm; taken in a negative light, they signal that management does not have wealth-increasing opportunities to use the funds to generate capital appreciation. Cash dividends paid reflect the product of dividends per share times the number of shares outstanding. For example, ExxonMobil's 42% increase in dividends paid out between 2003 and 2007 represents a 42% increase in dividends per share only if the number of shares outstanding is constant. If the number of shares increases due to new issues, then the actual return is less. If the number of shares falls, the actual return to shareholders from dividend payments is greater. Thus, it is important to review the total shares outstanding, as shown in Table 6 . Share repurchase programs reduce the number of shares outstanding in the market, as the company buys back its own shares and keeps them in the company treasury. For the company, share repurchase creates a potential source of quickly available capital. Treasury shares may be resold in the market without further Securities and Exchange Commission registration and approval. From the point of view of the investor, share repurchase programs should increase the capital value of the shares they hold, other things equal. This appreciation is due to the asset base of the company being divided among a smaller number of outstanding shares, in principle making each share worth more. Compared to dividends, there may also be tax advantages associated with this type of value appreciation. ExxonMobil reduced its shares outstanding by 18% between 2003 and 2007. BP reduced its shares by 18.6% from 2004 to 2006, and Shell shares outstanding declined by 3.2% from 2005 to 2006. Although Chevron and ConocoPhillips data are more associated with share increases, these increases are likely at least partly associated with the mergers the companies were involved with in 2005 and 2006, respectively. In 2007, shares outstanding at both Chevron and ConocoPhillips declined. Earnings-per-share is a popular indicator used by investors as a factor in determining the viability of a financial investment. During a period of share repurchasing, earnings-per-share reflects not only the earning power of the company, but the extent of repurchases. For example, earnings-per-share at ExxonMobil rose by 10% from 2006 to 2007, while earnings rose by 2.8% over the same period. As a result, the more than doubling of earnings-per-share experienced by ExxonMobil and BP, as well as the 4.5% and 26% increments at ConocoPhillips and Chevron, respectively, since the beginning of the current round of oil price increases that began in 2003, reflect not only market conditions but corporate strategy as well. Companies might use profits to alter their capital structure, defined as the balance of debt and equity financing. Corporate finance theory has long held that the choice of capital structure should have no effect on the value of a company in a perfect market. In the real world of finance, however, where bankruptcy is a potential reality, many analysts look upon debt reduction as an important way to strengthen the balance sheet of a company, improving its financial health. Although reducing debt might be a desirable corporate strategy, eliminating it entirely is not likely to be efficient. Debt financing, compared to equity financing, offers several attractive characteristics. Corporate interest payments are tax-deductible, while dividend payments are paid from after-tax income. This differential allows a greater net return from identical assets, one financed through debt, the other financed with equity. Additionally, issuing debt does not dilute the ownership base of the company for existing shareholders, nor does it dilute the capital value of an equity share. Offsetting these advantages are several disadvantages. Interest payments are a fixed liability of the firm, unlike dividends, which are paid at the discretion of management. If interest payments are not paid on time and in full, legal consequences might ensue. Debt holders stand ahead of equity holders for repayment if the firm is forced into liquidation. Increasing proportions of debt on the balance sheet also make bankruptcy more possible, making the firm riskier. Table 8 suggests that the major integrated oil companies seemingly have not followed the same strategy with respect to debt management. ExxonMobil has reduced its long-term debt from its peak in 2004, but long-term debt increased by 276% in 2007. BP, which had roughly steady levels of long-term debt in 2003 and 2004, saw increases in 2005 and 2006 and a 6.4% decline in 2007. Shell's limited available data show, again, a roughly steady approach until 2007, when long-term debt increased by 29%. Chevron reduced its long-term debt by 37% from 2005 to 2006, and by an additional 21% from 2006 to 2007, achieving its lowest long-term debt level in the data period. ConocoPhillips increased its long-term debt in 2006, again likely related to its purchase of Burlington Resources in March 2006, but long-term debt decreased by 12% in 2007. Short-term debt is defined as maturing in one year or less. While short-term debt constitutes an immediate obligation on yearly earnings, short-term interest rates are usually lower than long-term rates, making this mode of financing cheaper in many cases. As shown in Table 9 , the major integrated oil companies showed divergent policy with respect to short-term debt. ExxonMobil has reduced its debt every year since 2002 until 2007. BP saw expanding debt since 2003, but showed a 31% decline in short-term debt in 2007. Chevron showed low short-term debt levels from 2003 until 2005, but short-term debt turned upward in 2006, to decline by 46% in 2007. ConocoPhillips also accumulated short-term debt from 2004 to 2006. Long-term debt declined by 65% in 2007. When revenues and profits accrue quickly, and perhaps unexpectedly, there may be little alternative to holding those returns as cash balances until a strategy for using them can be developed and put in motion. As shown in Table 10 , although the total cash held by the companies has increased by more than $32 billion