[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]

COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR
2011

_______________________________________________________________________

HEARINGS

BEFORE A

SUBCOMMITTEE OF THE

COMMITTEE ON APPROPRIATIONS

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
________
SUBCOMMITTEE ON COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES
ALAN B. MOLLOHAN, West Virginia, Chairman
PATRICK J. KENNEDY, Rhode Island FRANK R. WOLF, Virginia
CHAKA FATTAH, Pennsylvania JOHN ABNEY CULBERSON, Texas
ADAM SCHIFF, California ROBERT B. ADERHOLT, Alabama
MICHAEL HONDA, California JO BONNER, Alabama
C.A. ``DUTCH'' RUPPERSBERGER,
Maryland
JOSE E. SERRANO, New York
PATRICK J. MURPHY, Pennsylvania

NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full
Committee, and Mr. Lewis, as Ranking Minority Member of the Full
Committee, are authorized to sit as Members of all Subcommittees.
John Blazey, Dixon Butler, Adrienne Simonson,
Diana Simpson, Darek Newby, and Brad Daniels,
Subcommittee Staff
________
PART 5
Page
Department of Commerce Fiscal Year 2011 Budget Overview.......... 1
National Oceanic and Atmospheric Administration Fiscal Year 2011
Budget Overview................................................... 123
National Institute of Standards and Technology Fiscal Year 2011
Budget Overview................................................... 233
Economic Development Administration Fiscal Year 2011 Budget
Overview.......................................................... 313
Economic Development Administration Grantees..................... 393
United States Patent and Trademark Office Fiscal Year 2011 Budget
Overview.......................................................... 461

______
Printed for the use of the Committee on Appropriations
PART 5--COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS
FOR 2011
?

COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR
2011

_______________________________________________________________________

HEARINGS

BEFORE A

SUBCOMMITTEE OF THE

COMMITTEE ON APPROPRIATIONS

HOUSE OF REPRESENTATIVES

______
Printed for the use of the Committee on Appropriations
______

U.S. GOVERNMENT PRINTING OFFICE

56-756

WASHINGTON : 2010

COMMITTEE ON APPROPRIATIONS

DAVID R. OBEY, Wisconsin, Chairman

NORMAN D. DICKS, Washington JERRY LEWIS, California
ALAN B. MOLLOHAN, West Virginia C. W. BILL YOUNG, Florida
MARCY KAPTUR, Ohio HAROLD ROGERS, Kentucky
PETER J. VISCLOSKY, Indiana FRANK R. WOLF, Virginia
NITA M. LOWEY, New York JACK KINGSTON, Georgia
JOSE E. SERRANO, New York RODNEY P. FRELINGHUYSEN, New
ROSA L. DeLAURO, Connecticut Jersey
JAMES P. MORAN, Virginia TODD TIAHRT, Kansas
JOHN W. OLVER, Massachusetts ZACH WAMP, Tennessee
ED PASTOR, Arizona TOM LATHAM, Iowa
DAVID E. PRICE, North Carolina ROBERT B. ADERHOLT, Alabama
CHET EDWARDS, Texas JO ANN EMERSON, Missouri
PATRICK J. KENNEDY, Rhode Island KAY GRANGER, Texas
MAURICE D. HINCHEY, New York MICHAEL K. SIMPSON, Idaho
LUCILLE ROYBAL-ALLARD, California JOHN ABNEY CULBERSON, Texas
SAM FARR, California MARK STEVEN KIRK, Illinois
JESSE L. JACKSON, Jr., Illinois ANDER CRENSHAW, Florida
CAROLYN C. KILPATRICK, Michigan DENNIS R. REHBERG, Montana
ALLEN BOYD, Florida JOHN R. CARTER, Texas
CHAKA FATTAH, Pennsylvania RODNEY ALEXANDER, Louisiana
STEVEN R. ROTHMAN, New Jersey KEN CALVERT, California
SANFORD D. BISHOP, Jr., Georgia JO BONNER, Alabama
MARION BERRY, Arkansas STEVEN C. LaTOURETTE, Ohio
BARBARA LEE, California TOM COLE, Oklahoma
ADAM SCHIFF, California
MICHAEL HONDA, California
BETTY McCOLLUM, Minnesota
STEVE ISRAEL, New York
TIM RYAN, Ohio
C.A. ``DUTCH'' RUPPERSBERGER,
Maryland
BEN CHANDLER, Kentucky
DEBBIE WASSERMAN SCHULTZ, Florida
CIRO RODRIGUEZ, Texas
LINCOLN DAVIS, Tennessee
JOHN T. SALAZAR, Colorado
PATRICK J. MURPHY, Pennsylvania

Beverly Pheto, Clerk and Staff Director

(ii)

COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR
2011

---------- --
--------

Thursday, March 4, 2010.

DEPARTMENT OF COMMERCE

WITNESS

HON. GARY LOCKE, SECRETARY OF COMMERCE
Mr. Mollohan. Well, good afternoon.
Welcome, Secretary Locke, to our hearing today.
Today we will hear from Secretary Locke of the Department
of Commerce. The fiscal year 2011 budget request includes $8.9
billion in discretionary funds for Commerce, a decrease of $5.1
billion, or 36 percent below the fiscal year 2010 enacted
level. The significant decrease is attributable to the
anticipated completion of the 2010 Decennial Census.
But there are some significant increases in the proposed
budget as well, including $809 million in the National Oceanic
and Atmospheric Administration, or NOAA, for satellites, catch
shares and conservation and climate change related programs,
and $87 million in the International Trade Administration, or
ITA, for the National Export Initiative.
Last week this subcommittee heard testimony from the
director of the National Institute of Standards and Technology,
or NIST, Dr. Pat Gallagher. Later this month, we will hold
separate hearings on the Economic Development Administration
(EDA), NOAA and the U.S. Patent ` Trademark Office (USPTO),
which will provide us with the opportunity to look more closely
at programs within those agencies.
Today's hearing will allow us to touch on issues of
Departmental oversight and overarching policy issues affecting
these agencies, while also delving into issues and funding
related to other Departmental agencies, including the Census
Bureau, the International Trade Administration, and the
National Telecommunications and Information Administration
(NTIA).
The 2010 Decennial Census has officially begun, with
enumeration in remote Alaskan villages completed. We look
forward to a status report and timeline for the rest of the
country, as well as discussions on current concerns, including
the effectiveness and cost of Decennial advertising.
Apparently, Census has gotten one thing right, Mr.
Secretary, because everyone appears to have seen the Super Bowl
ad, whatever one might think of it.
NTIA has significant American Recovery and Reinvestment Act
responsibilities in overseeing $4.7 billion in broadband grant
awards. While there are concerns about the delay in first-round
awards, it is exciting to contemplate a future where high-speed
Internet connections are as common as telephones.
We also will discuss how ITA's proposed National Export
Initiative will help promote U.S. exports and protect U.S. jobs
from unfair export subsidies.
And finally, the Department has held a number of events and
made quite a few announcements in fiscal year 2010. At times,
the announcements are made well in advance of any actual
implementation, and so details are scarce. The focus appears to
be more on getting good press coverage for the Department's
efforts and less on the actual benefits to the public, so we
intend to get to some of those details today.
There is much to discuss, and Secretary Locke, thank you
for coming.
Following the opening statement of Ranking Member Wolf, we
will ask you to provide a brief summary of your written
testimony, and your written testimony will be made a part of
the record.
And now, I will call on Mr. Wolf.
Mr. Wolf. Thank you, Mr. Chairman.
I apologize for being late. I had some veterans in my
office I just could not leave.
With that, I will just submit the statement for the record.
[The information follows:]

[GRAPHIC] [TIFF OMITTED] T6756A.001

Mr. Wolf. Secretary Locke, I want to welcome you. Thank you
very much.
Mr. Mollohan. Secretary Locke, as I mentioned, your
statement will be made a part of the record, and we invite you
to summarize.

Opening Statement by Secretary Locke

Secretary Locke. Well, thank you very much, Chairman
Mollohan and Ranking Member Congressman Wolf. I am pleased to
join you to talk about the President's budget for the
Department of Commerce for fiscal year 2011.
With the 2010 census field operations ending this year, the
President's $8.9 billion request decreases overall spending
from fiscal year 2010, but funds targeted increases for vital
economic activities. Because in these challenging times, the
central mission of the Commerce Department is very clear and
straightforward, helping American businesses become more
competitive so they put more people back to work.
I want to highlight four areas where the Commerce
Department's efforts described in the 2011 budget are integral
to that goal of putting more people back to work. First,
businesses use our unparalleled statistical and technical
research to develop new products, identify new markets and make
long-term investments. For instance, the National Institute of
Standards and Technology, or NIST, provides metrics that enable
development of everything from a National Smart Grid, advance
manufacturing processes, to airport screening devices and new
cyber security measures. NIST also provides consulting services
to American manufacturers to become more efficient and
profitable so that they become more viable and competitive in a
global economy.
Increasingly, businesses are turning to NOAA for its
unmatched weather and climate observations, and much of NOAA's
2011 budget increase will finance its added responsibilities to
implement the long called for restructuring of the National
Polar-orbiting Operational Environmental Satellite System,
commonly known as NPOESS. This effort will help us better meet
civil and military weather forecasts, storm tracking and
climate monitoring requirements.
And at a time when both businesses and the President have
called for more accurate and readily available climate
information, the fiscal year 2011 budget assigns additional
responsibilities NOAA's proposed new Climate Service Office
which is the result of a proposed budget-neutral reorganization
to bring together its observational and analytical resources,
now scattered throughout NOAA, all under one roof.
A second key function of the Commerce Department is
overseeing the patent protection that has incentivized American
inventors and entrepreneurs for over 200 years. When I came to
the Department of Commerce, the Patent and Trademark Office had
a backlog of almost 800,000 patent applications and a waiting
period of over 3 years just to receive a yes or no on a
proposed patent. We have already taken important steps to fix
these problems, knowing that every patent application waiting
in line could be a new product not going to market and a new
job not being created.
And through short-term surcharges and other fee provisions,
as well as upgrades to our outmoded IT systems, the 2011 budget
will, along with management innovations and employee process
improvements, enable the Patent and Trademark Office to grant
or deny a patent within 12 months, and our goal is to do this
by the year 2014, except for those innovations that are also
seeking FDA approval, which takes several years.
Area number three, Commerce provides direct consultation
and funding to help communities develop crucial economic
infrastructure through the Recovery Act's Broadband Technology
Opportunities Program, BTOP. By tomorrow, we expect to announce
or will have announced close to a billion dollars to lay or
activate over 20,000 miles of high-speed Internet cable lines
in underserved communities. And the fiscal year 2011 budget
provides critical funding to ensure that all of these projects
have rigorous oversight.
Our BTOP program, our broadband technology program is a
true public/private partnership because, just as the Federal
Government might fund construction of an interstate across the
State and then have local communities and governments build the
streets and the roads that branch off of it, our infrastructure
grants fund super high-speed Internet lines or highways that
local providers, the private sector, will then connect to or
tap into to bring high-speed Internet service directly to homes
and businesses.
The 2011 budget also provides $75 million to our Economic
Development Administration for planning and infrastructure
grants to help communities identify their unique economic
strengths and then to develop Regional Innovation Clusters
similar to what we have seen in Silicon Valley or the Route 128
corridor in Boston.
And area Number four, in foreign countries, the Commerce
Department serves as a lead advocate for U.S. companies looking
to break into new markets or grow their shares in existing
ones. The 2011 budget provides a 20 percent increase to the
International Trade Administration, which, among other things,
will allow us to hire some 328 new trade specialists, mostly
stationed in foreign countries, to help find buyers and
customers for U.S.-made goods. And our target is for medium-
and small-sized businesses, because when American companies
export more, they manufacture more; and when they manufacture
more, they hire more people. The International Trade
Administration will play a key role in implementing the
President's National Export Initiative, which aims to double
American exports over the next 5 years and support 2 million
new jobs.
And as we implement all these programs, results, cost
effectiveness, performance and accountability are paramount
objectives. And so we take to heart the Department's managerial
challenges and operational issues, as identified by our
Inspector General, Todd Zinser, and his staff. His findings are
acted upon and used to re-evaluate other operations and serve
as benchmarks or metrics of performance improvement.
We are pleased to support and pleased that the President
has granted our request in the 2011 budget to have increased
funding for the Inspector General for increased oversight of
departmental acquisitions and contracts.
So I thank you for the opportunity to come before you today
and for your continuing support of the Department of Commerce
and its programs, and I look forward to your questions.
Thank you.
[The written statement of Gary Locke, Secretary of
Commerce, follows:]

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CENSUS--2010 DECENNIAL

Mr. Mollohan. Thank you, Mr. Secretary.
Mr. Secretary, the 2010 Decennial is upon us. Could you
give us a brief timeline of the upcoming Decennial? When will
surveys be mailed? What is the actual Census Day? What happens
if people don't return their surveys? Just give us an overview.
Secretary Locke. Actually, starting around March 8th,
residents will be receiving advance letters notifying them that
they are going to be soon receiving the Census form, and around
March 15th, they will actually receive those Census forms.
Around 11.7 million of those Census forms will be bilingual
English and Spanish.
By around March 22, we are going to actually make available
to mayors and governors and local government officials, elected
officials as well as Members of Congress, an interactive map
which will enable people to actually go Census tract by Census
tract and see within their communities how people are starting
to return those Census forms compared to what happened in the
year 2000, so that policymakers, mayors, public officials can
do more publicity campaigns, public service announcements, or
even target specific areas within their community or their
State or their region to ensure that there is a full count.
We are asking that people send back their Census forms
around March--excuse me--April 1. And by around April 20th, all
those forms not processed, not returned, will then become our
targets for what we call the nonresponse follow up, which means
people going door-to-door and trying to have the forms filled
out then. That activity will actually start May 1st and go all
the way through the middle of July.
Mr. Mollohan. How much does that nonresponse follow up cost
per visit?
Secretary Locke. I can't tell you the exact, because
sometimes we may have to go several times, and it depends on
location. But for every 1 percent mail-back response, we save
the Federal Government approximately $80 million to $90
million, which is why we have that unprecedented media
campaign.
In the year 2000, when we had the first media campaign, we
actually saw an increase in participation rate, reversing a
decline of several decades of households not returning the
Census form. And of course, this year we are trying to make it
even more simple and more convenient to people to fill out.
Only 10 questions, should only take about 10 minutes.
[The information follows:]

The average cost per household during non response follow
up (NFRU) is $57.

Mr. Mollohan. How much did the Super Bowl ad cost?
Secretary Locke. I think we spent about $2.5 million, and I
think we reached about over 50 percent or 45 percent of all
households in America. You compare that with a 30-second ad,
and we had three 30-second ads during that Super Bowl, compared
to, I think, a cost of almost a half million for one 30-second
ad during American Idol, and that reaches only about 10 percent
of American households.
[The information follows:]

2010 Decennial Census

The 2010 Census advertising campaign spent $2.5 million for one 30-
second and two 15-second pregame spots, two on air mentions during the
pregame show, and a one 30-second ad during the third quarter of the
game.

Mr. Mollohan. And how much was that per person that saw it?
Secretary Locke. Two cents per person.
Mr. Mollohan. 2.15.
Secretary Locke. 2.15. And I know there has been a lot of
comment about that Super Bowl ad, along with all the other
Super Bowl ads. And it seems like maybe that is the point of
it, to foster this discussion. Because I was puzzled by many of
the other ads that I saw during the Super Bowl, wondering what
their point was. But what we do know is that there was a lot of
discussion, both pro and con, about that Super Bowl ad
involving the Census, and there was unprecedented chatter among
YouTube and other social media. So we got people talking about
the Census.
Mr. Mollohan. Well, for 2 cents a person, you got a lot of
play on it, didn't you?
Secretary Locke. Yes.
Mr. Mollohan. Good. Congratulations.
The cost of the nonresponse follow up, that has been
recently revised, and I am just curious. What made it necessary
to revise it, if you're able to answer that?
Secretary Locke. Well, we are trying to constantly revise
that, and we also have a cushion, but we took some of the
lessons that we learned from the address canvassing, which was
conducted in the spring, when we sent several hundred thousand
people to make sure we had the right addresses, documenting
that new buildings were there, or buildings may have been
demolished, updating really the list of addresses from local
governments as well as the Postal Office.
And we had some cost overruns in that particular operation,
primarily because we hire people and train them and expect a
certain rate of attrition, people who, after 1 day canvassing
addresses, saying, this is not for me. I don't want it. I am
quitting. Or people who then get another job and say, I am
quitting, and I don't need this temporary job from the Census
Bureau. It turns out that because of the tough economy, we had
a much smaller attrition rate, and so we ended up training more
people than we actually needed. And so we are taking that into
account in terms of the number of people we will actually hire,
building in a revised attrition rate for the non response
follow up.
Mr. Mollohan. So you feel this is going well? Do you
anticipate any problems? And to the extent you have anticipated
any problems, do you have adequate funding to address them?
Secretary Locke. We do have a reserve built in. We have had
other operations that have come in under budget and ahead of
schedule. But we still have almost a half a billion dollars set
aside for the nonrespone follow up.
Starting around March 22nd, when we start seeing the
initial mail-back of the Census forms, community by community,
ethnic group by ethnic group, we will have a better sense of
how things are going and how we can redeploy, using local
government officials, nonprofit agencies, churches to get the
message out and to be as proactive and as nimble as we can.
Mr. Mollohan. If your mass advertising was a success, how
about your targeting specific hard-to-reach groups? What are
your strategies with regard to that, and how successful do you
think you are being or are going to be?
Secretary Locke. We have an unprecedented level of
community partnerships, churches, community organizations,
nonprofits, corporations, most of the mayors and governors,
elected officials. Local elected officials have put together
what they call complete count committees, because we rely on
community organizations, faith-based organizations, respected
organizations within the community to basically buttress and
reinforce our message. A lot of concern among immigrant groups
about participating, people who are new to this country, who
don't understand the history and the constitutional basis for
the Census may not want to participate. So it is a challenge to
get that message out.
For the first time ever we are sending out the bilingual
Census forms in Spanish and English. We have language guides in
some 59 different languages, also Census forms printed up in
other languages, Vietnamese, Korean, Russian, Chinese, and one
other. But it is an unprecedented effort to really try to reach
out to people.
Mr. Mollohan. Do you think you are being successful, and do
you have any measurement of that to date?
Secretary Locke. We do have Gallup polling which shows the
awareness of the Census is pretty high.
Mr. Mollohan. What about willingness to participate by
these hard-to-reach groups?
Secretary Locke. It is fairly high. I think we always would
want as close to 100 percent, but right now, I think the
indicators are about 80 percent of households plan to
participate.
Mr. Mollohan. And is that a general number, or is that----
Secretary Locke. That is on average, but we are tracking it
ethnic group by ethnic group.
Mr. Mollohan. I am really looking at these hard-to-reach
groups, these groups where language challenges, maybe
community, cultural issues make it more difficult. Do you have
unique strategies to identify those people and to make sure you
get as exact an account as possible in those communities?
Secretary Locke. We are tracking both awareness by ethnic
group, traditionally hard-to-count groups, as well as intent to
participate. Then we have unprecedented direct media in
different languages, Telemundo, Univision, local newspapers,
and radio stations among the different ethnic groups.
Mr. Mollohan. Trying to take the fear out of it where it
might exist.
Secretary Locke. A lot of it. And that is why the trusted
leaders of the community are so critical. It is one thing for a
government official to say it, but when church leaders say it,
when key members of their local community say it, that has much
more power.
Mr. Mollohan. Mr. Wolf.

U.S. PATENT AND TRADEMARK OFFICE

Mr. Wolf. I thank you, Mr. Chairman.
Mr. Secretary, a few months ago, an inventor came to my
office to raise concerns that the USPTO put his complete patent
application for cryptology software on the Internet. He is
prohibited from exporting this product because of its potential
military and intelligence capabilities. And he did not want to,
I want to make that clear.
Our system of export controls is meaningless if the plans
for developing dual-use technologies are posted by the U.S.
Government on the Internet. We all know that our country's
adversaries and rivals are aggressively working to steal as
much of our intellectual property as possible. It is a national
security issue. It is a job issue, too, but it should be
addressed immediately.
If you need legislation, would you please submit a proposal
and maybe some language that the committee could carry.
Are you concerned that patent information on dual-use
technologies is on the Internet? And what is your plan for
addressing this national security issue?
Secretary Locke. Well, I am not aware of that particular
situation, and I do know that information, applications, to
some extent, are posted on the Internet to make sure that those
who might contest the novelty or the uniqueness of that
innovation can be heard as we make the determinations about
patentability and whether it should be patented.
But obviously, I don't know the extent to which we do
reveal or publicize on the Internet or any other method the
complete contents of a new technology. And especially, as you
say, if it involves military application we need to be very,
very careful about that because, on the one hand, the United
States Government wants to protect our national security, and
we are trying to restrict exports, making sure that items that
have strictly military applicability on the list conducted and
administered by the Department of State, or even things that
are dual-use civilian products that may have military
application do not fall into the wrong hands. And as Brent
Scowcroft, the former National Security Adviser to President
Bush indicated in the study conducted by the National Academy
of Sciences a year ago, we need to do a much better job of
protecting various technologies that could really do us harm.
Mr. Wolf. Well, could you look into this? Because we have
heard from others that the Chinese surf your information and
see what ideas are out there and, many times, take it. And we
know the cyber attacks--we have some questions on that--come in
to find information. So if you could do that, maybe get back to
the committee, right away because it may be something that you
are not aware of, your people are not aware of that could be
corrected without any legislative of language. But if you could
let us know, we would appreciate it.
Secretary Locke. Thank you.

BUREAU OF INDUSTRY AND SECURITY--EXPORT CONTROL REFORM

Mr. Wolf. We understand the administration has undertaken a
multi-agency effort to reform our Nation's export control laws.
This could be beneficial exercise because our export control
laws are very complicated with Commerce, Energy, State and
Defense all playing different roles, depending on the product.
However, I am concerned that business interests may prevail
over national security interests. How would these reforms
strengthen our ability to prevent our enemies and rivals from
stealing dual-use technology that could be used against the
United States and our allies, or used against their own people
to restrict basic human rights?
Secretary Locke. Thank you very much, Congressman Wolf.
And as I indicated, Brent Scowcroft and others authored the
report by the National Academy of Sciences and called for major
reforms of our export control system that, in many cases, we
need to build higher fences around very sensitive technologies
that are unique to the United States, manufactured, produced in
the United States, that if they fall into the wrong hands could
do us harm.
At the same time, the report indicated that there are many
other things, civilian items that may have military
application, that are readily available by other countries from
other companies around the world and that our restrictions
oftentimes put our U.S. companies at a disadvantage, especially
when those products are readily available almost at Radio Shack
or Home Depot, or other companies around the world advertise
that they will ship it to a purchaser within the next 24 hours.
And even the head of the European Aerospace Industries
Association openly advised members within Europe not to seek
any technology that might come from the United States because
of the difficult export control regime. That deprives U.S.
companies of opportunities to engage in research, to advance
their products, and to get revenues so that they can continue
to perfect their products, which can then also benefit our
military and our national security.
In this export control reform that the President has called
for, first and foremost must always be national security. Are
we protecting, enhancing our national security? And whatever
commercial benefits may come from modernization or reform of
the export control system, the number one objective has to be
national security. And that has to be paramount.
I can tell you that, for instance, within the Bureau of
Industry and Security, when we issue licenses for dual-use
exports, we may allow a U.S. Company to export something to,
let's say, France. We never really follow up to see if that
company in France is improperly re-exporting to a country that
is unfriendly to the United States. So what we would like to do
within the Department of Commerce is reform that effort, free
up people, so that we are actually doing that additional
monitoring to make sure that those items that are properly
licensed are not falling into the wrong hands.

BIS--CRIME CONTROL TECHNOLOGIES

Mr. Wolf. Well, I would encourage you to do that quickly;
60 Minutes had a piece on that about 3 weeks ago, that precise
thing. And if there is anything, again, that the committee can
do to give you that authority and that ability, I hope you will
let us know.
Crime control and law enforcement technologies can be
exported to foreign governments and used to abuse human rights.
The Bureau of Industry and Security is currently working to
update crime control and law enforcement items contained on the
Commerce Control List. In addition, they are working on a more
complex crime control review to address developing
technologies, such as biometric identification systems,
training simulators and surveillance systems.
What is the status of these efforts? It is not uncommon to
hear stories of a dissident in a particular country being
tortured with equipment that has been made in the United States
and that sometimes an American company, either knowingly or
maybe unknowingly, has sold to that company, cattle prods,
things like that. Can you update us on where that is?
Secretary Locke. Well, our Department of Commerce and
Bureau of Industry and Security is very much committed to
effectively controlling these dual-use items that also, not
just could be used for military application against us and our
allies but also could hinder or abuse human rights. And so we
are looking at prohibitions on the export of crime-control
items to countries such as China and even instruments that
could be used for torture. So that is part of our control list,
and we take that seriously.
Mr. Wolf. It should not only be China, though. I think that
is very good. But Egypt has done some torturing, and you can
just go down the line. So I would hope it would be with all the
countries that may very well be.

NTIA--CELLULAR DETECTION AND JAMMING TECHNOLOGIES

Secretary Locke. Yes, sir.
Mr. Wolf. We understand that contraband cell phones--and
the prison system will tell you this--are increasingly being
smuggled into State and Federal prisons and used by inmates to
orchestrate prison breaks, conduct illegal activity, and harass
or intimidate judges, lawyers or former victims. The fiscal
year 2010 conference report directs the Department of Commerce
to work with the FCC and the Department of Justice to develop a
plan to investigate and evaluate how wireless jamming detection
and other technologies might be utilized for law enforcement
and correction applications in Federal and local prisons. What
is the status of this plan, and what is the Department doing?
Secretary Locke. We just recently conducted such a test
involving the Federal Bureau of Prisons, along with
manufacturers, and we did this at the Federal correctional
facility here in Maryland.
Mr. Wolf. And what did you find?
Secretary Locke. The results are not yet in. But our goal
is to make sure that we can jam those cell phones that are
somehow being smuggled in to prisons, State or local prisons,
and make sure that whatever technology that we use is not
hampering cell phone use by, let's say, prison guards or
administrators within the prison, or even first responders who
might have to come into a prison in a time of a riot or a
disturbance.
So we have got to make sure that, whatever we do, it is not
hurting the necessary communication of law enforcement
individuals who are operating within a prison or who are coming
into the prison on an emergency basis. So we don't have a
report yet, but we are very interested in getting that.
Mr. Wolf. How close are you to having a report?
Secretary Locke. I would have to get back to you, sir. The
test was just conducted on over a 3-day period from February
16th to the 19th, so that was only about 2 weeks ago.
[The information follows:]

It is the Administration's view that the use of cell phones
by prisoners to carry out criminal enterprises is intolerable
and demands an effective solution. The solution may include
jamming technology, but we must ensure no harm is done to
public safety, Federal and law enforcement activities or to use
of cell phones by law-abiding citizens. In December and early
January, NTIA's Institute of Telecommunications Sciences in
Boulder, Colorado performed radio measurements of a jamming
device in a closed environment. These tests were followed by
on-site measurements at the Cumberland, Maryland federal
correctional facility. Those tests were coordinated with the
equipment manufacturer and the Bureau of Prisons and NTIA
worked with the Bureau of Prisons to issue final reports on
test findings. NTIA released its findings on the Cumberland
test in May 2010. In May, NTIA also produced a technical
memorandum analyzing the data in these reports. NTIA then
issued a Notice of Inquiry seeking public input concerning
technologies that could help eliminate contraband cell phones
in prisons. Comments on this NOI are due in mid-June. NTIA
expects to complete a report by the end of 2010.

Mr. Wolf. Who did the test?
Secretary Locke. It was conducted by our NTIA, National
Telecommunications Information Administration, along with the
Federal Bureau of Prisons.
Mr. Wolf. When do you think you are going to have the final
report? And how do you plan on letting the different prison
systems know? Is there any particular approach you have in mind
or what?
Secretary Locke. Well, we will definitely inform the
members of the committee and all others who are interested.
I know that, for instance, Senator Mikulski and Senator
Hutchison have a strong interest in this, and we will certainly
report back to the appropriate committees.
And I think that ultimately we need to share this with law
enforcement and prison officials because this is a growing
problem, not just in the Federal prisons but the State prisons.
Our jurisdiction, of course, can only be over the Federal
prisons, but I think we would want to share this with local law
enforcement.
Mr. Wolf. Maybe you ought to ask Director Lappin once it is
available to get it out to all of the State and local prison
systems and to the Governors. But if you could kind of keep us
informed.
I have some other questions, but I will pass. And thank
you.
Thank you, Mr. Chairman.
Mr. Mollohan. Thank you, Mr. Wolf.
Mr. Schiff.

ACCESS TO CREDIT

Mr. Schiff. Thank you, Mr. Chairman.
There were a couple of areas that I wanted to raise with
you, Mr. Secretary, and if one or either are in a different
jurisdiction, that is fine. Let me know that. The first is
probably the most recurrent concern that I hear from my
constituents in terms of the business climate and the economy--
the inability of small business owners to access credit. And I
have so many business owners that will tell me that they have
had a perfect relationship with their bank for 25 years. They
have a perfect credit history. They want to make an investment
in equipment or maybe want to make additional hires, and their
bank of all that time is telling them they can't do it or are
requiring such onerous conditions that they can't get access to
credit, can't meet payroll, certainly can't expand their
businesses.
So I would like to get your sense of what you think, within
the jurisdiction of Commerce, can be done about this.
The other area that I wanted to raise, which is very
important to my constituents as well, many of whom are in the
business of producing content that is sold all over the world,
and I just met with a group of publishers who are very
concerned about the dramatic proliferation of intellectual
property theft of published works. But this has been true for a
long time in the music industry and film and TV industry. So I
would like to ask you about how we can beef up our efforts to
go after intellectual property theft.
Secretary Locke. Two very important issues.
On the issue of access to credit, we are hearing that in
talking to small- and medium-size companies and large companies
all around the country. It is a major, major problem because
while the big banks have been rescued and are profitable,
nonetheless, the regulators appear to be putting enormous
pressure on them to be much more conservative with respect to
their lending practices, even to companies that have long been
very good, who have always repaid their loans and are very,
very profitable.
Mr. Schiff. Can I just ask you about that? I am sorry to
interrupt. I won't interrupt you again. But I do hear that
comment made secondhand via the small business owners. They
say, well, the bank is telling me the regulators are breathing
down their neck, and I have really been curious about that. Is
it really the regulators telling them not to lend or to be
really, really conservative in their lending? Or is this an
excuse being used by some of the banks to hold on to their
capital and increase their liquidity on the books? Is it really
a problem with the regulators, or are the regulators being the
fall guy for the banks?
Secretary Locke. Well, it could be a combination of the
two. And it would have to depend on a bank by bank situation.
Perhaps Treasury officials could, and banking officials are the
ones really more appropriate people to really ask or to dive
down into to get that information.
But I can tell you that the President, of course, has
called for a redirection of some $30 billion in not used TARP
money to be targeted toward community banks with incentives for
those community banks, which oftentimes are closest to those
small- and medium-size companies who have that relationship
with them, familiar with their operations, to make these loans
available.
Also, the Small Business Administration has increased its
Loan Guarantee Program up to 90 percent, and there is
consideration to modifying even that.
And of course, under the National Export Initiative that
the President announced, he has called on the Ex-Im Bank to
increase the amount of financing available for medium- and
small-size business from the current $4 billion of activity to
$6 billion of activity.
But it is going to require, I think, a very comprehensive
holistic approach to address this issue of access to capital.
Mr. Schiff. On the President's program, and I support that
completely, to use some of these TARP funds to incentivize the
small and community banks to lend, will there be conditions
placed on the access of those small and community banks to
these funds, in the sense that if they are going to get the
funds, they really need to increase their lending portfolio?
Because, you know, I have heard secondhand some of the small
banks saying, we will take the money, but we are not going to
use it to lend. They are just going to hang on to it.
And I think we saw this with some of the big banks that got
TARP funds, that they used it to improve their bottom line but
not necessarily to get the economy moving. How can, through
this program, we ensure that if banks make access to this, that
they in fact use it to lend?

USPTO--INTELLECTUAL PROPERTY RIGHTS

Secretary Locke. I would have to really defer to Secretary
Geithner and others in the Treasury Department for all those
details in terms of the checks and balances or the incentives
and the requirements.
With respect to the issue of content and publishers,
violation of intellectual property rights is a big concern.
American companies are losing billions and billions of dollars
in lost sales, and actually hurting job creation, whether it is
in the music industry or the film industry, and we are focusing
on that.
The Vice President has convened a multi-agency task force
involving Homeland Security, Justice Department, Commerce,
Patent and Trademark Office. And we know that there is a lot of
tension even among the new information technology providers in
terms of their responsibilities. Are they simply the postmen
and should not be liable for what is contained or transmitted
over their lines?
So the Department of Commerce, while we help enforce
intellectual property rights and in all of our meetings with
government officials really press the issue of enforcement of
intellectual property rights, nonetheless, we, for instance,
the Department of Commerce are hosting a forum of industries,
both those who provide, create the content as well as those who
transmit that content through to look at this very issue.
Mr. Schiff. Thank you Mr. Secretary.
And thank you, Mr. Chairman.
Mr. Mollohan. Thank you, Mr. Schiff.

ITA--NATIONAL EXPORT INITIATIVE

Mr. Secretary, the fiscal year 2011 budget proposes a net
appropriation of $534.3 million for the International Trade
Administration. Of that amount, the budget requests $83.5
million for a National Export Initiative. You have referenced
that. Does this initiative include an increase in funding for
the agency responsibilities associated with challenging unfair
trade?
Secretary Locke. Yes, it does. Part of that funding for the
International Trade Administration under the National Export
Initiative includes folks dealing with trade compliance and
enforcement.
Mr. Mollohan. How much of this initiative is directed to
the responsibility associated with challenging unfair trade?
Secretary Locke. About 15 percent of the funds.
Mr. Mollohan. Is this increased funding on imports coming
into the U.S. from abroad, or does it just increase funding for
challenging unfair trade when the U.S. exports?
Secretary Locke. It would be both.
Mr. Mollohan. Can you talk about it separately, and how
much is for challenging unfair imports versus----
Secretary Locke. Well, excuse me, the 11 percent is more
for enforcement and compliance of U.S. trade laws. Then we have
another sector of trying to break down market barriers in other
countries to U.S. products and services.
Mr. Mollohan. Well, that is what I am trying to tease out
of here. How much of the increase will be used for challenging
unfair trade on imports, unfair imports?
Secretary Locke. That is approximately $11.8 million or 15
percent of the funds requested for the Department of Commerce.
Mr. Mollohan. Do you agree that the production of a billion
dollars, for example, worth of goods in the United States that
substitutes for a billion dollars worth of unfairly traded
imports creates or preserves just as many jobs as a billion
dollars worth of exports?
Secretary Locke. That was a pretty complicated question
there.
Mr. Mollohan. Do you agree that if you save the number of
jobs that it takes to create a billion dollars worth of
exports, that that is worth just as much as preventing a
billion dollars worth of unfair imports; that for the domestic
market it is worth just as many jobs as going out and creating
export opportunities worth a billion dollars?
Secretary Locke. Oh, very much so. A billion jobs is a
billion jobs.
Mr. Mollohan. Well, it is a billion dollars worth of jobs.
My point is that we hope that the Commerce Department will
focus just as aggressively on unfair imports as we are in
trying to break the barriers, unfair barriers that exist to our
exports. And there are a lot of industries that are very
sensitive to that and felt that not as much attention has been
given at Commerce. And so we applaud you for this initiative
and hope that it is focusing on unfair imports as well as
trying to break log jams that unfairly exist for exports.
Secretary Locke. As the President has noted on many
occasions, America is perhaps one of the most hospitable
countries for investment. We have almost the fewest barriers of
any country around the world, and that is why, if we open our
markets to products from other countries, it is incumbent upon
other countries to reciprocate. And it also means that other
countries have to abide by the rules of trade. Otherwise,
American companies don't get the advantage or the full measure
of whatever bargains and treaties and agreements we make with
our countries.
If we are able to create jobs and create new jobs, that is
terrific. But if we already have jobs that are here in America,
we need to save every single one of those. And if that means
making sure that countries are not improperly selling their
products at below normal cost, or not taking advantage or
having extra advantage because their governments subsidize
those products or services, then we need to go after those
because we are talking about existing jobs. And unfair trade
practices by other countries that disrupt existing jobs has
tremendous impact to the people involved, their families they
support, as well as their entire communities.
Mr. Mollohan. Thank you for that affirmation, Mr.
Secretary, and we look forward to working with you in ensuring
that the administration is really up on full alert with regard
to that.

ITA--TRADE COMPLIANCE--ENFORCEMENT

The positions included in the overall trade compliance
enforcement increase, will any of those positions work on
reducing foreign subsidy programs? In other words, are you
increasing your staff to look at foreign subsidy, where foreign
subsidy programs exist, and identifying that as unfair
competition?
Secretary Locke. Well, we do have specialists who look at
those various parts.
Mr. Mollohan. Do you have sole jurisdiction over subsidy
investigations?
Secretary Locke. We don't have people focused on subsidy
investigations unless they are part of a complaint that has
been filed that we then investigate.
[The information follows:]

Trade Compliance--Enforcement

The Department of Commerce has sole authority for investigating
subsidy allegations in countervailing duty proceedings. In addition to
the responsibilities for subsidy investigations, the Department also
has a team of subsidy experts which research, monitor, analyze, and
assess the WTO-consistency of foreign government subsidy practices.
These practices are addressed, as appropriate, including through WTO-
dispute settlement action, working with USTR. I envision that these
enforcement efforts will increase under the NEI.

Mr. Mollohan. Do you agree that, in order to have free
trade, currencies must float?
Secretary Locke. That is the position of the United States.

ITA--CHINA'S CURRENCY MANIPULATION

Mr. Mollohan. On February 26, 2010, the Wall Street Journal
reported that 15 Senators, including six Republicans, sent a
letter to you, Secretary Locke, noting serious concerns about
the Commerce Department's failure to conclude that China's
currency manipulation is, in fact, a countervailing subsidy to
its domestic exporters.
The article goes on to state that you made a pledge in
December to thoroughly investigate such allegations. The
article quotes the President as saying that the U.S. needs ``to
make sure our goods are not artificially inflated in price, and
their goods are not artificially deflated in price; that puts
us at a huge competitive disadvantage.''
And the article notes that the Federal Reserve Board
chairman, Ben Bernanke, ``echoed these concerns, calling on
China to be more flexible towards its currency.'' Is the
Department investigating the allegations that China's currency
manipulation is a countervailing subsidy for its domestic
exporters?
Secretary Locke. The petitioners in that particular case
have filed an amended complaint alleging that the
undervaluation of the currency constitutes an unfair subsidy,
along with several other allegations, and we are investigating
that. And I cannot comment because it is under investigation
right now.
Mr. Mollohan. My question was only, is that under
investigation by the Department?
Secretary Locke. Yes.
Mr. Mollohan. When will we hear results of that
investigation?
Secretary Locke. I believe that it depends on whether or
not the petitioners will grant us an extension to add these
additional elements into our investigation. If they don't grant
us an extension, we have a statutory deadline by which me must
respond to the initial set of allegations, and with these
additional allegations, that is are very complex in nature, we
need to be sure that we have sufficient time.
Mr. Mollohan. Thank you Mr. Secretary.
Mr. Fattah.

CENSUS 2010 DECENNIAL PARTICIPATION

Mr. Fattah. Thank you, Mr. Chairman.
Mr. Secretary, it is good to see you again.
And let me just, I want to focus in on the Census which is
one of the instant matters before your Department.
The Census, plan was essentially developed under the
previous administration?
Secretary Locke. Much of the work of the Census was planned
several years ago, under the previous administration, almost 4
years ago.
Mr. Fattah. Because there is some noise out in the
atmosphere from conservatives with respect to the Obama Census
plan--yet this is a plan that was put in place years ago,
before the President was sworn in and before you took office,
too, in terms of this year's Census, right? There should be no
reason for anyone in our country, no matter what their
political stripes, to not encourage people to comply with the
Census. It is important data that the government needs to go
forward, right?
Secretary Locke. It is a constitutional responsibility of
the government, and it goes all the way back to 1790 under
President George Washington. It is the sacred duty of every
resident of the United States.
Mr. Fattah. I just raised it because I heard someone on Fox
News, saying that if they had gotten this form, they weren't
going to fill it out; that they couldn't encourage anyone else
not to fill it out. This person is a judge or a former judge
purported to be giving, you know, some overview about this.
But I think that we should be encouraging everyone,
wherever they may be to participate in the Census. It is
important to the work of the long-term planning for a whole
range of issues, transportation, education, and the like.
And I just wanted to see if we could just put on the record
that the program of the Census, that is, the short form, the
planning for the implementation of this, that you really are
the conductor on this train, but, as the conductor on the
train, the tracks and the direction of this program was put in
place by the former administration, which was a Republican
administration. Is that correct?
Secretary Locke. That is correct. And, in fact, the
questions were all submitted to the Members of Congress, I
believe 2 years ago, and approved by the Members of Congress 2
years ago.
Mr. Fattah. So this nonsense is nonconstructive in terms of
doing the important constitutional work that your Department
has. And I just wanted to put that on the record. I appreciate
you being here.
I thank the Chairman for yielding me time.
Secretary Locke. Thank you.
Let me just add that the Census program is really run by
career people, nonpolitical people.
Mr. Fattah. I know, but the political atmosphere sometimes
in our city doesn't allow common sense to rise to high places,
or when people have responsibility to act responsibly. So thank
you.
Secretary Locke. Thank you.
Mr. Mollohan. Occasionally.
Mr. Wolf.
Mr. Wolf. I thank you, Mr. Chairman.
I didn't know Mr. Fattah watched Fox News. I think that was
interesting.
Mr. Fattah. I do. I am a big fan.
Mr. Wolf. Oh, good. There you go.
Mr. Fattah. It is hard to find the news portion thereof; it
is colored with so much opinion.

JOB PROTECTION, COMMERCE'S ROLE

Mr. Wolf. I have a couple of questions, and I think we are
going to come back. And I don't want to miss the vote.
One thing I would like, and it is not really a question,
but have you ever considered, because your job is a very
important job, I think the Secretary of Commerce can make a
tremendous difference with regard to jobs. And following up
with what Mr. Mollohan, the chairman said, have you ever
thought of having a tiger team or an advocate team in the
Department of Commerce to help small businesses who are looking
to protect jobs? For example, a Chinese firm will hire a Case &
White up in New York and come in and just pound and pound onto
a small business who really can't afford a Wall Street firm or
a K Street firm. Have you ever thought of putting together an
advocate team that will help people who are going through
exactly what the Chairman was saying, where there is a foreign
entity coming over, pounding, taking the jobs away? Have you
ever given that any thought?
Secretary Locke. Well, we do have various groups like that.
For instance, we recently created an Office of Innovation and
Entrepreneurship reporting directly to me, focusing on the
issues of entrepreneurs because, for instance, in the last 30
years, virtually all the net new jobs in America came from
entrepreneur start-up companies.
Mr. Wolf. But I mean to protect them in a way that when
they, when these high-powered people are coming in? If you are
an entrepreneur, you are small; all of a sudden, this foreign
interest comes in. They have one of the best law firms in Wall
Street coming in. How do you advocate or protect them? Or maybe
you should-- would you think about it? Maybe there are some
ideas that maybe you and I can chat about.
Secretary Locke. Sure.

JOBS REPATRIATION

Mr. Wolf. The second thing was, and I don't know how much
time we have left, have you ever given any thought to putting
together a repatriation team, a team whereby you would go
around the country talking to American companies that are doing
business in China and Bangladesh and Mexico and Guatemala,
wherever the case may be, and say, we want to repatriate you.
Not a Governor from Washington State taking a job from
California or vice versa, but getting a job back from China,
back from India, back from wherever. You would put together a
high-level, bipartisan, nonpartisan team that would go out and
meet with the head of Intel and say, hey, we have a great
opportunity. Come home. Bring your jobs back home. Have you
ever put together a major effort to do that?
Secretary Locke. Not in the way that you have described,
but we have been having discussions with major industries about
what we can do to help them create more jobs here at home.
Mr. Wolf. Well, the best job, though, is a job that is
abroad that should have never left a little town in West
Virginia or a little town in Virginia, that was taken over by
it, and it is gone. And I think to find these American
companies who, I believe, if given the right incentive and the
right encouragement by the administration and by somebody like
you, I would encourage you, if we can talk about it, maybe
offline here, putting together a team and picking 25 of the
largest American companies, good companies. Generally, the way
to bring them back and in the past has been punish, but instead
to see if there can be an incentive where there can be an
incentive to scatter. Because you may want to come to
Martinsville in southern Virginia, whereby you can pay a little
less of a salary than you may pay if you are going to move it
to the suburbs of New York City. But they want to come home.
They want to come back.
But if we could talk about maybe developing an incentive
and if you could also have someone call me to see what
literature is out there about any major action that has been
done by this administration or other administrations in
repatriation. Again, I am not talking about Governor of this
State stealing from this State, but a Governor or a President
or administration looking to go abroad, American companies
solely, beginning, who were doing a good job in the United
States, who, for whatever reason, moved abroad, to see if we
could repatriate them back.
Secretary Locke. I will be happy to have that conversation
with you.
Mr. Wolf. If you could. Thank you.
With that, Mr. Chairman, I will yield back. And we are
going to come back I assume.
Mr. Mollohan. We are coming back from the vote.

ITA--NATIONAL EXPORT INITIATIVE

Mr. Secretary, in the National Export Initiative, you
propose $4.4 million for increased outreach and guidance to
small and medium enterprises. And that includes a new
Nationwide Export Education and Awareness Campaign and a
National Series of Export Conferences and a Program of
Assistance Outreach and Education tailored to the small and
medium enterprises. This is a worthy goal. This is a worthy
initiative. This, I am sure, works well in some places, this
whole notion of really trying to mine companies who are not
sophisticated exporters and are small- to medium-sized and to
try to pull--it is a mine-pull program. It is not easy. I wish
you all the success in the world.
My first question has to do with the statement that
accompanied our fiscal 2010 omnibus where we directed ITA to
provide a report to the Committee on Appropriations, not later
than 60 days after enactment, on the status of the current
program, the pre-National Export Initiative program. And you
can reference the language, the omnibus language in the
conference report. But we haven't yet received the report. The
question is, why not? And when can we expect it?
What I am really interested in is telling you how strongly
this committee will actually support this initiative. And we
will be looking to see what reality is with regard to it after
a short period of time. We recognize, those of us who are from
economies that are extraction and manufacturing, how important
it is to get this small- and medium-size business
entrepreneurial engine going in, hopefully, a lot of
diversified kind of economies. But getting access to that
international market, and I can tell you I have personally been
involved with, in a serious real way, with trying to help other
entities facilitate those relationships, is not easy to do.
So I will be really interested to see what this National
Export Initiative ends up looking like. I will be very
interested to see your report, and to work with you on it, and
to support it in this bill, and look to your request, which
will make judgments, obviously, to the extent which we support
it on performance. I think I would like to, before we recess
here for the vote--and we will be coming back right after these
three votes to finish up. And it won't take very long to finish
up after we come back.

EMERGENCY STEEL GUARANTEE LOAN PROGRAM

The Emergency Steel Guarantee Loan program, Mr. Secretary.
The fiscal year 2011 request, proposes to reduce the Emergency
Steel Guarantee Loan program by $43.1 million. And Congress
just extended the authorization for this program in the 2010
omnibus. What is the administration's rationale for reducing
the Emergency Steel Guarantee Loan Program nearly 90 percent?
Secretary Locke. We have not had any loan activity on that
for several years. The loans have all been paid back. There has
been no activity, no loans. Only three loans have been made
through the program, none since the year 2000.
Mr. Mollohan. Well, if we approved your request and then
there were a need, particularly in this current economic
climate, then you wouldn't have any money to effect the
program?
Secretary Locke. Well, there are no outstanding loans.
There have not been any requests, even in the last year.
Mr. Mollohan. I know, but we are looking perspectively. We
are looking into 2011.
Secretary Locke. That is why we have proposed leaving at
least some money in the account.
Mr. Mollohan. But the money you have in the account is less
than a placeholder. I mean, I can't imagine a situation that
could exist that would actually be benefitted by $5.2 million.
Secretary Locke. That is the administration's position, and
we have just looked at the course of the history of the program
since its inception.
Mr. Mollohan. Well, let me ask you this, do you think it is
possible that some steel companies in the next year might have
a need and be able to participate in the Emergency Steel
Guarantee Loan Program? Do you think that is possible?
Secretary Locke. That is possible. That is why we have left
some funds in the account.
Mr. Mollohan. What will that, if you were, if we were to
approve your request, what would the $43.1 million, how would
you redirect that? Is any of it going to be used for import
trade enforcement programs?
Secretary Locke. Well, that is all part of the funds that
go into the Department, and that includes funding for all the
enhancements including the National Export Initiative. So I
can't say that it was this dollar that went into this program
because once it goes into the kitty, how do you know which
dollar is funding which?
Mr. Mollohan. Well, it is not here, and it is there, so--
well, we will be looking at this very closely and working with
you.
And we will return after the third vote, Mr. Secretary, and
should finish up within a half hour of that.
Secretary Locke. Okay. Thank you.
Mr. Mollohan. The hearing will resume.
Mr. Wolf.
Mr. Wolf. Thank you, Mr. Chairman.

JOBS REPATRIATION

Following up, could you have someone--and I know how busy
you are--call me next week who you think is the most
knowledgeable person in the Department on this issue? I would
love to see us put together a repatriation program. And because
I think there has been a tendency to just criticize and
condemn, and maybe to flip it the other way around and see what
incentives could be granted. I think most of these companies
would really, like to have an opportunity to kind of come home.
And I know, as a Governor, you have probably been in
competition with different Governors to get someone to come to
your State versus another--this would be different. This would
be to get an American company to come to the United States and
maybe to your State, maybe to another State, but on an
incentive basis. So if you could have somebody call me, I would
appreciate it. And if there is something that we could maybe
put some language in here that would do something that would
kind of help you.

USPTO--TELEWORK

One other thing. When you came by, you mentioned about PTO
and telework. And, for the record, the Department is interested
in creating a long-distance telework pilot program. We
understand that such a program could increase employee
recruitment, and retention. Is there a legislative fix or
language that the committee could carry that would give you
that ability to have more people to telework than USPTO
currently does? If you recall the conversation that we had.
Secretary Locke. Right. We are really proud that the Patent
and Trademark Office, of all the Federal agencies and bureaus,
perhaps has the most number of people, the largest percentage
of people who telecommute or telework. But there is a Federal
requirement that they come back to the home office a couple of
times a month, I believe. And so when we have a lot of people
on the West Coast and around the country doing patent work, it
is burdensome and actually cuts into their productivity to have
them come back into Washington, D.C.
So I believe that that is being addressed under the patent
law that is being contemplated both in the House and the
Senate.
Mr. Wolf. Contemplated. Is that passing or is that just
contemplated?
Secretary Locke. Well, they have a manager's amendment in
the Senate, and the House Members are conferring with the
Senate.
[The information follows:]

Patent Law and Telework

The Administration supports developing a travel expenses test
program proposal to provide agencies with the flexibility to enhance
telework opportunities for employees.

Mr. Wolf. Will there be a bill this year?
Secretary Locke. You are a better predictor of that than I
am.

HUMAN RIGHTS AND ECONOMIC TRADE WITH CHINA

Mr. Wolf. Well, maybe you could give the Chairman some back
up language that, if that were not the case, that could help
you do this.
The last issue, your assessment as to the current economic
trade relationship with China. About a decade ago, when
Congress was considering most-favored-nation trading status,
which I voted against. Many urged its passage and said it would
strengthen the rule of law and accelerate domestic reforms. Ten
years have passed and conditions are worse today in China than
they have been in the last 20 years.
Economically, they are booming. The Uighur population is
having a very, very tough, tough time. Tibet, and I was
disappointed that the President didn't meet with the Dalai Lama
the first visit; I am glad he did the second time. But what
they are doing to Tibet--have you ever been to Tibet?
Secretary Locke. I have never had a chance. I have always
wanted to go to Tibet.
Mr. Wolf. I have been to Tibet. I went in with a young
Buddhist monk. I went in with a trekking group, not as a
Congressman. They didn't know what I did. I got a clean
passport. We went back into the bowels of the monasteries. And
what they are doing, they are literally bulldozing large
portions of Lhasa. Lhasa is almost turning into a Chinese city
and not a Tibetan city. They are destroying the culture.
A large number of Catholic bishops now, it is 34, I think
the latest figure is 35, are under house arrest. Protestant
pastors.
We had a hearing in the Tom Lantos Human Rights Caucus
about 2 and a half months ago. One of the lawyers that we had
as a witness was arrested when he got back. His family was
arrested. And we just have to do a better job of advocating and
connecting with regard to human rights and religious freedom.
And I am not going to get into too much of the detail.
It does trouble me, though, that the insensitivity of the
previous administration and of this administration and of this
Congress, of the Republicans in this Congress, and of the
Democrats in this Congress, the issue of human rights and
religious freedom means less today than it ever has. The number
of people, we used to have Congressman Lantos and Henry Hyde
and the giants that used to speak out. Now it is almost like no
one even cares.
And so I am not asking you a question. I would hope that
the administration could be very aggressive in advocating for
human rights, religious freedom, and for people that are being
persecuted because of their faith or because of their belief.
And that is not a question. It is a statement for the record.
With that, I will just maybe, Mr. Chairman, I will just end and
yield back.
Secretary Locke. Congressman Wolf, let me just say that I
accompanied the President on his most recent trip to China and
was there when he was meeting with President Hu Jintao and
Premier Wen Jiabao, and I can say that he did raise those
issues of human rights. I have always raised it in all my
meetings with top government officials, indicating that the
strength of America is our diversity of thought, of opinion,
religion and ethnic groups, and that they should embrace that
as well. I can tell you the President did address those issues
and raised those issues of human rights of the different ethnic
minorities within China.
Mr. Wolf. I would think, though, and I would urge you, the
next time you go to China, and I will give you the telephone
number and I will put you in touch with the people, if you
would go to a house church and worship, not with a recognized
church, with a house church, whether it be the Catholic
underground church or the Protestant, it doesn't matter. They
would love to have you there.
Secondly, when we advocate for them it isn't enough to do
it privately. It needs to be done publicly. It is like when you
are in Congress and you are running for office, somebody says
to you, I am really for you. Now, I am just not for you so much
that I want to be identified to have my name down, and but I am
really for you.
Well, if you can't be with me publicly, then--so I think
when the President goes and you go, it is important to speak
out. It is important we have good relations. It is important we
trade, but to advocate publicly, to stand, and so I would ask
you, I am not going to put you on the spot, but I would ask to
consider and if you are interested, call us, and we will put
you in touch with the people, that the next time you go, that
you go and worship with a house church. And I think to have,
particularly, you would send such a message, it would resonate,
and you wouldn't have to come out and make a press statement or
say anything. Just by showing up physically there would really
give hope to some of the people. So if you want to do that,
just give us a call. We will put you in touch with them.
Anyway, thank you for your testimony.
Thank you, Mr. Chairman.
Secretary Locke. Thank you, Congressman.
Mr. Mollohan. Thank you, Mr. Wolf.
Mr. Ruppersberger.
Mr. Ruppersberger. Mr. Secretary, first, there are three
areas if I have time I would like to get into, and it is STEM
education, the issue of ITAR, and also the weather satellite,
NPOESS.

INTERNATIONAL TRAFFIC IN ARMS REGULATIONS AND EXPORT CONTROL SYSTEMS

First thing, let me start with ITAR. The ITAR was what
happens a lot in Congress, unintended consequences as a result
of the Chinese getting some of our equipment. When we passed a
law, the existing ITAR law right now, that is in existence, the
United States controlled about 73 percent of the space
industry. As a result of ITAR, we control about 27 percent and
slipping as we speak. I believe not only does this hurt
commerce, but it hurts national security.
We were able to get a bill passed in the House, one of my
other committees is Intelligence, and we worked with the
Foreign Relations Committee, Congressman Berman, to get a bill
passed, which basically takes the jurisdiction away from the
State Department into Commerce. And then the list would be
really more controlled by Commerce and the President on what
could be and what could not be on the list. I mean, there are
some ridiculous provisions in the list; a wooden table that
doesn't impact anybody. But it is really something that the
entire space industry in the United States, whether the larger
groups or the smaller or whatever, is really being put at a
disadvantage to the point that our allies and non allies are
now selling our equipment, ITAR free they call it.
So the bill is now in the Senate, in the Foreign Relations
Committee, Senator Kerry's committee. I would like to know what
your position or the administration's position is, and whether
or not you can help us move this forward. The President has
given different speeches that he wants to deal with ITAR. But
from where we sit, it is almost a no-brainer. And then that
list that is controlled by the President and Commerce would
then come back to Congress for a final say.
Do you have any comments on the ITAR issue?
Secretary Locke. I cannot give you a comment now. I am not
familiar with the legislation that you just referenced.
But I can tell you that the President is very supportive of
reforming our export control regime. And there was a
Presidential Study Directive that was completed. We are
beginning to meet with Members on the Hill to talk about the
administration strategy and ideas.
And it really comes from the report authored by Brent
Scowcroft, the former National Security Advisor to President
Bush, who said that our export control systems are
irretrievably broken and that we don't protect enough those
technologies that really warrant more protection, and then we
have undue and unnecessary restrictions on other items that
actually hurt our national security and our economic
competitiveness.
And you talk about satellites. Mr. Edelstenne, who is
president of the European Aerospace Industries Association, has
openly written and opined to all the members of the association
that none of them should use any technology from U.S. companies
because of our export control regime and the uncertainty it
would provide, that would come with trying to incorporate U.S.
technology.
Well, that actually hurts our national competitiveness, our
national security, because if our defense industries and those
involved in high technology don't have opportunities in which
to build products and provide services, then they are not able
to receive the revenues for further R&D or even opportunities
to perfect their products which ultimately can be used for our
national security.
Mr. Ruppersberger. I appreciate your answer. I would like
someone from your staff to get with my staff. This is a
consensus within the industry. We know we have to keep certain
things secret. But when you take an industry in the United
States from 73 percent to 27 percent and slipping, it is
something that we have been working on for 10 years, and I
think it is time we move forward, so I really would like
someone from your staff to get with my staff and work maybe a
strategy with the Senate.
The Senate doesn't object to it. It is just a lot of things
happen in the Senate that we don't understand, and they are not
moving a lot. So let's see where that goes.

WEATHER SATELLITES

The second issue, and I am not going to get into it. This
isn't your realm. It is more in other areas, about what
happened in other areas with NASA and the President's new
program, which we all have an issue with, about whether or not
we don't move forward with manned space. And you know, we
control the world because we control the skies. And Russia and
China are that close to us, so we really have to work close
with the administration.
But the weather satellites, they were really controlled by
both the, I think, Commerce and by Defense.
Secretary Locke. Defense Department.
Mr. Ruppersberger. And now Defense gave it over to you, and
then you all came in and you cancelled the program. It is
called NPOESS. And you know, it is a concern at this point on
why this was done. And when I had--who is the science advisor?
Secretary Locke. John Holdren.
Mr. Ruppersberger. Holdren. I was questioning him and I
think I believe it was this committee about, what are we going
to do? You know, we have two older satellites in the barn, so
to speak, but, you know, when you are talking about moving
forward in the research and development and staying, again,
ahead of Russia and China, but just generally, I think the
answer was, well, we are going to rely a lot more on the
Europeans. Well, that just doesn't get it for me. I mean, we
are a strong country. We have been dominant in space, and we
can't afford to take any slip at all in where we are moving
ahead.
Do you have any opinion on the NPOESS program? Supposedly
it has been cancelled, and I think there is going to be a lot
more work that we need to do working together, Congress and the
administration on this issue.
Secretary Locke. Thank you, Congressman.
We are not cancelling the program. This is a very troubled
program that started originally with six satellites, and it has
been cut down to four satellites. The original cost for the six
satellites was about $8 billion. It is now, for even the four
satellites, gone up to I think $14 billion. And it keeps
climbing.
A whole host of different studies, Inspector General, GAO
audit reports on this program, and in fact, expert review
panels involving experts and leaders from the space industry
have looked at this. And they basically said it had to be
completely restructured or completely abandoned. And I read
those reports upon becoming Secretary of Commerce and
immediately brought this to Mr. Holdren and others within the
White House, and we have finally been able to prevail and
follow those recommendations of the expert panels, and we are
restructuring it.
So NOAA will be working with NASA at the Goddard Space
Flight Center to focus on our two satellites, and Defense
Department will focus on its two satellites. And NOAA will
still operationalize or focus on the operations, the
information gathering from all the satellites. But instead of a
50/50 cost share, where we were paying half of the development
of the Defense Department's satellites and they are paying half
of the development and cost of our NOAA satellites, especially
the afternoon satellites, we will separate our ways. We will
now have NASA in charge of the acquisition of the afternoon
satellites on behalf of NOAA and the management of the
development of the satellites and the instruments. So we are
going our separate ways.
[The information follows:]

The JPSS decision severs NOAA from an open-ended liability
of having to fund 50 percent of a contract that it had limited
control over. By placing NOAA in charge of the afternoon orbit
and providing funds to develop JPSS, NOAA can exercise greater
control over the management of the contracts. The JPSS budget
of $11.9 billion gives NOAA high confidence that the program
will be implemented and protects NOAA's non-space portfolio
from the risks to uncontrolled cost growth that was evident
under the NPOESS program.
Each year, NOAA works with the Administration and Congress
to create a balanced portfolio of programs to address the
Nation's most critical needs. NOAA undergoes an extensive
planning process to ensure the highest priorities are addressed
in its annual request within the constraints of the current
fiscal environment. NOAA's FY 2011 Budget request of $5.6
billion includes investments to strengthen NOAA's science,
promote economic development, strengthen energy and security,
sustain oceans and coasts, and protect lives and livelihoods.
Satellites are our most critical observing platforms that
provide data to support all of NOAA's mission priority areas
ensuring continuity of space-based climate, weather, and ocean
observations. The FY 2011 Budget Request of $2.2 billion for
satellite systems supports national priorities for: improving
weather forecasts and disaster warnings; ending overfishing and
transforming fisheries management, protecting and recovering
species and habitat; strengthening climate science and
services; enhancing the vitality of coastal communities and
ecosystems; and strengthening Arctic science and stewardship.

Mr. Ruppersberger. I can understand that.
But, on the other hand, when you take Defense satellites
and intelligence satellites and you have the NASA satellites,
which includes NOAA and the weather satellites, there is not
enough money for all. And, if anything, I would think that the
three areas, and that Defense will push back more than anyone,
DOD, is we have got to start collaborating and maybe using
certain Defense or intelligence satellites for weather or
whatever. It just has to be done.
The other issue we need to focus on, too, is commercial.
The other countries, European countries who don't put the money
into the satellites that we have throughout the years, are
using commercial, and it is about half the price. And they are
getting the same pictures we are getting throughout the world,
including issues involving terrorism.
So I would hope that when you meet, that we would really
focus on the issue of collaboration between DOD, between intel
and NASA, and then we are going to have to really decide where
we are going to go; what is going to be commercial, what is
not. But I just don't want to rely on other countries for what
we get out of these satellites. That, I think, puts the United
States at a disadvantage.

STEM EDUCATION

On STEM, as we know, we are having issues in our country
with younger generation going to, being out of math and science
and engineering, whatever. China just last year, I think,
graduated over 660,000 rocket scientists, mathematicians and
engineers. I think we were about 66,000. Now the good news is
that we are still are ahead curriculum wise, but they are
gaining on us. China's gaining on us in a lot of different
areas.
A program that I have been working on in my area, and I
represent NSA, they are in my district and Fort Meade, all of
those different areas, is trying to start focusing on middle
school, on high school and getting some testing and developing
and regional, because I am from the Baltimore region, and to
get these students who have aptitude and test them in the area
of math and science and whatever and start working them in a
kind of a STEM school possibly maybe on the campus of NSA or
NASA, which is up the street, so to speak, and to get them
involved early so that they can learn the culture and the
intern programs.
Now, I know you all work on these type of programs I think
in your Regional Innovation Clusters and areas like that. But
most of it is either college or postgraduate. I would hope you
would consider really starting to focus and working on the
middle school and high school and identifying these students in
an early way.
I met with a group today that I have been working with for
years at Fort Meade, NSA, the Anne Arundel County Education
System. They have put together a program that we are going to
start involving UMBC, which is one of the top technology
schools in the country, University of Maryland, Baltimore
Campus, and they are going to come together and bring students
in from different regional areas, as long as we find them
money, but the education component and the business component
coming together. And this is so important to our future and in
the area of science and technology and engineering, which also
deals with the issue of space.
In the old days, when Russia came out with Sputnik, we
responded by putting a man on the moon in 8 years, and there
was enthusiasm. It was when astronauts were as popular as NFL
football players. Americans were behind the program. I think
Americans just aren't getting into the fact that we just go
back and forth to the Space Station, especially if we are going
to have to hitch a ride with Russia now.
But we need to start generating more activity in the area
of space, because Russia and China are communist countries, and
they will take their best and say, you are working in space,
whether you like it or not.
So I really think and I would hope that Commerce can start
focusing and working, and we are going to look at it from a DOD
point of view and whatever, start focusing and helping us on
the middle schools and the high schools involving STEM. Could
you consider doing that? What is your opinion on it?
Secretary Locke. I would love to be part of those
discussions. In a lot of my meetings and speeches in front of
business groups, I keep emphasizing to them, maybe it is my
former hat as Governor, that the business agenda must always
include the education agenda, especially in math and science
and engineering.
[The information follows:]

STEM Activities

The Department of Commerce has a number of existing Science,
Technology, Engineering and Mathematics (STEM) Education programs
within the National Institute of Standards (NIST) and Technology and
the National Oceanic and Atmospheric Administration (NOAA).
NIST's primary STEM education program is the prestigious NIST
National Research Council Postdoctoral Research Associateships program.
NIST also supports the 12-week Summer Undergraduate Research Fellowship
(SURF) program, which brings in about 130-150 students each summer to
work with NIST researchers. In addition, NIST offers teacher training
through the NIST Summer Institute for Middle School Science Teachers, a
collaboration between NIST and local school districts. Teachers use
their experiences at NIST to enhance their curriculum, with end goals
of helping students acquire the necessary STEM skills to successfully
compete in a global economy and explore opportunities in STEM fields.
Also at NIST, education organizations have been eligible to
participate in the Malcolm Baldrige National Quality Award process
since 2001. In that period there have been eight education Baldrige
Award Recipients--five were K-12 school systems and three were high
education institutions. Additionally, the Baldrige Education Criteria
for Performance Excellence are used by educational institutions for
self-assessments and guidance.
NOAA STEM education activities focus on connecting educators,
students (K-12 through postgraduate). The programs include competitive
national and regional education grants, the Ernest F. Hollings
Scholarship Program, the Dr. Nancy Foster Scholarship Program and the
Educational Partnership Program with Minority Serving Institutions.
Through competitive educational grants, NOAA partners with
organizations such as the American Meteorological Society and National
Science Teachers Association to provide professional development for K-
12 teachers in atmospheric, climate and ocean sciences. These grants
also support partnerships with organizations such as the National
Aquarium in Baltimore and the Maryland Science Center to reach diverse
audiences and promote STEM literacy.
The Ernest F. Hollings Scholarship Program supports undergraduate
training in oceanic and atmospheric science, research, technology, and
education and fosters multidisciplinary training opportunities. In
addition, the Educational Partnership Program partners with minority
serving institutions to increase the number of undergraduate students,
particularly from under-represented communities, who are trained and
graduate in sciences directly related to NOAA's mission.
The Dr. Nancy Foster Scholarship Program recognize outstanding
graduate students in marine biology, oceanography, or maritime
archaeology, particularly by women and minorities, and encourages
independent graduate-level research by providing financial support,
through a competitive grant process, of graduate studies in those
fields.

Mr. Ruppersberger. Again, whoever is going to contact my
staff on the first issue. We have some programs we have been
talking with the Gates Foundation for the other--I mean, the
business community wants a workforce. And they will be willing
to work with us when we put together the appropriate programs
that are solid and have the curriculum that is necessary and
proved by education components.
And I have to leave. I am sorry, we have another hearing.
Thank you for your testimony.
Mr. Mollohan. Thank you, Mr. Ruppersberger.
Mr. Ruppersberger gets to more hearings than any Member of
the United States Congress. We appreciate his service on this
committee.
Mr. Secretary, let me reinforce Mr. Ruppersberger's
comments about STEM education. We are all over that in this
committee, and we are really going to do some things in some of
the science accounts that will try to create some prototype
programs for STEM and really get down to it. We are anxious for
agencies, NSF, to come up here and say they have made some
progress and actually tell us how to make the improvements that
they say have not been made for 20 years.

COMMERCE REPORTS NOT TIMELY

Mr. Secretary, I have in my hand a list of reports that the
committee has directed the Department of Commerce to submit.
Most of them are pretty small reports. Here is one, ``Census:
Inspector General's Recommendations Regarding Implementation.''
I can only imagine, by the time we get that report, events will
have overtaken the purpose of the report.
We are going to take this really seriously if Commerce
isn't, and we will reflect our seriousness about them in the
2011 bill. If Commerce is responsive, as I am sure you want
them to be, just not being there very long, that would be a
really good thing, and that might be something you want to pay
attention to.
Secretary Locke. We are aware of it, and we are trying to
get on top of it and trying to get these to you as soon as we
can, sir.
Mr. Mollohan. Well, your office has the responsibility to
do this. If they can't do it, perhaps that should be looked at
closely.

NTIA--PUBLIC TELECOMMUNICATIONS FACILITIES, PLANNING AND CONSTRUCTION

The National Telecommunications and Information
Administration's PTFPC, Public Telecommunications Facilities
and Planning and Construction, account, this administration has
zeroed that account out.
Secretary Locke. Yes.
Mr. Mollohan. The last administration zeroed that account
out. And I would hope that this administration would be
sympathetic to the needs that the Public Telecommunications
Facilities Planning Construction account address, and I am
really surprised to see it zeroed out.
Now, that is one of the places where we requested a report.
We haven't received it. And let me start out with that. Why
haven't we received that report?
Secretary Locke. We are in the process of finalizing that
report to your committee, sir.
Mr. Mollohan. And who is working on it? What different
levels of government and different entities are looking at that
finalization of it?
Secretary Locke. I can just tell you that it is simply
within the administration.
Mr. Mollohan. You can't tell me anything more than that? Or
do you want me to tell you where it is?
Secretary Locke. Well, it involves NTIA and other agencies
within the administration that also have to review and comment
on our drafts. And so it is a back-and-forth process.
Mr. Mollohan. Is this at OMB right now?
Secretary Locke. I cannot tell you if it is exactly at OMB,
but I know that it is making the rounds.
Mr. Mollohan. I would just encourage you to be more
sympathetic to the professional comment than to the budgetary
commenters on this, because our request went to the question
of, what is the difference between the two accounts? There is
some assertion that, gee, they are the same; they are
overlapping. That is not our experience, and we are fairly
experienced with this. And it probably would be disappointing
to come back and have it initiated, defining the differences,
the distinctions between the two programs, and having come back
and say, there is no distinction between the two programs. It
is really something that you might want to look at.
Do you believe, are you familiar enough with these programs
to make judgments about whether they duplicate each other or
not?
Secretary Locke. I am not personally familiar with these
programs.
Mr. Mollohan. For the record, would you submit a comment on
that question, in addition to the letter we have asked, in
response to my question are they duplicating?
Secretary Locke. Sure.
[The information follows:]

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[GRAPHIC] [TIFF OMITTED] T6756A.009

EDA--REGIONAL INNOVATION CLUSTER

Mr. Mollohan. The administration has apparently announced a
multi-agency funding opportunity to sport an Energy Regional
Innovation Cluster. And our understanding is that there are
three Commerce, Justice, Science agencies that are included in
this initiative, and two of those agencies are within your
Department. We don't know very much about this initiative, just
what we have really read on the Department of Energy Web site.
Could you describe the goals and the vision for this
initiative?
Secretary Locke. Let me see. I have some paperwork on
those. I can try to find that.
One of the projects that I am aware of dealing with the
energy-efficient building technologies is a consortium or
partnering of six agencies, including Commerce's Economic
Development Administration. And it is our intent, within EDA,
to provide $5 million toward what would be about a $129 million
grant to accelerate the development or to help put together a
regional innovation cluster focusing on these energy-building
technologies. But it would involve Energy, I believe Department
of Education, Small Business Administration. I can't remember.
[The information follows:]

[GRAPHIC] [TIFF OMITTED] T6756A.010

[GRAPHIC] [TIFF OMITTED] T6756A.011

[GRAPHIC] [TIFF OMITTED] T6756A.012

[GRAPHIC] [TIFF OMITTED] T6756A.013

Mr. Mollohan. What is the request in your agency, and how
does it break down?
Secretary Locke. $5 million.
Mr. Mollohan. Total, from Department of Commerce?
Secretary Locke. Right. That is, we would make that much
money available for this if there is an entity which applies
for it and is accepted.
Mr. Mollohan. How does that break down? What agencies in
the Commerce Department are going to be involved in this?
Secretary Locke. Economic Development Administration.
Mr. Mollohan. It is my information there were two agencies
involved.
Secretary Locke. I am not aware of that. We can get back to
you.
Mr. Mollohan. Okay.
Secretary Locke. Also NIST. I am sorry.
Mr. Mollohan. I wish we could follow up a little bit with
this program. Just give me, what are the goals of this program?
Secretary Locke. Well, the point of Regional Innovation
Clusters is to really try to develop the strengths of
communities, creating almost like research parks, the way
that--Silicon Valleys or Route 128 corridor. And we are
interested in----
Mr. Mollohan. But how does $5 million--an Energy Regional
Innovation Cluster? What is that?
Secretary Locke. Focusing on new technologies and involving
energy that might go for manufacturing new materials, building
materials.
Mr. Mollohan. What is the ``it'? Is this a grant program to
a nonprofit, to an academic institution?
Secretary Locke. It depends on the proposal that each
regional applicant might put together. It could be a consortium
of colleges, universities, economic development associations,
research entities, nonprofit or for-profit. It really depends
on the existing strengths of a particular region, what their
assets are, what they would use this funding for to build out
and complement. So it is really--just as the whole notion of
Regional Innovation Clusters is to determine the strengths and
look at the gaps of an area as they pursue whatever what their
economic vision might be, whether it is in biomedical research;
do they need more training? Do they need some infrastructure?
Do they need some facilities? Do they need telecommunications
assets, et cetera, et cetera? Or, for instance, it could be a
Regional Innovation Cluster focusing on tourism and the
different sets and skills and organizations and training that
would be required for that.
Mr. Mollohan. Well, we look forward to it.
Secretary Locke. But this one is focusing on energy-
efficient building technologies, whether it is insulation, new
materials, components, et cetera, et cetera.

NIST--NATIONAL INNOVATION MARKETPLACE

Mr. Mollohan. We will look forward to additional
information forthcoming on the program.
The National Innovation Marketplace, in last week's NIST
hearing, we discussed the National Innovation Marketplace. And
we understand that is a new initiative in the Manufacturing
Extension Partnership Program, and we have learned that EDA has
a role in this initiative as well. Can you describe the goals
and vision of the National Innovation Marketplace, and what is
that?
Secretary Locke. I would have to get back to you on that. I
am sorry.
[The information follows:]

National Innovation Marketplace

The National Innovation Marketplace (NIM) involves the translation
of emerging technologies into business applications, market
opportunities, and the adoption of new products. It does so by allowing
sellers, buyers, investors and distributors of new products and
technologies in all industries to connect with each other through a
web-based tool. The tool also connects manufacturers with sources of
new technologies to improve their manufacturing processes or for
adoption into new and improved products. EDA does not have a formal
role in the NIM.

Mr. Mollohan. Sure.

USPTO--DEPARTMENTAL OVERSIGHT

Mr. Secretary, the United States Patent and Trademark
Office, let's explore the funding difficulties associated with
that, the budgeting difficulties associated with that.
You know, we had a fiscal crisis with regard to USPTO in
2009, and they had to come back to Congress as a result of the
economic downturn and some other issues. Since Director Kappos
will be testifying before this subcommittee at the end of
March, it is not my intent to dwell too deeply into this
subject matter. We have a high regard for him. We consider him
to be really a straight shooter, and we look forward to his
testimony before our committee.
However, I would like to ask you a bit about the
Department's role in oversighting USPTO. You know, there is an
agreement out there someplace in space that USPTO will through
some process have access to the funds that it--the fees that it
generates to operate. I don't think, I hope that was never
intended to preclude their submitting a requirements-based
budget, but they haven't. We have required that this year. We
look forward to that.
I think that is a first step in understanding, what are
their needs? Certainly, their needs aren't necessarily related
in any budgetary sense to what their fees collections are. So
it seems like a really bad budgeting process, and it has proved
to be a very bad budgeting process; because they guess what
their fees are going to be, we appropriate it, and then they
are in excess of that or they are below that.
When they are below that, it costs us. We get scored for
that. It costs us a lot of money, which means that EDA doesn't
get funded. They are shortchanged or somebody else is
shortchanged. And it also means the USPTO probably doesn't have
the money to run its operations.
So we are looking for a process where, like every other
agency, USPTO submits a budget request which reflects what
their needs are. Hopefully the authorizers, which are
considering this issue, will come up with a fee funding scheme
that really works and we will be interested in seeing and
inputting into that process.
But it became evident during the crisis that the Commerce
Department considered itself to have essentially no oversight
responsibilities. It was a pass-through. The USPTO just passed
through its budget. Has that changed?
Secretary Locke. That is changing.
And that is one of the unusual situations that the new
management team at the Department of Commerce has come across,
that USPTO for a long time has traditionally considered itself
semi-autonomous from Commerce Department central management or
even our budgeting processes.
So we are reviewing a new requirements-based budgeting
process for the USPTO. And David Kappos has been terrific in
and is welcoming involvement of the top managers and the
management of the Commerce Department, because, as you
recalled, in the late summer, when the funding crisis arose, it
was the people from the Department of Commerce that had to help
intervene in that situation and help provide leadership to get
them through that. And we very much appreciate the support that
you and your committee provided in giving them temporary
funding flexibility and relief, borrowing authority. In the
end, it wasn't necessary, but it really demonstrated the
shortcomings in terms of reporting and budgeting within the
Department or the U.S. Patent and Trademark Office.
So we are trying to get a handle on it, and Dave Kappos is
doing a terrific job. We have a huge backlog. We also have some
excess fees that are now being generated because of some of the
management efficiencies and the reworking, the whole labor-
management cooperative processes that have been undertaken, as
well as just applying paralegals to take care of things that
are sitting out there that could be easily remedied, which we
can then issue the patent, collect more fees and use that to
replace people who are retiring.
Because of the dire budget situation, with a lot of the
retirements of the workforce, we don't have--we are really not
able to fill those spaces. And so our goal of trying to get the
approval or determination down to one year by year 2014 is in
jeopardy unless we have access to all those fees. And we
appreciate the willingness of you and your staff and the
committee staff to work on that.
That is why the President's 2011 budget assumes some
additional fee-setting authority and other temporary fee
provisions, along with updating our IT systems. I mean, here it
is the agency that patents and protects innovation perhaps it
is under-utilizing the very things that they approve that are
out there that can help them do a more efficient job.
So it is a very--we have a very comprehensive program that
we have embarked upon to reduce that backlog and get the
processing down to within a year.