since 2003, 66% of those holdings were in the hands of one company, ExxonMobil. At the other companies, the results are more mixed, with both increases and decreases observable. While holding cash balances might be unavoidable in the short-run, a long-term strategy based on increasing cash holdings is likely to be questionable. While cash offers flexibility, it generally offers little or no return. The price for flexibility is the potential return lost by holding it. In the longer term, financial analysts generally agree that more productive uses should be identified for cash balances, or they should be returned to shareholders in the form of dividends if no feasible investment opportunities can be identified. It is likely that the increases in the price of oil that began in late 2003 and persist today were unexpected by the major integrated companies. The onset of the war in Iraq and the rapid growth of oil demand in China, India, and even the United States, were not generally forecast. Hurricanes Katrina and Rita were associated with even greater degrees of uncertainty than the war and demand growth. As a result, and especially in the context of 2002 being a relatively weak year for oil company financials, it is likely that no set plan existed for the use of the rapidly growing profits that began to accrue in 2004. In the several years that have passed since 2003, capital expenditures have begun to expand, investor returns have been enhanced, acquisitions have been made, and balance sheets have been strengthened, even though cash balance levels are still high and growing. In time, as corporate plans more reflect a crude oil market characterized by higher prices, long-term assets might be accumulated, supplies of both crude oil and petroleum products might be enhanced, and consumers might see a slacker market where prices may moderate from current levels. Until that time, investors in the oil industry may continue to see high rates of dividend payout, stock repurchase plans, and the accumulation of short-term assets.

The price of crude oil began to increase in the last quarter of 2003, and has led to the high prices observed from 2004 through 2007. The Iraq War, unexpectedly high demand growth in China, India, and the United States, and Hurricanes Katrina and Rita, along with a number of other factors, all contributed to the rising price. An important result of these largely unexpected events was that the oil industry, as represented by the five major integrated oil companies doing business in the United States, experienced rapidly expanding revenues and profits. Some observers characterized these profits as "windfall" gains, while others pointed to the increasing scarcity and rising costs observable in the oil industry. Some saw "price gouging" in high gasoline prices, while others saw the market working to avoid physical supply shortages. The larger profits experienced by the oil industry and the five major integrated oil companies can be used in a variety of ways. Profits might be used to expand exploration and development of crude oil resources to expand the supply of oil. Refineries might be constructed, and technology improved at existing refineries, to expand the supply of petroleum products, most notably, gasoline. Profits might also be used to provide increased returns to the owners of the oil companies, the shareholders. This end might be accomplished through dividend payments and share repurchase plans. Profits might also be used to improve the balance sheets of the companies through debt reduction, potentially improving their financial health should they face a downturn in the market in the future. Until the effects of corporate plans that reflect a market characterized by higher oil prices can be observed, profits might tend to build up as cash reserves, as experienced by some of the five firms since 2004. How the profits generated over the past four years are used will help to determine whether oil and petroleum product markets remain tight with high prices, or whether they loosen, develop extra capacity, and lead to moderating prices. This report will be updated.

The federal government holds a large and diverse real property portfolio that includes more than 2.8 billion square feet of building space, 496,000 structures, and 42 million acres of land. These assets have been acquired over a period of decades to help agencies fulfill their diverse missions. Agencies own and lease buildings, for example, that provide space for offices, health clinics, warehouses, and laboratories. As agencies' missions change over time, so, too, do their real property needs, thereby rendering some assets less useful or unneeded altogether. Health care provided by the Department of Veterans Affairs (VA), for example, has shifted in recent decades from predominately hospital-based inpatient care to a greater reliance on clinics and outpatient care, with a resulting change in space needs. Similarly, the Department of Defense (DOD) reduced its force since the Cold War ended and has engaged in several rounds of base realignments and installation closures. As a consequence of shifting space needs, federal agencies hold thousands of properties--particularly buildings--that they no longer need. In FY2016, federal agencies owned 3,120 buildings that were vacant (unutilized), and another 7,859 that were partially empty (underutilized). Agencies are required to dispose of unneeded space and have a range of options for disposal, including transfer to another federal agency, demolition, sale, and conveyance to a state or local government or qualified nonprofit. Federal agencies have indicated, however, that their disposal efforts are often hampered by legal and budgetary disincentives, and competing stakeholder interests. The inability of agencies to dispose of unneeded space in a timely manner is one of the primary reasons the Government Accountability Office (GAO) has included real property management on its high-risk list since 2003. As noted, the government holds thousands of unutilized or underutilized properties in its inventory. These properties not only incur