NOAA CLIMATE SERVICE

Mr. Mollohan. Okay. Well, we look forward to that. And
perhaps this will be the year that we will, first of all, know
what their budget requirements really are, and put in place a
fee funding scheme that really works. And we look forward to
working with you on that and the authorizers as well.
NOAA Climate Service, Mr. Secretary. On February 8th, the
first day the Federal Government closed as a result of the
blizzard's aftermath, the Department of Commerce and the
National Oceanic and Atmospheric Administration announced the
intent to reprogram and create a NOAA Climate Service. The
subcommittee will go into the details of the NOAA Climate
Service with Dr. Lubchenco on the 17th of this month. But since
the announcement was made jointly, I would like to ask you a
few questions about the process.
Why was the announcement made on the day that the Federal
Government was closed?
Secretary Locke. Well, that was already the date that had
been planned. In fact, the employees were going to be convened
in a big meeting at NOAA headquarters to receive that
information. When the government closed down, we weren't sure
how many people were coming to work and how many weren't. And
it was primarily an announcement to the press and various
stakeholders, so it was conducted by conference call. So we
felt people would still be available whether they were at work
or at home to participate in that.
Mr. Mollohan. You know, I don't know who you briefed, but
the Appropriations Committee wasn't briefed.
Secretary Locke. I don't know who all was briefed. We were
told that we had been informing people even weeks before of our
intent to try to do this, and I don't know exactly how
finalized a version of the reorganization people were informed
of. But I do know that, in our meetings with NOAA, that they
were indicating that they very much needed to, and wanted to,
inform key Members of Congress, including the various
appropriating committees. I do know that there was a lot of
outreach to a lot of the staff to inform them of what was
coming and what was being contemplated.
Again, we do know that it is a work in progress, and we
want to consult with the Members of Congress on the final
design. There is no final design for this but really a concept,
some tentative ideas on which people and which units would be
moved from the various scattered offices within NOAA into a
one-stop shop or one-roof climate service.
Recognizing that, that is why, for instance, nothing would
move until the beginning of the next fiscal year so that,
depending on what the Members of Congress say, then we can line
up with the next fiscal year.
Mr. Mollohan. Is that the goal, one roof, one shop?
Secretary Locke. Yes. We have so many functions data that
is collected with respect to climate from, probably about over
a dozen different line agencies or offices within NOAA.
Mr. Mollohan. When you make that reference, are you talking
about just within NOAA? Or are you talking about----
Secretary Locke. We are just talking about the NOAA
functions, making it easier and more convenient for
stakeholders or members of the public or government officials
to access whatever information we now collect with respect to
climate.
Mr. Mollohan. So you will have a discreet service, and
folks will know that NOAA has stood up a climate service?
Secretary Locke. Yes.
Mr. Mollohan. What about other agencies or departments in
the government? Are you coordinating this effort with them and
to the extent----
Secretary Locke. Yes. We coordinated this with the office
of Mr. Holdren, of Science and Technology, the White House, and
even the Department of Interior, because they also have a lot
of collection and data regarding climate.
Mr. Mollohan. You describe it as a concept, but you
announce it as a program. What is next? Are you seeking an
authorization?
Secretary Locke. Yes. We need approval from the Congress
for this reorganization.
Mr. Mollohan. Do you have an authorization before an
authorizing committee in the House of Representatives?
Secretary Locke. We believe that we have the authority
under the National Climate Act. But we certainly would welcome
the input and the approval of the appropriating committees.
Mr. Mollohan. Well, this is just an inquiry of what the
status of it is and what you think you have to do to move
forward. Are you going to seek a reprogramming, or are you
going to submit and have an amended budget request up here for
this purpose?
Secretary Locke. It would be reprogramming, but not to take
effect until the beginning of the next fiscal year to make it
easier so that we are not having to amend existing budgets.
Mr. Mollohan. Okay. Well, that is all right. We will follow
up with it. Do you have a current package? Is it with the
Department, or is it with OMB, to flesh out this concept?
Secretary Locke. We have proposals. It has not been fully
fleshed out. Still with consultation, even with the employees
and the various labor groups. So we have a proposal, but it has
not been finalized.

ITA--TRADE COMPLIANCE--SUBSIDY INVESTIGATION

Mr. Mollohan. Okay. Well, we are very interested in this,
and so we look forward to working with you on it.
Mr. Secretary, we are coming down to the----
Secretary Locke. Mr. Chairman, because I know you have a
great interest in this, and I want to make sure there is enough
time if you want to follow up on it. I want to clarify my
earlier statement regarding the International Trade
Administration and the allegations about currency manipulation
and how that ties in. The International Trade Administration is
reviewing that allegation and will be making a determination
whether or not to initiate an investigation of that particular
allegation.
Mr. Mollohan. You don't have an investigation ongoing at
the time?
Secretary Locke. That is not yet ongoing. They are still
making determination as to whether or not to initiate such
investigation. I want to make sure we are clear on that.
[The information follows:]

Trade Compliance--Subsidy Investigations

Our determination on whether to investigate this allegation is not
dependent upon whether an extension is requested in the case.

EDA--PUBLIC WORKS FUNDING LEVEL

Mr. Mollohan. Thank you for that.
Recently we had a hearing of the EDA grant program,
Economic Development Administration's grant programs, Mr.
Secretary, and we had five grantees from around the Nation
sitting down there testifying, most of them very favorably,
testifying about their experiences with EDA. And they provided
ideas for improving the programs. It was very valuable
testimony.
We find that we have these interested stakeholders in these
programs, and they come. And we have hearings, and it really is
enlightening. We will go into these issues in depth with your
fine Assistant Secretary Fernandez. And he is scheduled to
testify next week, so we look forward to that. However, I would
like to focus on a couple overarching issues with you today.
The grantees were very appreciative of the Economic
Adjustment Assistance program and its flexibility, but they
also agreed to the person that the Public Works Funding should
not be reduced to increase the Economic Adjustment Assistance,
the EAA, funding levels.
Now, every year, again, in the past administration--and I
encourage you folks to sit down to distinguish yourself in some
policy way from the past administration--the past
administration tried to rob Peter to pay Paul in the same way
you have; robbing Public Works in this manner to fund the
Economic Adjustment Assistance. I had no problem with the
Economic Adjustment Assistance. As a matter of fact, I am
increasingly convinced that it provides the flexibility that
you advertise when you come here and testify before the
committee.
On the other hand, I think you are going to find a lot of
resistance to reducing, changing much the Public Works
projects. And the interest in that remains very high out there
in the stakeholder community, also in the congressional
community here.
So I guess what we ask is, why do you repeatedly propose to
eliminate Public Works to fund this program? Because at some
point, you are going to jeopardize--and people are going to----
Secretary Locke. I understand that concern.
Mr. Mollohan [continuing]. Not be very responsive to your
EAA funding.
Secretary Locke. I understand that concern.
And as you noted, it is reduction of the Public Works Fund
and transferring virtually all of that over to the Economic
Assistance Program. Yes, the EAA program does have greater
flexibility, and the EAA also funds infrastructure projects
very similar to what the Public Works account also funds.
Mr. Mollohan. Yes. But if you funded it that way, you would
be funding less Public Works, right?
Secretary Locke. There is that possibility that there could
be actually less Public Works projects funded by merging it
into the Economic Adjustment Assistance.
Mr. Mollohan. It would be more than a possibility. I mean,
it would actually have to happen because you are going to be
siphoning off funds to the other activities. So almost by
definition you would be funding less Public Works projects. And
that is not something that is very attractive up here.
Secretary Locke. Well, we are adding to the current funding
within the Economic Adjustment Assistance account. And that
does not necessarily--because the pie is now bigger--does not
necessarily mean that we will fund less Public Works projects
within this larger account.
Mr. Mollohan. Well, then, let's just all fund it out of the
Public Works account then.
Secretary Locke. I understand that.
Mr. Mollohan. And if flexibility is the issue, really, then
why don't you give that flexibility to the Public Works
accounts?
Secretary Locke. That is a possibility, too.
Mr. Mollohan. Okay. Well, we look forward to working with
you. And I think that expresses our concern about this. It does
not express an opposition, however, to the Economic Adjustment
Assistance account. We are going to be looking at that and
working with Assistant Secretary Fernandez. I look forward to
working with him on it.
Secretary Locke. He is a very, very----
Mr. Mollohan. Impressive young man.
Secretary Locke. Very, very impressive person.
Mr. Mollohan. We have a couple other questions we are going
to submit for the record for you. And thank you very much for
your testimony here today. We appreciate your appearing, and we
look forward to working with you, Mr. Secretary.
The hearing is adjourned.

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Wednesday, March 17, 2010.

NOAA (NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION) FY2011 BUDGET
OVERVIEW

WITNESS

DR. JANE LUBCHENCO, UNDER SECRETARY OF COMMERCE FOR OCEANS AND
ATMOSPHERE AND NOAA ADMINISTRATOR

Opening Remarks

Mr. Mollohan. The hearing will come to order. Good morning,
welcome.
Today we will hear testimony from Dr. Lubchenco, NOAA
Administrator and Under Secretary of Commerce for Oceans and
Atmosphere. This is Dr. Lubchenco's first opportunity to
testify before this Subcommittee.
Welcome.
Ms. Lubchenco. Thank you, Mr. Chairman.
Mr. Mollohan. NOAA's fiscal year 2011 budget request
includes $5.5 billion for NOAA, an increase of $808.6 million
over the fiscal year 2010 enacted level, or a 17 percent
increase.
The majority of this increase or $678.6 million is
attributable to the proposed restructure of the National Polar
Orbiting Environmental Satellite System. NPOESS, a NOAA/DoD
partnership with NASA playing a supporting role, has
experienced technical and management challenges, cost overruns,
and schedule slips, and the fiscal year 2010 Omnibus statement
urged the Administrator to resolve these problems.
In response, the Administration has proposed a new approach
under which DoD and NOAA would each acquire satellites for
their respective orbits that would continue to share data.
The new approach will be referred to as the Joint Polar
Satellite System. This a significant change designed to ensure
continuity of critical climate data and we want to explore the
reasons for the new approach as well as the proposed plan in
some depth.
There is also $155 million in increases for NOAA's other
satellite programs, including $63.5 million for the
Geostationary Orbiting Environmental Satellite, GOES-R, which
had been delayed by a contract protest.
We want to get a status update on these critical programs
and explore the need for increases.
NOAA is an agency with multiple missions and the proposed
budget provides a variety of topics. Unfortunately, we simply
do not have time to discuss them all.
However, one of the more significant requests in the fiscal
year 2011 budget is $54 million, an increase of $36.6 million
to accelerate and enhance the implementation of a National
Catch Share Program. Will this program ensure jobs for
commercial and recreational fisherman and the profitability of
coastal communities?
We want to understand the elements of this program and why
such a significant increase is needed now and we need to know
why taxpayers should fund the cost of ensuring a sustainable
resource for the benefit of private industry.
And last but far from least, on February the 8th, 2010, the
Department of Commerce and NOAA announced the intent to
reorganize and create the National Climate Service. The
programming request will not reach the Committee for some time,
but we understand that the Agency hopes that the reorganization
can begin in fiscal year 2011.
We will ask you to share the details which you can convey
and the reason for the timing of the announcement.
The mission of the NOAA Climate Service is critically
important. It is unfortunate that the process of announcing it
has overshadowed the efforts to create it.
Dr. Lubchenco, thank you for coming. I am going to ask
Congressman Wolf, invite him to make opening statement,
following which your written testimony will be made part of the
record and we will invite you to present your oral testimony.
Mr. Wolf.
Mr. Wolf. Thank you, Mr. Chairman.
Welcome to the Committee. I look forward to your testimony.
Mr. Mollohan. Dr. Lubchenco.

Opening Statement by Dr. Lubchenco

Ms. Lubchenco. Thank you.
Members of the Committee, thank you very much for the
leadership and the generous support that you have shown NOAA.
It is greatly appreciated as we work to improve our products
and services for the American people.
As you know, on February 27th, the Pacific Ocean was
impacted by a tsunami originating from an 8.8 magnitude
earthquake off the coast of Chile. Fortunately, this tsunami
was not as destructive as it could have been, but it provided a
graphic illustration of how very far we have come in the past
decade in making timely and accurate tsunami warnings and
providing the public with information needed to make decisions.
This event demonstrates that that continued investment in
observations, modeling, research, and outreach is vital to
saving lives and property.
And our spring outlook announced just yesterday is intended
to alert city and state emergency managers and citizens that
over one-third of the contiguous United States has an above
average flood risk in the coming weeks and months.
The President's fiscal year 2011 budget request provides a
solid foundation to continue to advance NOAA's mission and for
meeting our most pressing needs.
The request of $5.6 billion represents an $806 million
increase over fiscal year 2011, as you noted, and addresses a
set of priorities that will guide our actions in the coming
year.
I would like to highlight a couple of significant areas of
progress over the last fiscal year.
In the area of climate, we have continued to provide
climate observations and analysis while engaging with our
partners on how to strengthen our climate services.
We have made important progress in rebuilding our
fisheries, recovering protected species, and sustaining the
livelihoods and communities they make.
We introduced a draft Catch Share policy and are committed
to improving fisheries enforcement and our relationship with
the fishing communities and industries. And we made good
progress in meeting the mandates of the Magnuson-Stevens Act
and commissioning the NOAA ship Pisces which will support
fishery research in the Gulf of Mexico and the southeast United
States.
NOAA was also fully engaged in the President's Interagency
Ocean Policy Task Force. The release of a draft national ocean
policy and a framework for coastal and marine special planning
reflects the growing recognition that healthy oceans matter and
that protecting and restoring critical habitat is essential.
The fiscal year 2011 budget includes new investments to
strengthen our science, foster innovation, rebuild and improve
fisheries, and sustain and enhance satellite observations.
NOAA has become a global leader in reporting on the state
of the central climate variables and proposes to establish a
new line office called the NOAA Climate Service.
I want to thank the Committee for all the support that you
have given us for improving NOAA climate services. The office
will enable NOAA to better address the growing needs for
climate services.
NOAA's fiscal year 2011 request includes $435 million in
support of the U.S. Global Change Research Program with $77
million in increases for core climate services and
observations.
NOAA's satellites provide the data and information that are
vital to every citizen in our nation.
A funding increase of $678.6 million for a total of $1.1
billion is requested to support the Administration decision to
restructure the NPOESS Program and create within NOAA the Joint
Polar Satellite System.
NOAA is requesting an increase of $62.5 million for a total
of $730 million to continue the development of the GOES-R
Program to be prepared for launch near the end of 2015.
The fiscal year 2011 budget also supports NOAA's
responsibilities in transforming fisheries and protecting
species. The budget includes an increase of $36.6 million to
establish a National Catch Share Program. The program will
provide a national framework to develop, manage, and improve
Catch Share Programs in fisheries across the nation.
This increase will also continue the transition of the
Northeast Groundfish Multi-Species Fishery to sector management
as well as support new voluntary Catch Share Programs in the
Mid-Atlantic, Gulf of Mexico, and Pacific Coast regions.
The fiscal year 2011 budget request also includes an
increase of $10.4 million in the Community-Based Restoration
Program. NOAA plans to increase fish passage and spawning and
rearing habitats by implementing larger scale ecological
restoration in target areas.
We will continue supporting the Species Recovery Grant
Program with a requested increase of $9.6 million. This will
allow NOAA to provide grants to conduct priority recovery
actions for threatened and endangered species, including
restoring habitat, monitoring population trends, developing
conservation plans, and educating the public.
With a total request of $65 million, the Pacific Coast
Salmon Recovery Grants Program will continue to leverage
federal, state, and tribal resources in the Pacific Coast
region to implement projects that restore and protect salmonid
populations and their habitats.
In fiscal year 2011, NOAA will continue to support its
education programs and work to implement our new education
strategic plan. A total of $20.8 million is requested for the
NOAA Education Program.
A recently released report from the National Academy of
Sciences commends NOAA's commitment to education and provides
recommendations for optimizing NOAA's investment in education.
We plan to carefully review those recommendations and
incorporate them as needed to maximize the effectiveness of our
education programs.
Overall, NOAA's fiscal year 2011 budget request reflects
the commitment of the President and the Secretary to public
safety, a healthy environment, sound science, underpinning
decision making, and job creation.
These resources are critical to the future success of
meeting our needs in climate, fisheries, coasts, and oceans.
And I look forward to working with you and I am happy to
respond to any questions that the Committee may have.
Thank you, Mr. Chairman.
[The written statement of Dr. Jane Lubchenco, NOAA
Administrator and Under Secretary of Commerce for Oceans and
Atmosphere, follows:]

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NATIONAL POLAR-ORBITING OPERATIONAL ENVIRONMENTAL SATELLITE SYSTEM

Mr. Mollohan. Thank you, Doctor.
Doctor, there have been some significant changes in the
plans for Polar-orbiting Operational Environmental Satellites
recently. I would like to begin with you by walking us through
the problems with the management and implementation of the
Polar-Orbiting Operational Environmental Satellite System and
then we will discuss the proposed approach, budget request, and
future plans.
So, first of all, please describe the purpose for NPOESS.
Ms. Lubchenco. The NPOESS or National Polar-orbiting
Operational Environmental Satellite System was created in 1994.
It was intended to provide information that is related to both
weather and climate information, both critically important to
the nation. It was set up as a collaboration between NOAA and
the Department of Defense with NASA providing additional
support.
The original formulation had the program with a joint
decision-making management structure, the EXCOM, the Executive
Committee, that had representatives from each of the three
agencies, NOAA, NASA, and DoD, and specifically Air Force, and
that management structure was intended to--the program was set
up with the intent of combining and putting together both
civilian and military needs into a single program and taking
advantage of the synergies to be derived from that.
As you know, the program experienced very considerable cost
overruns, 87 percent increase in costs through 2009, and 30
percent of that growth in cost was after the restructuring
incurred after the Nunn-McCurdy process.
Mr. Mollohan. Before you get to that, just explain to the
Committee how initially the program was funded, appropriations,
and you mentioned the agencies, but what were the relative
contributions of the agencies.
Ms. Lubchenco. The budget was split 50/50, half to NOAA and
half to Department of Defense.
Mr. Mollohan. What was the original budget for the program?
Ms. Lubchenco. The original budget, let me look at my notes
here so that I am sure that I get it correct. What I have are
NOAA's numbers. May I ask my staff behind me?
Mr. Mollohan. You can submit that for the record. That is
okay.
[The information follows:]

In 2005, Pre-Nunn-McCurdy, the NPOESS program Life Cycle
Cost (LCC) was $8.4 billion. Of that amount, DoD would provide
$4.354 billion, and NOAA would provide $4.048 billion.
In June 2006, Post-Nunn-McCurdy, the NPOESS program LCC was
increased to $12.516 billion. Of that amount, DoD would provide
$6.265 billion, and NOAA would provide $6.251 billion.
In 2009, the NPOESS program LCC was updated to reflect the
July 2008 Office of the Secretary of Defense Cost Analysis
Improvement Group (CAIG) cost estimate (including updated the
operations and sustainment costs that had been omitted at 2006
Nunn-McCurdy certification. The NPOESS program LCC increased to
$13.951 billion. Of that amount, DoD would provide $6.983
billion, and NOAA would provide $6,967 billion.
On February 1, 2010, the NPOESS Program was restructured.
DoD is still assessing its costs for implementing the early
morning orbit and those costs are unknown at this time. The
cost to implement JPSS, the NOAA portion for the afternoon
orbit is $111.9 billion, of which $2.9 billion has already been
spent.

Mr. Mollohan. Describe the management structure in a little
more detail, the process by which decisions were supposed to be
made and just conceptually when you bring the Department of
Defense in with a civilian activity, what was the interface?
What were the rules of engagement, if you were, and who were to
make final decisions in that process?
Ms. Lubchenco. Mr. Chairman, the concept was that the EXCOM
would make final decisions and the individuals who sat on the
EXCOM from NOAA and from NASA had that authority. The
individual who sat on the Committee from the Department of
Defense did not have that authority.
And so the Executive Committee would make decisions and the
individual from Department of Defense would go back to DoD and
in many cases, a decision that had been made jointly would be
overruled.
Mr. Mollohan. Was there one person? I guess your testimony
is that there is one person who made a final decision with the
Defense Department; is that correct?
Ms. Lubchenco. In effect, there was often a dysfunctional
relationship because there were different priorities and
different requirements of the different agencies.
And the contract was structured in a way that there was no
direct immediate oversight which was an additional problem that
has been identified by multiple GAO reports as well as the
Independent Review Team report.
Mr. Mollohan. Was there one decider, to use that word, who
could make a decision for the overall program and, if so, who
was that person?
Ms. Lubchenco. There was no one tasked with that
responsibility. In principle, the Executive Committee as
supposed to be doing that. But in reality, it was unable to do
so.
Mr. Mollohan. Why?
Ms. Lubchenco. Because the individual who sat on the EXCOM
for the Department of Defense did not have decision-making
authority.
Mr. Mollohan. Okay. But it sounds like there is a big dog
on the porch some place that maybe, I do not know, because of
the amount of money they brought to the table or could in
effect direct the path forward for the program and make
decisions with regard to funding and process and contracting.
Is that true and was that with the Department of Defense,
the person you are alluding to?
Ms. Lubchenco. Because this was well before my time, I have
not seen this play out firsthand.
Mr. Mollohan. No, I know you have not, but you are bound to
have reviewed this.
Ms. Lubchenco. We have.
Mr. Mollohan. And the Committee is asking you to tell us
who was the decision maker and because they had such a dominant
role in the program and you are suggesting it is in the Defense
Department, I am asking who it is. Who was it? What position
was it?
Ms. Lubchenco. Mr. Chairman, I do not know that.
Mr. Mollohan. Was the program independently evaluated?
Ms. Lubchenco. Yes, Mr. Chairman. There were nine GAO
reports in--eight reports in nine years.
And the NPOESS Program also constituted an Independent
Review Team Chaired by Mr. Tom Young who was the former
President and COO of Martin Marietta and a former Director of
NASA Goddard Space Flight Center.
That Independent Review Team echoed many of the findings of
the GAO reports and it highlighted or, I think, concluded that
there was an extraordinarily low probability of success of the
program and that this should be of great concern to the nation
because the continuity of both climate and weather information
was at risk.
Mr. Mollohan. Well, you have made some evaluations about
moving forward with the current NPOESS Program. What would be
the risk that the nation faces if we were to move forward with
the current program?
Ms. Lubchenco. It was explicitly because of that risk that
we have paid special attention to how to put this program back
on track because it is vital to the nation's interests.
And I believe that the proposed restructuring announced by
the Administration would, in fact, put that program on a path
to success with a much higher probability of success than the
former NPOESS Program.
Mr. Mollohan. When did the Administration start reviewing
the program and trying to resolve the problems in the civil and
military weather climate systems and what was the result of
that effort? When did it start and what was the result?
Ms. Lubchenco. When I first assumed the position of
Administrator, which was March 20th of last year, I almost
immediately began conferring with the Secretary of Commerce,
with the Office of Science and Technology Policy, with the
Office of Management and Budget, with NASA, and with DoD to
figure out what the problems were and what solutions might be.
Shortly thereafter, I believe early in the summer, the
Administration announced that it was going to take a
comprehensive look at this program following on the review of
the Independent Review Team and later in the summer set up a
formal process for doing that review involving various offices
of the White House, OMB, OSTP, and National Security Council.
And so there were two parallel processes underway, the White
House process and the joint interagency process of the three
agencies, all wrestling with how can we fix this problem.
It is not that others had not tried before, but we were
determined to actually figure out--you know, the status quo was
simply unacceptable.
Mr. Mollohan. And what did you come up with?
Ms. Lubchenco. In the President's budget that was announced
in early February, part of that announcement was the
Administration's decision to restructure the NPOESS Program by
separating out the responsibility for acquisition for the
satellites, giving DoD responsibility for acquisition for
satellites and instruments that are relevant to the early
morning orbit which is most critical for military needs.
Mr. Mollohan. So Defense needs and----
Ms. Lubchenco. Defense needs.
Mr. Mollohan. Uh-huh.
Ms. Lubchenco. And giving to NOAA responsibility for
acquisition for the instruments and the satellites for the
afternoon orbit which is most important for weather and climate
information.
NOAA would work closely with NASA to oversee and execute
the acquisitions and all three agencies would continue to
operate the ground system which that part of the former NPOESS
Program was working well.
So this proposal retains the elements that were working
well----
Mr. Mollohan. The ground system?
Ms. Lubchenco. The ground system, and separates out the
acquisition and the oversight for the satellites and the
instruments for the two different orbits.
Mr. Mollohan. So you are the Administrator. How do you feel
about this new arrangement?
Ms. Lubchenco. Mr. Chairman, I am really pleased that we
have a solution that I believe is viable. This program is too
important to not be on a path to success. And I think the
situation was becoming intolerable and really inexcusable.
That said, there was a pretty high hurdle to figuring out a
solution. I am really pleased with the solution that we came up
with and hope that you and the Committee and others in Congress
agree that it is a good viable solution. I believe that it is.
Mr. Mollohan. So Defense Department decisions are out of
your critical path judgments and you are out of the Defense
Department's critical path judgments?
Ms. Lubchenco. That is correct.
Mr. Mollohan. So you are going to be developing satellites
and making decisions that serve you. Are there going to be any
operational problems as a result of this new arrangement?
Ms. Lubchenco. Let me first point out that much of the data
that we acquire, that NOAA and NASA will acquire will be shared
with DoD and conversely. So there is still sharing of
information. It is the acquisition that is separated.
And I believe there is always risk associated with any
complex satellite programs. That comes with the territory. But
I think the risk is much less substantial and much more
manageable than with the current management structure,
specifically because the program acquisition will be overseen
by NASA. We have a good working relationship and track record
with them for joint oversight of programs. There is much more
immediate access to technical capability. We have a lot of
assets to bring to the table.
And the risk that exists, I believe, can be mitigated both
by staying on top of the programs immediately and anticipating
and dealing with problems, but also having adequate budget
reserves to be able to deal in real time with any problems as
they arise. And that is the way that we have typically dealt
with our other satellite programs that we run jointly with
NASA. So that is a good model for this newly-structured
program.
Mr. Mollohan. So there are no decisions that Defense can
make that would impede your progress or time line? You know,
they have got a couple of satellites on the ground, we
understand, but that will not impede you? It will not affect
you; is that correct?
Ms. Lubchenco. The period of transition, fiscal year 2010,
is a critical year. And the path to success assumes that the
funds that the Department of Defense has in its budget for
fiscal year 2010 will be spent for the needs for which they
were intended.
Mr. Mollohan. Is there a threat to that possibility?
Ms. Lubchenco. I assume that there is a possible threat.
Mr. Mollohan. I said that wrong, but is there a possibility
that there is a threat to that?
Ms. Lubchenco. Yes, sir, I think there is.
Mr. Mollohan. Are you picking up any concerns or do you
have concerns based on any information you are picking up?
Ms. Lubchenco. We know that the program, that the success
of the program depends on an effective transition. And if that
transition does not go as anticipated, there may be very
serious consequences with delay in the program or derailing of
the program. And what is at risk is the continuity of the
weather and climate information. And any further delays or
insufficient budgeting could easily be quite problematic.
Mr. Mollohan. What are you doing to head that off?
Ms. Lubchenco. We are emphasizing how important this
solution is, how likely it is to, or how it is a very
significant improvement over the status quo. We have been
working closely with the leadership at DoD, with the point
person for acquisitions who has been working on this solution
with us and who has indicated his commitment to seeing this
through. So I believe that within DoD, there is interest in
having this program succeed.
Mr. Mollohan. Mr. Wolf.
Mr. Wolf. How much money was wasted over the years, the
fact that it was not successful?
Ms. Lubchenco. The cost overruns, as I mentioned, were on
the order of 85 percent.
Mr. Wolf. Can you put that in dollars?
Ms. Lubchenco. Yes, sir. The NPOESS Program was originally
budgeted at $8.4 billion in 2004.
Mr. Wolf. So how much of that do you think was wasted?
Ms. Lubchenco. So I do not have that number, but I would be
happy to get it to you. It is a very large number.
Mr. Wolf. In the billions?
Ms. Lubchenco. Yes, sir.
Mr. Wolf. Do you think the failure was because of
personality or do you think the failure was because of
technology?
Ms. Lubchenco. The Independent Review Team that was chaired
by Tom Young said that there were a number of causes for the
failure, that the Executive Committee, as I indicated, was
inefficient and ineffective, that the different agencies have
very different requirements and their priorities are not
aligned, that there is no backup capability in this system,
that the budget was insufficient to deal with a very complex
program that this one is, and that there was insufficient
government oversight of the contract.
So the IRT and the GAO reviews highlighted multiple
problems with the way the program was originally structured.
Mr. Wolf. So it was less technology and more human factors
that resulted in it?
Ms. Lubchenco. Congressman, there is a lot of new
technology that was being developed for the program and that is
part of what creates the risk. And because it is new
technology, because we are sort of pushing the envelope for new
instruments, it is important to have adequate budgeting to
account for the inevitable problems that might develop in those
new instrument systems.
Mr. Wolf. Are any of the people who were involved with the
failure still there in the operation of it now? And you are not
justifying this because you are new in town, so it is not that
you have to be defensive. Are the people who were there
involved in either agency or all three continuing to be, but
just now there has been a divorce and a separation? But have
you thought there should be some other people come in?
Ms. Lubchenco. Congressman, I believe that the personnel
that are still on board at NOAA are immensely capable and very,
very good. I believe that our track record of other successful
programs with NASA in partnership with NASA attest to our
skills and our abilities to manage complex programs. I cannot
evaluate the expertise of the individuals that were involved on
the Department of Defense side because that is not something
that I know.
Mr. Wolf. Well, I will move on. I used to be on the
Subcommittee years ago and this was a big issue. And then I
left and now it is continuing to be.
And it would seem to me that if the divorce, unless it was
a no-fault divorce, but if the divorce was partially because of
both sides, it would seem that you ought to have a clean
approach and new people to come in to have the opportunity to
sort of begin and not having started out with the failure.
So if you have the same people that were there before, even
though they may be wonderful people, maybe their expertise
ought to be put in some other important program at NOAA. But
maybe you ought to have just a new person or a new team to
begin afresh so you are not kind of tied down with that.
Maybe you can just let the staff know. I mean, give us a
list of the personnel who are going to work on the program now
and let us look and overlap and see how many were there for the
last three years before this. And then the Committee can take a
look at that judgment and see if the same people ought to stay.
But when you look at the food banks are empty and there are
a lot of problems in the country, the loss of billions of
dollars, you know, that is a lot of money.
Ms. Lubchenco. I agree, Congressman, which is why I made it
one of my highest priorities to fix this program, because I
think it was inexcusable and an embarrassment. And this is not
the way we should be operating.

CLIMATE SERVICE

Mr. Wolf. You have announced your intent to create a NOAA
Climate Service. This was done absent any proposal in the
fiscal year 2011 budget and absent any of the required
notification to the Committee.
We included funding in the fiscal year 2010 bill for the
National Academy of Public Administration, NAPA, which
generally does a pretty good job, to conduct an analysis of
options for establishing a Climate Service.
Is the review underway? What is the status of that?
Ms. Lubchenco. Congressman, the announcement that we made
on February 8th was an intention to create a new line office
within NOAA called the NOAA Climate Service. That proposal is
reorganizing existing assets.
NOAA currently has a wealth of climate science and climate
services that we provide already. They are distributed
currently across many line offices within NOAA. They are in
lots of different places. And this proposal is simply to pull
all of those together and put them into a single line office.
So it is reorganizing existing assets to be better
positioned to be effective partners with other agencies, to
provide services that we are being increasingly asked for more
effectively, more efficiently, essentially to do our jobs more
responsibly.
Mr. Wolf. Just as a result of the NAPA review?
Ms. Lubchenco. No. We announced the intent to reorganize.
We intend to use the NAPA review to help us inform how that
organization should be best accomplished.
Mr. Wolf. So you will not do anything until the NAPA review
is finished?
Ms. Lubchenco. We anticipate that the NAPA review is going
to be providing information to us on an ongoing basis. And as
that information comes forward and interim reports or other
things, we will fold that into our planning. So the NAPA review
will be very, very helpful in guiding our understanding of the
tradeoffs with a specific organizational design.
Mr. Wolf. Now, you need the authorization of the
authorizers to do this? Do you plan on asking for legislation?
Ms. Lubchenco. My understanding is that what we have
proposed, taking existing people from existing places and
putting them in a different place is a reprogramming and----
Mr. Wolf. Wouldn't that need the legislative----
Ms. Lubchenco. The programming would require approval by
the Department, by OMB, and by our Appropriations Committees.
Mr. Wolf. How do the Authorizing Committees feel about
that?
Ms. Lubchenco. Obviously many of our Authorizing Committees
are keenly interested in this and we intend to work closely
with them as the NAPA report is being prepared to inform the
way that we are thinking about designing this. So we fully
anticipate working closely with all of the relevant Committees,
both Appropriations and Authorization Committees.
Mr. Wolf. So, therefore, you will continue to go ahead
waiting on the reprogramming of approval by this Committee or
by the authorizers or by both?
Ms. Lubchenco. The formal approval that is required is by
your Committee, but we would hope to work closely with the
Authorizing Committees and have their blessing. Different
Authorizing Committees have had different views of how this
might be best structured and so this is a great opportunity for
us to be in dialogue with all of them and to think about what
type of organization would best meet the needs of the nation.

OFFICE OF ATMOSPHERIC RESEARCH

Mr. Wolf. Your initial announcement, it appears that you
have already developed a plan to establish the Climate Service
mainly by breaking off pieces of the Office of Oceanic and
Atmospheric Research.
That office was established in its current form in 2005
with the purpose to unify and to strengthen the role of science
and research in NOAA's programs. And that organization resulted
from the recommendations of a Research Review Team of prominent
scientists.
So why would the undoing of the last science reorganization
at NOAA be a good idea at this time?
Ms. Lubchenco. When that reorganization was done, the need
for climate services was not as obvious as it is today. And
what we have proposed is to take some offices, some labs, some
offices from the Office of Oceanic and Atmospheric Research,
some from other parts of NOAA. We have not made any decisions
about how to organize those pieces together and that is what
the NAPA report will inform, number one.
Your question was asking more specifically about our
existing Oceanic and Atmospheric Research line which the two
goals that we had in mind with this restructuring were, one, to
make climate services and science more effective and efficient,
but, two, to strengthen science across NOAA. And OAR, the line
Office for Oceanic and Atmospheric Research plays a vita role
in strengthening the science.
And it is my hope and plan to use this opportunity to
reposition OAR to advance transformational science that is
right at the forefront of innovation on key issues for NOAA.
There is a lot more science that is done at NOAA, not just
climate science, and there are a lot of places in NOAA where
science exists.
Mr. Wolf. Are there pieces of other federal agencies that
ought to be in this if you were to do this?
Ms. Lubchenco. There are other federal agencies that have
responsibilities for delivering some kind of climate services
and we are in dialogue with them. Many of them rely on what
NOAA provides in terms of basic data, basic models, basic
predictions. And so this organization is designed to better
position us as partners to the other agencies so that they can
do their climate job better and we can be more useful to them.

EDUCATION PROGRAM

Mr. Wolf. Okay, Well, maybe we will talk to NAPA, too, at
the time and see where they are.
One other area is on the educational programs. According to
the staff, they said you are only requesting $20.8 million for
NOAA's education programs which is a reduction of over 60
percent from the amount appropriated in fiscal year 2010.
Every time you have a hearing, you always hear about the
importance of the critical nature of the challenge that our
country has with regard to science, the competition with regard
to China, the competition with regard to India.
Education is probably a key, so why would you have such a
significant cut? When I think of the first question of the $4
billion that has been lost going down the drain and then you
think of we are falling behind as a nation in math and science
and physics and chemistry and biology, why would you be looking
for such a significant cut or is it not significant? Is it just
different accounts or how is that?
Ms. Lubchenco. Education is one of my highest priorities at
NOAA. It is very critical to the national interests for all the
reasons that you have just articulated. The request this year
reflects readjustments from congressionally directed funding in
earlier years. And----
Mr. Wolf. Earmark, is that what you are calling that,
congressionally what? How do you put that in congressional----
Ms. Lubchenco. This is one of the Washington euphemisms,
congressionally directed funds.
Mr. Wolf. Is that diplomatic? You are really
congressionally directed.
Ms. Lubchenco. I had to learn a whole new language coming
here.
Mr. Wolf. So this is to correct the mistakes the Committee
has made?
Ms. Lubchenco. Not mistakes at all.
Mr. Wolf. How about the Jason Project? I am just curious.
Ms. Lubchenco. Could I just add one note to that? NOAA had
requested that the National Academy of Sciences review our
Education Program with the idea of providing us information
with how to make it most strategic, most effective, most
complementary to a lot of the other educational programs and
science education programs that are out there.
Just earlier this month, we received the report from the
Academy study. It is highly complimentary of our efforts and it
provides a large number of recommendations for improvement.
It is my intention to utilize that report to rethink our
Education Program and figure out what it should look like, how
it should best serve the nation's needs.
Mr. Wolf. Before you get into Jason, what are some of the
things? What did the Science Foundation recommend? What did
they say you should be doing you are not doing now?
Ms. Lubchenco. They highlighted many of our current
programs as being highly successful but not at scale, so to
scale up some of the specific programs.
I have not had a chance to read the report in depth because
it just came out. And I am very much looking forward to doing
that. I know that it highlighted the GLOBE Program, the Jason
Program many of our competitive grants programs, our B-WET
Program. There are our educational partnership programs. There
are a whole slew of programs that we have.
Mr. Wolf. Could I get a copy of their----
Ms. Lubchenco. Absolutely.
Mr. Wolf. What did they say about the Jason Program?
Ms. Lubchenco. I do not recall specifically.
Mr. Wolf. I had a discussion with Dr. Ballard.
Ms. Lubchenco. I have, too.
Mr. Wolf. And I was asked to introduce Dr. Ballard at a
program in my district about four or five years ago. It was the
night of the seventh game of the World Series. And they asked
me to come and I said I would come. I had an anti-gambling
group I was speaking to that night and I said I did not think
anyone was going to show. But because of my respect, I will
come.
I went in. It was at Rachel Carson Intermediate School----
Ms. Lubchenco. Uh-huh.
Mr. Wolf [continuing]. In Fairfax County. And I will tell
you, the auditorium, it was a gymnasium, was packed. And these
kids really got into the program.
And Ballard has a way of getting people interested who are
not that interested and people who are interested, getting them
very interested. So I would be anxious to see what the National
Science Foundation feels.
Do you know Dr. Ballard?
Ms. Lubchenco. I know him quite well, Congressman, and I
think he is a very gifted educator, explorer, scientist. And
you are right. He really does generate a huge amount of
interest and enthusiasm.
Mr. Wolf. And we are neglecting the oceans, I think.
Ms. Lubchenco. We are absolutely neglecting the oceans and
the knowledge that school children and others have about
oceans. Why they are important to us, what the opportunities
are for keeping them healthy are not known to the extent that
they need to be. So that is why our education programs are so
important.
I just recognize that the scale of the problem is so much
larger than our ability to do everything, that we need to be
strategic in what we are doing, which----
Mr. Wolf. I agree. The last question I would ask you is one
in that area. Is there a coordinating group in the government,
because we are falling behind?
The reality of it is America, if you look at the scores and
you look at we used to be number one, now the competition is
not only with China and India, but it is in Poland and Hungary
and Romania and Bulgaria.
I mean, during the 1980s, you would go to Romania and there
was one little string and a lightbulb and now you go there and
they are pulsating there. They are hungry, the competition.
And I am not criticizing what you are doing. I think you
want to readjust, but is there a coordinating group in--
different than an NPOESS coordinating group--but is there one
in town that looks at every single program and is working with
the Department of Education and working with you and working
with NASA to make sure that everything--we have almost a man to
the moon type approach to kind of change the dynamics of this?
Ms. Lubchenco. Congressman, the Office of Science and
Technology Policy in the White House has identified STEM, S-T-
E-M, science, technology, engineering, and math, so that is one
of the other Washington-isms, has identified STEM education as
one of their priorities and they are coordinating a dialogue
across the different agencies, each of which has some
responsibility for STEM education.
So there is acknowledgement of the need for better
coordination and more strategic movement in addressing the
challenge.
Mr. Wolf. Well, okay. Well, why don't you let us know about
that and then if we could see a copy of the report.
We put language in last year directing the National Science
Foundation to do either a 90- or 120-day study of what works--
--
Ms. Lubchenco. Uh-huh.
Mr. Wolf [continuing]. Because I think once you have lost
somebody by fifth or sixth grade, it is over. You almost never
find somebody getting excited about science in twelfth grade or
when they go to college majoring in English Literature
transferring into physics. It does not happen.
And so you might take a look at where the National Science
Foundation is. They ought to be close to being finished. And so
you ought to see. We just asked them what actually works, best
practices, first through fifth, and I think there may be some
helpful information there.
Ms. Lubchenco. Congressman, NSF has really been the lead on
STEM education and I am delighted to know of this study. I
served on the National Science Board for ten years and so I am
very familiar with the range of their programs and the quality.
And I will definitely find this report. And each of the mission
agencies has some responsibility. NASA has some. Department of
Energy has some education. We have some. Other agencies do as
well. And you have highlighted the importance of coordinating
across those but drawing on the best practices, for example,
from this NSF report. So I think that is exactly what is
needed.
Mr. Wolf. Well, thank you.
Thank you, Mr. Chairman.
Mr. Mollohan. Mr. Bonner