costs to the government to operate and maintain, but could, in some instances, be utilized by nonfederal entities--state and local governments, nonprofits, private sector businesses--to accomplish a range of public purposes, such as providing services to the homeless or facilitating economic development. GAO reports have consistently noted that efforts to dispose of unneeded and underutilized properties are hindered by statutory disposal requirements, the cost of preparing properties for disposal, conflicts with stakeholders, and a lack of accurate real property data. Agencies are required to continuously survey property under their control to identify any property that they no longer need to carry out their missions--excess property--and to "promptly" report that property as excess to the General Services Administration (GSA). Agencies are then required to follow the regulations prescribed by GSA when disposing of unneeded property or to follow independent or delegated statutory authority. GSA's regulations, in turn, implement statutory disposal requirements, which are discussed below. The steps in the real property disposal process are established by statute. Agencies must first offer to transfer properties they do not need (excess properties) to other federal agencies, who generally pay market value for excess properties they wish to acquire. Unneeded properties that are not acquired by federal agencies (surplus properties) must then be offered to state and local governments, and qualified nonprofits, for use in accomplishing public purposes specified in statute, such as creating public parks or providing services to the homeless. Agencies may convey surplus properties to state and local governments, and qualified nonprofits, for public benefit at less than fair market value--even at no cost. Surplus properties not conveyed for public benefit are then available for sale at fair market value or are demolished (or, in some cases abandoned) if the property could not be sold due to the condition or location of the property. Agencies have argued that these statutory requirements slow down the disposition process, compelling agencies to incur operating costs while the properties are being screened. For example, real property officials have said the McKinney-Vento Act ( P.L. 100-77 )--which mandates that all surplus property be screened for homeless use--can extend the time it takes to dispose of certain properties by months or years. Because public benefit conveyance requirements are set in law, agencies do not have the authority to skip screening, even for surplus properties that could not be conveyed anyway. Real property experts with the Army, for example, told auditors they had properties they believed could be disposed of only by demolition, due to their condition or location, but that still had to be screened, thereby adding as much as six months to the disposal process and forcing the Army to pay maintenance costs that could have been avoided. Statutes pertaining to environmental remediation or historic preservation also add time to the process. It may take agencies years of study to assess the potential environmental consequences of a proposed disposal and to develop and implement an abatement plan, as required by law. Similarly, the National Historic Preservation Act requires agencies to plan their disposal actions so as to minimize the harm they cause to historic properties, which may include additional procedures, such as consulting with historic preservation groups at the state, local, and federal levels. Unneeded buildings are often among the older properties in an agency's portfolio. As a consequence, agencies sometimes find expensive repairs and renovations may be needed before the properties are fully functional, meet health and safety standards, and comply with historic preservation requirements. The poor condition of these properties may deter potential buyers or lessees, particularly if they must cover the cost of required improvements as a condition of acquiring the properties. Similarly, agencies that wish to demolish vacant buildings face deconstruction and cleanup costs that, at times, exceed the cost of maintaining the property--at least in the short run--which may encourage real property managers to retain a property rather than dispose of it. Federal agencies frequently cite the cost of complying with environmental regulations as a major disincentive to disposal. Some agencies have found their disposal efforts are complicated by the involvement of stakeholders with competing agendas. The Department of the Interior (DOI) has said that the competing concerns of local and state governments, historic preservation offices, and political factors can stymie the disposal of some of its unneeded real property. Similarly, the VA has found that communities sometimes oppose disposals that would result in new development, and veterans groups have opposed disposing of building space if that space would be used for purposes unrelated to the needs of veterans. These conflicts can result in delay, or even cancellation of proposed disposals, which, in turn, prevent agencies from reducing their inventories of unneeded properties. In addition to the obstacles mentioned above, data about agency real property portfolios--which might be useful for congressional oversight--appear to be potentially inaccurate, and some government-wide data are accessible only to GSA. Moreover, agencies sometimes enter into leases rather than seek funding for new construction when acquiring space, even when the leased space might be more expensive over time. The Federal Real Property Profile (FRPP) is the government's most comprehensive source of information about real property under the control of executive branch agencies. GSA manages the FRPP and collects real property data from 24 of the largest landholding agencies each year. Other agencies are encouraged, but not required, to report data to GSA. The data elements that participating agencies collect and report are determined by the Federal Real Property Council (FRPC), an interagency taskforce that is funded and chaired by the Office of Management and Budget (OMB). The other members of the FRPC are agency senior real property officers (SRPOs) and GSA. The FRPP contains data that could enhance congressional oversight of federal real property activities, such as the number of excess and surplus properties held by major landholding agencies and the annual costs of maintaining those properties. Historically, GSA has not permitted direct access to the FRPP by Congress on the grounds that the data are proprietary. GSA does respond to some requests for real property data from congressional offices, but GSA staff query the database and provide the results to the requestor. Some FRPP data are made public through an annual summary report posted on GSA's website, but the summary reports may be of limited use for congressional oversight. Most of the data are highly aggregated and limited information is provided on an agency-by-agency basis. Certain data, such as building utilization rates at each agency, or the number of excess and surplus properties each agency holds, are not available to Congress or the public. This can limit the ability of Congress to compare the performance of agencies, which in turn can limit its ability to identify the policies and practices used by the most successful agencies and hold poorly performing agencies accountable. The quality of the FRPP data has also been questioned. GAO audits have found, for example, that real property data were unreliable in key areas, such as annual operating costs, and often were not reported correctly by agencies. Another GAO report reexamined weaknesses in FRPP data collection practices, noting that key data elements--such as buildings' maintenance needs and utilization rates--are not consistently and accurately captured in the database. The GAO report concluded that problems with FRPP data collection result in agencies "making real property decisions using unreliable data." Data quality problems may result from changing definitions. The FRPC stopped reporting data on underutilized and not utilized buildings in its FY2011 real property report. It began reporting the data again in FY2013, but with different definitions than those used in FY2010. The old definitions were based on the amount of space occupied in a building, while the new definitions are based on the frequency with which space was in use. Under the new definitions, the FRPC reported 5,532 underutilized and not utilized buildings in FY2013, down from 77,700 in FY2010--a 93% decrease in three years. By FY2014, the number of underutilized and not utilized buildings reported decreased to 4,971, a 94% decline from FY2010. Inconsistencies like this have led GAO to conclude that the FRPC's data on underutilized and not utilized federal real property are not reliable. The annual summary reports also omit data that might enhance congressional oversight. The FRPP contains, for example, the number of excess and surplus properties held by each agency and the annual operating costs of those properties--issues about which Congress has expressed ongoing interest. The summary report, however, only provides the number and annual operating costs of disposed assets, thereby providing the "good news" of future costs avoided through disposition while omitting the "bad news" of the ongoing operating costs associated with excess and surplus properties the government maintains. The government's ongoing "overreliance on costly leased space" is one of the primary reasons federal real property continues to be designated as a "high risk" issue by GAO. The percentage of square feet leased by GSA--which leases property for itself and on behalf of many agencies--is nearly equal to the percentage of square feet it owns. According to GAO, leasing space is typically more expensive than owning space over the same time period. GAO cited, for example, a long-term operating lease that cost an estimated $40.3 million more than if the agency had purchased the same building. The decision to lease rather than purchase space may be driven by operational requirements--such as the United States Postal Service (USPS) leasing space in areas that it believes will optimize the efficiency of mail delivery. Agencies often choose to lease rather than purchase space because of budget scoring rules, even if the decision to lease is not the most cost-effective long-term option. Under the Budget Enforcement Act of 1990, an agency must have budget authority up-front for the government's total legal commitment before acquiring space. Thus, if an agency were to construct or purchase a building, it would need up-front funding for the entire cost of the construction or acquisition, but leased space only requires the annual lease payment plus the cost of terminating the lease agreement. In addition to the budget scoring issue, some agencies have been granted independent leasing authority, which means they do not have to work with GSA to acquire leased space. Some agencies with independent leasing authority, such as the USPS and VA, have established in-house real property expertise, while other agencies with independent authority have not. The Securities and Exchange Commission (SEC), for example, entered into a $557 million, 10-year lease for 900,000 square feet, which the SEC's inspector general (IG) called "another in a long history of missteps and misguided leasing decisions made by the SEC since it was granted independent leasing authority." The IG found that "inexperienced senior management" at the SEC made poor decisions that led to acquiring three times the amount of space needed--the original estimate provided to Congress was for 300,000 square feet--and bypassing other locations that were closer and less expensive. Real property disposition historically has been a relatively decentralized process. Numerous federal agencies have the authority to dispose of some or all of the properties they hold. Some agencies have very broad authority to dispose of properties by any method, while others only have the authority to dispose of certain types of properties, or to only use certain disposal methods. Under this