FISHERIES STOCK ASSESSMENTS

Mr. Bonner. Thank you, Mr. Chairman.
It is good to see you again.
Ms. Lubchenco. Congressman.
Mr. Bonner. I want to first of all thank you publicly for
coming to Mobile back in January----
Ms. Lubchenco. It was my pleasure.
Mr. Bonner [continuing]. To help with the groundbreaking of
the Disaster Response Center.
Ms. Lubchenco. Uh-huh.
Mr. Bonner. And we are looking forward to that continued
partnership with NOAA.
In full disclosure, I have a statement that my wonderful
staff has prepared that has the questions that I am going to
pose to you.
Ms. Lubchenco. Okay.
Mr. Bonner. But before I get there, I want to follow up on
a conversation we had at that dedication because I told you I
wanted to bring you back down. I hope, to help a community that
is not only in my district in Alabama but many communities like
it all along the Gulf Coast that is struggling today.
And I want to take you, and I do not think you were there,
but I would give anything if you could have been at our full
Committee hearing yesterday where we had Secretary Geithner, we
had Dr. Orszag with OMB, and we had Dr. Romer who were
representing the Administration on the budget, on healthcare,
on the challenging times that we are facing.
One of our colleagues, Ms. Kaptur from Ohio, a member of
the Majority, said probably as well as any colleagues I have
heard say that there is a real disconnect between Washington,
D.C. and America. There is disconnect between the
Administration. Again, she is a Democrat and so she was
speaking of the Obama Administration.
But as a Republican, I would say there has been a
disconnect that precedes this Administration and goes probably
for decades, not just years. Presidents, Administrations,
Congress, the American people are very frustrated and believe
that their government is not on their side.
Orange Beach, Alabama, which is a little beach community
about 60 miles from where we were in Mobile in January, had at
one time one of the largest charter fleets in the Gulf of
Mexico. They have gone just in recent years from 140 boats down
to 90 boats.
And when I mention boats, I am talking about a business,
family business, three or four or five generations, a million
to maybe sometimes two and a half million dollar business that
employs five or six people. And so with those that have gone
out of business, those families have now been forced to find
work elsewhere.
Baldwin County, the unemployment rate in January of 2007
was two percent. It is now over ten and a half percent. And
this is one of the most prosperous counties economically in the
State of Alabama. National Marine Fisheries has been involved
as part of this problem, unfortunately.
While I understand the final decision has not been made
with regard to the length of the 2010 season, we have reason to
believe that it will be shortened from the 65-day season for
red snapper in 2009 to somewhere between 51 and 60 days.
Last year, we heard that there was a contemplation of
taking the fishing for red snapper from two fish down to one. I
understand that is not going to happen and I am grateful for
that.
But now, Doctor, I want to speak to all of the people that
work with you who are behind you and ask you this question. And
you are not sworn in, so you cannot answer, but think about
this.
Would you pay $1,200 to take your family on a fishing trip
to catch two fish? Most people would not.
So we are talking about family businesses that are
struggling in the worst economy since the Great Depression.
And, again, I use this only as an aside to Marcy Kaptur's
comments yesterday.
The best I can tell in your written statement, and I do not
hold you for that any more than you should hold me for the
written statement I will give you in just a second from my
staff, but there is some mention of commercial and recreational
fishery products.
Red snapper are not products to the men and women and their
families whose lives have been turned upside down any more than
we are talking about the flounder in Massachusetts or the
salmon off the coast of Washington State and Alaska. These are
not products. These are real issues that affect people at the
very heart of their survivability.
So here is my question. Red snapper has supported one of
the most important fisheries in the entire country. Management
restrictions started around 1990, thus the population has been
restricted for some 20 years. Despite these restrictions,
fishery dependent derived population estimates still consider
the population severely overfished. The same condition was
suggested in 1990.
The overstock designation and the devastating reaction to
it are based on an antiquated, at least in my view, antiquated
data collection and analysis method dependent on actual fish
takes that brings its validity into question.
Recently this overfished stock condition has led to even
greater cutbacks in the total allowable catch that has led to
even greater hardship to both commercial and sports fishers.
This year, the charter boat season, as I mentioned, upon
which several communities in my district depend economically
will again be shortened. We just do not know how long. And,
again, as we believe, it will still be only two fish,
thankfully not down to one.
This despite the fact that my home state has done, I think,
as much as any state in being actively progressive,
aggressively proactive in establishing some 20,000 artificial
reefs and there are more than 4,500 oil rigs in Texas and
Louisiana that provide additional safety for the habitat.
From a different base of knowledge and research using
fishery independent surveys, the stock is clearly in better
condition than predicted from most fishery dependent stock
assessments and may be more in tune with what the fishers have
adamantly been saying to me and to my colleagues. There is no
shortage of red snapper. Many scientists locally are saying red
snapper is at its highest stock ever.
There is also a unique opportunity to compare past fishing
independent surveys from over ten years ago with a present
stock conditions based on a new fishery independent study.
These studies would take advantage of a variety of technology
to measure a fishery without taking from fishermen only.
Such a new survey would not need any start-up time and
would be directly comparable to a similar past survey. This
approach of fishery independent research in my view would be
more reliable, faster, and scientifically would bring some
validity to evaluate the present stock condition and possible
increases in population that have resulted from the
restrictions over the past ten years.
So the question. Why is there such a delay in funding this
type of work and why have repeated attempts to fund this type
of work been rejected? And then I have got two quick follow-up
questions, but I will give you a chance to answer those first.
Ms. Lubchenco. So, Congressman, let me simply start by
saying that I am very concerned about the current status of
many of our fisheries. And if you look nationwide, we are not
in a good position. I think the number is over 60 stocks are
currently overfished or undergoing overfishing. And I think the
reality is that current fishery management has really not
adequately controlled overfishing.
Thousands of jobs have been lost as fisheries decline under
the current system and many valuable fisheries face huge
closures, including the ones that you were describing in your
state. And that has very serious impacts on jobs, on
communities, on lives and livelihoods, on recreational
opportunities as well as the availability of seafood.
So I agree that we are not in a good place right now. This
is one of the reasons why I have been championing consideration
of and transition to Catch Share programs for commercial
fisheries, because I believe that they have a significantly
better track record in improving fish and they work for
fishermen as well as fish. And I think the changes in the
commercial fishery in the Gulf of Mexico for red snapper are a
strong testament to that.
I also agree with you that we do not have adequate
information on the number of fish that are out there, if you
will, or on the activities of recreational fishermen. The data
are not as current as we would like. They are not as robust as
we would like.
That said, we are required by law to use the best available
information to make our decisions and it would be nice if we
were in a better position and we had better data. I agree with
the importance of acquiring those better data and funding those
kinds of programs.
The decisions that we make about what to fund and what not
to fund have to take into account all of the different
fisheries all around the nation. And we simply have inadequate
resources to do justice to all of them.
So it is not a good situation. I understand it has very
serious consequences. Acquiring better fishery independent data
is certainly appropriate. So, too, is having better information
on what the activities are of recreational fishermen so that we
can have more real-time information on what is being caught.
And so there are sort of two data needs. One is the fish. One
is the activities of the recreational fishing community.
One of the things that I committed to doing, which I shared
with you when we were together in Mobile, was establishing a
much better relationship with recreational fishermen. And I
have been systematically beginning to do that.
We are convening a summit with recreational fishermen in
April here in Washington, D.C. and we have been designing that
summit in close collaboration with leadership from the
recreational fishing community.
And we intend to work with them to identify the highest
priority areas and to have a much better understanding of the
data we do have, what is the basis of making our decisions, but
also how can we improve that and how can we work
collaboratively together with them to do that.
Mr. Bonner. Well, I appreciate the summit in April. And I
appreciate your desire, stated desire to establish a better
relationship with the recreational fishermen.
The only thing I will ask you in closing is, I am going to
extend to you the same invitation that I extended to Mr.
Schwabb who was nice enough to come meet with me, the Assistant
Administrator for Fisheries. We had a very good conversation.
But I would welcome the chance to bring you back to my district
and we will go out on a boat and we will do independent data
research. And I am very sincere. I am not trying to make light
of this.
If the very people whose lives we are impacting the most,
and it is not just the boat captains, it is the entire
community, it is the restaurant and hotel people, it is the
Chamber of Commerce, it is the thousands of people that come to
these communities and fishing is a big part of their vacation,
but if they could have a chance to visit with you and with your
team and let you see what we have been talking about when we
say we believe red snapper has returned and is now more
abundant than ever, not that that is alone going to convince
you or anyone else at NOAA or National Marine Fisheries that
more should not be done in terms of balance, science, but I
will be perfectly honest, I think it would make them feel that
people in their government that are going to--you know, we have
no control over hurricanes. I wish we did. We cannot keep them
from coming. We have no control over tornadoes.
We do not even have any control with the price of gas. So
when fuel was $4.00 a gallon a couple summers ago and that was
another economic factor that put some of these folks out of
business, there are some things we have no control over, but we
do have control over writing regulations and passing laws that
put hard-working, God-fearing Americans out of business and
make them bitter toward their government. And so I would love
to get you back down and anyone you would like to bring for an
independent day of science and research.
And, again, I appreciate your coming down earlier.
Ms. Lubchenco. I appreciate that offer, Congressman. And I
really do believe that we have much work to do to be out on the
shore, on the water, and interacting more with people whose
lives and livelihoods are affected.
Part of our challenge is keeping the eye on the long term
as well as trying to figure out the solutions for the short
term. And decisions that would preclude recovery of depleted
fisheries are not going to be good for communities, for
fishermen in the long term.
We are trying to think creatively about how we can address
the very real short-term economic challenges while not
precluding recovery down the road and it is that tension. And I
think that these are extraordinary times and we are looking for
creative solutions to try to do that balancing.
Mr. Bonner. Thank you.
Thank you, Chairman.
Mr. Mollohan. Thank you, Mr. Bonner.
We have a vote. I plan to continue the hearing down to a
point that we can all make our votes and then adjourn for----
Mr. Ruppersberger. Mr. Chairman, I just made my vote.
Mr. Mollohan. And adjourn for the remainder of three votes
and then we will reassemble----
Ms. Lubchenco. Okay.

JOINT POLAR SATELLITE SYSTEM

Mr. Mollohan [continuing]. After the three votes are cast.
Please describe the new approach. What are NOAA's
responsibilities and what are DoD's in the Joint Polar
Satellite System?
Ms. Lubchenco. With the proposed restructuring of the
Joint Polar Satellite System, NOAA would have responsibility
essentially for the afternoon orbit. So NASA on behalf of NOAA
would provide the acquisition management for the afternoon
mission requirements. The Department of Defense would continue
acquisition for the morning orbit assets and would need to
transition the afternoon orbit instrument assets from DoD to
NASA. So that is what would be done in fiscal year 2010 with
those funds that were allocated for that.
NOAA with assistance of NASA would continue procurement of
an NPOESS Preparatory Project, or NPP-like spacecraft for the
afternoon orbit. We do not yet have that spacecraft. We are
examining options for acquiring that. It is a smaller bus than
would have been the case under the old NPOESS Program.
Mr. Mollohan. It could be a smaller bus or it is a smaller
bus?
Ms. Lubchenco. We believe that we do not need the huge bus
that was part of the NPOESS Program, that a smaller bus is more
appropriate and certainly a lot cheaper.
And so we would continue procurement of those two
spacecraft for the afternoon orbit and then support the launch
readiness of the NPP, which is the NPOESS Preparatory Program,
that is underway.
So that is what the funds for fiscal year 2011 would go to,
would be to those particular responsibilities. And then, of
course, the ground system, as I mentioned before, we would
continue to operate jointly. That is working well and we
anticipate no changes with that.
Mr. Mollohan. So DoD's responsibilities would continue to
be the morning or would be the morning round?
Ms. Lubchenco. That is correct. It would continue to have
responsibility for the morning orbit and would share the data
that would be appropriate from that that is not needed or that
is appropriate to share for civilian purposes with us and then
the converse.
Mr. Mollohan. And what is DoD doing? Well, let me ask you
this. What data from the different satellites will be shared or
will data be shared from the different satellites, DoD, NOAA?
Ms. Lubchenco. We would share all of our data. DoD would
share data that is not of a classified nature essentially. So
each of those satellites has multiple different instruments on
it and some of the instruments are more relevant for weather
than climate, for example. And so that is one of the purposes
of having a joint ground system is that you can share those
data and it is set up to do that.
Mr. Mollohan. And I think you said earlier in your
testimony that the ground system will be jointly managed?
Ms. Lubchenco. NOAA manages it and NOAA is responsible for
it, but it is a partnership that we all contribute to.
Mr. Mollohan. Financially contribute to?
Ms. Lubchenco. No. I can check on this, but I believe that
NOAA has the financial responsibility for that.
Mr. Mollohan. But DoD is benefitting from that?
Ms. Lubchenco. I stand corrected. It is jointly funded.
Mr. Mollohan. And would you submit for the record the
share, how the joint funding is going to be shared?
Ms. Lubchenco. I would be happy to do that, Chairman.
[The information follows:]

In the February 1, 2010 decision to restructure the NPOESS program,
in addition to assigning NOAA the responsibility of providing the
observation for the afternoon orbit, it also assigned NOAA the
responsibility of fielding the ground system network.
NOAA currently operates DoD's Defense Meteorological Satellite
Program (DMSP) spacecraft on a reimbursable basis from the NOAA
Satellite Operations Facility (NSOF). NOAA will continue this
arrangement for the rest of the DMSP satellites and NOAA anticipates
that DoD would provide funds to NOAA to continue operation of
satellites implemented under the DoD portion of the restructured NPOESS
program. NOAA's Office of Satellite Operations has provided the
command, control, and communication for DMSP spacecraft from Suitland,
Maryland since 1998 with Schriever Air Force Base in Colorado providing
back-up support. NOAA will continue to operate the DMSP platforms in
the morning orbit under the restructured NPOESS program. The new ground
system offers the agencies the opportunity to make operations more
efficient by transitioning to a single enterprise solution for multiple
satellites.
The JPSS budget will allow NOAA to continue development and
fielding of the ground system in preparation for operations of the
satellite on launch.

SATELLITE INTERNATIONAL PARTNERSHIPS

Mr. Mollohan. International partners, how do they play in
this?
Ms. Lubchenco. We currently have a partnership with
EUMETSAT which is the European Meteorological Satellite System
for support of the mid-morning orbit. There is an early-morning
orbit, mid-morning orbit, and an afternoon orbit. They
currently have satellites that operate in that mid-morning
orbit. And NOAA provides instruments for that orbit that are
flown on this European satellite and then we share the data.
So they provide the satellite, we provide the instruments,
and everybody shares the data. That is currently what we do
now. It is working very, very well. It is a great partnership.
It saves us a lot of resources, a lot of money. And----
Mr. Mollohan. Is that the extent of your international
partnerships?
Ms. Lubchenco. No. We have considerable joint satellite
systems, some with Europe's Meteorological Satellite
Organization or EUMETSAT, some with the Japanese. Another one,
for example, that we share with EUMETSAT is the Jason Program.
Jason is a satellite system that measures sea surface height.
It has altimeters that are critically important to have
continuity of climate information but also for a lot of
forecasting and information about sea level rise. That program
is, I believe, a 50/50 split between NOAA and EUMETSAT.
And the funds that are requested in fiscal year 2011 are
for Jason-3 and that satellite system builds on the earlier
successes of Jason-1 and Jason-2 which again have been jointly
operated with the Europeans.
Mr. Mollohan. Are there international partnerships that you
do not have that you are pursuing?
Ms. Lubchenco. There are a number of partnerships that we
are having exploratory conversations about. I am not as
familiar with those, but I would be happy to get that
information to you.
Mr. Mollohan. The information that comes down from these
partnership satellites, does that information all come down the
same ground system and it is managed in the same way as the
data that would be managed between you and DoD?
Ms. Lubchenco. We have ground stations that have big
satellite dishes. For example, in Fairbanks, Alaska, there is a
ground system that captures data from the Polar-orbiting
Satellites that are going around. It captures those data and
then redistributes it to the relevant countries, the relevant
agencies within the United States. And there are a number of
ground systems like that for the different types of satellite
systems.

JOINT POLAR SATELLITE SYSTEM

Mr. Mollohan. Okay. I am not sure I totally understand
that. But all the data that is coming down from the Joint Polar
Satellite System, all the data that will be coming down from
the Defense satellite once they get that worked out, that is
coming down in a ground system that you are managing?
Ms. Lubchenco. That is correct.
Mr. Mollohan. And you are going to share that data in sort
of arrangement with DoD. The information that is coming down
from your partnerships like in the mid morning, is that coming
down into the same system?
Ms. Lubchenco. Yes, it is.
Mr. Mollohan. What role does NASA play in the Joint Polar
Satellite System?
Ms. Lubchenco. The funds that are in NOAA's budget are
contracted to NASA.
Mr. Mollohan. NASA contributes no resources, no money?
Ms. Lubchenco. That is correct. NASA does not have any for
the JPSS System, NASA does not have any budget. They are our
partner. They----
Mr. Mollohan. Is that a reimbursable agreement? Is it a
memorandum of understanding?
Ms. Lubchenco. It is a reimbursable agreement. And it is
the similar arrangement that we have for the GOES systems, for
example. So they have the technical expertise, the experience
in managing contracts, and they have primary responsibility for
overseeing the acquisition, the testing of the instruments, the
oversight of the contracts, et cetera. And they are very, very
good at doing that and we have a great partnership with them.
Mr. Mollohan. Well, because Defense is still reviewing
this, correct? They are not at a point that they have made
decisions of how they are going to go here. But will the Joint
Polar Satellite System, will it include the same observations
that were originally planned for the NPOESS afternoon orbit?
Ms. Lubchenco. For the afternoon orbit, yes, it will,
because those are our responsibilities. DoD has committed to
providing the same information that it does for the morning
orbit, but they have not yet decided exactly how they will be
doing that because those decisions for them are a little bit
down the road.
Mr. Mollohan. With regard to the afternoon orbit and the--
--
Ms. Lubchenco. Uh-huh.

JPSS SENSORS

Mr. Mollohan. You are saying that you are going to have the
same observations that were planned for NPOESS on the afternoon
orbit under the JPSS System?
Ms. Lubchenco. That is correct.
Mr. Mollohan. What are those sensors?
Ms. Lubchenco. There are a whole range of sensors. Let me
look here. The JPSS would have the Visible/Infrared Imager/
Radiometer Suite, which is called VIIRS; the Cross Track
Infrared Sounder, which is CrIS; the Advanced Technology
Microwave Sounder, ATMS; the Ozone Mapping and Profiler Suite,
OMPS; Clouds and Earth Radiant Energy System, CERES; the Earth
Radiation Budget Satellite, ERBS; and the Total Solar and
Spectral Irradiance Sensor, TSIS. So those are all instruments
that were on NPOESS that now will be on JPSS.
Mr. Mollohan. Okay. So whatever bus you are using, you
decide to use, you will have the same instrumentation for the
afternoon orbit as was planned for NPOESS?
Ms. Lubchenco. That is correct.

JPSS BUS

Mr. Mollohan. What are your plans with regard to the bus to
be used? Has a decision been made with regard to that?
Ms. Lubchenco. The decision has not yet been made. We are
exploring options. We currently plan to acquire two buses that
are roughly the size of NPP. That seems to be a good model. It
has worked well for us. It is adequate. And so exactly from
whom we would get them has not yet been decided. We are
exploring what options are out there.
Mr. Mollohan. So what are you calling these launches, the
C-1, C-2, C-3 launches under NPOESS, and these launches are
JPSS-1, 2, 3?
Ms. Lubchenco. That is correct. So C-1 would become JPSS-1.

JPSS LAUNCH DATES

Mr. Mollohan. And when is the estimated launch date for
JPSS-1?
Ms. Lubchenco. It would be fiscal year 2015.
Mr. Mollohan. And how does that schedule compare and what
about 2, launch of the second satellite?
Ms. Lubchenco. The second is end of calendar year 2017.
Mr. Mollohan. How do those dates compare with the NPOESS
scheduled launches, C-1, C-?
Ms. Lubchenco. The JPSS-1 is about six months later than
the original NPOESS schedule, but that schedule was
questionable. No one thought that was actually very realistic.
And it is 18 months sooner than the NPOESS schedule we have
adjusted. So we are better off.
Mr. Mollohan. Okay. We are going to recess for these votes
and we will be back after the third vote.
Ms. Lubchenco. Okay.
Mr. Mollohan. The hearing will stand in recess. Thank you.
I think we ended on my trying to--the hearing will
reconvene--on getting estimates of schedules. So will you
review that again? When do you anticipate JPSS-1 ready for
launch?
Ms. Lubchenco. We anticipate JPSS-1 ready in fiscal year
2015.
Mr. Mollohan. And JPSS-2?
Ms. Lubchenco. A couple years later, 2017.
Mr. Mollohan. Okay. Will there be any data gaps with that
schedule?
Ms. Lubchenco. There should not be any loss in data. We
should not have any data gaps if the transition goes as
scheduled.
And I just received during the break a memorandum from
Department of Defense, from the Under Secretary of Defense for
Acquisitions, Logistics and Technology who is the point person
at DoD. And he issued this morning his decision memorandum
which is his formal direction to the folks at DoD to do what
they had committed to for the transition.
So we had their word that they were going to be responsible
for transitioning the afternoon assets to us and to be
responsible for the morning orbit. Now his decision memorandum
has been issued which is the order to actually do that. So that
is very good news.

JPSS TRANSITION

Mr. Mollohan. How will the transition from NPOESS to JPSS
be handled? You alluded to a transition plan and team. If you
would elaborate on that, please.
Ms. Lubchenco. Yes, I would be happy to. We have laid out a
transition plan that would ensure efficient and smooth handover
of assets. There is a Government Transition Team that has been
established. Those individuals have been named and they will
immediately develop and execute this transition plan that we
all agreed to.
Part of that entails, for example, DoD transitioning its
assets to NOAA, but it also means working with DoD and Northrop
Grumman Aerospace Systems Procurement to transfer the work on
the instruments and the ground systems to the NASA-led
acquisition vehicles.

DOD APPROPRIATIONS FOR NPOESS

Mr. Mollohan. The information you just got from DoD, did it
speak to its intent with regard to its appropriations for
NPOESS for fiscal year 2010?
Ms. Lubchenco. Mr. Chairman, I have not read the entire
memo. It is one of the PDFs that is on a screen that is too
hard to read. So I have not read the entire thing.
I believe it simply orders DoD to do the things that were
in the transition plan. So DoD has committed to the funding
that they have for fiscal year 2010.
Mr. Mollohan. They committed to buying into the program?
Ms. Lubchenco. That is correct.
Mr. Mollohan. So that is their intention previously
expressed?
Ms. Lubchenco. That is correct.
Mr. Mollohan. Whether it is in that memo or not, I think
that is my information.
Please describe the effect of the JPSS Program if the
Defense Appropriations Committee here were to rescind some of
those funds. And there is some expression and concern around
that that might be a possibility.
Ms. Lubchenco. There is expression of concern. Should that
happen, I think there would be significant risk of a data gap.
It is our hope that that will not happen because that would be
quite serious. So we are hopeful.
Mr. Mollohan. Would there be a delay? What would be the----
Ms. Lubchenco. Yes. If the funds are rescinded, then the
launch of JPSS-1 would be delayed probably by about six months
and there would be very considerable risk of a data gap. In
fact, that risk would be almost a certainty.

JPSS BUDGET IMPACTS

Mr. Mollohan. Let me finish this line up. Please explain
the effects of the JPSS decision on NOAA's budget for fiscal
year 2011.
Ms. Lubchenco. The fiscal year budget includes contingency
funding, termination costs for the Northrop Grumman contract,
and a cost estimate that is at or close to the 80 percent
level. So this would ensure that lack of funding will not drive
day-to-day decisions which has been a chronic problem with this
program throughout.
Mr. Mollohan. How has it impacted your request here? Your
request has been increased by X number of dollars in order to
support the JPSS approach.
Ms. Lubchenco. Yes, Mr. Chairman. The request has been
increased by almost $680 million. So the total request is a
little over $6 billion. And that request essentially has the--
that is the total request, correct, yes--and that request
includes this contingency funding, the termination cost, and--
--
Mr. Mollohan. And would you please submit for the record an
explanation of the effects of the JPSS decision on NOAA's
budget for 2011?
Ms. Lubchenco. I would be happy to.
[The information follows:]

Northrop Grumman Aerospace Systems Contract

On February 1, 2010, the Administration announced NOAA and the
Department of Defense (DoD) would no longer jointly procure the polar-
orbiting satellite system called NPOESS. NOAA and DoD are in a critical
transition phase as each agency determines how the programs in each
agency's respective orbit will be structured. NOAA is working closely
with NASA to develop the Joint Polar Satellite System (JPSS) for the
afternoon orbit, while DoD is analyzing its options for fulfilling its
need for environmental data in the morning orbit.
At this time, however, no final decision has been reached on the
disposition of the NPOESS prime contract as a result of the
Administration decision and ongoing transition. While it is possible
the NPOESS prime contract, held by Northrop Grumman Aerospace Systems,
could be terminated by DOD, it is also possible the contract could be
transferred or modified. The FY 2011 budget includes funds to cover our
termination liability should termination occur.
Most importantly, NOAA is working closely with NASA and DoD to
ensure there will be no gap in polar satellite coverage, particularly
in the afternoon orbit, which is crucial for monitoring climate change
and its many impacts.

Mr. Mollohan. Given the mutual use of data by NOAA and DoD
and their shared responsibilities for termination liabilities,
don't DoD decisions still have the potential to increase your
cost?
Ms. Lubchenco. Yes, Mr. Chairman, they do. You know, what
DoD decides to do in the out years still has the potential for
affecting our costs.
Mr. Mollohan. How?
Ms. Lubchenco. It is in the process of conducting a
requirements review and analysis of its alternatives. The
termination liabilities are a particular concern for us. We are
working with DoD to minimize those liabilities and we are still
in the process of negotiations.
Mr. Mollohan. When will the JPSS Program baseline be
determined and what steps will be taken before then and how
will that impact your 2012 budget request?
Ms. Lubchenco. The program is going to be subject to
independent review of the mission concepts, the organizational
structure, the acquisition strategies, and the budget prior to
program baselining.
The goal is to include these findings and resultant
strategies in the fiscal year 2012 budget. So the Transition
Team will provide the date for this review, but the DoD
architecture is needed before that can be finalized.
Mr. Mollohan. Has the NOAA/NASA Transition Team membership
been finalized and how is it going if it has?
Ms. Lubchenco. The team has been formed. It is working
together. I think we are off to a good start. And I think there
is a solid basis from which to move forward. The recent
decision memorandum from Dr. Carter, I think, is very good news
and puts us in a good position.

SCATTEROMETER

Mr. Mollohan. Okay. Mr. Schiff.
Mr. Schiff. Thank you, Mr. Chairman.
Last year, the Committee asked for a plan to develop a
satellite-based scatterometer to monitor surface specter winds.
That proposal was supposed to be included in the budget, but
unfortunately it was not. This data is vital for forecasting
the progression of hurricanes and other large storms. And our
current source of such data, the QuikSCAT Satellite, lost an
antenna in November ending its operational capability.
Given the predictable demise of QuikSCAT and ongoing
discussions with NASA and the Japanese Space Agency, I am a
collaborating on a new mission.
Why was this project not included in the fiscal year 2011
proposal and what are your plans for obtaining high-quality
surface specter wind data?
Ms. Lubchenco. Congressman, the QuikSCAT Program was very,
very useful and helpful. We currently have other satellite
programs that can provide some comparable information for the
coastlines of the U.S. So even though we have lost that
satellite system, we can make up for those data in forecasting
hurricanes along the coastline.
What we have lost completely is the ability to do forecasts
for ocean weather way out in the middle of the ocean away from
the coastlines. And so replacing that satellite is an important
thing for us to do. It was deemed less urgent than other needs
and so it was a decision of tradeoffs because we currently have
some capability to forecast hurricanes. QuikSCAT was not
essential to that capacity. We still have that. And so we are
anticipating studying what our options are for the future to
replace what was lost with that system.
Mr. Schiff. Is it your expectation at this point that this
will be included in next year's budget? This is a yearly
reprieve but not a cancellation of the effort?
Ms. Lubchenco. It is probably too early to say at this
point. We are looking at what the options are. And I would be
happy to let you know as soon as we have made any decisions on
that.

CONSTELLATION OBSERVING SYSTEM FOR METEOROLOGY, IONOSPHERE AND CLIMATE

Mr. Schiff. Thank you.
And very quickly, I wanted to ask you, the budget
submission in the case that NOAA is following up on, the
successful COSMIC Radio Occultation Satellite Program with a
new program COSMIC-2 to launch 12 small satellites to gather
key weather and climate data, the new program is again a
collaboration with Taiwan, meaning half the funding comes from
Taiwan and about half the work will be done there.
For several years now, American companies have expressed
interest in providing this data on a commercial basis and claim
they can do so at considerable savings.
What would be the relative expense of procuring this data
commercially as compared to under the current plan? When would
the COSMIC-2 System be operational in providing data and how
does that compare to when a commercial provider would become
operational? And more generally, is NOAA pursuing opportunities
to procure data from domestic commercial sources and help
support the American commercial space industry?
Ms. Lubchenco. Congressman, NOAA currently uses commercial
satellite data to obtain crucial information on a number of
different--for different types of information, ocean color, for
example. Sea ice tracking and monitoring are examples.
And so we fully recognize the value of the public/private
partnerships that those kinds of arrangements entail.
We have ongoing dialogue with companies that might be able
to provide additional crucial environmental data sets beyond
our existing Geostationary and Polar Orbiting Satellite
Systems.
In the last couple of years, NOAA has awarded a series of
study contracts to get additional information from the private
sector to examine possible ways to obtain additional high-
priority weather, climate, and space weather observations. And
we are folding that into our planning for the future. So we are
taking stock of what is out there.
And COSMIC is one of those programs. COSMIC will provide
important information for weather forecasting in an area where
private sector cooperation will likely be very beneficial in
the future.
While it has been determined that a 50/50 funding
partnership with Taiwan is currently the most economical on the
short term to obtain those instruments, on the longer term,
private sector cooperation will likely be a good option as we
are interested in obtaining more of that type of information.
Mr. Schiff. Can you just get back to the Committee with a
comparison of what the commercial providers can do now in terms
of the data you are looking for and what the relative cost
would be?
Ms. Lubchenco. Certainly. I would be happy to.
Mr. Schiff. And whether they lack the capacity to give or
if they have the capacity, whether the costs are greater or
less than the partnership with Taiwan.
Ms. Lubchenco. One of the issues, Congressman, is who has
access to the data. And so I am just flagging that as a
consideration that we have to fold into our thinking. Any
contractual arrangements we would have, we would want to have
the data be freely accessible and available. And that does not
always fit in with the business plan of some companies.
So that is one of the issues that we have to work through
with them when we are talking about these kind of contractual
arrangements. It is not just the money. It is how the data can
be used is also important.
Mr. Schiff. Thank you, Mr. Chairman.
Mr. Mollohan. Mr. Wolf.
Mr. Wolf. I will pass.
Mr. Mollohan. Mr. Schiff, do you have any other questions?
Mr. Schiff. No thank you.
Mr. Mollohan. Okay.
Mr. Wolf. Mr. Chairman, I have some questions I will just
submit for the record.

RECREATIONAL FISHING

Mr. Mollohan. Okay. You scared me there. I thought I gave
you too much time.
Recreational fishing contributes over 125 billion to the
economy on an annual basis and supports over a million jobs.
The recreational fishing community has expressed concerns with
respect to NOAA programs, including Catch Shares and research.
We heard that spoken to by Mr. Bonner here earlier this
morning.
This community also has concerns about the effect of the
coastal and marine spatial planning framework. We will submit
several questions for the record on these topics.

Closing Remarks

We are at the twelve o'clock hour and members have other
engagements. And you have kindly given up your time to be here
this morning and I know you have a busy schedule likewise.
So we will submit a number of other questions for the
record other than this.
Thank you for your excellent testimony here today and your
excellent service. The kind of management you brought to NOAA
is very impressive dealing with this NPOESS issue and getting
this on the right track will earn you, I do not know, a legacy
forever. And we look forward to working with you and your fine
staff.
Thank you very much, Dr. Lubchenco, for appearing here
today.
Ms. Lubchenco. Thank you, Mr. Chairman. I appreciate it.
Mr. Mollohan. The hearing is adjourned.

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Tuesday, February 23, 2010.

NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY

WITNESS

DR. PATRICK GALLAGHER, DIRECTOR

Opening Remarks

Mr. Mollohan. The hearing will come to order. Good
afternoon.
Today we will explore the fiscal 2011 budget request for
the National Institute of Standards and Technology.
NIST's critical role in measurement science and standards
fosters innovation and encourages economic growth. The agency
is a world leader in the physical sciences and technology.
The total NIST request is $918.9 million, an increase of
$62.3 million over the fiscal year 2010 enacted level of $856.6
million, or just over seven percent.
We will explore NIST's progress in awarding American
Recovery and Reinvestment Act funds, including specific details
on how the funds are being utilized and their importance in
supporting NIST's mission while addressing National priorities.
NIST received $580 million in ARRA funding, including $220
million for research, competitive grants, additional research
fellowships, and advanced research and measurement equipment
and supplies: $180 million to address NIST's backlog of
maintenance and renovation needs, and for the construction of
new facilities and laboratories; and $180 million for the
relatively new and well-received competitive construction grant
program for research science buildings.
I would like to acknowledge that this is Dr. Gallagher's
first time testifying before this Subcommittee.
I understand, Dr. Gallagher, that you have some practice
with authorizing committees, however, so it is not exactly new
territory for you.
Welcome, and we look forward to your testimony. Your
written statement will be made a part of the record. Following
Mr. Wolf's opening statement, we will ask you to briefly
summarize your written statement.
Mr. Wolf.

Opening Remarks

Mr. Wolf. Thank you, Mr. Chairman.
Dr. Gallagher, we welcome you and look forward to hearing
your testimony.
And I yield back. Thanks, Mr. Chairman.
Mr. Mollohan. Dr. Gallagher.

Opening Statement by Dr. Gallagher

Mr. Gallagher. Well, thank you very much. It is a real
pleasure to be here for my first hearing before this
Subcommittee.
And I want to thank you, Chairman Mollohan and Ranking
Member Wolf and the other members of the Subcommittee, for
allowing me to appear before you today to summarize the
President's request for the National Institute of Standards and
Technology for fiscal year 2011.
I also want to take this opportunity to thank you for your
continued support of NIST. This budget reflects, I hope you
will agree, the important role that NIST plays into the
President's Plan for Science and Innovation.
The President's fiscal year 2011 budget request for NIST is
$918.9 million. This is a 7.3 percent increase over the fiscal
year 2010 appropriation for the agency.
This budget maintains the President's commitment to double
the NIST laboratory budget by 2017 and to increase funding for
the Hollings Manufacturing Extension Partnership or MEP
Program.
The request for our Scientific and Technological Research
Services account which funds NIST laboratory programs is $584.5
million, an increase of $69.5 million above last year. This
increase is focused on critical areas such as manufacturing,
cyber security, standards for interoperable health records,
Smart Grid, advanced photovoltaic research, and disaster
resilient buildings.
The request for our Industrial Technology Services or ITS
account, which is comprised of the MEP Program and the
Technology Innovation Program or TIP, is $209.6 million and
includes increases of $4.6 million for MEP and $10 million for
TIP. The request also includes $124.8 million for our
Construction of Research Facilities account.
So let me briefly summarize some of the initiatives in the
request.
In the laboratory initiatives, the standard for conformity
assessment for interoperability and emerging technologies
initiative covers the development of framework of documentary
standards and conformity assessment requirements to enable
interoperability and new technologies. This initiative
specifically includes our efforts in Smart Grid and health IT.
The scalable cyber security for emerging threats and
technologies initiative will support the development of tools
and standards necessary to enable a robust, usable, and
accessible cyber security framework and will include a specific
program of competitive grants to strengthen U.S. capabilities
in cryptography.
Our green manufacturing and construction initiative will
provide for the development of tools to improve energy
efficiency in manufacturing and construction and to benchmark
and stimulate the utilization of sustainable materials in
manufacturing.
The innovations for 21st century U.S. manufacturing will
accelerate the development and adoption of advanced
manufacturing technologies, including nano manufacturing
capability. This initiative is also in line with the
President's framework for revitalizing American manufacturing.
NIST's advanced solar technology initiative, consistent
with the Administration's support for the development of
alternative energy sources, will focus on bridging the current
gap in measurement technology needed to develop both advanced
technology of photovoltaics and to promote their commercial
use.
The disaster resilient buildings and infrastructure
initiative will fund improved techniques, tools, and guidelines
for evaluating and rehabilitating existing buildings based on
analytical and experimental studies. It also supports efforts
to work with national code organizations so that we can
incorporate those tools and products into improved model codes.
The nano material environment health and safety initiative
builds on our current efforts to characterize nano materials
and to begin developing the standards and reference materials
framework, including measurement methods and instruments needed
to support research and standards on nano material safety.
For our biologic drugs initiative, we're working with
industry stakeholders to develop a program to provide reference
materials and tools to control the manufacturing of biologic
drugs and to support their eventual regulation. This initiative
will include funds for grants to stimulate advances in these
new measurement technologies.
The Strategic and Emerging Research Initiatives fund, or
SERI, is a Director's discretionary research account, enabling
the NIST Director to respond quickly to critical research
needs. The NIST NRC Postdoctoral Research Associateships
program initiative will enable NIST to support up to 23
additional new postdoctoral associateships per year through
this highly competitive program.
Our request for MEP this year is the second year of
proposed increases to the program. This is consistent with the
trajectory for the program that was outlined in the America
COMPETES Act. This initiative will enable the program to expand
its suite of business growth services, which we call Next
Generation MEP services, to promote the acceleration of new
technology, to promote green and sustainable manufacturing, and
to open up new markets for U.S. small- and mid-size
manufacturers.
The requested increase for the TIP Program will support new
competitions and cover any remaining commitments from previous
competitions in areas of critical national need like civil
infrastructure, advanced manufacturing, energy, healthcare, or
green chemistry.
Our Construction of Research Facilities request reflects
three major goals for the agency. First, to fund the repairs
and maintenance of our existing building systems, second, to
renovate a dangerously obsolete Building 1 at our Boulder
campus, and, finally, to begin detailed planning for the most
cost-effective way for a future renovation at our aging general
purpose laboratories in Gaithersburg.
Mr. Chairman, this request reflects the Administration's
recognition of the important role that NIST plays in innovation
and our impact on the future of manufacturing and hopefully of
moving this Nation from recession to recovery.
I am looking forward to working with this Committee and
look forward to answering any questions you have.
[The written statement of Dr. Patrick D. Gallagher,
Director of the National Institute of Standards and Technology,
follows:]

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AMERICAN RECOVERY AND REINVESTMENT ACT

Mr. Mollohan. Thank you, Dr. Gallagher.
In the American Recovery and Reinvestment Act NIST received
a total of $580 million. We are interested in knowing what you
did with it, how many jobs it preserved or created. So let us
just start with how much funding has been obligated to date.
Mr. Gallagher. The total amount of funding for Recovery Act
varies according to the different programs. Where we have the
most progress in obligations is through our grants programs.
Mr. Mollohan. Uh-huh.
Mr. Gallagher. We have announced awards for all of our
construction grants.
Mr. Mollohan. Well, may I? Excuse me for interrupting you.
Mr. Gallagher. Yes.
Mr. Mollohan. Let me start at the top. You had $580 million
in the Recovery, right? This is a total, a top line number, how
much----
Mr. Gallagher. You want me to break that out? Yes, let me
break it down because there were a number of pieces to it.
Of the $580 million that NIST received, $360 million was in
our Construction of Research Facility accounts. Of that $360
million, half of it, $180 million, was for internal NIST
construction. The other half was for the competitive
construction grants program.
In the construction grants program, a third of that funding
was awarded rather quickly based on proposals that had been
received but were unfunded from the prior year.
Mr. Mollohan. Uh-huh.
Mr. Gallagher. The remaining two-thirds was funded under a
new competition and those awards have all been announced.
In the internal NIST construction, this is done through
design and then build contracts. The design contracts have all
been awarded and we are now moving into the construction
contracts. Those contracts will be moving out between now and
the middle of the summer which just reflects the two-phase
process that occurs under construction.
Mr. Mollohan. So $360 million for construction, it is out,
and construction will begin when the construction season
starts, I assume?
Mr. Gallagher. That is correct.
Mr. Mollohan. Okay.
Mr. Gallagher. The remaining $220 million was in our
laboratory base account, the so-called STRS line for NIST, and
that was broken into a number of distinct programs. A little
over half of that, approximately $110 million, was for the
purchase of high-end equipment needed for NIST research. We
focused that specifically on large items of equipment. So that
was good from a management perspective because it gave us a
finite number of items to move, but it also complicates it
because large contracts move a little slower than lots of small
contracts.
We have awarded approximately 16 of those and the balance
of those are pending with a very heavy season of awards
anticipated through this spring and summer. In terms of
equipment received, there is not a lot yet. Three or four items
have been installed and are underway.
Mr. Mollohan. How much of that equipment is purchased in
the United States from United States manufacturers, if you
know?
Mr. Gallagher. My understanding is that almost all of it
is. I only know of one exception that, because of a Trade Act
issue, a foreign registered company was allowed to compete and
I think obtained the contract. But everything else to date has
been American-manufactured equipment.
Mr. Mollohan. Uh-huh.
Mr. Gallagher. There are some details that go with whether
we can restrict competition to U.S. companies or not, but we
have done everything we know to promote U.S. manufacturers in
this by identifying the nature of the equipment, make sure that
it is the kind of equipment that we could buy from U.S.
manufacturers.
Mr. Mollohan. Uh-huh.
Mr. Gallagher. After the $110 million, there are a number
of programs that are various grants and contract programs.
There is a $35 million research grants program that was to
support areas of research and that support NIST work and those
are all announced.
We announced last week a fellowship program which will
support positions not just postdoctoral or graduate student but
all the way up to senior scientists at both our Gaithersburg
and Boulder facilities.
There is also a $22 million expansion of the NIST NRC
Postdoctoral Research Associateships postdoc program in the
Recovery Act that, in fact, we are also expanding in our 2011
request. Those positions are underway and are brought in as
term appointments to NIST.
Mr. Mollohan. So those are postdocs that would be working
in with NIST as an agency?
Mr. Gallagher. That is correct.
In the research grants program, we were trying to have
programs that would both bring people to work at NIST and
provide grants to universities so they could fund students and
postdocs at their institutions. So we tried to have both
aspects of the program.
We also had a series of research contracts to support
particularly our efforts in cyber security, health IT, and
Smart Grid and about half of those have been obligated and are
underway. The other half are in progress.
Mr. Mollohan. Just because the efficacy of the stimulus
program has been so questioned, can you translate your
expenditure into jobs? Have you done that computation? You may
not have. And if you have not, that is fine. If you have, we
would like to have the benefit of your knowledge on that.
Mr. Gallagher. Well, you know, the Recovery Act, the part
of the Recovery Act that NIST saw was very much in the
investment side. So as you see, a lot of our spending is
according to our anticipated profile, but it really peaks this
year, not in the prior year.
We are required, as are all Recovery Act recipients, to
report job creation through the recovery.gov web site.
Mr. Mollohan. Can you do that here today or would you like
to submit that for the record?
Mr. Gallagher. Well, yes. The numbers that come up, though,
I can share those numbers. What we have so far is 115 jobs
created, funded by the Recovery Act recipient-based reports.
But I want to point out that, one, there is this generic
undercounting problem that everybody talks about which is just
the limitation of doing the recipient-based reporting which is
that, for example, when you buy equipment, we do not look at
the jobs that are created in the supply chain of that
manufacturer and so forth.
And specifically at NIST, there is an under-reporting
because these are postdocs that are hiring under term
appointments, and they are excluded from the count. So there is
already another 53 positions where we have hired people,
provided jobs, but they are not part of the job tally.
Mr. Mollohan. Uh-huh. What about the construction jobs?
Mr. Gallagher. Well, in the----
Mr. Mollohan. They are prospective as you are looking at
them? That would happen when the construction starts?
Mr. Gallagher. Both the construction grant recipients and
the internal construction have recipient reporting requirements
for them to report. But most of the jobs will come with the
construction phase, so we are not reporting many of those yet.
Mr. Mollohan. So that is 360 million out of your
expenditure?
Mr. Gallagher. That is correct.
Mr. Mollohan. So they will hit, I assume, when that starts
and that is in the summer?
Mr. Gallagher. Yes. They are fairly labor intensive as all
construction projects. So as soon as we let those construction
projects, we typically are breaking ground pretty quickly. So I
anticipate the recipient reporting to follow that pretty
quickly.
Mr. Mollohan. Thank you, Dr. Gallagher.
Mr. Wolf.