decentralized structure, agencies have identified unneeded assets and disposed of them in piecemeal fashion, often limited by the budgetary resources available for disposition activities. The Federal Assets Sale and Transfer Act of 2016 (FASTA, P.L. 114-287 ), by contrast, requires a more centralized process, whereby disposal decisions will be based on the recommendations of a newly created board rather than individual agencies. Moreover, the board may recommend the disposal of hundreds or even thousands of properties at one time. FASTA applies to all federal executive branch agencies and wholly owned government corporations, but properties on military installations are excluded, as are most Coast Guard properties and properties located outside the United States that are operated or maintained by the Department of State or the Agency for International Development. Properties controlled by Indian and Native Alaskan tribes, the USPS, and the Tennessee Valley Authority are also excluded, as well as properties used for certain federal programs or power projects. The OMB Director may also exclude properties for reasons of national security. The first step in disposing of unneeded properties under FASTA is for federal landholding agencies to develop their own recommendations for reducing unused space and operating and maintenance costs. Agencies are required to submit these recommendations to GSA and OMB not later than 120 days after the start of each fiscal year, along with specific data on each of the properties they own and lease. The data include, for each property, its age and condition, operating costs, history of capital expenditures, sustainability metrics, square footage, and the number of federal employees that work there. Agency recommendations must categorize properties according to whether they should be sold, transferred, exchanged, consolidated, relocated, redeveloped, reconfigured, or outleased--a range of options which are referred to collectively as "realignment." Agencies may also recommend properties be declared excess or surplus if they have not already been so designated. FASTA then requires the GSA Administrator and the OMB Director to develop criteria they will use to determine which properties should be realigned and what type of realignment should be recommended. FASTA specifies nine principles that must be taken into account when establishing the criteria: 1. the extent to which a property could be sold, redeveloped, or outleased in a manner that would produce the best value; 2. the extent to which the operating and maintenance costs would be reduced through the consolidation, colocation, and reconfiguration of space; 3. the extent to which a property aligns with the current mission of the agency; 4. the extent to which the utilization rate is being maximized and is consistent with nongovernment standards; 5. the potential costs and savings over time; 6. the extent to which leasing long-term space would be reduced; 7. the extent to which there are opportunities to consolidate similar operations across or within agencies; 8. the economic impact on existing communities in the vicinity of the property; and 9. the extent to which energy consumption specifically would be reduced. The criteria must include utilization rate standards that apply to each category of space, such as office space and warehouse space. Once the criteria are established, OMB and GSA must apply them to the list of agency recommendations and revise that list as deemed appropriate. The OMB Director must then submit the revised recommendations, along with the criteria, to a newly established Public Buildings Reform Board. The board is to be composed of a chairperson appointed by the President with the advice and consent of the Senate, and six other members, also appointed by the President. In making appointments to the board, the President is required to consult with the Speaker of the House of Representatives regarding two members, the majority leader of the Senate regarding two members, the House minority leader regarding one member, and the Senate minority leader regarding one member. FASTA directs the President to ensure that the board includes members with expertise in commercial real estate, space optimization and utilization, and community development. Board members are each appointed to a six-year term, and the board itself terminates six years from the date FASTA was enacted. The board is required to review the recommendations submitted by OMB, but it is not bound by them. The board is required to perform an independent review of agency inventories, and it may reject, accept, or modify OMB's recommendations, and add recommendations of its own. As part of the review process, the board is required to develop an accounting system to help in evaluating the costs and returns of various recommendations. The board shall have access to the same data that agencies provided to OMB and GSA, and agencies are required to provide any additional information the board requests. In addition, the board may receive and review proposals submitted by state and local officials and the private sector, which the board is required to consider. The board shall hold public hearings when developing its recommendations. As part of its recommendations, the board must identify at least five "high-value" federal properties to sell. These properties may not be listed as excess or surplus, and must have a total estimated fair market value of at least $500 million and not more than $750 million. Each of these properties may be disposed of only through sale. The high-value list is subject to the same review and approval process as the much longer list of recommendations. Once the board finalizes its recommendations, it is required to submit them in a report to the OMB Director and post them on a website established by the board for that purpose. The report may only include recommendations supported by at least a majority of commission members. GAO is required to publish a report on the recommendations, including a review of the methodology used to select properties for realignment. The OMB Director has 30 days to review the board's recommendations and submit a report to Congress that discusses the decision to approve or disapprove them. If the Director approves all of the board's recommendations, then he must submit a copy of the recommendations to Congress along with a certification of his approval. If the Director disapproves some or all of the board's recommendations, he must submit a report to Congress and to the board identifying the reasons for disapproval, and the board would have 30 days to submit a revised list of recommendations to the Director. If the Director approves all of the revised recommendations, he must submit a copy of the revised recommendations along with a certification of approval to Congress. If the Director does not submit a report within 30 days of the receipt of the commission's original or revised recommendations, then the process terminates. If the OMB Director approves a set of board recommendations, federal agencies must begin implementation of all recommendations within two years from the date Congress received them, and complete implementation within six years. Agencies must work in consultation with GSA, and within their existing authorities to implement board recommendations, although they may contract with real estate companies for assistance. The OMB Director has the authority to exclude a property from the board's recommendations if the Director determines the property is suitable for use as a public park or recreation area by a state or local government. In addition, several sections of the U.S. Code that pertain to real and personal property conveyances, particularly those for public benefit, would not apply to recommended disposals. The McKinney-Vento Homeless Assistance Act still applies to properties that are included in the approved set of recommendations but which the HUD Secretary determines are suitable for use providing services to the homeless. However, FASTA amends McKinney-Vento by shortening the screening and application process for these properties. FASTA requires the Comptroller General to annually monitor and review the implementation activities of federal agencies and report to Congress his findings and recommendations. In addition, the act precludes actions taken pursuant to recommendations from judicial review. If the board recommends the disposal of a property on which hazardous material was stored for more than one year, known to have been released, or disposed of, federal agencies may agree to transfer the deed of such property only under certain conditions. First, the deed must comply with the Comprehensive Environmental Response, Compensations, and Liability Act of 1980 (42 U.S.C. 9601 SSSS et seq.). Second, the head of the disposing agency must certify either (1) the cost of all environmental restoration, waste management, and other environmental compliance activities that would otherwise be paid for by the disposing agency are equal to or greater than the fair market value of the property; or (2) if such costs are lower than fair market value the recipient of the property agrees to pay the difference between fair market value and such costs. Once a property has been certified, the agency may pay the recipient of the property the lesser of the amount by which the costs incurred by the recipient for environmental compliance exceed fair market value, or the amount by which the costs that would have been incurred by the disposing agency exceed fair market value. The disposing agency must provide to the property recipient all of the information it possesses on environmental restoration, waste management, and compliance activities. FASTA established both a salaries and expenses account to fund the board's administrative and personnel costs, and an asset proceeds and space management fund (APSMF) that will be used to implement recommended actions. Both accounts may receive funds from appropriations but the APSMF is also authorized to receive the proceeds generated by the sale of real property pursuant to the board's recommendations. All of the funds deposited in the APSMF account may only be used to cover the costs associated with implementing the board's recommendations. The President is required to include in his budget submission an estimate of the proceeds that are the result of the board's recommendations and the funding needed to implement them. After the board terminates, federal agencies are authorized to retain the net proceeds from the disposal of real property they control. Net proceeds may only be used for further disposal activities and only as authorized in annual appropriations acts. Any net proceeds not expended for disposal activities are required to be used for deficit reduction. FASTA requires the GSA Administrator to establish and maintain a "single, comprehensive, and descriptive" database of all real property under the control of federal agencies. The database must include, for each property, its size in square feet and acreage; geographic location, including a physical address and description; relevance to the agency's mission, presently and in the future; level of utilization, including whether it is excess, surplus, underutilized, or unutilized, and the number of days it has been so designated; annual operating costs; and replacement value. The database must permit users to search and sort properties, and download data. Once operational, the database must be made available, at no cost, to federal agencies and the public. Numerous provisions of FASTA have the potential to mitigate weaknesses in the real property disposal process and enhance oversight. There are also potential drawbacks to certain provisions, and some real property weaknesses are only tangentially addressed. One potential advantage of the FASTA process is that it incorporates a variety of perspectives. Agencies initiate the process, using detailed knowledge of their portfolios to propose disposal actions that they believe make the most sense in terms of their mission. A government-wide perspective is added in the next step, when GSA and OMB jointly review and revise agency recommendations. By