MANUFACTURING FOCUS AT NIST

Mr. Wolf. Thank you.
Mr. Chairman, I have a number of questions and maybe we
will get to them in the second round.
The manufacturing base of our country is eroding pretty
rapidly. If you get on a train in Washington and take it up to
New York, close your book and do not buy a newspaper and just
look off to the right and the left, you will see factories are
in decay. The windows are broken. There is graffiti on the
walls. The weeds are growing out of the buildings.
And you are coming right up to the industrial heartland of
the nation. You actually go through my old neighborhood and we
had the largest General Electric switch gear plant, I think, in
the world and it is gone. There is nothing there. When the wind
blows, the weeds just tumble and kind of go through the
buildings now.
There is the sign over the Delaware River from Trenton, New
Jersey to Pennsylvania that says ``Trenton Makes and the World
Takes''. Trenton does not make anything anymore that I know of.
I think American Standard has since pulled out of Trenton.
And much of the funding are you doing that really deals
with manufacturing and bringing about a renaissance in this
nation with regard to creating jobs--not just a job because you
are constructing a building out at NIST that lasts for one
year--but a job that lasts for a long period of time?
So I guess the question is, do you agree that manufacturing
is in the tank and we are really in a very difficult situation?
Secondly, what of the funding that you have has been used to
really create jobs in the private sector?
Mr. Gallagher. Well, thank you very much for that question.
I share your passion and your observation on the state of
manufacturing in the United States. I happen to believe that
this country needs a very strong production and manufacturing
capability to be viable. And there are a number of reasons why
I think it is so essential for us to build that.
The NIST programs themselves focus on manufacturing in a
couple of different ways. And, in fact, the types of programs
that NIST has authorized within the agency make it somewhat
unique among federal agencies.
In the NIST laboratory program, our request for fiscal year
2011 has an unprecedented focus on manufacturing. And the
motivation here is to use a research and development agency
like NIST to both address barriers that manufacturers are
facing and to give them a competitive advantage when they are
looking at foreign competition.
And so the examples of that would be, for example, in terms
of giving them advantages would be looking at Smart Grid or
Health IT where you are looking at a new set of technologies
and if you are going to manufacture devices and products in
that space, rapidly having consensus on what interfaces those
components have to have and doing it very quickly advantages
U.S. manufacturers.
So in the case of Smart Grid, as we quickly deploy these
interoperability standards, we can have U.S. manufacturers
developing Smart Grid appliances and components and Smart
meters. And because we are the first mover, we give our
manufacturers a competitive advantage.
The other area is that we want to take advantage of the
fact that U.S. manufacturers are in proximity to one of the
strongest R&D activities in the world. And so giving them
access, accelerated access to how to incorporate technology
into their manufacturing process to improve productivity or
efficiency or to create new products and services is something
that those programs are focused at.
And then if you look at the MEP Program, we are working
with small and mid-size manufacturers very directly on sort of
a needs basis to give them the business services and growth
services they need to support on a case-by-case basis what they
do.
All that being said, I think that these are necessary
things to have to happen, that we have to put U.S.
manufacturers in the strongest position possible to compete. I
think there are more pieces to the puzzle than the technology
pieces that NIST is looking at.
And I know within the Commerce Department, we are very
focused on looking at this issue to see rather holistically all
of the issues in terms of both trade and export controls and
looking at the technology issues that NIST does and rapid
access to intellectual property and so forth so that we can try
to do everything we can to support American manufacturing.

SMART GRID

Mr. Wolf. But can you attribute any of the current funding,
and I know it is too soon, that will lead to actually creating
manufacturing jobs?
Mr. Gallagher. Well, in the case of Smart Grid, I am aware
of an economic analysis that was sponsored last year, it was
published in the Wall Street Journal, that projected over
200,000 new jobs in Smart Grid-related fields by the end of
2011, which I found to be a very impressive, somewhat
astonishing number.
But when they broke it out and you saw that it was both in
appliances and new appliance capabilities, it was in Smart
Grids, it was in installers that would have to be installing
these, it was in terms of network support to make these things
happen, and then on the bulk power side looking at the upgrades
to our switch gear and power distribution systems, and then
including the renewable energy, so it is one of these
infrastructures that enables a very broad spectrum of new
technologies. And the job creation potential is quite large.

JOB EXPANSION IN CHINA INSTEAD OF U.S.

Mr. Wolf. And I guess you are right. I just was reading the
old book out by John Meacham, Franklin and Winston, whereby
they from almost zero got up and running and built a fleet of
ships and airplanes and manufactured and did things in order to
win World War II, almost coming from nothing.
And it seems that today there is something missing. Why do
you think jobs are expanding in China, and not in the United
States?
And I was very disturbed. There was an ABC report last week
that in the area of wind, there were a large number of turbines
and equipment that were being made in China that were being
funded through a Texas company. There were 55 jobs in Texas and
thousands in China. But why do you think they are able to
compete or do so well in China or India and not here?
Mr. Gallagher. Well, I think, you know, we have all heard
sort of what I call the simple argument, that it was labor cost
driven and it is cheaper to manufacture things where the labor
is cheaper.
What I find interesting is that if you look at some of the
manufacturers that are moving overseas now, they are not in
areas that are strictly advantaged by labor costs. So advanced
photovoltaics are being manufactured in China even though that
was an American invention of photovoltaic technology. And the
U.S. has lost market share rapidly in photovoltaic
manufacturing.
Photovoltaics are an energy intensive and capital intensive
manufacturing. And so companies are making these siting
decisions not strictly on labor, but on a set of other issues.
Mr. Wolf. What are those other issues?
Mr. Gallagher. I am not sure we know them all, but the ones
that I am worried about are, you know, there is going to be a
total sort of cost environment that they are in. Maybe these
sites are more aggressive at making regulatory and cost
decisions that simply put product manufacturers that have very
rapid product cycles in an environment where it is just more
predictable from a business sense. We sometimes hear that from
business leaders.
The other one that I am quite interested in is that many of
the Asian markets have been much more systematic at building
integrated supply chains so that when you start moving into a
semiconductor type technology like photovoltaics, they have the
assemblers, they have the device manufacturers, and they have
simply paid more attention to the supply chain.
And I think that is what is driving a lot of the current
discussion here in terms of regional and innovation type
clusters so that we try to have the symbiotic relationship that
occurs between manufacturers and their supply chain.

JOB REPATRIATION PROGRAM

Mr. Wolf. But are we looking at that, and not to just be
critical of this Administration, but the previous
Administration allowed jobs to go offshore? And I just wonder
if there is not more that we can do from a practical point of
view.
I would love to see any Administration put together what I
will call a repatriation program whereby we repatriate jobs,
not New Jersey competing with Pennsylvania or Pennsylvania
competing with West Virginia, but to compete for jobs with
China and India and Bangladesh and Mexico.
And I do not know that you are the right person, that you
are the right agency, but somehow it seems that there ought to
be a model put together, and the Department of Commerce has
been asleep at the switch, both in this Administration and--let
me just stress again in the interest of bipartisanship--in the
previous Administration, but to almost put together a model.
How do you repatriate jobs back? I would sense that if you
are an American company, you would certainly rather have your
location, your plant manufacturing in a rural area in the
United States, perhaps to look to see how you can bring some
companies back from China that are American companies, giving
them a significant tax break, perhaps relocate in an area, for
instance, in south side Virginia, in Martinsville, where there
is an unemployment rate at 20 percent.
So clearly you would not have to pay the people as high of
a wage as you pay them if they were going to be relocated to
Gaithersburg, where you have high property taxes in Montgomery
County, for example. You would not have the commute, the
transportation.
But would it not make sense to put together kind of a
model? I think the research and the development is very
important. And when I was on this Committee before, we always
funded NIST at a very high rate. So I am not questioning what
NIST does.
I know NIST standards, building standards perhaps have been
involved in Haiti with regard to the earthquake and if you read
today's paper of the number of earthquake zones. So I think
everything you do is good, but to really put together kind of a
comprehensive way and, therefore, make an effort.
Now, my sense is I do not see this Administration doing it.
I did not see the previous Administration doing it. And there
are probably more lawyers on K Street working for the Chinese
than there are working for other people.
Would that not make sense to kind of do, to look at a model
and see----
Mr. Gallagher. I----
Mr. Wolf [continuing]. Some of those companies, to bring
them back home?
Mr. Gallagher. I would love to work with you on this. I
think that the only way we are going to tackle the
manufacturing problem is to look at it very holistically and
look at the systematics and make sure that it is not going to
be one technology or just a tax issue or just--it is going to
have to be a whole package because we are seeing companies
making these decisions for reasons other than the simple ones
that we thought we understood.
Mr. Wolf. Well, maybe, at an appropriate time, working with
the Chairman, we could put together a model, particularly with
regard to this Committee having Commerce and NIST and NSF,
together and do it on a kind of a ``forced march'' whereby you
could promote this to come back in 180 days as to what is the
model to repatriate.
If every American company were to return to the United
States, what would that mean in terms of jobs? How many jobs
would there be and what would we have to do? So if you could
come on by and we could sit down and pick your brains and see--
--
Mr. Gallagher. I would love to.
Mr. Wolf [continuing]. If we could offer something.
Mr. Gallagher. I would love to.

CYBER SECURITY

Mr. Wolf. On the cyber security issue, what country is the
most aggressive with regard to cyber attacks?
Mr. Gallagher. Well, I do not have access to the detailed
data, but it is----
Mr. Mollohan. Access to the details.
Mr. Gallagher. I was going to say what I read would put
China and former Soviet Union, those countries sort of near the
top of the list, but that is from my reading of the papers.
Mr. Wolf. Well, I would think you would know, though. Do
you work with the FBI and talk to their people? I mean, but is
it not China from what you know as well as what you read----
Mr. Gallagher. That is correct.
Mr. Wolf [continuing]. In the paper? Okay. I just wanted to
get that out. Can you describe for the Committee the economic
impact that results from cyber crime and the potential for
economic loss and the disruption that could come from future
attacks? How vulnerable are we and are we becoming more or less
vulnerable? I think I know the answers, but I want to hear from
an expert.
Mr. Gallagher. Well, you know, the risk we face in cyber
security is based on the utility of cyber. So as we become more
dependent on it for e-commerce, which has had great benefits,
as we become more dependent on it for delivering public goods
and services, as we become more sensitive to failures of the
same infrastructure, so the increased risk we face is also a
byproduct of the increased benefits we incur from information
technology.
The magnitude of the risk is enormous. The estimates I have
seen are billions of dollars lost in cyber crime.
Mr. Wolf. Three billion or seven----
Mr. Gallagher. Billions. I do not----
Mr. Wolf. But I am asking three billion or seventy-five
billion?
Mr. Gallagher. I do not know.
Mr. Wolf. Could you see what you could----
Mr. Gallagher. Yes, we could look into it.
[The information follows:]

Cybersecurity

There have been many estimates of the economic impact of cyber
attacks to U.S. businesses and citizens. However, estimates are largely
based on anecdotal evidence, so there is no consensus in estimates of
impact. A 2007 GAO report, GAO-07-705, ``Cybercrime: Public and Private
Entities Face Challenges in Addressing Cyber Threats,'' confirmed the
lack of consensus and explained the difficulties in precisely
determining impact. The GAO report did cite a 2005 FBI survey that
estimated U.S. organizations' loss from computer crime at over $67
billion. Other, more recent surveys have estimated the U.S. impact in
the hundreds of billions of dollars a year.

Mr. Wolf. Go ahead and finish there.
Mr. Gallagher. Well, what I was going to say is I think
that what makes this a real challenge is that this is a new and
rapidly evolving technology and you cannot think about the
solutions as static patch the holes.
These systems are evolving and they are sitting in a threat
environment that is extremely dynamic. And so I think the
solution to this is not can we just worry about the border
security, if you will, in computer systems, but how do you have
real robust defense in depth?
The problem we really face right now is that the bad guys
can have lots of failures and just have one success and they
are done and they win. We can have lots of successes and one
failure and we lose. And so it is very asymmetric.
I think what you really want to do is have a lot of defense
in depth. You also want to make security usable. If we turn
computer systems into Fort Knox, we lose all of the benefit
that these technologies have for us. We want to try to automate
as much as possible how these systems respond to environments
so that the security is sort of built in.
One of the things at NIST that we are really focused on is
how do you measure the security performance of a system. And
the reality is today what we do is we propose controls and you
really assess by an audit how many controls you have in place.
It is a very primitive form of measurement.
The question is, can we actually look at IT system behavior
and actually do what we are supposed to do at NIST which is to
get some very meaningful measurement tools so that system
operators can say this is how well my system is performing? And
if the threat environment changes, this is what I have to do to
adjust.
Mr. Wolf. Well, thank you very much.
Thank you, Mr. Chairman.
Mr. Mollohan. Thank you, Mr. Wolf.
Mr. Bonner.

JOB CREATION AT NIST

Mr. Bonner. Thank you, Mr. Chairman.
Dr. Gallagher, listening to you, to your opening testimony
and listening to you respond to the Chairman and Ranking
Member, I told you when you introduced yourself that I do not
think you are going to get grilled today and there was a lot of
hard questions, but just listening to your response to Chairman
Mollohan that the 115 new jobs that have been created, are
those in your estimation all federal government jobs or are any
of those in the private sector?
Mr. Gallagher. No. At NIST, the 115 jobs that we count are
all private sector jobs that are being created. At NIST, the
only jobs that are the federal sector in our tally are these
two-year term appointments for the postdocs. That is really the
only----
Mr. Bonner. That would be the 53 positions?
Mr. Gallagher. That is correct.

MANUFACTURING BASE AND NIST'S ROLE IN RE-ENERGIZING

Mr. Bonner. And then you also mentioned in answering Mr.
Wolf's questions about the importance of re-energizing the
manufacturing base in this country.
Could you tell us a little bit more specifically about what
NIST's role could be in that?
And the reason, I am not trying to lay a trap for you, I
have got a county that has got 20 percent unemployment. I would
venture a guess with no disrespect to the people in that county
that if I went home this weekend and said NIST has received
$500 million last year in the stimulus and got the President
asking for a 7.3 percent increase, most of the Social Security
recipients this year will not get any increase in their gold
and most state legislators are struggling just to keep level
funding or will see significant cuts.
So my question is really based on how can I convey to one
of my constituents or any of our constituents that are here
that an investment in NIST is an investment in a better life
for them individually or for the life of our country?
Mr. Gallagher. Well, I think the short answer to that is
that, and it goes to the heart of the whole innovation
discussion, that if we are making these justifications for
these public investments in R&D, we have to translate this into
economic activity for the country. So the proof is really do we
generate meaningful jobs and economic activity.
In terms of what NIST can do to support that, as I said,
there are a couple of aspects to that. One thing we know is
that our research intensive manufacturers do much better than
low intensity R&D. So if you look at just how well certain
manufacturing sectors have done, those that are R&D intensive
have really done fairly well in the United States. It is the
ones that are not.
And so it is a plan forward in terms of how we identify
sectors. And that is why this R&D investment is very important.
The other aspect in terms of an approach and maybe one with
Ranking Member Wolf we can talk about is the federal government
does not alone work with manufacturers. The states and local
governments play an enormous role and we see that in every
siting decision that is made.
One of the approaches I would like to explore is whether we
can use the federal involvement as a mechanism for tying
together what is happening in different regions and states
across the country. If we can quickly disseminate best
practices and identify those areas that really do it well and
can shed those things that are not effective, we might be able
to help everybody by sort of leveraging these precious
resources and making sure they are maximally beneficial.
And that is a little bit what the MEP Program tried to do
20 years ago which was to take the various extension
partnership programs, identify those practices that worked
really well, and use the federal part to basically act as a
network.

MANUFACTURERS AND STATES' ROLES

Mr. Bonner. Do you have a breakdown or could you get us a
breakdown of what the individual 50 states do in terms of their
own contribution because I think that is an interesting point
here today? You have got New York, Maryland, Pennsylvania, West
Virginia, Virginia, and Alabama, and my colleague from Alabama
might know what we invest. It is probably not near as much as
it should be, but I would like to know what other states are
doing as well so that when our state legislators and governors
come up to us asking for help at the federal level, we can turn
around and ask for help from investment from the state?
Mr. Gallagher. Okay. I would be happy to share what we do
know. What I am afraid of is that we will be impartial as well.
And I think that really does point to a problem that we should
be looking at this broad spectrum of programs, what happens in
universities, what is happening in the technical colleges and
community colleges, what is happening in technology parks, what
is happening with the manufacturing extension centers, and what
mixes appear to be proper. What sort of conditions have to be
in place so that you do start to bring jobs back in and create
an attractive environment for manufacturers.
[The information follows:]

[GRAPHIC] [TIFF OMITTED] T6756A.178

[GRAPHIC] [TIFF OMITTED] T6756A.179

OVERSEAS COUNTERPARTS OF NIST

Mr. Bonner. And then the last question that I have got is,
I always like to look at the map of the world behind the
Chairman because if you think about the investment of $918
million in our country this year, assuming this goes through,
what would China--what is the Chinese counterpart to NIST? What
is the European counterpart to NIST or the Japanese? And what
are their countries investing in this?
Mr. Gallagher. I do not have those numbers off the top of
my head. We tend to have to aggregate those because there tends
to be no exact counterpart to each agency in the other
countries.
But we do know that in some of the technology areas, it is
not uncommon in other countries for the federal government, if
you will, in those countries to play a very direct role in
industrial policy and conditions. And so you are going to see
very large and significant investments in China and Europe in
setting the conditions for their manufacturers.
And I do not think our diversity is a disadvantage. I just
think we have to harness it better. So, you know, the trick is
let us not disadvantage ourselves by the fact that we do not
have a central planning, but we can certainly pull what we know
about those numbers and be happy to share that with you.

National Measurement Institute (NMI) International Counterparts

Arguably, NIST is the predominant National Metrology Institute
(NMI) in the world. Most U.S. trading partners have a National
Metrology Institute (NMI) of their own, which provide services to their
economies analogous to those that NIST provides to the U.S. economy.
These foreign NMIs range in size/scope from the Physikalisch-Technische
Bundesanstalt (PTB, Germany), which is the second largest NMI in the
world, to very small NMIs, with a handful of employees, who just
provide limited traceability to the internatinal unit of measurements
(the SI) via a few calibration services. Among the principal
counterparts of NIST are: NRC-CNRC (Canada), NIM (China), CENAM
(Mexico), NMIJ (Japan), PTB (Germany), NPL (UK), KRISS (South Korea),
LNE (France), VSL (The Netherlands), CMS/ITRI (Taiwan) and INMETRO
(Brazil).

Mr. Bonner. Thank you, Dr. Gallagher.
Thank you, Chairman.
Mr. Mollohan. Thank you, Mr. Bonner.
Mr. Aderholt.

MANUFACTURING OF TEXTILES

Mr. Aderholt. Thank you, Dr. Gallagher, for being here
today.
One thing that NIST has been helpful in the past as with,
of course, a lot regarding the manufacturing we have already
talked here today, one of the areas that has been hit hard by
not only the recession but also through overseas competition
has been the textile aspect of manufacturing.
And just if you could tell us a little bit about what NIST
is doing to ensure that the textile industry that remains in
America does stay strong and tries to make sure that what we
have now does not leave. So if you could share some of those
thoughts with us.
Mr. Gallagher. Yes. I hate to tell you that the NIST
intramural efforts in textile manufacturing were largely
terminated years ago. So there is actually very little that
NIST is doing to support textile manufacturing right now,
unless it is of a general manufacturing technology like sensors
and various materials, calibration processes that textile
manufacturers would have to have access to.
So we support their basic measurement needs, but we do not
have a focused sector-based program anymore in textile. We used
to, but not anymore in textile manufacturing.
One interesting note, one area where that seems poised to
change is in nano manufacturing. It appears that some of the
high through-put manufacturing technologies that are being
looked at have a lot of similarities with textile
manufacturing. And it may very well be that we will be looking
at nano materials in textiles as an approach in a very advanced
manufacturing sector.
Mr. Aderholt. What about as far as the National Textile
Center? What relation do you have with that?
Mr. Gallagher. I do not know. I am not aware of a specific
relationship with that program.
Mr. Aderholt. If you could check on that and----
Mr. Gallagher. I would be happy to.
[The information follows:]

National Textile Center

At this time, NIST does not have a direct relationship with the
National Textile Center (NTC). However, NIST does have scientific
collaborations with researchers at Cornell who are affiliated with NTC
as well as others at the University of Delaware and Purdue, who are
studying body armor and conducting research on high-strength fibers.

Mr. Aderholt [continuing]. Get back with us. That is all I
have.
Mr. Mollohan. Thank you, Mr. Aderholt.
Mr. Ruppersberger.

CYBER SECURITY INCREASE

Mr. Ruppersberger. Yeah. Dr. Gallagher, thank you for being
here.
I know we had some conversations about cyber security in
your role. This is an appropriations hearing, so the first
thing I want to ask you about is the issue of cyber security in
the role that you play. And I know you work very closely with
NSA, but we also have challenges with the Homeland Security
also.
And I think in your budget that you have asked for a $10
million increase considering the cyber security threat. Because
of the role I have on Intelligence, you know, we see that it is
a very serious issue. It is one of the most serious issues
involving our national security and not only national security
but in the commercial area and the threats that are happening.
Where do you see this ten million going and do you feel
that that is significant based on what your role is going to be
coordinating with NSA and also the Department of Homeland
Security?
Mr. Gallagher. Great. Thank you very much.
Yes. The $10 million increase has two very distinct
components for NIST. One of them is to strengthen certain
research activities needed to develop stronger cyber security
standards for federal systems and that does include advanced
automation of configuration management of computer systems. It
includes multi-factor authentications so we know that the
authorized user is the person doing the work. And there is a
set of very specific test beds that are needed to look at how
to test security performance in financial systems, for example.
There are a number of very specific research programs.
The one new component to this program is that approximately
$4 million of this we envision as a grants program to U.S.
universities to develop core competency in cryptography. And
that is very important because cryptography, of course, is the
mathematical science that tells us how to encrypt and protect
information.
A lot of cryptography work in the United States is not
supported by the open science agencies. And, therefore, when we
have an international competition in developing new encryption
standards, we find that the participation is predominantly
foreign.
Mr. Ruppersberger. And what open agencies do not really
participate?
Mr. Gallagher. Well, it is just that branch of mathematics
is just not covered to any large extent by National Science
Foundation or DOE or NSF. So because NIST has a core competency
and we have strong ties with the academic community, we feel we
have a stewardship role to make sure that there is a strong
core competency in open cryptography work in U.S. universities.
Mr. Ruppersberger. You also have a role in working with
small business; is that correct?
Mr. Gallagher. Yes, we do.

CYBER SECURITY AND NIST'S ROLE IN PRIVATE SECTOR

Mr. Ruppersberger. And, unfortunately, from what we know,
you could have a senior citizen in North Dakota who has a
computer and communicates with her community bank. And that
community bank then communicates with, say, Bank of America.
And the bad guys could really get in through that one weak link
and go through the community bank and probably be in a position
if they knew what they were doing to maybe shut down some ATM
systems for Bank of America.
This is a threat that I do not think the public even
understands where we are.
And, again, in dealing, why cyber security is so difficult
and, yet, it is so important because we are constantly getting
attacked on a regular basis, what would you see your role? What
would you recommend we do to involve so many--I mean, small
businesses are about 80 percent of what we really do in this
country, working with small business. What would your role be
and what would you recommend?
Mr. Gallagher. Well, I think it is an outstanding question
because, you know, we tend to focus on the federal systems
because it is the information we are charged to protect and,
yet, 80 percent of the infrastructure is in the private sector.
And vulnerability in the private sector can affect all of us.
I know that I can barely configure my computer. They are
highly flexible. And I know my mom and dad certainly cannot. So
one of the questions is that how do you provide support to
individuals and the small businesses to provide these sort of
security enhancements?
One of them is that we have to extend the standards
framework. In other words, the description of how to provide
meaningful cyber security in depth that we have done for the
federal sector and promulgate that effectively to the private
sector internationally, how we configure machines and how they
are set up and how they operate.
But the other one was a particular focus of this initiative
which is to increase the automation of these systems. What we
want to be able to do is have software and operating systems
that can be dynamically configured so that we can adjust the
way they are set up to minimize risk and, frankly, not have a
single point of failure in the system where once you are
inside, you are inside and you can do anything, that there is
really a defense.
Mr. Ruppersberger. Well, you know that is really a massive
undertaking because the weakest link of any individual and
whether the bad guys are other countries, whether they are al-
Qaeda, whether they are hackers just who want to do a lot of
mischief, whatever, and you cannot start over, though, the
internet. I mean, we have it and we are going to be moving
forward.

CYBER SECURITY AND OTHER AGENCIES

Let me ask you this. You might not want to answer this
question because it might be too advanced at this point or it
might be better to talk about this from a--they are classified
or whatever. But we know that NSA does an outstanding job. Some
of what they do, they are the best in the world in what they
do. And thank goodness for the United States' national security
they do that, whether it is helping in cyber security, whether
it is helping with war fighter, whether it is identifying, you
know, terrorists throughout the world.
But they have developed a lot of software in dealing with
the issue of cyber security. And, you know, their
responsibility is in the military and intelligence area where
Homeland Security has the rest of the internet basically and
including the .gov.
And it seems to me that we really need to focus on one
system because so much research and development has been done.
And I would hope that we would be in a position to recommend to
Homeland Security that they need to learn and to work with, you
know, NSA as far as developing their system to protect our
homeland, basically, from the cyber security issue. They are
way far behind NSA, there have not been investments. And I
think it is important that maybe, and this is very well
respected, and you will have input in this issue about making
sure that we have some type of compatibility where NSA is, and
we can grow from NSA. Unfortunately in this country in law
enforcement and a lot of places we have turf battles and we
cannot afford turf battles here. Do you have any opinion or any
comments you might like to make on what I just said?
Mr. Gallagher. Yes, I think there are a couple of quick
comments. One is, you know, in the cyber security space there
are going to be multiple agencies participating. And it is
important that they are all playing effectively, and we are not
needlessly duplicating effort. And as I shared with you before
we are working very hard on doing that.
There is one area in particular where NIST and NSA have a
particularly close relationship because they actually were
charged with the same thing. NIST is responsible for developing
the security standards to protect federal information
technology systems with the exception of Title 50 agencies, or
the intelligence community. And NSA was given that
responsibility over the intelligence community. So NIST and NSA
together are responsible for developing basically the standards
and protocols that are needed to protect IT systems. What we
have done very effectively is work closely so that those two
approaches are completely harmonized. And so there really is no
daylight between the way we are approaching this. And at the
technical level there is a very strong collaborative
relationship between the two.
NIST will be able to interact in a way with industry and
with private sector in a way that NSA probably will not, and so
it is very important to have both of those capabilities there.

HOMELAND SECURITY AND NSA

Mr. Ruppersberger. But my question goes further about
Homeland Security, because that concerns me where they are at
this point. And that they work closely with NSA, work closely
with NIST to make sure that we have a standard approach and
that we do not not use the research and development monies,
millions of dollars that have been used to develop our
cybersecurity system.
Mr. Gallagher. Yes. We believe that it is imperative to
have an effective DHS to partner with because they carry out
roles that nobody else can. And there is very intense
discussion internally about hammering out a very specific
understanding between NIST, NSA, and DHS so we have a very
clear roadmap of how to work effectively together.
Mr. Ruppersberger. You know, an example of where this has
not occurred, and because this Committee does the funding for
FBI, is their communications system. To this day it is still
not working, when in fact you have communications systems like
CINSA that have a communications system that works well. And
why we had to go out and develop other contractors and systems
when it is right there in front of us? We need to learn from
those mistakes when it comes to the issue of cybersecurity.
Cybersecurity is going to cost this country and other countries
throughout the world billions of dollars. And there is a lot
out there that we have to deal with.
So I think you all are doing a good job. I think you keep
working with NSA, and I think we can do a lot more in the
collaboration and working with Homeland Security.
Mr. Gallagher. Thank you, and I look forward to working
with you on this.
Mr. Ruppersberger. Sure.
Mr. Mollohan. Thank you, Mr. Ruppersberger. Mr. Serrano.

9/11 REPORT UPDATES

Mr. Serrano. Thank you, Mr. Chairman. Is there anything
that you can update us on in terms of your report, the agency's
report after 9/11? I know that there were recommendations made,
and findings about the structural setup in those buildings. Now
we are rebuilding. And so how much of what you said has been
included in any new plans? And lastly, that tragedy, and sight
of that plane coming into that building, those planes, almost
makes you feel that there was nothing that could have been done
to prevent that tragedy. Am I correct in saying that? Not
prevent the tragedy, you know, the attack, but what happened
afterwards? Or was this now in the study suggesting that in
fact the damage could have been less?
Mr. Gallagher. I want to thank you for the question. Our
job was to take this enormous national tragedy and try to learn
from it. Specifically, to try to prevent a similar reoccurrence
from ever occurring. And so the technical study that was
underdone, which was the most advanced study of a building
failure ever attempted, ever done, has actually led to some
very important conclusions about how we can strengthen our
codes and our approach to building structures to improve them
in a number of ways. One is to make them resilient to the type
of fire that actually caused the failure and the collapse. And
so the adhesion of the fire protectant to the steel was
something that was a weakness in that building and led to the
ultimate structural failure of the buildings. And so some of
the new codes that have now been adopted address improved
fireproofing technologies and bonding to the steel. The other
lessons we have learned----
Mr. Serrano. Adopting locally or nationally, now?
Mr. Gallagher. These are international.
Mr. Serrano. International?
Mr. Gallagher. International. So the International Building
Code has adopted twenty-three specific recommendations already
from that study. And these now become the basis, these are
model regulations that all local and state communities adopt as
the basis for construction. So it includes improvements in sort
of fire performance, that we talked about. It also includes
performance in the ability to evacuate. We learned a lot about
how important it was to be able to rapidly evacuate large
skyscrapers. That includes new standards for the width of
firewalls. It includes something that we were all taught as
kids. You never get into an elevator when there is a fire. But
in fact, one of the lessons we learned is that we can build
fireproof elevators. And in fact, now they will be part of new
construction and you will be told to evacuate using the
elevator because it decreases the time to evacuate. And also
improvements on how the buildings perform for the first
responders. So making sure that the infrastructure in that
building is resistant, and functions, and is in places that are
hardened so that first responders can assume command and
control over a damaged building and get people out safely.
I hope we never see a tragedy like that again. But we will
have learned some lessons that will make new buildings
constructed under these codes much more resilient against
tragedies.

9/11 AND BUILDING DESIGN FAILURE

Mr. Serrano. Thank you. Now, my understanding, if I recall
that day, the buildings sort of crumbled. And it was the
tragedy that it was. My understanding also was that even though
that was so tragic, had they fallen this way the surrounding
area and many more people involved than what indeed happened.
First of all, is that true? And second of all, were those
buildings built for unfortunately a situation like that to kind
of collapse rather than tilt over? Or is that uncontrollable?
Mr. Gallagher. Yes, I do not want to hesitate to guess
whether that was a design failure mode for that building. I do
not think that the designers were designing in the progressive
failure mode. What happened was a progressive failure when the
structural steel weakened to a point.
Mr. Serrano. Right.
Mr. Gallagher. And the weight simply caused a progressive
failure that in this case led to a very vertical pancaking
motion.
Mr. Serrano. Right.
Mr. Gallagher. My impression has always been that if it had
occurred differently it would have been more catastrophic
because it would have affected nearby buildings more.
Mr. Serrano. Right. My understanding was that at any given
time in those days in that area there was, like, 50,000 people,
I heard was the figure. Which seems large, but not if you know
New York. It seems there are that many people in a subway car
at times, you know. So, it was from your study, from this
study, that these international regulations were adapted?
Mr. Gallagher. Correct. Yes, by both the International
Building Codes and also by the National Fire Protection Agency.
So the code organizations are adopting key findings that were a
result of this study.
Mr. Serrano. Did any countries, anybody resist that? Or is
that just accepted?
Mr. Gallagher. I am not aware of any----
Mr. Serrano. Yes.
Mr. Gallagher [continuing]. Resistance.

9/11 AND NIST'S ROLE IN REBUILDING

Mr. Serrano. Now, what further role does your agency play
in supervising, overseeing, consulting once we start to
rebuild, or once the rebuilding has started in Lower Manhattan?
Mr. Gallagher. Well I think in fact we have worked very
closely with the Port Authority, and with other organizations
in New York. The predominant mode that NIST comes into is as a
technical agency offering assistance. So when we are looking at
improving codes, eventually localities have to take these model
codes and adopt them to their own circumstances. And if we can
provide assistance we do so. I know there has been ongoing
discussion with those authorities in New York. We do similar
work in other areas. I want to point out as well, the fiscal
year 2011 request, it does include this initiative in resilient
buildings and structures. It is a generic version of this,
which is that we want to make sure that we collect failure
information about buildings, no matter what caused the failure.
If it was an attack, if it was fire, if it was an earthquake,
if it was wind. Because it is in studying those failures, in
some ways the world is your laboratory. We want to understand
what went wrong so we can learn from that and figure out how to
make sure it does not happen again. And so part of that FY 2011
initiative is to create a national failures database system
where we will start to collect systematically this information
from across the country. So we can look at that, decide which
ones we need to go investigate further because we think there
are important lessons to learn.

COMMAND CENTERS IN BUILDINGS

Mr. Serrano. All right, one further part. You said
something about a command center, setting up a command center.
What did you mean? What is it that you are after? To accomplish
what?
Mr. Gallagher. As I understand it, fire in large
structures, the World Trade Center would be an example, that
part of the building design is to create command centers, or
basically hardened centers where first responders can assess
the condition to a building. It basically is access to the fire
alarm, fire suppression systems. Can communicate with different
floors, can access emergency operation of elevators, things of
that type. And you want to make sure that those capabilities
are not lost easily when the building is harmed. So this had to
do with looking at redundancy, improving redundancy of these
systems against what happens if the power fails, or what
happens if a particular part of the building is affected. Do we
lose all of these capabilities or not? Can we still talk to
other parts of the building? Can we still control key systems
in the building?

9/11 RECOMMENDATIONS AND IMPLEMENTATION IN NEW YORK

Mr. Serrano. Okay. And my last point is, and so now what
you recommended and what has been accepted is true for any new
construction, for instance, in New York City? Not just the
replacement of what is happening in Lower Manhattan. Any new
building going up in New York, and there are a lot going up all
of a sudden, have to meet these new standards?
Mr. Gallagher. Well what happens is these ideas have been
adopted by the international code organizations. Those are in
essence, they have no regulatory authority. Those are what are
called model codes.
Mr. Serrano. Right.
Mr. Gallagher. What happens is, the City of New York and
various others would basically, through their permitting
process, adopt certain codes as being the ones in force for
that area. So as these codes are basically adopted locally they
tend to point to these model codes.
Mr. Serrano. So it is a guide, it is a guide, and I imagine
New York has been pretty good at following that guide?
Mr. Gallagher. They have been leaders in this.
Mr. Serrano. Okay. Thank you so much. Thank you, Mr.
Chairman.
Mr. Mollohan. Thank you, Mr. Serrano. Mr. Fattah.