looking at the federal portfolio as a whole, OMB and GSA may see opportunities for dispositions across agencies that individual agencies do not, such as consolidation or colocation of agency personnel. In addition, OMB and GSA may see opportunities to apply new ideas to multiple agencies. If an agency recommended reducing costs related to warehouse maintenance through a particular method, for example, OMB and GSA might recommend other agencies with warehouse space use that method as well. A third perspective is added by the Public Buildings Reform Board, an independent body whose members may have expertise different than that of executive branch employees involved in developing the list of recommendations. That diversity of expertise--which may include private sector work in real estate development or community development--may enable the board to identify opportunities for the government to sell properties that agencies may not have thought were marketable, or consider the effects of disposing of multiple properties from different agencies in a single city or region. A diversity of perspectives may also hinder consensus on recommendations, particularly if it results in disagreement between OMB and the board. If the OMB Director's philosophy emphasizes certain methods of disposition over others, for example, and a majority of the board favors a different approach, then that disagreement could potentially result in the OMB Director rejecting some of the board's recommendations and terminating the FASTA disposal process for a given year. Congress has an indirect role in developing FASTA recommendations through its advisory role on board appointees. A potential benefit of this limited presence is that it may reduce the pressure exerted by local stakeholders on disposal decisions. By keeping Congress at a distance from the recommendation process, FASTA encourages stakeholders to work with the board, which has a nationwide perspective and is not subject to public elections. Conversely, FASTA may be perceived to put Congress at an institutional disadvantage relative to the executive branch. The OMB Director works with GSA to develop an initial list of recommendations to the board and has the authority to approve or disapprove of the board's recommendations. This process may be seen as giving OMB two opportunities to directly influence the final recommendations, whereas Congress has only an indirect presence through the board. At no time is Congress able to vote on any recommendations under FASTA. As noted, prior to FASTA, all federal properties were required to be screened for use by state and local governments and nonprofits, a process which added weeks to months to the disposal process. While some properties would eventually be conveyed to these entities, the majority would not, meaning agencies incurred operating and maintenance costs on many properties unnecessarily while the screening process took place. By exempting the board's recommendations from many conveyance screening requirements, FASTA may enable agencies to dispose of unneeded properties in a less costly and more efficient manner. These exemptions may not necessarily result in fewer properties being conveyed to state and local governments and nonprofits. The board may still recommend conveyances, and nearly all board recommendations are eligible for review by HUD to determine whether any properties might be suitable for use providing assistance to the homeless. In addition, the OMB Director has the authority to exclude any property from the board's recommendations if he determines that it might be suitable for use by a state or local government as a public park or recreation area. It could be argued that centralizing conveyance decisions might, under some circumstances, reduce the number of properties available to state and local governments and nonprofits. FASTA does not instruct the board to give precedence to any particular disposal method, and some properties that might be used for public benefit if conveyed might also be valued by the private sector. The board and the OMB Director may approve recommendations to sell some of those properties rather than convey them, whereas before FASTA state and local governments and nonprofits would have been given the first opportunity to acquire all unneeded properties. Federal agencies have argued that they are unable to dispose of many of their unneeded properties because they lack sufficient funding. FASTA may help address that concern by providing funding for recommended disposals through appropriations and from the sale of civilian properties. Notably, FASTA requires that the board recommend the sale of at least five properties with an estimated fair market value of $500 million to $750 million. However, these properties are not to be listed as excess or surplus--meaning agencies have not declared them to be unneeded. It is not clear how these properties will be identified. It is also not clear how much revenue might be generated by the sale of civilian properties, since the FRPP does not provide sales proceeds data on an agency-by-agency basis. FASTA requires GSA to establish a publicly accessible real property database that may enhance oversight and policymaking. The new database must provide information that may help Congress monitor agency portfolios, such as the utilization rate and annual operating costs of each property. The database is not required to include other data that Congress might find useful. Agencies estimate a dollar amount for the repair needs of their buildings and structures as part of their FRPP reporting, but these estimates are then folded into a formula for calculating a "condition index" for each building, which is not reported. Given that repair needs are an obstacle to disposing of some properties, Congress may find it useful to have agency repair estimates reported for each building to help inform funding decisions. FASTA primarily addresses the disposal of unneeded properties, but its objectives include reducing the government's reliance on leased space. Information comparing the cost of leasing to the cost of building or buying space might enhance oversight of long-term operating leases. As discussed earlier in this report, one of the primary reasons GAO has listed federal real property management as a high-risk area since 2003 is that the government increasingly acquires space through leases rather than by constructing or purchasing buildings. The prospectus approval process provides Congress with an opportunity to exercise oversight of GSA's lease decisions. Prior to seeking appropriations, GSA is required to obtain congressional authorization for constructing, purchasing, leasing, or renovating real property when the estimated cost of the project exceeds a given threshold. To that end, GSA submits a prospectus to two committees--the Senate Committee on Environment and Public Works and the House Committee on Transportation and Infrastructure--for each proposal that exceeds the threshold. The prospectus provides detailed information about the project, including its location and estimated cost. By law, a project that exceeds the threshold may not receive appropriations unless both committees pass resolutions approving of the prospectus. Given the size of its portfolio, and its role as the procurer of space for numerous other agencies, congressional oversight of GSA's prospectus-level lease proposals has broad implications. The usefulness of the prospectus approval process as an oversight tool, however, may be limited by the fact that GSA is not required to present data that directly compare the cost of leasing with the cost of owning space. This means that Congress may be unable to determine whether it is being asked to approve the most cost-effective option for meeting an agency's real property needs. One option for potentially improving oversight of GSA leases would be to mandate that GSA include comparative cost data in its prospectuses. This would not be a completely new step for GSA to take: in the 1980s and throughout the early part of the 1990s, GSA's lease prospectuses included a comparison of the costs of leasing space to constructing or buying it. GSA discontinued reporting comparative cost data in the mid-1990s, it said, because funding for construction and purchase alternatives was so limited that they were not considered realistic alternatives.

Real property disposal is the process by which federal agencies identify and then transfer, donate, or sell real property they no longer need. Disposition is an important asset management function because the costs of maintaining unneeded properties can be substantial. Moreover, properties the government no longer needs may be used by state or local governments, nonprofits, or businesses to provide benefits to the public. Finally, the government loses potential revenue when it holds onto certain unneeded properties that might be sold for a profit. Despite these drawbacks, federal agencies hold thousands of unneeded and underutilized properties. Agencies have argued that they are unable to dispose of these properties for several reasons. First, there are statutorily prescribed steps in the disposal process that can take months to complete. Second, properties may not be appealing to potential buyers or lessees if they require major repairs or environmental remediation--steps for which agencies lack funding to complete before bringing a property to market. Third, key stakeholders in the disposal process--including local governments, nonprofit organizations, and businesses--are often at odds over how to dispose of properties. In addition, Congress may be limited in its capacity to conduct oversight of the disposal process because it currently lacks access to reliable, comprehensive real property data. The General Services Administration (GSA) maintains a database with information on most federal buildings, but those data are provided to Congress on a limited basis. Moreover, the quality of the information in the database has been questioned, in part because of inconsistent reporting of key data elements, such as how much space within a given building is unneeded. The lack of data may also hinder congressional oversight on the extent to which agencies enter into leases rather than purchase space. Leasing space is typically more expensive than owning, and the government's "overreliance on costly leased space" is one of the primary reasons federal real property is designated as a "high risk" issue by the Government Accountability Office (GAO). The Federal Assets Sale and Transfer Act of 2016 (P.L. 114-287) established a new, centralized process for disposing of unneeded space. Under FASTA, agencies are required to develop a list of disposal recommendations, which could include the sale, transfer, conveyance, consolidation, or outlease of any unneeded space, among other options. These recommendations are then to be submitted to the GSA Administrator and the Director of the Office of Management and Budget (OMB) for review and revision. The revised list of recommendations is then vetted by a newly established Public Buildings Reform Board, and returned to the OMB Director for final approval or disapproval. FASTA may address some of the obstacles agencies face when disposing of unneeded space. Properties on the recommendation list are exempt from certain statutory requirements, such as screening for public benefit, and FASTA provides funding for agencies to implement the board's recommendations. The use of a board to make disposal decisions may also reduce the impact of stakeholder conflict. In addition, FASTA requires GSA to create a public database with information that may enhance congressional oversight. There may be drawbacks to FASTA. The law does not provide Congress with an opportunity to vote for or against the list of recommendations, nor is Congress directly involved in the creation of the list. It is possible that philosophical differences between the board and the OMB Director could lead to an impasse that would effectively shut down the FASTA disposal process. The required database may not include some information that could be useful to Congress, such as the repair needs and condition of each building.