AMERICAN RECOVERY AND REINVESTMENT ACT

Mr. Fattah. Thank you, Mr. Chairman. Let me dispose of the
obvious, but it needs to be said. One is that our Chairman has
really led the effort to secure a great deal of additional
funding for NIST in the Stimulus and Recovery Act, that is some
$500-plus million in a whole range of activity areas. In
disaster preparedness, as you were just discussing, and a
number of other areas that you have made significant progress.
So I want to publicly thank the Chairman for his leadership in
that regard. And I want to say that it is obvious that in terms
of your leadership, now you were formerly the Deputy Director?
Mr. Gallagher. That is correct.
Mr. Fattah. And now you are in charge?
Mr. Gallagher. That is correct.
Mr. Fattah. So, and that is obvious because you got
educated in the greatest State in the Union, Pennsylvania, and
got your doctorate at University of Pittsburgh. Thank you, Mr.
Chairman.
Mr. Gallagher. It is worse than that. Both of my parents
are from Pennsylvania.
Mr. Serrano. That makes you a Phillies fan?
Mr. Fattah. No.
Mr. Gallagher. My father is from Philadelphia and my mother
is from Pittsburgh.
Mr. Fattah. Yeah, he has got the whole state in balance,
right? But so I want to thank you for your leadership of the
agency, and congratulate you on your appointment. We have in
the Philadelphia area some 1,300 manufacturers who against
significant odds are doing well, working hard, and involving
all manner of activity. Penn Fish and Tackle, Mr. Chairman, is
making salt water fishing reels in the heart of my district.
They make a world class fishing reel, sells for over $1,000 a
pop. And they have only one competitor in the world, and they
are over in the Pacific Rim.

SCIENCE EDUCATION

But we have a lot of challenges in manufacturing, I know
that. And at the heart of it is, I think, the dearth of
educational attainment in the hard sciences by unfortunately
Americans of every stripe are doing less and less and less. If
you talk about, you know, our doctoral programs, you know, at
Carnegie Mellon, I mean, anywhere you want to go in the hard
sciences, I mean, you would be hard pressed to find,
particularly to find American citizens who are pursuing
terminal degrees in the disciplines that we, you know, whether
nanotechnology, computer information science, so on, and so on.
So I am very interested in the world of the agency. And I
know you are doing a lot of work in the STEM area. You have got
some postdoctoral students involved. I would like to learn more
about that.

PHARMACEUTICAL INDUSTRY AND NIST

On a different point, in the Philadelphia area we have a
significant attachment to pharmaceutical related, because we
have about 42 percent of the pharmaceutical manufacturers in
the country headquartered right there in the Philadelphia area.
So I know you are doing work on biologic drugs. And these are
very promising drugs. And the work that you are doing is going
to both increase the effectiveness but also the efficiency of
moving these drugs to the market. And so I am also interested
in my staff learning more about your request in that area, and
to make sure that we can align our priorities in ways to be
beneficial.
So I want to thank you for your presentation. And I look
forward to finding ways in which we can partner to make sure
that notwithstanding the other forty-nine states, that
Pennsylvania gets more than its fair share whatever resources
in technology and assistance that you can provide. And since
you have this home state connection I know you will not have a
problem being biased in your application of the resources of
the agency. Thank you.
Mr. Wolf. They are the number one manufacturer of cheese
steaks and hoagies.
Mr. Mollohan. Yes, they are also to be envied the way they
finance technology development. Their Ben Franklin Program is
outstanding, so really. Much like Virginia is to be commended
for their investment.
Mr. Fattah. Mr. Chairman, as a state legislator I created
the Ben Franklin Technology Program.
Mr. Mollohan. Did you?
Mr. Fattah. Yes, thank you.
Mr. Mollohan. Well, I would like to talk with you about how
you did that.
Mr. Serrano. I had nothing to do with any of this. Just for
the record.

COMPETITIVE CONSTRUCTION GRANT PROGRAM

Mr. Mollohan. Thank you. Dr. Gallagher, in the stimulus
package there was $180 million to address backlog of
maintenance and renovation projects, and for the construction
of new facilities and laboratories. And $180 million for the
Competitive Construction Grant Program for science research.
Would you first explain the purposes behind the, how NIST has
implemented the Competitive Construction Grant Program, and how
it relates to how to value science and how you might advocate
for it based on that?
Mr. Gallagher. Yes, I would be happy to. I think one of the
striking things about the Competitive Grants Program is this is
meeting an unmet need in the research community. The proposal
pressure has been very high. The interest has been
extraordinary and the caliber of proposals has been very, very
high. I think that reflects both the fact that facilities play
a key enabling role for research, and the fact that there has
not been a dedicated federal program looking at this type of
funding since the late nineties. I believe the NSF had a
program that was terminated at that time.
We are very pleased with what we are seeing evaluating
proposals. The way we established the program beginning in 2008
with the much smaller program that we had at first, was that
this was to look at research facilities in areas of interest to
the Commerce agencies. So it really gave wide latitude to the
proposers to propose research facilities as long as they could
address an alignment with the mission focus of one of the
Commerce agencies. That is why you, when you look at the
programs you will see NIST-type measurement programs,
nanotechnology, materials. You also see oceanography, ocean
sensors, and NOAA-type programs, and that reflects that change.
I believe you and I had a brief discussion about this a
while ago, one of the things that I would like to explore, and
we have initiated some internal discussions, is whether, if it
is not a specifically authorized program at NIST, but if we
could tie it more closely to the NIST mission, the NIST focus,
then I think we could explore whether this makes sense to make
part of the request. I think there are a lot of different ways
we could do that. The need, the unmet need is so high that
looking at the construction related activities, for example, we
talked about as a bridge to what is happening, let us say, in
technology or research in a given region or university or
cluster, I think there is a chance to bring this program into
stronger synergy with what we are trying to accomplish, either
in a technology promotion agenda, or developing certain
research capabilities where we have a key interest. We have
talked about cyber security in the case of manufacturing.
So I think it is not much of a limitation, but I think it
can be brought in as part of a portfolio where not only does it
build a building, but it builds a building that addresses and
fits into a broader context. I would actually enjoy working
with you to discuss that further.
Mr. Mollohan. Well, let us do that. We want to make it as
relevant as possible, and as competitive as possible as far as
that is concerned. How many applications were received in the
2009 competition?
Mr. Gallagher. Which 2009?
Mr. Mollohan. Fiscal year 2009.
Mr. Gallagher. So in----
Mr. Mollohan. Is there more than one?
Mr. Gallagher. Well, what happened in 2009 is we had the--
--
Mr. Mollohan. Oh, you had the ARRA.
Mr. Gallagher. ARRA, and then we had the $180 million.
Mr. Mollohan. Yes.
Mr. Gallagher. So if I recall we had something like 170
proposals that came in and--167--and we were able to fund four.
Mr. Mollohan. And so this year you are really folding a lot
of the 2009 money into the 2010 competition?
Mr. Gallagher. Well, what happened, that is, so what
happened when the Recovery Act came is we had had all of these
proposals received, and only funding----
Mr. Mollohan. From 2008.
Mr. Gallagher. From 2008.
Mr. Mollohan. So you put a lot of money----
Mr. Gallagher. So there was a decision made about what
would be a responsible amount to make available to look at
unfunded but highly meritorious proposals and then compete the
balance.
Mr. Mollohan. Good.
Mr. Gallagher. We have another competition with the 2010
that will be announced imminently. So----
Mr. Mollohan. And then that will include some 2009 funding
as I understand?
Mr. Gallagher. That is correct.
[The information follows:]

NIST has received 384 applications for the competitive
construction grant program since the inception of the program and has
awared 19 grants. The breakdown of applications and grants per
competition are:

------------------------------------------------------------------------
Number of Number of
Competition Applications Grants
------------------------------------------------------------------------
FY 2008 (FY 2008 funds)................. 93 3
FY 2009 (ARRA funds).................... 167 16*
FY 2010 (FY 2009 & FY 2010 funds)....... 124 None yet**
------------------------------------------------------------------------
* 4 grants (@$55.537 M) awarded July 2009 using unfunded meritorious FY
2009 applications and 12 grants ($123.517 M) awarded January 2010
using new FY 2009 ARRA applications.
** Application deadline was April 26, 2010; applications currently under
review and grants are expected to be awarded in September 2010.

The American Recovery and Reinvestment Act of 2009 (ARRA)
(Public Law 111-5) appropriated $180 million to NIST ``for a
competitive construction grant program for research science buildings.
Additional information on the program was provided on page 418 of the
Conference Report to accopany House Report 111-16 (Feb. 12, 2009): ``.
. . $180,000,000 shall be for the competitive construction grant
program for research science buildings, including fiscal year 2008 and
2009 competitions. Consistent with the Conference Report language NIST
announced an ARRA competition in FY 2009 with available funding of $180
million with up to $60 million available for unfunded FY 2008
meritorious applications and approximately $120 million available for
new applications under a new FY 2009 ARRA competition.
The FY 2009 ARRA Construction Grant Program Competition
was a top priority. Therefore, the decision was made to defer holding a
separate competition for the Omnibus Appropriations Act, 2009 (Public
Law 111-8) appropriated funds of $30 million until FY 2010. When NIST
received an additional $20 million in appropriated funds under the
Consolidated Appropriations Act, 2010 (Public Law 111-117), the
decision was made to combine the funding and hold a single competition
with available funding of $50 million.

Mr. Mollohan. Give us an example of an award winner in that
contest.
Mr. Gallagher. Well, the University of Pittsburgh,
actually, was one award winner where they are looking at
developing----
Mr. Mollohan. Wait a minute, Dr. Gallagher.
Mr. Gallagher. Yes?
Mr. Mollohan. Pitt won one of these?
Mr. Gallagher. They did.
Mr. Mollohan. Pitt, that is----
Mr. Gallagher. Pitt won one, yes they did.
Mr. Mollohan. Oh my God.
Mr. Gallagher. That is why I stay out of the decisions. I
have nothing to do with them until----
Mr. Mollohan. Well, that is because it is a great
university. What else about that one?
Mr. Gallagher. Well it is interesting, it is a proposal to
develop state of the art nanoscience centers.
Mr. Mollohan. By the way, Pitt beat West Virginia
University in double overtime in basketball. This is about two
weeks ago, I would say. We are not forgetting that, yet. So go
ahead.
Mr. Gallagher. Yes, it has been fun to watch that because
they were not that good when I was there. The University of
Pittsburgh grant is a $15 million grant. Interestingly, there
was an article in Science middle of last month that highlighted
some of the projects that have been funded through the NIST
Construction Grant Program. As I said, since there was no other
federal program like this that provided, construction funding
like this, what you often had were situations where very
thoughtful designs and approaches have been put together, cost
sharing had been started to be assembled, and yet they simply
could not get it over to the point where it became a viable
project. A number of these really have that characteristic and
the Pitt program is certainly one of those.
A counterexample is in Maine, I believe, there is a
facility to look at nanocomposites and energy technology. So
for example, advanced windmills, and looking at advanced
materials laboratory and advanced composites to basically
generate new composites, looking at ocean sensor technology. So
it is really quite diverse in both energy, environment,
oceanography, and advanced materials.
Mr. Mollohan. So it turns out the program you think works?
It has a----
Mr. Gallagher. Yes.
Mr. Mollohan. So you basically support it. Did you make
that a part of your request to OMB?
Mr. Gallagher. It was not part of our request to OMB.
Mr. Mollohan. You did not push it up to OMB?
Mr. Gallagher. That is correct partly because we were still
in the middle of the Recovery Act. We had so much that we were
managing. What I have done is raise to OMB the prospect of
whether this becomes part of our request in the next cycle. So
it just, it was just a phasing.
Mr. Mollohan. So your----
Mr. Gallagher. But we have raised the question.
Mr. Mollohan. So you are asking for permission to make it a
part of your request in the next cycle?
Mr. Gallagher. Yes, that is correct. So, and one of the
questions is, does it mean that we look at the attributes of
that program and, as I said, tighten it to bring it into
alignment? There was not really time to have those discussions
as we were starting the new administration.

STEM EDUCATION

Mr. Mollohan. We had several I consider really good
hearings with regard to education, science and math education,
STEM education, here earlier in the year before we had the big
snow. I would just like to hear you talk a little bit about
STEM education. The budget requests an additional $3.4 million
for strengthening STEM education through the NIST NRC
postdoctoral research associates program. Talk about that, and
how you think that contributes to STEM education, if you will,
for the Committee, and justify the request?
Mr. Gallagher. Okay. So the efforts at NIST in STEM are
interesting to me because it is not generally thought of as a
primary mission focus of NIST in terms of education. But in
fact it does play an important role. I tend to think of the
NIST role in STEM as having two distinct characteristics. One
is, we are a national laboratory and I believe have an
obligation, as do all national laboratories, to provide this
unique experience and make it available to the country as part
of developing meaningful STEM programs. And so that includes
postdoctoral programs, of which the FY 2011 request includes an
increase to bring the numbers back up, actually, to numbers we
had a number of years ago. This is almost a correction for
inflation type of request.
Mr. Mollohan. How close does that get you to where they
were?
Mr. Gallagher. Well, we are authorized to carry 120
positions. We are currently only, if you exclude Recovery Act,
we really only have about forty that we can hire each year. So
this increase that we requested adds another twenty-three, I
believe. So it is still only between sixty and sixty-five total
new positions each year.
Mr. Mollohan. What was the high water? That was your
authorization. What was the most you had on board?
Mr. Gallagher. Well the highest will be under the Recovery
Act, where we actually took advantage of that cap. So we funded
everything under the Recovery Act, so.
Mr. Mollohan. Okay.
Mr. Gallagher. But we also have undergraduate programs that
bring undergraduates, particularly in the summer, for an in
depth research experience. We bring high school students at
NIST. We have a weekend program that my own son participates
in, which works with middle and elementary school kids to give
them an experience in science. Those are programs that are
designed basically to bring students to NIST. By the way, we
also have a program for teachers, where we bring middle school
teachers in the summer to work with NIST scientists to develop
materials they can use in the classroom.
But those programs are bound to have a more local effect.
In other words, they are going to preferentially leverage what
is nearby. There are also programs where you have to look what
can we do at a national level to support STEM. And there are
two distinct areas. One is in the Baldrige Program. The
Baldrige is really no longer just a manufacturing program. It
really is an organizational excellence program. It disseminates
criteria that represent achieving organizational excellence.
The two most rapidly growing areas, or sectors, that are using
Baldrige criteria, and we see this in the awards program, are
healthcare systems and school systems. And in fact, you know,
some of the outcomes that some of these school systems have
been able to achieve by focusing on their organizational
performance are remarkable. And I think that is something we
should continue to look at to see whether that program can be
made more effective, or whether in fact, and this is under
discussion, we can add a specific STEM component that really
focuses on----
Mr. Mollohan. Let me ask you, just hearing your testimony,
not knowing a lot about this program, which I will follow up,
and want to know a lot about this program, that you are, that
NIST is involved in with regard to STEM. It sounds like it is a
program that is local, it is limited in terms of scope. And it
has no scaling potential or even intent. And so I ask if what I
am saying is true, how does that help the nation better
advance, systemically, STEM education across the country?
Mr. Gallagher. Well I think, as I said, I think our STEM
program has these two distinct components. One which is
experiential, where it is about having a research experience at
one of our labs. And those are very local. And I----
Mr. Mollohan. Right, and that, in and of itself that is
great. And the second?
Mr. Gallagher. And the second one is really one where you
can have a national impact, and that would be things like
Baldrige which really is a national program.
Mr. Mollohan. How would that have an impact on promoting
STEM education in the country?
Mr. Gallagher. Well what it does is, the idea that is being
looked at in coordination with OSTP, with the Education
Department, with NSF, is to develop the equivalent excellence
criteria in STEM that we disseminate as best practices that are
used by school systems as they develop their----
Mr. Mollohan. So that you would actually look at all of the
aspects of education?
Mr. Gallagher. That is correct.
Mr. Mollohan. Teacher preparation, materials, local boards
of education, local superintendents, state education
authorizations. Do you have such a plan developed and on paper?
Or----
Mr. Gallagher. Well, no. what we have right now developed
is the current Baldrige program which does look holistically at
school systems, but not specifically in STEM.
Mr. Mollohan. Uh-huh.
Mr. Gallagher. So the Baldrige criteria have brought in
educational experts in terms of how we----
Mr. Mollohan. There are so many people coming at this from
so many different directions.
Mr. Gallagher. Right.
Mr. Mollohan. I mean, we are going to be looking at NSF and
our funding in NSF. And now based on your testimony here we are
going to look and see how NIST fits into all of that. And try
to be helpful. So any direction you might have for us, or any
of the collaboration you are conducting with NSF, or Education,
or anybody else in regard to this, please make us the
beneficiary of that before we mark up our bill.
Mr. Gallagher. Will do.
[The information follows:]

[GRAPHIC] [TIFF OMITTED] T6756A.180

[GRAPHIC] [TIFF OMITTED] T6756A.181

Mr. Mollohan. Because we want to help you actually do this,
maybe get some prototypes out there in the country this year.
Mr. Gallagher. Well let me, to that end let me mention one
other area that we are exploring as well, which is technology
in education. Where we have been asked to work with the
Education Department in, how do you develop this as standards?
How do you develop standards so that educational technology is
meaningful when it is deployed, and covered by federal funding?
So we are working with OSTP and the Department of Education to
address the question of how does the Department of Education
incorporate effective technology standards in their EdTech
Program?

NATIONAL INNOVATION MARKETPLACE

Mr. Mollohan. Yes. Thank you for that testimony. The
National Innovation Marketplace, talk to us about that
initiative. What is it? What role do you play in it? And what
role are the other components of Commerce going to play in it,
or other agencies?
Mr. Gallagher. The National Innovation Marketplace is
actually a specific service that is offered under this class of
services that I call Next Generation MEP. This is basically, at
the current level, a pilot program. It is being developed and
offered through MEP. And basically what it does is it provides
to small- and mid-size manufacturers a capability that large
manufacturers already have, which is to allow them to look
effectively at the range of technologies that are in the
marketplace that might either be adopted by them to
manufacture, in other words opening up new products and
services, or that they can adopt in their manufacturing
process. So you have heard about large companies that have gone
into this market base model where they really go out and put
ideas and needs that they have and look very broadly at where
they can find these types of technology solutions. This is an
approach that a small- and mid-size manufacturer simply cannot
replicate. The idea is to give them access through this service
to this marketplace of technology that they can explore.
It is predominantly an effort through the MEP program as a
service. It does not, as far as I know, have any distinct
impact on other Commerce programs except through ITA and if
there are some trade related aspects to the Innovation
Marketplace.
Mr. Mollohan. Was this an initiative stood up by MEP?
Mr. Gallagher. Yes, it was. It is something that MEP had
been exploring. You will see that it had some Vice Presidential
involvement where they were looking and promoting this program
as well.
Mr. Mollohan. Yes, he was suggesting $45 million needed to
expand it to the fifty states, and I think the request is for
$5 million.
Mr. Gallagher. Well, the question really becomes one of how
rapidly you deploy this across the full network. Our approach
through the increased profile we had for MEP was to start with
this as a pilot program and to ramp it more gradually. I think
what was being talked about at that time, which is not
reflected in the request, was a more dramatic----
Mr. Mollohan. But my question is, and I am not clear yet,
was this a program stood up by MEP or adopted out there, stood
up by somebody else? Or----
Mr. Gallagher. Oh, this was by MEP.
Mr. Mollohan. In what year did you do that?
Mr. Gallagher. I do not recall. It is a fairly young
program, but I do not recall exactly when it was started. We
can certainly give you the information on that.
[The information follows:]

National Innovation Marketplace

The National Innovation Marketplace (NIM) was launched as a pilot
effort in April 2009. The NIM connects innovation sellers, buyers,
investors and distributors in all industries through an on-line web-
based tool that enables open innovation and connects manufacturers with
sources of new technologies. The NIM involves the translation of
emerging technologies into business applications, market opportunities,
and the adoption of new products.

Mr. Mollohan. We will be interested in learning more about
that. Mr. Wolf.
Mr. Wolf. Thank you, Mr. Chairman. I had seen figures
before that I, were triggered when you said STEM, that the
funding for STEM higher education grants is roughly about $700
million and only $350 million was used in 2007.
Mr. Gallagher. At NIST? No, I am sorry, I am not----
Mr. Wolf. Government wide.
Mr. Gallagher. Oh, government wide? Thank you.
Mr. Wolf. And therefore, the execution takes place at 4:00
tomorrow, I mean, what does that mean?
Mr. Gallagher. I am not familiar with the numbers. I cannot
even hazard a guess what that might mean.
Mr. Wolf. Okay. Would you check and let the Committee know?
Mr. Gallagher. Sure.
Mr. Wolf. And by the time things, could you also just give
my office a call and let me know?
Mr. Gallagher. Sure.
Mr. Wolf. Is anybody looking at that? One, do you agree
with that number, or you just do not know if that number is
accurate?
Mr. Gallagher. I just do not know that number, I am sorry.
Mr. Wolf. The staff person who gave it to me was wrong?
Mr. Gallagher. I do not want to suggest that, it is
probably right. But we will look into it.
[The information follows:]

STEM Education

NIST cannot speak to the experience of other Federal agencies.
However, of the $11 million allocated to NIST specifically for STEM
activities in FY 2009 (for the NRC postdoctoral programs and Middle
School Science Teachers program), $11 million was spent on these
programs. For the long run, the participation of science mission
agencies, including NIST, in the NSTC Education Subcommittee, which
meets monthly to exchange information and ideas, can do much to
coordinate and complement Federal STEM education programs. The
Subcommittee is currently addressing education and workforce policy
issues and research and development efforts that focus on STEM
education issues at the pre-K-12, undergraduate, graduate, postdoctoral
and lifelong learning levels, as well as current and projected STEM
workforce needs, trends and issues. The Subcommittee supports the
President's STEM education goals, with active involvement in the
meetings and topics by the Office of Science and Technology Policy.

Mr. Wolf. If you could. And then if you could make an
evaluation of why you think that that would be the case?
Mr. Gallagher. Okay.
Mr. Wolf. And how you could rectify that? Or if not you,
but how we could rectify that? If $700 million is appropriated
in these very difficult times we would hope that $700 million
would be accessed.
Mr. Gallagher. Was this in the Recovery Act, or----
Mr. Wolf. No.
Mr. Gallagher. No? Okay.
Mr. Wolf. Everything did not begin and end with the
Recovery Act.
Mr. Gallagher. Right, I was just----
Mr. Wolf. There used to be a Congress, people did things
before the Recovery Act.
Mr. Gallagher. Okay.

CYBER SECURITY AND INTERAGENCY EFFORTS

Mr. Wolf. Back to cybersecurity, NIST is just one of the
players in the interagency efforts. Who are the other players?
What is NIST's unique role? And is your budget sufficient for
you to play that role effectively? So, what are the other
players? Two, what is your unique role? And is your budget
sufficient?
Mr. Gallagher. So quickly, it will not be an inclusive
list, but the main players include NIST, the National Security
Agency, Department of Defense, Homeland Security, White House.
Mr. Wolf. Is there a Czar yet?
Mr. Gallagher. There is. Howard Schmidt, in fact I am
meeting with him right after we are done here.
Mr. Wolf. Is he actually called a Czar? I hope they are not
calling him that.
Mr. Gallagher. No, they are not calling him a Czar.
Mr. Wolf. And where is he based? In the National Security
Council?
Mr. Gallagher. It is in the National Security, and I
believe it is co-chaired with the National Economic Council so
that he is supposed to look at not just the security, but the
context.
Mr. Wolf. What is his background? He was with the FBI, was
he not?
Mr. Gallagher. I believe so. I do not recall his biography
off the top of my head. So there is a number of players. The
unique NIST role is the one defined by FISMA, which is that
NIST develops the standards. And not just writing the standards
but the testing infrastructure to make sure that we know how to
protect federal information systems. And so in that context we
work closely, that is why NSA and DHS figure very prominently
in our relationships, because NSA has a similar responsibility
for the information, the same information for the intelligence
community agencies as we have for the rest of the federal
government.
Mr. Wolf. Do you work closely with them?
Mr. Gallagher. Yes, we do. And also with the DHS, because
DHS really has the operational responsibility. Once you have
these standards in place, the US-CERT system, which was started
at NIST and it is not at DHS, in terms of how do you monitor
cybersecurity and look at attacks. That whole role is at DHS,
and of course that has to inform the standards process. So
those are, and the White House because these requirements are
actually disseminated through OMB, through the Chief
Information Officer at OMB, to the federal agencies. And so we
work very closely, very actively, through the National Security
Council and committees, through the CIO Council, through Vivek
Kundra's office at OMB, and then strong bilateral ties as well
with these key agencies.

CYBER SECURITY INCREASE

Mr. Wolf. Is the $10 million increase enough to keep pace
with----
Mr. Gallagher. Well it is always, you know, one of the
problems we face when you look at these multiple agencies, the
NIST role is actually one of the smallest in terms of funding
and effort. And you might argue when you look at this that it
should be proportionately bigger so that it can cover that
space. The way we do this, though, is we make sure that we
define the role that can be done very well with our current
funding level. The $10 million increase, as I said, is a
balance between needing to grow this program pretty
significantly and not basically doing an irresponsible increase
where it is too much at once. And that is why we identified
about $4 million of about $10 million to be through a grant
program to universities. And I think that represents a good
balance between expanding to universities some of these
research activities that are critically important and expanding
NIST efforts because our current funding level is about $28.9
million for this activity.
Mr. Wolf. What top two universities are doing research in
this area?
Mr. Gallagher. I would not be able to hazard a guess for
you right now.
Mr. Wolf. But you are giving grants?
Mr. Gallagher. No, we have not done the grants yet. We
would issue a competitive call for grants with this to one or
more universities.

CYBER SECURITY OF U.S. SYSTEMS OVERSEAS

Mr. Wolf. Do you think there is a sensitivity to
cybersecurity? My computer was stripped by the Chinese a couple
of years ago. Seventeen other members of the House, and Foreign
Affairs Committee. Members are still taking their blackberries
to China and making telephone calls. And do you think there is
a sensitivity now to this issue in government that has
permeated everywhere?
Mr. Gallagher. I think it is hard not to be sensitized to
this now, between what we see happening these large scale
attacks we read about in the newspapers almost every week.
Mr. Wolf. Do you take your blackberry to China and use it
in China?
Mr. Gallagher. Well, it is interesting. I have. But what
they basically do is they lobotomize it ahead of time so that
it does not have anything on it. I take it. And if I come back
then they basically lobotomize it again so that there is
nothing on it. So I have----
Mr. Wolf. I am told that may not be totally effective.
Mr. Gallagher. Well it may not----
Mr. Wolf. Remember Secretary Gutierrez? His laptop computer
was compromised in China, Are there guidelines in NIST and in
the Department of Commerce that tell you that if you are going
to go to China or certain places----
Mr. Gallagher. Yes, there are. Yes, there are. And we work
with the NSA in terms of how we look at those systems and test
them.
Mr. Wolf. And so if somebody at the Food and Drug
Administration is coming over to China they are certainly
alerted that they have to be careful? There is a system in the
government that lets everyone know that is going to go to these
places that----
Mr. Gallagher. That is my understanding.
Mr. Wolf. Could you check and tell me what it is?
Mr. Gallagher. Sure.
[The information follows:]

International Travel Security Protocols

All Federal employees who travel internationally are required to
complete a Department of Commerce-sponsored Foreign Travel Briefing
once per year. There is specific information on travel to China within
this briefing, including specific sensitivities to information
technology security, as well as attention to measures to ensure
personal security.

Mr. Wolf. And how it works? I mean, if somebody in the meat
inspection, or somebody in the Department of Commerce, how do
they tell them? How do they alert them? What do they do?
Mr. Gallagher. I can tell you at NIST that it is basically
tied into the travel authorization process. So that if you are
going to travel, and you submit your request, they can see
where you are going and then there is basically a set of
procedures that are put in place that you have to meet before
you are allowed to go and when you complete your travel,
immediately after, before you can use that technology.

CYBER ATTACKS AGAINST NIST

Mr. Wolf. Has there ever been a cyberattack against NIST?
Mr. Gallagher. I am sure there has.
Mr. Wolf. Are you guessing, or are you certain?
Mr. Gallagher. I would have to check, but I mean there are
attacks against systems all the time. So I am certain there.
Mr. Wolf. And most of the attacks come from?
Mr. Gallagher. I do not know. I do not have that data?
Mr. Wolf. Would you guess it would be China?
Mr. Gallagher. It would not be a bad guess.
Mr. Wolf. It is China and Russia. We all know. Why would
you be reluctant just to say that? Could you tell us?
Mr. Gallagher. Well I think when we are looking at the
firewall data at the agency we are not seeing the country of
origin, we are basically seeing the anomalous behavior that is
attempting to gain access. So we see the evidence of an attack
but at that level we are not seeing origin. Whereas other
operational agencies are looking more systematically, US-CERT
would be looking at----
Mr. Wolf. But would the FBI not tell you that as you are
doing this, ``This is what the process is. This is how they do
it in China. This is what the Russia organized crime is
doing.'' So you should be looking. I mean, do you not have to
know all of that to be involved in----
Mr. Gallagher. I do not know if system administrators need
to have that type of information as they are responding to the
actual attacks themselves.
Mr. Wolf. But would it not give you a level of
sophistication coming from X or Y or Z?
Mr. Gallagher. It might, but I think----
Mr. Wolf. Every cyberattack is not the same.
Mr. Gallagher. I think the information comes in that way
through what the vulnerabilities are. So we understand what
different parts of the world do in terms of compromising
systems and then the idea is through these vulnerability
databases designing appropriate controls and fixes to----
Mr. Wolf. Do you get a list of all the cyberattacks, since
you have been giving this job of coming up with the technology
and standards?
Mr. Gallagher. We maintain a vulnerability database, that
is correct.
Mr. Wolf. Of every federal agency that is hit?
Mr. Gallagher. I do not know, I do not want to misrepresent
what is on that list. But it is the comprehensive vulnerability
database that is used.
Mr. Wolf. And who collects that?
Mr. Gallagher. It is collected by NIST. But I think we, let
me check and give you the details on how that program works.
[The information follows:]

National Vulnerability Database

The National Vulnerability Database (NVD) is the U.S. government
repository of standards-based vulnerability management data for
publicly known cyber vulnerabilities. This data, which is freely
available to the public, enables automation of vulnerability
management, security measurement, and security compliance verification.
NVD includes databases of security checklists, security related
software flaws, security misconfigurations, product names, and
vulnerability impact metrics. NVD is a product of the NIST Computer
Security Division and is sponsored by DHS's National Cyber Security
Division. All of the software flaw vulnerabilities included in NVD are
first identified in the Common Vulnerabilities and Exposures (CVE)
dictionary. The CVE dictionary is compiled by cybersecurity analysts at
The MITRE Corporation. As soon as the CVE analysts identify a new
vulnerability, they document its basic characteristics and publish the
information. The public and NIST's NVD get this information at the same
time. NIST cybersecurity analysts perform additional analysis that
provides a severity rating for each vulnerability, and these ratings
are added to NVD to help federal agencies and other organizations
understand the relative importance of each vulnerability so they can
respond appropriately to prevent attacks.

TIP PROGRAM

Mr. Wolf. The last question, you are requesting a $10
million increase for the TIP program, that took over from the
ATP program which phased out in 2008. How would you assess its
performance? And is this one of your top priorities?
Mr. Gallagher. The TIP program is young. It was created in
2007. It is different from the ATP program in a couple of key
ways, including who can participate. Universities are allowed
to take lead roles. It also changed some of the evaluation
criteria. Some of the business criteria that were looked at in
the ATP program are no longer in the TIP program. My view on
the TIP program has been that from the context of an innovation
agenda where you are looking at not only R & D performance but
how effective we are at turning this into commercial activity,
there are a lot of good things to be said about TIP because it
does bring together these cross-disciplinary teams of
participants from industry, university, national labs, to work
on focused problems.
That being said, I do not believe that at this level of
funding this is going to have an enormous national impact. And
I think, the way I have been viewing this is that you have to
consider this as a, as really a pilot and to see whether it is
meaningful that we continue. So we are looking very carefully,
what is the right way to measure whether this program is going
to make the kind of impacts that we think are needed? And then
take a hard look at it and decide whether it is worth
continuing.
Mr. Wolf. Thank you very much.
Mr. Gallagher. Thank you very much.
Mr. Wolf. Thank you, Mr. Chair.
Mr. Mollohan. Thank you, Mr. Wolf. Let me follow up on the
TIP program, because that is where I was going to end actually.
It has been around a couple of years. If it is a pilot program,
can you not assess it at this point?
Mr. Gallagher. I do not believe so, The problem with
commercialization is that you would like to assess it when you
see whether the technology finally reached the market. And this
is pre-competitive. These grants are focused on the pre-
competitive activity. So we are going to have to look at
leading indicators. The first awards really went in early 2008.
They are three to five year grants. So we are sort of entering
the period now where we are beginning to see from the first
award recipients what types of technologies and what types of
outcomes they have been able to have in those programs. So I do
not, I think we are at, now or the very near future is the time
to take a look. I am not trying to push this down the road. I
do not want to say that we already have all the information and
we know because I do not think that is true.
Mr. Mollohan. At its best, what could the program do as a
prototype at this point? What would be the measurement that
would say, ``Wow, this program is really worthwhile.''
Dr. Gallagher. Well, I think it is a high risk, high pay
off program. So the question is, did you take some big risks
but have you got some big wins? Because that is what a program
like that is designed to do. So I think we have to look at the
technologies that are coming out of these proposals.
Mr. Mollohan. Could you give us an example?
Mr. Gallagher. Well in the first call for----
Mr. Mollohan. Of the high risk, high reward?
Mr. Gallagher. Well I think in the first call the focus was
on developing advanced sensor technology to look at physical
infrastructure, our roads and bridges. Clearly a national need.
We have an aging infrastructure. And the question was, could
you create a game changing technology that would allow you to
detect incipient failure or maintenance problems in things like
bridge or road surfaces before they failed? And can you do it
in a very cost effective way? And some of the proposals were
very clever, where you would seed a bridge with sensors and
basically the vehicles driving over the bridge would be able to
talk to the sensors and pick up the data or other type of
remote sensing technologies that would detect this.
This is not the kind of program where you are going to see
a commercial home run in every proposal. But if we were to see
something that was clearly identifying the types of
technologies that, if it were commercialized, would make a big
difference, that is really what this program was designed to
do. Big, disruptive, high pay off, technology wins. And as I
said, we are not going to be looking at this when it has gotten
to the commercialization point. We are going to have to do it
from a technology side where we take a look at these
technologies that are being developed and then make a decision
whether we think it is having that type of impact. And that is
what the TIP program folks are looking at now, is how will we
take a look at this?
We have also been working with the authorization committees
on the same question and I think we will be working with you on
the same question, too, as we look at this program.
Mr. Mollohan. Well, we want to follow up on that. Frank, do
you have any more questions?
Mr. Wolf. No.
Mr. Mollohan. Thank you. Doctor, thank you very much for
your testimony here today.
Mr. Gallagher. Thank you.
Mr. Mollohan. I learned a lot and appreciate your service.
Thank you.
Mr. Gallagher. I appreciate it. Thank you.
Mr. Mollohan. Thank you.

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Wednesday, March 10, 2010.

ECONOMIC DEVELOPMENT ADMINISTRATION

WITNESS

JOHN FERNANDEZ, ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC
DEVELOPMENT

Opening Remarks

Mr. Mollohan. Good morning. Welcome, Mr. Fernandez. The
hearing is called to order. We will hear testimony from
Assistant Secretary of Commerce for Economic Development, John
Fernandez, for the first time since his appointment in
September, 2009. We look forward to working with you, John.
The fiscal year 2011 request for the Economic Development
Administration is $286.2 million, a 2.3 percent decrease from
fiscal year 2010. This includes a $2.1 million increase in
salaries and expenses, and a $9 million decrease in economic
development assistance programs. The budget proposes
significant changes within EDA programs, including an increase
of $86 million in the Economic Adjustment Assistance Program, a
corresponding decrease of $90.5 million in Public Works, and a
decrease of $8.5 million in the global climate change
mitigation initiative fund.
EDA's mission is to create sustainable jobs. There is no
other agency in the federal government with quite the same
focus. From fiscal year 2004 to fiscal year 2008, EDA helped
American communities create 350,000 higher skill, higher wage
jobs at an average cost of $2,500 per job. EDA is very good at
its mission, even with a reduced staffing level.
In fiscal year 2008 Congress appropriated $500 million in
disaster funding for EDA. In fiscal year 2009 Congress
appropriated $150 million in American Recovery and Reinvestment
Act funding for EDA, 98 percent of which is obligated. While
there are some concerns with respect to the disaster funding,
which we will discuss today, clearly EDA is filling a
significant need in very short time frames with funding
provided above the annual appropriation of close to $300
million. That makes it all the more puzzling that the
administration has proposed a reduction for EDA in fiscal year
2011.
In fact, instead of adding critical funding the
administration wants to move funding from the Public Works
program to the Economic Adjustment Assistance program. The
rationale appears to be one of flexibility, but the net effect
is a reduction in Public Works infrastructure project grants.
Given the critical role these projects play in communities, and
the fact that the demand for these projects remains constant,
EDA should be at least maintaining, if not increasing, the
Public Works funding level.
This is not to value Public Works projects over EAA
projects. According to EDA grantees that testified before this
Subcommittee in February the two programs should not be in
competition with each other for funding; both are vital to the
success of regional economies. Indeed, rather than debating the
relative merits of each program the administration and Congress
can agree that helping communities overcome the recent economic
downturn is exactly what EDA is designed to do and together
should provide the funding level needed to do it.
Mr. Mollohan. Thank you for coming, Mr. Fernandez. And
following Mr. Wolf's opening statement we will ask you to
submit your written statement for the record and proceed with
your oral testimony. Mr. Wolf.

Opening Remarks

Mr. Wolf. Thank you, Mr. Chairman. I want to welcome you to
the Committee and look forward to hearing your testimony. I
yield back, thanks.
Mr. Mollohan. Thank you, Mr. Wolf. Mr. Fernandez.

Opening Statement by Assistant Secretary Fernandez

Mr. Fernandez. All right, thank you very much Mr. Chairman,
and Ranking Member Wolf, members of the Committee. I have a
very brief opening statement, and then I will really look
forward to the exchange this morning.
As you know, I have been involved in economic development
for probably twenty years now at the street level. As a mayor,
as a private investor, really working at that grass roots level
to try and translate economic strategies into meaningful
investments to grow, in my case, Bloomington's economy. Having
that street level experience I can tell you that I have seen
the good and the bad of the impacts of a changing, very
competitive global economy. And there is a lot of things I do
not know. But one thing I think I can say with absolutely
certainty is that the world has changed. And as the only
federal agency with economic development as our sole mission,
EDA is poised to provide leadership with forward looking job
creation strategies built around collaboration and innovation.
EDA is a central part of the Obama administration's
national strategy to build a stronger foundation for long term
job creation and prosperity for American families. Our budget
proposal for fiscal year 2011 reflects the importance of
creating competitive, high performing, regional economies as
the building blocks for that sustainable growth. As you noted,
the President's budget proposal includes $246 million for our
economic development investment programs. A key component of
that long term strategy is to build these regional innovation
clusters. This is part of the administration's place-based
initiatives. In our budget we target $75 million towards
planning and matching grants within our EDA system to help
create these regional innovation clusters that can leverage the
competitive strengths of various communities.
And while it is not a specific budgetary program, the
regional innovation clusters represents a really important
framework, strategic framework, for how we target our overall
programmatic investments. Consistent with our fiscal year 2010
budget, EDA plans to continue to fully fund its network of
economic development districts, university centers, and our
research agenda. As you noted, we are proposing $16.5 million
for our global climate change mitigation fund that will help
EDA enhance our contribution to the expanding green economy.
As I stated earlier, the world really has changed. And it
is critically important, in my view, that EDA's limited
resources are allocated within our programs in a way that align
our investments with the emerging needs of the communities we
serve. This is why in fiscal year 2011 our proposal shifts the
majority of our program resources to the economic adjustment
assistance program. We know that Public Works investments play
a very important role in leveraging private investment and job
creation. Yet we also know that in today's economic development
challenges we need more flexibility, and the requirements of
our communities go beyond just Public Works. Communities need
more flexibility to develop strategic responses to the changing
economy. These strategies include a broad mix of investments
that address access to capital issues, work force training,
retraining, systems for accelerating the commercialization of
research and development, and establishing a strong
entrepreneurial network. Together all of these elements, along
with Public Works, help build the kind of ecosystem that is
necessary today to support an innovation oriented, sustainable
economic development strategy.
So Mr. Chairman, and Ranking Member Wolf, members of the
Committee, I certainly appreciate the opportunity to have a
discussion today about our budget proposal. I firmly believe
that EDA can continue to be a driver for growth in distressed
areas across the country. And we certainly look forward to
continuing our work with the Subcommittee and the Congress to
ensure that these important programs and initiatives are
resourced appropriately and implemented properly. So I thank
you for your time today and I look forward to answering your
questions.
[The written statement of Assistant Secretary for Economic
Development, John Fernandez, follows:]

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REORGANIZATION

Mr. Mollohan. Thank you, Mr. Fernandez. Mr. Fernandez, last
week the Committee was notified of a reorganization of EDA, and
you spoke to it in your testimony. Elaborate on the purpose of
this reorganization for the Committee?
Mr. Fernandez. Yes. The reorg is designed, essentially, to
streamline our programs, make it clear in terms of some of the
responsibilities within EDA. And most importantly, to put a
focus on particularly the Office of Innovation and
Entrepreneurship as a way to focus EDA's investments around
this critically important agency item for the Obama
administration and the Department of Commerce. It is a budget
neutral proposal, and we think it really helps align our
organization properly for the challenges we face today.
Mr. Mollohan. Elaborate on it. Streamline your programs?
How does it do that?
Mr. Fernandez. Well, as part of my work, Mr. Chairman, when
I first came on board, I reached out to the EDA staff. Not just
in Washington, but across the regional agency offices. And I
asked them, what are some of the things we need to do to better
serve their needs as well as headquarters' needs? And one of
the top responses we got was the need to rebuild capacity
within our Office of Regional Affairs, particularly around the
subject matter expertise for our programs. So we have proposed
within our reorg adding positions that are programs experts
that can help serve in policy development but also guidance and
implementation through, the programs we administer out in our
regional offices.
We have also cleaned up some of the minor organizational
structure in regard to our external affairs. The way the
organization is currently structured that office was referred
to as the External Affairs and Executive Secretariat. And for
most of our stakeholders they have no idea what that means. But
when you refer to that division, which includes our legislative
affairs, public affairs, congressional relations, External
Affairs just is a cleaner structure for that.
We also modified some of the structure within our Finance
and Administration Office that I think makes it much clearer in
terms of their programmatic focus.
Mr. Mollohan. What does this reorganization mean to
regional offices versus the home office?
Mr. Fernandez. Most importantly, as I noted, it means that
we are going to have better capacity to help them do their
jobs.
Mr. Mollohan. Well, by that I mean what is the flow of
personnel? Is there any dramatic flow of personnel from
headquarters out to the field, from the field to headquarters,
an expansion of the field versus the headquarters?
Mr. Fernandez. A good clarification is that, if you looked
at the staffing levels of EDA since, really, the year 2000 we
went, in total, from 255 employees to 175. And those reductions
were felt within the headquarters offices as well as our
regional offices. With the support that we received with the
2010 budget, for which we are very grateful, we have additional
resources now to try and rebuild the capacity of the agency.
And as we are deploying those resources, we are doing a mix of
investments in staffing in the Washington office to build that
programmatic expertise that our regional offices have asked
for. But also adding staff in the field offices as well. So I
think the split is essentially twenty/eighteen, twenty here and
eighteen in our regional offices.

ECONOMIC DEVELOPMENT REPRESENTATIVES

Mr. Mollohan. The trend toward cutting the regional staff
had dramatic impact in my state. As a matter of fact, we lost a
state EDA representative. In the bill last year we spoke to
that. Where are you in addressing additional personnel at the
state level across the country?
Mr. Fernandez. What we have done is we went to the regional
directors and said, ``Here is the additional resources we
believe are available. Here is what we think it means in terms
of total full time equivalents. You tell us how you think you
can best deploy them, and what you need the most.'' So most of
those positions will be in what we call economic development
representatives, or econ development specialists. It is really
focused on the outreach that we provide within the regions and
the states that each office serves.
I might note that an important body of work that is going
on right now within the agency is centered around how we do our
business in terms of the process improvements. And that is
being led by the leadership in our regional offices. And as
part of that process we hope we can streamline, add efficiency,
and hopefully be able to deploy even more resources towards
that outreach function, which is critically important.
In the budget there was language about exploring adding
EDRs, if you will, to each state. We have analyzed what that
would mean budgetarily. It would add approximately $4.4
million, maybe $4.1 million, annually to our staff
requirements. The up front costs would include a couple more
millions dollars in terms of office set up, etcetera. But the
way we are structured now is, we think, appropriate in terms of
rather than trying to create an office in all fifty states,
having these regional teams that can provide a broader range of
services than one individual might be able to do in a
particular state. And it is that team approach that we think
provides a broader, better service.
Mr. Mollohan. What kind of feedback are you getting, if any
yet, on your team approach versus having a representative in,
at least one in every state?
Mr. Fernandez. Well, most of what I hear from stakeholders
has to do with resources. I think we have received good
feedback in terms of level of service. One of the challenges I
think would occur, if you deployed a system where you would
have representatives in every single state, or an office in
every single state, that structure would not really align well
with the resources we have. You would, I think, create a lot of
expectation management issues. It is hard to justify having one
person in one state that might get a grant one year, they may
not the next year. So by having these teams we can really
deploy a broader system, I think, to elevate the services that
we are able to provide.
Mr. Mollohan. I really did not understand what you just
said. It would create an expectation, one person in one state
getting a grant, and with the team----
Mr. Fernandez. Well----
Mr. Mollohan. What were you saying?
Mr. Fernandez. Let me say it a different way. The costs
associated with having a stand alone office with a person
serving an entire state, the programmatic resources behind that
just are not there. I mean, if we were in 1975 and EDA's budget
was $6 billion, then that kind of system might make more sense.
So I think aligning the organization structure to fit with the
programmatic resources we have requires us to think about how
we serve regions not individual states.
Mr. Mollohan. Well, you are operating within the realities
of a budget and I appreciate that. On the other hand, not
having access to an EDR can be really difficult in getting
advice and counsel to a state. States are very large entities.
Mr. Wolf.

JOB REPATRIATION

Mr. Wolf. Thank you, Mr. Chairman. Let me try to see if we
can get you to agree to do something here. Maybe we could do it
in Virginia and in West Virginia, and Pennsylvania, and Texas,
if that were the case. Although Mr. Schiff, his district is
very affluent and I do not think you really operate too much
there, nor do you in my district, actually, too much. So I am
thinking more in terms of the country than I am about my
district. And I think, the other day I asked the Secretary
about a repatriation program whereby we would repatriate jobs
from other countries. Right now there is competition, and you
are from Indiana; Elkhart, Indiana has an unemployment rate of
what?
Mr. Fernandez. Too high.
Mr. Wolf. Too high. I even saw an article the other day
that that program Feed the Children, which I have been, I have
seen in African villages, was in Elkhart, Indiana giving out
food. And so if we could repatriate jobs from other countries
of American companies, and I asked the Secretary about it the
other day. He had someone call, and I am not going to say who,
and basically the answer was that the Department is not doing
anything with regard to this. And I would like to see if we
could get the administration to put together a team and contact
and look at the top twenty-five companies, U.S. companies, not
foreign companies but American companies, that are doing
business in China, in India, in, such as call centers, in
Bangladesh and Mexico, and put together a team, or maybe work
with my Governor, and none of the jobs would come to my
district, I understand that. But work with two Democratic
governors and two Republican governors, because if you do it
the whole country wide it gets dissipated. And see if we can
try to repatriate. Ask some of these CEOs to bring back jobs
that have left this country. American companies, because of
whatever reason, have relocated.
For instance, there was a company in Virginia, I spoke to
them. They have repatriated a call center back from India. They
wanted to be, the people were willing to work at a lower salary
living down in the Blacksburg area. Perhaps their family is
from Blacksburg, perhaps they went to Virginia Tech, perhaps
they like hunting and fishing and do not want to live in a
metropolitan area. But they were very pleased to be able to
take what they had in India, move it back to the United States,
pay a good salary. Maybe not as high as it would be if they
were in downtown New York City, or downtown Washington.
And so what I would like to ask you to do, if you could
maybe take the Chairman's state of West Virginia. What is the
unemployment rate in West Virginia?
Mr. Mollohan. In northern West Virginia we are doing better
than the nation.
Mr. Wolf. Well, wherever it be.
Mr. Fattah. We still need jobs, though.
Mr. Wolf. It is jobs. Well I go back, I went back to my old
neighborhood, and Mr. Fattah will know it. It is in southwest
Philadelphia. When you take the train from Washington to New
York you go right by my high school. We had the largest General
Electric factory in the country, I believe it was, called the
switch gear division. It is gone. It is at 70th and Elmwood,
went to 67th. It is gone. It is over. It is an empty field now,
and the tumbleweeds just blow. Nothing is there. And the old
neighborhood is boarded up.
And if you have ever been to Trenton, New Jersey, it is the
capital of New Jersey. There is a bridge that goes from Trenton
over to Pennsylvania that has a sign that says, ``Trenton
makes, the world takes.'' Trenton is not making anything
anymore. So what I would like to see us, rather than us just
having a general question about, you know, you are going to go
and look, I would like to ask you, John R. Fernandez, on behalf
of this administration, to work with this Committee and
perhaps, Mr. Rendell is a Democrat, the Democratic Governor,
and find two Republican governors, Bob McDonnell from Virginia
one of them, to see about repatriating jobs, bringing them back
from other countries. I mean, that is low hanging fruit.
In Martinsville, Virginia, which is not in my congressional
district, the unemployment rate is 20 percent, 20 percent.
There are many people there who would love to be in a call
center, who would love to do these things. And so could I ask
you officially if you could head up, and I know I am pushing a
little bit, but to head up a program whereby working with some
members up here you will contact the top twenty-five companies,
so it will take a little bit of research. You are going to have
to find companies. Intel is in India, Intel is in China. So
Intel would be one, and twenty-four other companies that are
American companies, that want to do business, love America, but
for some reason have put their business outside as they have
expanded. To give them an opportunity to do something to
repatriate, to do a patriotic thing. And I think now American
companies would like to return home. And to do it on an
incentive basis rather than to say, ``If you do not do this we
are going to attack you, condemn, and we are going to rip you
apart.'' But put some incentives out and see if we could pick
maybe four states that are in deep need and see if we could
encourage, put together a team. And I think you would have to
literally go around and meet with the twenty-five CEOs once we
found out where their locations were. But to bring those jobs
back to the United States, what do you think?
And when I spoke to one of the people, and I am not going
to say who, the other day, the Secretary had the person call
me. Frankly, the administration is not doing anything in this
area. And the previous administration did not do anything in
this area. It is kind of a new concept, a new idea. Now, there
may be ways that the Congress could give, later on give tax
credits, or benefits, or something, or maybe the state could
pass a law whereby there would be no taxation for five years,
or something, to give an incentive. Or maybe a locality would,
say Bloomington would say, ``We are going to give you free
space.'' Or, ``We are going to give you some land that the EDA
has that you can develop a call center.'' But could we actually
do this to see if we could create some fundamental jobs so that
Americans could have jobs, but yet not do it in a retaliatory
method but in a positive, and incentive method? Does that make
sense to you? Or----
Mr. Fernandez. I can say a couple of things about that.
First of all, we are working with some of the staff on the
Senate side as well as within our Oversight Committee for
reauthorization. And specifically there is a lot of discussion
going on around the notion of onshoring, and looking at how we
may incorporate an initiative within EDA's reauthorization to
address the very issues you are raising. The proposal that was
made by Senator Warner, and I believe it is----
Mr. Wolf. Mark? Mark Warner from my state?
Mr. Fernandez. Yes. Some of the language from his onshoring
bill has been included in the reauthorization legislation that
is working its way through the Senate. And in that legislation
it creates an opportunity for the EDA to be a real partner with
states and localities as they try and repatriate or recreate
those technology jobs, manufacturing jobs in the very areas
that you are discussing.
Mr. Wolf. Well I think Senator Warner was responsible----
Mr. Fernandez. He was.
Mr. Wolf [continuing]. For bringing this company back to
the State of Virginia from I believe it was India, if my memory
is correct.
Mr. Fernandez. And I can also make the point----
Mr. Wolf. But could we do it, could you do a pilot now?
Before we wait, I mean when is the reauthorization, and God
bless it, and I think it is good, and I will talk to the
Senator's office about this. But could we not, since Mark
Warner has taken the leadership, could we not do something that
you all go back to the Secretary and say, ``Here is an
opportunity to create some jobs.'' You know, ``The Committee
asked, I would like this responsibility.'' You were a mayor,
you were a political official. You put together a team and
maybe pick not the top twenty-five, the top five companies to
do an inventory, American companies that are abroad, that are
doing jobs that could be repatriated. So while we are waiting
for the authorization, do you expect that to pass by the end of
this year?
Mr. Fernandez. I can only express my hope that it will.
Mr. Wolf. Yeah but see, I notice that, that is good, but we
cannot wait.
Mr. Fernandez. And just to be clear----
Mr. Wolf. I mean if you are out of a job, I mean, the
country needs to create jobs. We need to create real jobs,
where people get up in the morning, and go to work, and do
things that make a difference for the country. And you all
should be excited about it because the unemployment rate is
increasing, it is not decreasing. And we are in record debt.
Anne Applebaum did a piece the other day for the Washington
Post saying we are going to be Greece. We are, if you want to
see the future, it is Greece. And so if we could get you to
commit today, this is a friendly question, that you are going
to do this, or you will go back and talk to Secretary Locke to
see, and maybe we could pick the states here, West Virginia,
and Pennsylvania, and Virginia, and Texas. But poor areas of, I
mean, we are not going to bring this to Houston because Houston
is big, and glittery, and vibrant.
But areas where, there are some communities, when I drive
up to go to a football game at Penn State I go through little
towns that are empty, they are boarded up. The steel mills have
gone. The factories have closed down. Have you ever taken the
train from Washington to New York?
Mr. Fernandez. No.
Mr. Wolf. If you ever do, get on the train and do not read
your book. Just look to the right and the left. The factories
are closed. The windows are broken. The graffiti is all over
the walls. The trash is all, weeds are growing out of the
buildings. This is the infrastructure. This would go through, I
think, Mr. Fattah's district. And I think we have an
opportunity in something that is not a partisan thing to see if
we could refurbish, because those people that live in those
areas, they want jobs. They want to get up in the morning. They
want to go out and do something.
So if we could get you to commit that you will see if you
can get the Secretary to designate you as the person that will
do this, to see if we could begin to repatriate now, and then
in anticipation of the reauthorization. Could we get you? Or
could you look at that and tell us if you----
Mr. Fernandez. We are always interested in working on good
ideas.
Mr. Wolf. It is a good idea.
Mr. Fernandez. And we are certainly willing to continue the
dialogue and look for opportunities----
Mr. Wolf. I do not want a dialogue. I----
Mr. Fernandez. No, I understand. But I----
Mr. Wolf [continuing]. Bad word. I just want to create
jobs.
Mr. Fernandez. We all do.
Mr. Wolf. This country is sinking. We are sinking. We are
sinking. We have $37 trillion of debt. We owe money to the
Chinese. The Chinese are, are you Catholic? The Chinese have
thirty-four Catholic bishops in jail. Are you Protestant? The
Chinese have hundreds of Protestant pastors in jail. Are you
Buddhist? The Chinese have plundered Tibet. Are you Muslim?
They are persecuting the Uighurs. They are compromising this
nation. So I do not want a dialogue. If it is a dialogue I
withdraw the question. I just want to know, yes or no, will you
take this back to the Secretary to ask to do this? Or if it is
a discussion, forget it. I just want to know, will you go back
and talk to him?
Mr. Fernandez. I can put it on the table. I think there are
many ways to address these issues, and we are working very hard
on a daily basis to create jobs.
Mr. Wolf. The jobs----
Mr. Fernandez. I was in Martinsville two weeks ago. I
understand. I may not have taken a train to New York, but I
have been in many parts of the country, my own backyard and
elsewhere, where I see the devastation, and I share that.
Mr. Wolf. And therefore, and therefore what will we do? I
mean, I, this is, I wanted to, will you then to go back to the
Secretary and work with the governors?
Mr. Fernandez. I can certainly talk to him about this
proposal, absolutely.
Mr. Wolf. Okay. And if you could let us know. And maybe fit
the Governor of West Virginia, and the Governor of
Pennsylvania, and the Governor of Virginia, I do not know, the
Governor of Texas. But I know my State would like to
participate and frankly these jobs are not going to go to my
area. But I am tired of just seeing us lose all these jobs, and
where Americans could do the jobs. And we could have a
renaissance in this nation. And quite frankly, with all due
respect, the previous administration did not do it, but you
guys are not creating new jobs. A lot of that stuff went out,
and it is just spend, spend. I am talking about low hanging
fruit that we could get these jobs, bring them back. They could
go to a Martinsville, they could go to West Virginia, they
could go to parts of Pennsylvania, or they could go, and we
could do something. Or at least we would know that these
companies are not going to come back, or they will, and then
see if there is an incentive package that you all would be able
to give, or maybe we could do something in the tax code, to
kind of give these companies an opportunity. So if you could do
that and let the Committee know I would appreciate it.
Mr. Fernandez. Sure.
Mr. Wolf. Thank you.
Mr. Mollohan. Thank you. Mr. Fattah.
Mr. Fattah. Thank you, Mr. Chairman. And Mr. Mayor, it is
good to see you.
Mr. Fernandez. Thank you, I am glad to be here.
Mr. Fattah. And in a new role, and I want to welcome you. I
think you are doing an extraordinary job. And I share the
passion of my colleague from Virginia in that, and, obviously
the administration does. Because when you all took office, we
were losing 700,000, 800,000 jobs a month. We have seen a major
turnaround in the economy. Yesterday a year ago the stock
market was at its lowest, 6,000. We have seen a major increase.
But there is more work to be done, and I was happy to see the
Senate act yesterday on a jobs initiative, but we have a lot of
work to do. I think that the passion you hear from my colleague
is shared. That as long as we have a significant number of
Americans unemployed, as the President said, we have to keep
working. It is good to see that the unemployment rate is
stabilized, and starting this month we are going to be in the
plus side of jobs, close to 100,000 each month for the rest of
the year. But it is going to take us a while to turn this
economy around from where we were. And the almost doubling of
the national debt, when the President took office, when he was
sworn in, the national debt was at around $11 trillion and
growing, with a $1.2 trillion deficit.
The country was headed off a cliff. So your team and this
administration has done a good job. And I do not think this is
a partisan issue that has been raised by my colleague. I think
that there is room for us to work to try to bring jobs that
have left the country back to America. Americans do create
jobs. Every time we buy a car, you know, that is putting people
to work. The question is, if we are going to buy cars that are
made somewhere else, if we are going to buy a TV, or a washer
and dryer, and it is made somewhere else then it creates a
dynamic in which we are shifting our wealth other places. And
in Indiana you built a great reputation for building these RVs
that I love. And in my home city we have some 1,300
manufacturers today who are doing an extraordinary job. We have
Penn Fish and Tackle, they make saltwater fishing reels. They
have no competitor in the U.S. They have one competitor
overseas. We have CARDONE Industries with 3,000 employees
making auto parts. And they have only one other competitor and
they are in Mexico. But there are a lot of pressures on
manufacturing jobs.
So first of all I want to join with my colleague. I would
be glad and interested, no matter what states are selected, to
see whether somewhere in the Commerce Department, whether it is
in EDA or somewhere else, if there is some effort to encourage
American companies to have these jobs, all other things being
equal, here. I think that American businesses have a lot of
challenges. I mean, if they have a market in some other place,
they have a responsibility to be a good corporate citizen
there. But if they are selling 99 percent of their products in
America, but yet making them somewhere else to improve their
profit line, then I think that there is something off base
about their calculation about where their long term interests
are. So, I mean, I think we have to kind of walk through this
and work on it.

PLANNING GRANTS

But I want to ask you about EDA. Now so you had about a 1.7
in applications. You did almost, close to $600 million in
awards if you look at the whole package. But it seems as though
the best place where you have almost funded everything that
came in the door were the planning grants, well over some 400
planning grants. And I would be interested if you could make
some comment about the range of diversity, and give us some
examples, of the kinds of planning awards that the Department
made to help communities kind of figure out what their niches
are and how they can exploit them to retain and create new
jobs.
Mr. Fernandez. Yes, absolutely. It is a good question
because it blends into a broader discussion we are going to
have today. The planning program within EDA's budget, the vast
majority of those resources fund our network of economic
development districts. Currently we have 383 districts that we
fund throughout the country. We have pending, I think, three
more applications for additional districts. These serve as
regional, on the ground, economic development partners for our
agency. That is one of the reasons why EDA works so well, we
work through and with, as partners, a broad national network of
economic development organizations.
When you look at the requests for planning beyond the
ongoing operational support for the economic development
districts, it is not a large amount of money.
Mr. Fattah. Mm-hmm.
Mr. Fernandez. Many of our strategic economic development
strategies are developed through our economic adjustment
program. So for example, a very good example, is in Lorain
County, Ohio where it has been in the news, a documentary about
the last truck, that was related to that community.
Mr. Wolf. The last what?
Mr. Fernandez. Last truck. They had the plant closing.
There were the changes at the Wright-Patterson Air Force Base.
Mr. Fattah. Mm-hmm.
Mr. Fernandez. And consequently, there was a very broad
regional impact of the changes in the economy. EDA funded a
strategic planning effort that is very regional. They just
rolled out the results of that planning. And what they did is
they took that step backwards, looked at the assets they have
in the region in terms of workforce, in terms of kinds of
businesses, and thought carefully about the commonalities there
that we can position the region to go after in terms of new
industries. And they identified aviation and a couple of other
sectors that I do not recall off the top of my head. But that
is a very good example of, I think, the unique role that EDA
plays in working with communities; thinking through these
strategic changes that they need to make to be competitive in a
global economy.
Mr. Fattah. Now you funded, outside of the planning area,
you funded a $900,000 project in Danville, Virginia to look
at----
Mr. Fernandez. Yes.
Mr. Fattah [continuing]. Is it technology-based
enterprises?
Mr. Fernandez. Yes, there is a commercialization center
that we helped initiate, invest in, in that region that helps
commercialize technology and ideas, and spin those out into new
businesses to create jobs. And truly, the source of almost all
of the net new growth in employment in our country are in these
small and medium sized companies. And I think Kauffman did a
study not too long ago, the Kauffman Foundation, and they found
that almost all net new jobs were being created by companies
that were five years old or less.
Mr. Fattah. Right.
Mr. Fernandez. And the point of that is that we work with
communities to think about how they can strategically position
themselves for sustainable economic growth----
Mr. Fattah. Right.
Mr. Fernandez [continuing]. Having a holistic approach here
that looks at how are you supporting entrepreneurism and small
business creation. Accelerating commercialization of research
and technology. Those are all critically important to helping
communities get on a glide path that is sustainable.
Mr. Fattah. Well, you know, there was this debate that I
recall about the fundamentals of our economy. It is great that
we are making that investment and----
Mr. Fernandez. Yes.

HUMAN CAPITAL DEVELOPMENT

Mr. Fattah [continuing]. We have been working in
Philadelphia focused on the same issue about the
commercialization of nanotechnology and the like. And up in the
other end of our State with Carnegie Mellon on robotics and
biotech. But the fundamentals which you, it is not in your
portfolio, but it concerns me and I just want to put it on the
record. I mean, for the first time now we have crossed a
rubicon in which the majority of the patents requested are now
not by Americans or American companies. The underlying point of
the new growth is on these cutting edge technologies and new
products. And when we see, much smaller countries like South
Korea out-producing us in terms of the numbers of engineers
graduated, and we see much larger countries like China out-
producing us in the number of engineers, if you look down the
road here, one of the real deficits in the country is in our
human capital development. One of the things that the Chairman
has been interested in is, we have a number of agencies under
the jurisdiction of the Committee that are involved in science
and technology and education, is to try to see where we can
have an impact. Because, whether it is the manufacturers in
Philadelphia or the advanced technology issues in Virginia, if
we do not grow the intellectual infrastructure that would be
the basis for, the new products, then the ability to grow new
companies and put new products in the market, which even in
manufacturing when we lost jobs overseas we usually lose them
after we have exploited the product for a fairly long time and
then move on; we will not even have that opportunity.
So, you know, I just want to put that on the record. I
thank you for your testimony and for your work, and I thank the
Chairman. Thank you.
Mr. Mollohan. Mr. Culberson.

DEFICIT SPENDING

Mr. Culberson. Thank you, Mr. Chairman. Thank you for being
with us today, Mr. Fernandez. A day that I am going to do my
best to remind everybody of every chance I get is June 1st,
because that is the day that the United States starts living on
credit and charging everything that we do to our kids, sending
them the bill. Because that is the day that, if you take the
amount of money, fiscal year 2009 revenues, and just divide it
by the amount of money we spend, and multiply that by 365, to
obtain the number of days out of 365, you know, that that
fraction represents, you can quickly see that we on June 1st
have spent all the revenue that has come into the federal
government. And from that day forward we as a nation are living
on debt. And I, this is, I know, a concern to the members of
this Committee. I particularly share Mr. Wolf's passion for
making sure that we do not leave this inheritance to our kids.
So as a fiscal conservative I am always looking for ways to try
to consolidate and save money. And I note that the GAO has
identified eight-six federal programs in ten federal agencies
and various commissions that provide economic development
funding. And one of these, of course, is the Economic
Development Administration, created of course for a noble
purpose. But in looking at your statute I see that you can make
grants to economic development districts, Indian tribes,
states, cities, or other political subdivisions, universities,
public or private nonprofit organizations. And really the
principal purpose of your agency is, you primarily issue grants
for planning, in essence, largely, looking at your statute.
Mr. Fernandez. The primary purpose of our agency----
Mr. Culberson. Assistance, planning----
Mr. Fernandez [continuing]. Is to create jobs and leverage
private investment.
Mr. Culberson. But as I read, when you read the statute
your guidance is to provide technical assistance, cooperation,
planning, promote investment. You may make grants to local
governments for public infrastructure, for public works, public
service. But the principal job it looks like you do is
planning, coordinating, facilitating economic development. Is
that right?
Mr. Fernandez. The statute sets out a range of activities
for EDA.
Mr. Culberson. Right. That are focused and built around
planning----
Mr. Fernandez. You are correct, there are numerous
divisions within other agencies that have an economic
development element to them. But EDA is the sole agency whose
sole mission is to help build and lead an economic development
strategy for the entire country, across sectorial areas----
Mr. Culberson. Sure, I understand. But you are focused on
planning and technical assistance. And you do grants to local
and state governments to build that infrastructure----
Mr. Fernandez. If you look at our budget the vast majority
of what we do is invest in our economic development programs,
which tend to be direct investments whether it is in
infrastructure, incubators, other kinds of strategic
initiatives----
Mr. Culberson. Okay.
Mr. Fernandez [continuing]. That leverage private
investment and create jobs.

JOB CREATION

Mr. Culberson. So what percentage of your total amount of
money you are appropriated each year do you estimate are spent
on grants like that, that go directly into, that create jobs?
Mr. Fernandez. I cannot tell you the percentage off the top
of my head. But essentially it is around $190 million out of a
total of $246 million.
Mr. Culberson. So $190 million out of $246 million?
Mr. Fernandez. Mm-hmm.
Mr. Culberson. Okay. And those go to grant programs that
build infrastructure, public works projects, etcetera, that are
going to----
Mr. Fernandez. Incubators, accelerators----
Mr. Culberson. Okay.
Mr. Fernandez [continuing]. Organizations that support
economic development.
Mr. Culberson. I cannot find where, you know the GAO has
been unable to verify the numbers that you use for the numbers
of jobs you allegedly create. What number of, how many jobs do
you, does your agency claim to have created and what do you
base that on?
Mr. Fernandez. Well this----
Mr. Culberson. I am trying to get a handle on what, if you
all can give me an estimate and where the estimate comes from
of how many----
Mr. Fernandez. Well there are two different sets of
estimates. One is based on what the grantees estimate. And I
think that might have been the number that the Chairman alluded
to earlier.
Mr. Culberson. Which was what? If I could, if you would
remind me what the Chairman, I am sorry, over what, 350,000
jobs?
Mr. Mollohan. 350,000 by the grantee estimates.
Mr. Culberson. By the grantee estimates over----
Mr. Fernandez. And he is trying to explain that to you.
Mr. Culberson. Yes, sir?
Mr. Fernandez. We have had a couple of different in depth
looks at this very issue. One was a study that was conducted by
Rutgers University. And then there was a follow up a couple of
years ago by the private consulting firm Grant Thornton. They
essentially verified that the estimates that we are using were
pretty good.
Mr. Culberson. And 350,000 jobs created over what period of
time? period of time?
Mr. Fernandez. I am not sure which period of time the
Chairman is referring to.
Mr. Culberson. And those are the estimates of the grantees?
Mr. Fernandez. Our average, is approximately $5,000 per
job, sometimes it bumps up. With the stimulus act if you look
at the total of jobs that were saved or created, the cost per
job was right around $4,600. We can talk about other agencies.
I do not know them as well as I know EDA. But what I can say
about EDA is that the strength of this agency has been built on
three points. One is that it is built on partnerships with
organizations, a national network of economic development
organizations that develop bottom up strategies for building
capacity in communities to support economic expansion. The
second point is that there is no one size fits all solution
here. So unlike a lot of agencies EDA has a substantial amount
of flexibility within our programmatic investments to respond
to creative solutions, unique solutions, that communities
identify. And then the third point about EDA's strength is our
return on investment. When you look at the cost per jobs that
we invest, the leverage we get, when you look at the private
investment that is leveraged per federal dollar. The return on
investment for communities and for the country is very
substantial and I think that is one of the reasons why over the
years there has been strong bipartisan support for EDA.
Mr. Culberson. I think flexibility is a very good point,
and that is certainly true. I am surprised to see in your
statute Title 42, Section 3151A that says that if a local
project, Mr. Chairman, has actually saved money, if it is less
expensive than originally planned, the money saved does not go
back to the taxpayer. I am sorry to see that we do not save the
money. It is actually respent somewhere else.
I do see, though, the flexibility is a good point. I see a
number of projects here in the State of Texas. Port of Beaumont
navigation district, Seabrook, Texas Medical Center branch at
Galveston building improvements, etcetera. But, you know, this,
and no question I am confident you do good work. But at a time
when we are literally approaching a financial cliff, the scale
of the debt and the deficit are so tremendous and so terrifying
that we need to look at places to save money, Mr. Chairman. I
do think this is an agency where, as in any private business
gets in trouble with debt they retrench and get back to their
core mission. I bet we could probably save some money here, and
maybe look at this, and we appreciate the work that you do,
sir, but I am confident this is an agency where we could
probably save some money and see it better, a little better
targeted perhaps----
Mr. Fernandez. We can agree to disagree.
Mr. Culberson [continuing]. Elsewhere, and maybe in the
form of tax cuts. Texans always prefer tax cuts to create jobs
rather than federal grants, as a general rule. But we
appreciate what you do, sir. Thank you very much.
Mr. Fernandez. I appreciate that.

PUBLIC WORKS & EAA FUNDING LEVELS

Mr. Mollohan. Thank you. Secretary Fernandez, I want to
explore your request and our attitudes as expressed in previous
appropriations. I am looking at your 2011 request and I am
looking at our 2010 omnibus. You have flipped, virtually
flipped the funding for Public Works and economic development
assistance. I want to give you an opportunity here today to
justify this request, particularly in light of our expressed
attitudes about it in the past. Make your case.
Mr. Fernandez. I will, and I appreciate that, Mr. Chairman.
And I sincerely respect the views of the Committee. I mean,
clearly this has been a discussion that precedes me and it is
one that will probably continue. When we look at the
President's proposal for EDA it is in the context of the entire
budget. So we are very cognizant of the constraints, the fiscal
constraints, concerns about the deficit. So you look at what
EDA does in the context of the entire federal budget proposal
that has been put forth by President Obama, for economic
development, there are multiple agencies that have an impact on
how we rebuild the economy. And what the President has made
clear and we wholeheartedly support is the notion that while we
have taken bold action with the support of the Congress and the
administration to keep the country from falling off a cliff, as
we move forward we really need to look at how we build a
stronger foundation that positions America to be very
competitive moving forward in this new economy, or changing
economy. It is not really new.
And the real pillars of that include unprecedented
commitments to education. The workforce issues are paramount to
having the capacity to compete in the global economy.
Infrastructure is clearly a huge part of that system that we
need to be able to build a strong economy. If you look at the
overall budget proposal by the President, there is substantial
investment in infrastructure. And then the third area is the
area of research and development. And the President's budget
includes significant increases in the federal government,
investments in the research that is going to be a real driver
of new ideas, new products, and commercialization.
So it is in that context that we look at EDA's budget. So
what does EDA do that----
Mr. Mollohan. Other agencies having primary
responsibilities for the R and D and primary responsibilities
for the workforce development?
Mr. Fernandez. Exactly.
Mr. Mollohan. You are not suggesting EDA's, that that----
Mr. Fernandez. No, I am just saying that----
Mr. Mollohan [continuing]. Where their mission----
Mr. Fernandez. Absolutely.
Mr. Mollohan. So you are just putting it in the context----
Mr. Fernandez. So if we put our request in the context of
the overall budget, the unique thing that EDA provides that the
other agencies do not is this flexibility to go in and address
strategically, different needs in the community. If you look at
demand for EDA in, year to date, fiscal year 2010 year to date
for economic adjustment, we have received applications worth
$222 million. Last year we had substantially more requests in
EAA as a percentage of requests than any other program we have.
And what we are hearing is that while infrastructure is very
important, and that is a key implementation strategy in many
communities, is the flexibility of economic adjustment to deal
with issues like access to capital, developing the strategic
plans that link workforce, innovation, existing employment to
the clusters that we are trying to build. And it is that kind
of flexibility that is available within the economic adjustment
assistance, even though the majority of economic adjustment
funds end up being construction projects. That is the area
where we see just a significant amount of demand and that is
the one area that EDA plays a very unique role that other
agencies cannot fulfill.
Mr. Mollohan. Well I mean, obviously that is a compelling
case. If you can think about economic development in strategic
terms that is very important, particularly if you can bring
assets to bear that assist local areas in strategic thinking
and strategic development, which equates in my experience to
promoting economic diversification, that is a very powerful
thing. And I am going to invite myself to have you come and
explain where that is happening. I would like to see some real
examples of that.
You know, we have gotten EDA on task up in Weirton, West
Virginia; when I was elected to Congress, there were 14,000
steel workers working at Weirton Steel. They are definitely in
transition. And the industry is definitely transitioned and it
is a catastrophic economic event over time. It has been a
process of attrition. But it has not taken forever. It has not
been sudden, it has not been precipitous, but it has been real.
And so they are in a period of rethinking strategically about
how they reconstitute their economy.
So I hear you talk about the EAA account in those terms,
and the flexibility that it represents in those terms. I invite
you to show me where that is happening, where you are really
going in and partnering and engaging a community on those terms
and having a result.
You are here to testify and I am not here to preach. But
one of the strengths of the Public Works program is that it is
understood. It has demonstrably impacted, in a favorable way,
all kinds of projects that have, in my district, promoted
economic diversification. It has leveraged a tremendous amount
of money, including conventional financing, to make deals work.
So, the Public Works program has a constituency and it is out
there, throughout our communities, but it is also here in
Congress. People have experience with it.
So when you talk about an EAA program you have a burden to
prove. And I am certainly susceptible to the argument. But when
it is put in the context of pitting EAA against Public Works,
it is tough sledding for you. It is a heavy lift, I can tell
you. Not that you are not convincing about the potential for
EAA funding, but that has not been as adequately demonstrated,
not to me. Conceptually it really sounds great, but the Public
Works program has been demonstrated. So we need to visit on
this and continue to talk about it. But just to come forward
with a budget request that flips these two accounts year after
year, I am not sure you are really going to get there in that
way. We want to help you get there, but I am not sure we are
going to get there in that way.

GLOBAL CLIMATE CHANGE MITIGATION INCENTIVE FUND

As we evolve the Economic Development Administration and
its programs to help promote economic development, leverage
economic development, and think about new priorities, I think
about incentivizing public works projects, to become more
environmentally sound. We initiated a program which we called
the Global Climate Change Mitigation Incentive Fund. As
originally conceived by the Congress that is exactly what that
was, an incentivation fund. The original thinking was to think
of it in the context of the Public Works account. And so as
grantee applicants came forward they would see this incentive
to incorporate environmental elements, maybe LEED certification
in their project. And in addition to getting a regular EDA
Public Works grant they would get an amount, supplementary
amount, on top of that for this purpose. A reward, if you will,
for trying to become environmentally friendly.
I think in the first year the agency limited that to LEED
criteria. I am actually interested in hearing how successful
that was? Or was it, it was a little bit before your
administration. But are you familiar with how successful or
unsuccessful, and how did you measure that, if you did?
Mr. Fernandez. I can attempt to do that, and I know enough
to be dangerous. It is my understanding that as originally
conceived the funds that were targeted for that fund were used
as leverage to get some of our construction projects to adopt
the sustainable development techniques.
Mr. Mollohan. Just as I described.
Mr. Fernandez. Exactly.
Mr. Mollohan. So do you agree with my description of that?
Mr. Fernandez. Yes.
Mr. Mollohan. Okay.
Mr. Fernandez. So often the investment made in 2008 for
global climate change money in conjunction with a Public Works
investment. I think it was very successful in terms of getting
that leverage and adding that incentive.
Mr. Mollohan. Can you cite cases for the record where that
is true? I would like to have cases for the record where Public
Works applications incorporated environmentally progressive
building systems, techniques----
Mr. Fernandez. We would be happy to provide you a complete
list of the projects that were funded.
Mr. Mollohan. Well no, no, no. I am not asking that,
exactly. I am asking, a list of projects that were incentivized
to be increasingly environmentally sensitive because of this
account. In other words, an applicant came forward and had an
application for a public works project. And said, ``Well gee,''
you know, ``if we get another $1 million we will,'' I do not
know, ``put a green roof on.'' Or, you know, ``It will cost a
little more, but we will do something with windows, or the
positioning of the building.'' I do not know what. But you
provide us with examples where this grant program did from the
start incentivize environmentally sensitive projects. That is
what I would like to focus on.
Mr. Fernandez. We will work on putting that together for
you.
[The information follows:]

[GRAPHIC] [TIFF OMITTED] T6756B.008

[GRAPHIC] [TIFF OMITTED] T6756B.009

Mr. Mollohan. Because that is the purpose, you know? And as
your grantees look at that, that was, ``Okay, we will give you
this money if you do something more to your building to be
efficient.'' You know, energy efficiency, for example.
Mr. Fernandez. Yes, and if I could just elaborate?
Mr. Mollohan. I am sure there are examples out there.
Mr. Fernandez. Yes. And if I could talk about it more
broadly, too, is that, the goals behind that initiative in
terms of encouraging that kind of building practice?
Mr. Mollohan. Mm-hmm.
Mr. Fernandez. Are goals that we have embedded in our new
investment priorities across our programs. I have looked at the
language from last year's budget that encouraged us to look
beyond just LEED buildings at how we support other elements of
expanding the green economy. And so we can target these
resources, I think, appropriately to help grow the green
economy in many communities. But also we can embed in the
evaluation criteria that we apply to other Economic Development
Administration investments the principles that were squarely
behind the creation of the program. And we have done that in
criteria that we have articulated for existing programs as
well.
Mr. Mollohan. Beyond just incentivizing construction
techniques? Or building----
Mr. Fernandez. The notion of ``sustainable development''
has evolved in the industry over the last few years as well.
And as someone who used to develop projects, there was a time
where LEED development was viewed as, ``Something that is going
to be incredibly more expensive.''
Mr. Mollohan. It was incredibly more, or it is incredibly
more expensive.
Mr. Fernandez. It was. But cost differential between
sustainable practices and more traditional practices is
shrinking. And the operational savings are shortening the
timeline on return on investment. So you see a lot more
buildings in the private sector and the public sector are
coming forward and saying, ``Look, we are going to do this.''
Mr. Mollohan. Without an incentive?
Mr. Fernandez. Because the incentive is there in terms of
reduced operating costs----
Mr. Mollohan. Mm-hmm.
Mr. Fernandez [continuing]. And broader benefits for the
community, for their employees. There is a wealth of evidence
that those kind of buildings have direct impacts on
productivity and just the quality of the work coming out of
these facilities.
Mr. Mollohan. Mm-hmm.
Mr. Fernandez. So that is shrinking. So if I understood the
guidance in last year's budget, we were asked to look at how we
can leverage these dollars to broaden the impact of the program
beyond just LEED buildings, but look at renewable energy
initiatives and other projects. And that is what we would like
to do moving forward. While we can still continue to
incentivize LEED buildings, I think there is a broader
application that could have a big impact.
Mr. Mollohan. Well if you are wanting to broaden the
purposes, which again we are not unsympathetic to but we look
forward to being convinced, then why are you at the same time
reducing the funding request below the 2010 funding level? You
came in with your request for 2010, for 2011, even though we
increased the funding for $8 million.
Mr. Fernandez. Well, as we noted earlier, the President has
articulated a budget based on the fiscal constraints.
Mr. Mollohan. So it is purely fiscal, a fiscal
consideration?
Mr. Fernandez. Yes, so, in light of the freeze on
discretionary spending, the request we are making is at the
same level for our programs that we made in 2010.
Mr. Mollohan. Okay.
Mr. Fernandez. And of course Congress appropriated
additional resources to us in 2010. We are certainly
appreciative of that. But our request is the same request we
made in 2010.
Mr. Mollohan. Okay, thank you. Mr. Ruppersberger.

PENN STATION IN BALTIMORE

Mr. Ruppersberger. I come from local government for about
eighteen years, a lot of economic development issues. Always
you are looking for the federal government for ways to help,
and whatever. And there are different grant issues that are out
there. When you come to Congress you prioritize on certain
major projects. And I am getting personal now, but there is
Penn Station in Baltimore. And it is pretty bad, and yet there
are people coming there all the time. And I am working with
Congressman Cummings to try to revitalize that area, and using
the station in Washington, D.C. as an example. We took a
station, revitalized it, retrofitted it, put in stores, food
banks, restaurants, whatever. And it is my understanding now
that that project is making profit for Washington, D.C. because
it is a place where people come.
Now there is, when you, in this market a lot of the
governments are distressed and they just cannot put money in
that needs to be. What I am going to probably ask is someone
from your Department contact my office. There is a major issue
that has to be done, and maybe some federal grants. But what
this does, it not only helps the area but it revitalizes a
neighborhood. This is a very poor neighborhood, a lot of crime
issues around the area. So I am making a request, basically, if
you could get with my staff, Walter Gonzales here, when this
hearing is over and talk about that issue.

PROCESS FOR WORKING WITH LOCAL GOVERNMENT

There are a lot of local governments in distress. Do you
see that the ones that are successful working with you in
getting funding are more aggressive themselves? You know, what
is the process? Are you reaching out to different states?
Because the key is jobs now, as we know. And the more that we
deal and focus on the jobs issue the better. Are you
coordinating with the stimulus package? Where are you in that
regard?
Mr. Fernandez. That is a good question. EDA operates,
through this national network of local economic development
organizations. We fund, 383 economic development districts that
by the very structure of those organizations, include local
representation from local government. They partner with them to
develop the strategic and economic development plans for their
area. And so, there is that direct connection between the local
government, the districts, and the Economic Development
Administration.
In addition, through our economic development
representatives, we engage in outreach efforts directly in
communities. We would like to be perceived as being accessible.
It may not always feel that way, and I certainly can appreciate
that having been on the other side of the table not so long
ago. There is a need for improvement, I am sure. But I think we
do a pretty aggressive job in terms of our outreach and we try
to be accessible.

COORDINATION WITH OTHER AGENCIES

Mr. Ruppersberger. Do you coordinate with Small Business
Administration, the Community Development Block Grants, those
different----
Mr. Fernandez. To some extent, yes. And I can tell you with
this administration there is an absolute commitment to blowing
up a lot of the silos. We are engaged in collaborative efforts
with SBA. I am leaving this hearing to go meet with HUD. There
are a number of agencies that are working together to look at
how we can address community needs so that we can integrate the
various kinds of federal resources we can bring to the table
and make it easier, frankly, from the customer side of the
table than them having to figure out how to get from agency A
to B and C, and try to put all those things together. I think
there is an opportunity to do things in a different way that
can be very helpful.

AWARD FUNDING FORMULA

Mr. Ruppersberger. My last question, because it is really
about end game results. What formula do you think works? And
what is your policy or philosophy as an agency to give money?
You know, you have a lot of people that want money, they do not
know how to get it. What are you looking for? And give me an
example of a project where you got involved, where you made a
difference?
Mr. Fernandez. It is a good question. First of all the
communities we work in by definition have to be distressed. I
mean, that is----
Mr. Ruppersberger. But is that point not, I mean it is so
broad now, you are dealing with about 80 percent of the whole
country?
Mr. Fernandez. It is, that is true. So----
Mr. Ruppersberger. You are probably going to have to relook
at that formula, in today's world.
Mr. Fernandez. It is a big part of the country. And
hopefully it will shrink. But we look at the investments based
on the level of collaboration, the amount of private sector
jobs that are created, the leverage of investment from the
private sector, how it is tied to the community's strategic
thinking about where their growth is going to come from. We
look at that entire package. One of the things we are working
on, is developing a more quantitative system for evaluating
projects to get a more even playing field and making it a lot
more transparent.
Mr. Ruppersberger. But what I need is an example now. Give
me an example of what you are looking for, what is the
quickest, the best way? When I am talking to our mayors, our
county executives, or even our governors, from your perspective
what works quickly? Because that is what people want to do,
they want to move forward. And we need to work quickly in this
market.
Mr. Fernandez. Well, you know, if you are talking about a
specific----
Mr. Ruppersberger. A project, a specific project.
Mr. Fernandez. I mean the----

PENN STATION IN BALTIMORE

Mr. Ruppersberger. I will give you an example, the Penn
Station thing.
Mr. Fernandez. Yes. Well, that is a very important project
and I believe in those kinds of projects. That is probably not
a quick project. As we go out and----
Mr. Ruppersberger. Well I know, I do not like to get
personal in these hearings but I will. It has to do with
removal of a certain pipe underground, to connect the parking
lot over the train tracks, and whatever. And nothing is going
to happen until that occurs. That would be a focus where I
would look from a federal level to get involved. If that opens
up the whole project might go.
Mr. Fernandez. I understand. And we will get more
information about that specific project. But, you know, what we
have seen is that by working through this network----
Mr. Ruppersberger. Give me an example. Answer my question
with that. Is that not the type of project that you are looking
at? That is not where your money is going to come from? You
have to be more involved in certain formulas and rules? I mean,
when you are talking jobs and business you have got to move
more quickly now.
Mr. Fernandez. Absolutely. And----
Mr. Ruppersberger. So give me an example.
Mr. Fernandez. And there is no shortage of examples.
Mr. Ruppersberger. Okay.
Mr. Fernandez. I was in a very small town in Minnesota
where the main issue was expansion of a water plant in
Nashwauk. It is a city with a population of nine hundred and
some people. Clearly they do not have the resources in a town
that size to make the kind of infrastructure investment that
was needed, which enabled a $16 billion private sector
investment creating 500 direct jobs in the steel industry. That
was part of the strategic planning for that region----
Mr. Ruppersberger. Okay.
Mr. Fernandez [continuing]. In Minnesota they call it the
Iron Ridge. And they were leveraging natural resources,
leveraging workforce, and we were able to make an investment to
meet that local need that they could not make but for us.
Mr. Ruppersberger. Okay.
Mr. Fernandez. And that is leveraging----
Mr. Ruppersberger. And that is what I am looking for.
Mr. Fernandez. And that is going to create immediately
2,000 jobs just to build the facilities. So it is those kinds
of projects. And what I was trying to say, not very
articulately, is that by working through these local networks
of economic development professionals, they have got great
projects queued up.
Mr. Ruppersberger. Mm-hmm.
Mr. Fernandez. That is why last year when the Congress
approved the Recovery Act, EDA was appropriated $150 million
for Recovery Act projects. We were able to obligate 100 percent
of our money within a year, a year ahead of schedule, because
this network that we work with has many projects queued up,
more than there are resources to fund. So it is that built-in
pipeline of investments that are out there that we can fund and
accelerate job creation in the near term, but do it in a way
that is built on longer term strategies for----
Mr. Ruppersberger. So it is fair to say that when it is the
right project, that you can be extremely aggressive to make the
project move forward?
Mr. Fernandez. We can. We can. And I do not want to dismiss
them, because there were some questions earlier. Sometimes it
takes longer than it ought to. And I can tell you that we are
very committed to evaluating how we do our review process to
make sure that we are doing it as quickly as possible.
Mr. Ruppersberger. We just voted on this budget while you
were gone. Thank you for leaving the room.
Mr. Mollohan. What did you do?
Mr. Ruppersberger. Nothing, I am teasing.
Mr. Mollohan. Mr. Wolf.

GAMBLING

Mr. Wolf. Thank you, Mr. Chairman. I have a question, but
before I do I want to make a comment. I am very disturbed to
see the number of communities and states that are expanding
gambling, that are seeking gambling, which brings crime,
corruption, break down of the family, etcetera. Does any of EDA
money ever, ever, ever, ever, ever go to any community to help
them bring about economic development for expansion? Because if
it is I am going to offer an amendment to prohibit that. But
has it ever----
Mr. Fernandez. I am not aware of any.
Mr. Wolf. And you would never do that, would you?
Mr. Fernandez. Well I personally would not put that on my
priorities of economic development strategies, but that is just
my personal opinion. I can check it. I do not know if there is
a specific exclusion for that kind of investment or not. But I
am not aware of any such investments.
Mr. Wolf. I mean, I do not think we should do it. I mean,
that does not create a job. That, I mean, the break down of the
American values. I just had a letter the other day. I was the
author of the National Commission on Gambling, and what it does
to communities. I, frankly it has not been the greatest thing
for the State of Indiana either, from a lot of people that I
hear. Where it comes you get crime, you get corruption. Where
we have kept it out of our state. Anyway, if you could let us
know if it has been used or can be used I would appreciate it.
[The information follows:]

Gambling Institution Investments

EDA's authorizing statute, the Public Works and Economic
Development Act of 1965, as amended, does not expressly exclude grant
investments to gambling institutions.
The American Recovery and Reinvestment Act (ARRA) included an
express prohibition as follows:
limit on funds
SEC. 1604. None of the funds appropriated or otherwise made
available in this Act may be used by any State or local government, or
any private entity, for any casino or other gambling establishment,
aquarium, zoo, golf course, or swimming pool.
In the past 20 years, EDA funded 4,734 construction projects
totaling $5.5 billion. None of these projects funded casinos or
gambling facilities. We would note that about a decade ago, EDA funded
a community-wide well and water treatment system for a City located on
an Indian reservation that included as part of its justification that
the water treatment system for the City would also benefit a hotel
associated with a casino in addition to other employers. One reason
that EDA does not fund such projects is that they do not represent the
kind of innovation-led economic development needed to transform the
regional economy. EDA intends to establish an explicit prohibition
against funding such projects in the Bureau's forthcoming FY 2010
Operational Guidance and in future revisions to its regulations.

BEST PRACTICES FOR COMMUNITIES IN NEED

The other question is, do you have a best practices for all
the communities that are in need? Because some communities are
so small they do not have the resources. Do you have a best
practice to ensure a community that is going through this has a
place to go to find out what has the best approach that has
been used by others? Do you offer a best practices for
communities?
Mr. Fernandez. Not as well as we should. And part of our
effort----
Mr. Wolf. That is an honest answer, is it not?
Mr. Fernandez. Well, our regional staff certainly have a
wealth of experience that they can share, and they do with
community representatives. What I would like to do as part of
rebuilding the capacity of the agency is to build that kind of
resource center. And it is really more of a virtual best
practices system, but, I look at the history of EDA over forty-
five years as having a whole host of not just best practices
but solutions. So that if I am in Bloomington, Indiana and I
have got a particular issue, we have funded solutions for those
kinds of issues before. We need to make that more accessible,
and not just, ``Here is a best practices page of what they
did.'' But, ``Here is a contact of the people that were
involved,'' and to try and do some of that direct connection to
help people accelerate their thinking about how to address
particular issues. So that is something we do need to do
better.
Mr. Wolf. What is the unemployment rate in the Bloomington
area? I remember, I saw that movie years ago, ``Breaking
Away?'' Is that----
Mr. Fernandez. ``Breaking Away'' I am embarrassed to say I
do not know off the top of my head what it is in Bloomington. I
can tell you that as a university community there was a time
where people there perceived it to be recession proof. But
because of the broader context of the shifting of manufacturing
jobs in the region, the tight budget constraints, they are
actually seeing layoffs in the universities and the public
schools like every other community. So they have very similar
challenges.
Mr. Wolf. Yes, okay. I think that is pretty much it. If you
could, after you check on that other thing, give us a call----
Mr. Fernandez. Absolutely.
Mr. Wolf [continuing]. A call on whether or not EDA would
be willing to, and then what I will do is, I will talk to
Senator Warner and see. I think he would join to see if maybe
before, the authorization is a great idea and the language, and
I think it is good that Mark is doing that. But to see if we
can maybe deputize you, or the Secretary could deputize you to
sort of have a little bit of a pilot to move ahead and see what
we can do. But anyway, thank you for your testimony. I
appreciate it.
Mr. Fernandez. Thank you.
Mr. Mollohan. Mr. Culberson.

GAMBLING

Mr. Culberson. Thank you. Thank you, Mr. Chairman. The, in
answer to Mr. Wolf's question, would you all be sure to check
to make sure, so find out if any of the money that you all have
sent to local or state government, or to business development,
economic development, because the statute is very broad. I am
looking at the language of the statute, Mr. Wolf, and there is
no real restriction of any kind. The Secretary has got complete
discretion to grant money to, for economic development,
business development. And that would, what we are looking for
is money that has been sent to, for example, infrastructure, to
help build out infrastructure, roads into and out of a gambling
area. So we are looking for direct or indirect would be very
helpful.

AMERICAN RECOVERY AND REINVESTMENT ACT & JOBS

I also wanted to confirm, Mr. Fernandez, did you say your
agency had received $150 million from the stimulus bill?
Mr. Fernandez. That is correct.
Mr. Culberson. And what, if I could, also the 350,000 jobs
that the grantees tell you they have created with the funding
that they have received, what independent outside verification
or audits have there been of the 350,000 job claim that the
grantees say they have created with the money?
Mr. Fernandez. As I noted earlier, there is not technically
an outside audit. We do our own follow up to evaluate whether
or not the numbers are being met. We did commission a couple of
outside studies to look at the methodology for calculating
return on investment.
Mr. Culberson. So you really cannot verify that number?
Mr. Fernandez. I cannot verify it from the standpoint that
we do not have an outside audit.

NASH, TEXAS ECONOMIC DEVELOPMENT FUNDING

Mr. Culberson. Okay. I note, Mr. Chairman, the wonders of
Google, I spot one of the grants in Texas, Mr. Chairman, is a
$2 million grant to, $1.875 million economic development
assistance to the city of Nash, Texas to spur economic recovery
by making infrastructure improvements to serve the Nash
Business Park. And under the wonders of Google Earth, Mr.
Chairman, I looked up, because I do not know where Nash, Texas
is. This is downtown Nash, Texas. I want you to see this. It is
literally a, it is two farm market roads and there is nothing
there. So it is a, I just think it is important that we do all
we can to really be sure that taxpayers are getting the value
for their dollars. The Agency undoubtedly performs a lot of
worthwhile work. But I am not, looking at this one I for the
life of me cannot, $1.8 million is probably more money than
Nash, Texas ever had in its entire existence. And I think this
agency just bears some careful scrutiny. Thank you, Mr.
Chairman.
Mr. Mollohan. Well I hope that Nash, Texas has some maybe
attention paid to it in the economic development, and hopefully
the agency's efforts to help facilitate it will be appreciated
at the local level.

REVOLVING LOAN FUNDS

Capitalizing RLF funds, revolving loan funds, why are you
not doing that?
Mr. Fernandez. Recapitalizing, or making additional
investments?
Mr. Mollohan. Mm-hmm.
Mr. Fernandez. I know that, it is my understanding, and I
could be wrong with this, it would not be the first time, that
the previous administration did not look favorably at that
initiative. We certainly look at the role of RLFs as a very
valuable tool to help address the critical access to capital
issues that many small businesses face today. I think it is a
program that can work well and we are not discouraging
applications for that very purpose.
Mr. Mollohan. You know, we have some concern expressed that
RLFs are not being capitalized because of pulling back funding
that might be available for that to fund the Energy Efficiency
Building Systems Regional Innovation Cluster Initiative. Can
you comment on that?
Mr. Fernandez. Yes, I would be happy to because that is not
accurate. The economic adjustment program is the--that is the
pool of resources that we have to make investments in revolving
loan funds, which, not to beat a dead horse, but that is one of
the reasons why we like the idea of increasing support for it
because that is a huge need.
Mr. Mollohan. It is a huge need to recap a lot of these
funds.
Mr. Fernandez. And to address access to capital.
Mr. Mollohan. Okay.
Mr. Fernandez [continuing]. There was a question about what
role does EDA have. I can tell you we did a $200,000 revolving
loan fund investment in St. Louis. It is a little company
called World Wide Technologies, which now today is a $3 billion
company that--employs--1,200 employees.
So I think these small investments can have tremendous
impact, very direct return on investment, and do the kinds of
work that people want.
The Energy-RIC is a very exciting project. It grew out of
President Obama's commitment to get interagency cooperation.
And so there is a White House interagency team that headed up
the effort to build this RIC proposal.
The total package is probably going to be, north of $120
million over a five-year period.
The EDA's role in this, which goes back to the unique role
that EDA plays in our federal system, is to help build, support
around the cluster element of the energy investment. Our
commitment was $5 million over a five-year period. Part of the
funding is public works and part of it would be through
economic adjustment.
We have been able to identify resources to--through some of
the deobligations that have occurred to fund that project
without taking away the capacity to fund any of the current
budget----
Mr. Mollohan. Okay. Let me go back to the revolving loan
funds. Are you recapitalizing them with funding?
Mr. Fernandez. Across the board, no. Are we evaluating
applications for those, I would have to look and see if we have
had any specific requests. But we are certainly not saying no
to the concept. I mean, they are evaluated in the context of
other competitive grants.
Mr. Mollohan. But you don't know. Have you recapitalized
one or started one new?
Mr. Fernandez. Last time I had I don't know. I mean----
Mr. Mollohan. Well for the record, will you?
Mr. Fernandez. Yes. I would be happy to. I know we did
through our Recovery Act funds. But I am not sure about a
regular EDA program.
[The information follows:]

Revolving Loan Funds

EDA is currently evaluating 6 applications for the Revolving Loan
Program totaling $7.25M. 5 applications have been approved for
recapitalization totaling $11.125M, and 2 applications are new RLFs
totaling $1.8M.

REGIONAL INNOVATION CLUSTERS

Mr. Mollohan. Okay. Well tell us what the Energy Regional
Innovation Cluster is. What is that?
Mr. Fernandez. It is a multi-agency investment program. EDA
has been involved in the work of clusters for almost 20 years.
Mr. Mollohan. Well let us really start. What is a cluster
in the context of this initiative?
Mr. Fernandez. It is a geographically-bound area. There is
a regional component to it that integrates businesses,
universities, education, all the elements of economic
development around a particular industry so that there is
complimentary activities, there is synergy, and it leverages--
--
Mr. Mollohan. And this doesn't exist now? This is a
concept. This is a new initiative, correct?
Mr. Fernandez. The Energy-RIC itself is a new initiative.
But Regional Innovation Clusters are not new. And we found that
they are a----
Mr. Mollohan. We being EDA?
Mr. Fernandez. EDA.
Mr. Mollohan. Where have you found that? I don't mean to
interrupt you and if you need to elaborate.
Mr. Fernandez. No, that is okay. There are a number of
clusters that have evolved over time.
Mr. Mollohan. Give us an example.
Mr. Fernandez. In Bloomington, Indiana there is a strong
life sciences partnership that is a cluster. In Seattle there
is a bio-medical cluster.
Mr. Mollohan. But what is it--okay, but what does
``cluster'' mean? You know, we have a lot of coal mining in
West Virginia, so would that be a cluster?
Mr. Fernandez. It could be.
Mr. Mollohan. Okay. Well what is----
Mr. Fernandez. I mean, I am not trying to be facetious.
Mr. Mollohan. What is a cluster? No, no, I know you are not
being. What is a cluster?
Mr. Fernandez. It is the combination of similarly focused
businesses and institutions that are all linked into a
particular industry.
Mr. Mollohan. Okay.
Mr. Fernandez. So you could have a cluster that is life
sciences. You could have a cluster that is mineral resources.
Mr. Mollohan. Okay. Well the word link suggests that there
is a central facilitating activity. Is there?
Mr. Fernandez. Yes.
Mr. Mollohan. There is. And who supplies that function?
Mr. Fernandez. Typically it is a public/private
partnership; economic development organization that is able to
align the strategies of the different participants in the
cluster. Look for common areas of interest, whether it is
workforce development, infrastructure development, broader
policies that can help support that particular industry----
Mr. Mollohan. Okay. So it is an identification of a core
competency around some activity that is being promoted by a
central facilitating group and being strategically managed in
that way.
Mr. Fernandez. Absolutely.
Mr. Mollohan. The relationships between those entities that
make up the partnership are strategically managed to further
the prosperity and growth of the members of the cluster to have
economic benefit throughout the defined region.
Mr. Fernandez. Exactly. And it is having that deliberate
strategy and coordination that helps accelerate the success of
these clusters.
Mr. Mollohan. Okay. So in one of your examples, give us an
example. What is the facilitating group?
Mr. Fernandez. In Bloomington it is the Life Sciences
Partnership. It is a public/private entity with representations
from the city, the university.
Mr. Mollohan. So is that a non-profit?
Mr. Fernandez. It is.
Mr. Mollohan. Created in----
Mr. Fernandez. Public non-profit.
Mr. Mollohan. A public non-profit with the board of
directors composed of people who are in the cluster----
Mr. Fernandez. Who are in the industry, who are in the
education.
Mr. Mollohan. With an executive director who has been hired
to facilitate that.
Mr. Fernandez. Coordinate that, yes.

ENERGY REGIONAL INNOVATION CLUSTER

Mr. Mollohan. So if we are talking about a energy regional
innovation cluster, is that proposing one additional focusing
on energy, one additional cluster? And it is going to be
concentrated on energy. Energy is going to be the core
competencies you are going to try to work on out of that
cluster and probably innovation.
Mr. Fernandez. In this one, Mr. Chairman, specifically it
is to build a cluster around building technologies,
efficiencies, and materials and design of actual buildings. So
it is narrowly focused on that area of the economy.
And the reason that this is being proposed is that, as I
noted earlier, we believe there is a lot of empirical evidence
outside of EDA that suggests that where you have this kind of
deliberate formation of a cluster, it accelerates the business
success of the individual companies and organizations that are
aligned within that cluster. It has an impact on wages. It has
an impact on the overall economy.
So the goal here is to say, and this is part of what the
President is very aggressively speaking about in terms of
blowing up silos, we are going to make an investment through
the Energy Department to leverage research and development
around energy building systems.
If we can bring with that commitment of the Energy
Department's funds, additional resources from EDA, from SBA,
from Labor, from others to actually form a cluster as part of
that energy investment, we have an opportunity to really
amplify those dollars in a way that is going to have a broader,
regional impact on the economy where that energy investment
will be made.
So it is an opportunity to truly leverage multiple federal
dollars in a way that amplify each other. And we think we will
have even greater success than they might have if it was done
individually.
Mr. Mollohan. What economic funding levels? What funding
levels is EDA expected to contribute to this initiative?
Mr. Fernandez. We have a commitment of $5 million or five
years.
Mr. Mollohan. Not for each of five years, a total of $5
million.
Mr. Fernandez. And, again, and this is one of the
challenges in talking about something like this is that it is a
competitive grant process. We don't know exactly what proposals
will look like.
Mr. Mollohan. That is a pretty specific request. I mean,
and you are talking about environmental efficiency and
building. I mean----
Mr. Fernandez. Yes. But it----
Mr. Mollohan [continuing]. I am sure it narrows it down to
several grantees. It almost sounds like a subtle administrative
earmark.
Mr. Fernandez. Well it is a competitive grant.
Mr. Mollohan. Well I understand. But how many people can--
how many entities are out there that can compete for this?
Mr. Fernandez. I think there has been tremendous interest.
I don't know exactly how many. I know we hosted, along with the
other partners, sort of a pre-application conference here in
Washington and had a webcast of it. And there was a strong
interest.
But how the EDA's investments may--we have made a
commitment of up to. But we don't know what those individual
applications are going to look like.
One applicant may have already a strong public/private
partnership entity that can serve that coordinating role. They
may not want or need resources to build that kind of
organizations, others might. Infrastructure may not be an
important part of a particular applicant's investment.
So, the way our commitment has been articulated, it is up
to, but we don't know exactly whether we will get a request for
the full amount, or half that amount, or what. But we will
soon.
Mr. Mollohan. So if your--I'm sorry, your 2011 funding
request you would expect a million, million and a half, two
million dollars of that request to go to this initiative. You
know, it is five million over five years.
Mr. Fernandez. We are looking at using funds that were
deobligated to fund this initiative. So it won't come out of
the 2010 budget nor the 2011 budget.
Mr. Mollohan. Okay. Will that require reprogramming?
Mr. Fernandez. Probably not. I don't think so.
Mr. Mollohan. Mr. Wolf.
Mr. Wolf. No, I'm fine.

DISASTER FUNDING

Mr. Mollohan. In June of 2008, Congress appropriated $100
million in disaster supplemental funding for EDA. In September
of fiscal year 2009, provided another $400 million, a total of
$500 million.
Of the $100 million disaster funding provided in 2008, $22
million is still unobligated or 22 percent and are only in the
Denver and Chicago regions. What is the reason for the delay in
obligating disaster funding in Denver and Chicago?
Mr. Fernandez. I don't know if it is technically a reason
for delay. I can tell you that doing disaster response work
often is very complex. The communities are often devastated,
the amount of initial work just in terms of first responder
cleanups and relief.
Mr. Mollohan. Are there projects in these regions which are
appropriate for disaster funding?
Mr. Fernandez. There certainly are.
Mr. Mollohan. Still at this time?
Mr. Fernandez. Yes. There are projects in the pipeline. I
looked at this question ahead of time. In my conversations with
our regional directors, in total out of both of those
supplemental appropriations, essentially 90 percent, 96 percent
of all those funds, are either approved, in final review, or in
some stage where they are going to be moving forward.
There is four percent left. And our commitment is to get
those funds obligated by the end of the second quarter.
Mr. Mollohan. Of the $400 million--I am sorry.
Mr. Fernandez. We will meet that commitment.
Mr. Mollohan. Of the $400 million provided in September of
2008, 100--we were advised, $143 million or more than 35
percent is still unobligated for projects in Atlanta, Denver,
Chicago, and the Austin regions----
Mr. Fernandez. Yes. And again----
Mr. Mollohan [continuing]. And Texas regions.
Mr. Fernandez. Yes. Again, I think we can brief you in more
detail. But those are in the pipeline. The funding is in the
pipeline.
Mr. Mollohan. Okay. But----
Mr. Fernandez. Let me give you an example if I could, Mr.
Chairman. There is a huge project in Cedar Rapids that is
probably a $35 million project. There are a lot of technical
things they are working out at a local issue, at a local level
to move that project forward.
So it has been identified as a very valuable investment for
the community as part of that rebuilding strategy. It is one
that we certainly would be receptive to. But it is in those
final kind of due diligence and review stage to move it forward
to announcement.
Mr. Mollohan. Okay. So you wouldn't even describe the fact
that these funds have not been obligated as a delay?
Mr. Fernandez. I wouldn't, because it would be one thing if
I were telling you that we have got hundreds of millions of
dollars that there is no pipeline for. That is not where we are
at.
Mr. Mollohan. Okay.
Mr. Fernandez. We want to move as quickly as we can.
Mr. Mollohan. So there are projects that in these regions--
Mr. Fernandez. Yes, sir.
Mr. Mollohan [continuing] That are appropriate for funding
and are moving through the pipeline.
Mr. Fernandez. Yes.
Mr. Mollohan. Are there still appropriate applications for
this funding? Would it be appropriate for an applicant to still
file for this funding?
Mr. Fernandez. Yes, because there is still the four percent
that hasn't been really pushed into the larger pipeline.
Mr. Mollohan. Okay.
Mr. Fernandez. I would have to get back to you on
specifically what that amount is though.
[The information follows:]

Disaster Funding Allocation Availability

As of today, of the $500M total disaster supplemental, EDA has
approved $271,629,200 with an additional $66,907,993 in final review in
DC. That leaves $161,462,807 still being processed at some stage in the
regional offices.

AMERICAN RECOVERY AND REINVESTMENT ACT FUNDING

Mr. Mollohan. Okay. You had some questions directed to you
about the American Recovery and Reinvestment Act. And we
mentioned in our statement that Congress appropriated $150
million to EDA and directed EDA to give priority to areas of
the Nation that had experienced sudden and severe economic
dislocation and job loss due to corporate restructuring.
I just would like to make the record as clear as possible
on this. How much of the funding has been obligated to date?
Mr. Fernandez. Hundred percent.
Mr. Mollohan. What areas of the country have experienced
sudden and severe economic dislocation and job loss due to
corporate restructuring?
Mr. Fernandez. It is hard to say which parts of the country
have not been affected by restructuring and changes in the
economy. It is a broad area.
Mr. Mollohan. Can you give a----
Mr. Fernandez. You know, my staff could give you an
actual----

[GRAPHIC] [TIFF OMITTED] T6756B.010

Mr. Mollohan. Okay.
Mr. Fernandez [continuing]. Breakdown of the counties.
Mr. Mollohan. But why don't--why don't you give us a more
detailed answer for the record. How did EDA determine the
allocation per region? Would you prefer to do that for the
record?
Mr. Fernandez. We can give you the formula. What we used
though was our--standard allocation formula that has been
developed over the years between the staff and members, I
believe of this Committee and others. And so we use
essentially, that same formula.
But one of the changes we made is rather than using a 24
month period for calculating unemployment, it was reduced to
three months to give more contemporary data of that sudden
impact for which the Recovery Act was intended to address.
[The information follows:]

[GRAPHIC] [TIFF OMITTED] T6756B.011

Mr. Mollohan. I understand that there were 68 projects
funded.
Mr. Fernandez. Correct.
Mr. Mollohan. That 64 were for construction coming out of
public work investments, two were revolving loan fund
recapitalizing or creation, and two were for technical
assistance.
Mr. Fernandez. Correct.
Mr. Mollohan. And all the funding is out.
Mr. Fernandez. Yes.
Mr. Mollohan. Well let me congratulate you for getting that
funding out. And it looks like they really went to bricks-and-
mortar projects, which----
Mr. Fernandez. As you know, I mean there is a wealth of
projects in the pipeline.
Mr. Mollohan. I am sorry?
Mr. Fernandez. There is a wealth of projects in the
pipeline.

ECONOMIC DEVELOPMENT DISTRICTS

Mr. Mollohan. Okay. In fiscal year 2009, Congress provided
$4 million above the request for a planning program to
increase--for the planning program to increase the amount
provided to each economic development district and to reduce
the backlog of designated but unfunded EDDs. This direction was
continued in the fiscal year 2010 bill.
Does the fiscal year 2011 request incorporate the increased
levels for the EDDs?
Mr. Fernandez. It does.
Mr. Mollohan. How much does that provide to each EDD?
Mr. Fernandez. Currently it is approximately $60,000
annually.
Mr. Mollohan. Do you know how many funded EDDs there were
in fiscal year 2010?
Mr. Fernandez. Three hundred eighty three.
Mr. Mollohan. How many designated but unfunded EDDs are
there?
Mr. Fernandez. As far as I know zero.
Mr. Mollohan. What is the process for designating an
economic development district?
Mr. Fernandez. The communities build an application based
on the criteria in our statute. And they submit it to the
regional offices. They look at an application, evaluate it, and
then forward it on. Currently we have three pending
applications.

TIMELINESS OF REVIEW PROCESS

Mr. Mollohan. There are always concerns about the lengthy
review of these grant applications. It really appears to be an
issue affecting particular regions maybe rather than all of
them.
Are you aware that EDA applicants have concerns about the
length of time for review of their applications--in their
particular regions?
Mr. Fernandez. Yes. I am aware. I come to this job with
kind of a double-edged sword of having been on the other side
of the table.
I understand how effective EDA can be. I also have
experience. I share some of the frustrations that our
constituents face from time to time. And we have put together
an internal interagency working group being led by our regional
offices in partnership with DC to look at how we can refine our
process to make it more accessible but also more efficient.
Mr. Mollohan. Are there some regions that have a particular
problem with the timeliness of review of grant applications?
And I would ask you to identify them.
Mr. Fernandez. In a more specific way than the perceptions
of pace, I can't single out a particular region.
Mr. Mollohan. Would you for the record provide the
Committee with a review of the--a comparative review of the
response times for review of grant applications region by
region? So that we can identify regions that are taking longer
and kind of do a bell curve.
Mr. Fernandez. I can do that. And I would be happy to do
that. But let me just, if I could though, maybe step back and
talk about the process.
[The information follows:]

[GRAPHIC] [TIFF OMITTED] T6756B.012

[GRAPHIC] [TIFF OMITTED] T6756B.013

Because, again, from my perspective I think there are areas
of opportunities for improvement. When communities come to EDA
or they meet with an EDR, one of our economic development
representatives, and start talking about their needs and some
of the kinds of projects that they think might be helpful for
their community--well let me step back.
There is even a beginning point. There are some communities
that know exactly what they want today. They can fill out an
application, hit the send button on grants.gov, and that is in
the system.
There are many other communities where an important role of
what EDA does is to try and do the consultation at the front
end and help move along an application. So it is really hard
sometimes to get apples-to-apples comparison.
Mr. Mollohan. Sure. And I understand that. I don't think
too much can be drawn initially from such a depiction. On the
other hand, it can identify areas where it may not have
anything to do with the personnel or the leadership in the
region. It may have something to do with the fact that we don't
have a representative in a particular geographic area where we
should have a representative in that geographical area helping
people. So that may be the need, the requirement.
There may be a lot of reasons for the disparity. But, you
know, it would be interesting to look at that.
Mr. Fernandez. It would be.
Mr. Mollohan. Where, you know, government interfaces with
constituents. We ought to look and see how the constituents are
judging the performance. And if there are concerns expressed,
then, you know, we need to address them, not in a judgmental
way. But look at it----
Mr. Fernandez. I absolutely agree.
Mr. Mollohan [continuing]. From an administrative
standpoint and see where we might. And actually that might
bring for the Committee an understanding, but also a process
that I am sure your folks have gone through, bringing a greater
efficiency. We don't want to beef up an area with personnel
where they already have the resources to do a really good job
and other areas they may need additional resources to do a good
job. And I think evening that out across the board would be
very helpful.
I know in West Virginia this consultive ability is very,
very important. And maybe it is just because we have been used
to having it for years and years. But it is something that
people have missed for a number of years since the agency has
been hobbled by a lack of personnel and expertise, both at the
regional and at the national levels. So I think that is a good
starting point to begin analyzing them.
Mr. Fernandez. And if I can, Mr. Chairman, my focus on this
is not totally unique or new to the agency. A few years ago
based on a lot of input, the EDA did modify their process to
streamline it. There used to be a pre-application then a formal
application. They have condensed that to try and expedite the
process. There has been a commitment in trying to improve
processes that predate my position here.
We are continuing to work on that. It is something we are
very committed to doing in terms of making the system more
effective.
I think you have to get to the point where you can tell
people yes or no. And you have to do that in a timely manner.
In my old world I would do deals where I could get a yes or no
in a relatively short amount of time.
And the yes or no might be, okay, here is my commitment
letter on financing. Of course there is going to be tons of due
diligence, lots of other stuff that I am going to have to check
the box on to actually close, right?
But in the context of EDA, I don't understand why we can't
have that kind of early process to review the merits of a
proposal and get you an answer based on the competitive grants
system. And then, of course, there will be some things we may
have to do in terms of due diligence, things that are internal,
and solely issues of the federal government process.
But at least you will know on whether or not you can move
forward with that project or not, at least with the EDA
component.
I think there is room for improvement. And I know that
staff across the board does not want to be in a system that is
perceived or in reality is, you know, too bureaucratic and
slow.

NATIONAL INNOVATION MARKETPLACE

Mr. Mollohan. Well we don't want to, you know, hang that
label on you or any particular region. This is in the spirit of
addressing it positively.
Final inquiry, in our NIST hearing we discussed the
National Innovation Marketplace. And I know you have discussed
that in a number of different places.
A new initiative in the MEP, the Manufacturing Extension
Program out of NIST, we have learned that EDA has a role in
this initiative. If you would discuss that role in terms of
goals and vision and in the process, you know, we inquired
about this at a previous hearing.
And I think we need some elaboration on what is the
National Innovation Marketplace. And in the process of telling
us that, what is EDA's role in it?
Mr. Fernandez. To be perfectly honest, that was news to us.
The marketplace, as I understand it, is----
Mr. Mollohan. You mean it was news to you that you were
involved with it?
Mr. Fernandez. Well I don't think----
Mr. Mollohan. Or maybe we are misinformed.
Mr. Fernandez. Well I am trying not to say that.
Mr. Mollohan. No, no, no, please say it. We are misinformed
all the time.
Mr. Fernandez. I don't think that is the case. There are
certainly opportunities----
Mr. Mollohan. We don't have a corner on knowledge here.
Believe me. And that is why you are here testifying.
Mr. Fernandez. Now the marketplace concept is a virtual
program that NIST has developed to match technology to business
spinoffs, et cetera. We are not engaged in that.
We are broadly engaged though in a discussion with NIST and
a whole host of other Department of Commerce bureaus about
partnering on commercialization ideas, how we can accelerate
commercialization, and we certainly have a role in that in
terms of some thought leadership as well as looking at----
Mr. Mollohan. Commercialization of university research for
example?
Mr. Fernandez. Federal labs.
Mr. Mollohan. You have a role in that. Elaborate on that
for us.
Mr. Fernandez. We can have a role. I mean, we find the
university centers, some of which are specifically focused on
commercialization, like the University of Kentucky. They are
specifically focused on how they accelerate commercialization.
We have accelerators that we invest in, incubators that are
regional-serving that are located on campuses. So we do play a
role in that commercialization and innovation economy.
We believe there will be opportunities. And that is part of
the Office of Innovation and Entrepreneurship's directive is to
look at how we can broadly collaborate within DOC as well as
other federal agencies.
Mr. Mollohan. You know, I think----
Mr. Fernandez. But the manufacturing--the program you are
talking about, that is not something that we have been involved
in.

Closing Remarks

Mr. Mollohan. Okay. Well thank you for that clarification.
We will have some questions for the record and other
members may as well. We have asked you to submit for the record
as we proceed in this hearing. And, you know, we would really
like for you to actually respond to all those requests
respectfully.
Mr. Fernandez. We certainly will.
Mr. Mollohan. I am sure you will. And thank you for the
good job that you have already done and the attitude you are
bringing to the Economic Development Administration.
I know your attitude it is not only sympathetic to the core
mission, but also brings a rigor to the efficiency of the
agency and to the service that it provides to our communities.
And also I think brings some imagination to the job, which we
look forward to supporting through the funding process.
Thank you for your testimony here today, Assistant
Secretary Fernandez.
Mr. Fernandez. Thank you.
Mr. Mollohan. The hearing is adjourned.

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Wednesday, February 3, 2010.

ECONOMIC DEVELOPMENT ADMINISTRATION

WITNESSES

MAYOR DAVID BRADFORD, MUSCLE SHOALS, ALABAMA
CHUCK WEMPLE, HOUSTON-GALVESTON AREA COUNCIL, TEXAS
JOHN BROWN, BROOKE-HANCOCK-JEFFERSON PLANNING
COMMISSION
MICHAEL KING, NORTH COUNTRY COUNCIL
DR. LES WYATT, ARKANSAS STATE UNIVERSITY

Opening Remarks

Mr. Mollohan. Welcome. The hearing will come to order. In
fiscal year 2010 Congress provided $255 million for the
Economic Development Administration's Economic Development
Assistance Programs, but in fiscal year 2011 the budget
proposes $246 million. Beyond the proposed $9 million reduction
the budget also proposes to shift almost $90 million from
Public Works grants to the Economic Adjustment Assistance
grants.
EDA provides critical funding for communities across the
nation working with state and local governments, private
industry, academia, and nonprofits, and leveraging investments
to create and sustain jobs and improve local economies. Through
the testimony of today's witnesses we will hear about the value
of such appropriations to local communities as well as
suggestions from grantees on how EDA can improve its processes
and provide better services as it plays a critical role in our
national economy.
Today we will hear from grantees from various regions with
a wide variety of EDA grant experiences. Each grantee will
touch on his or her depth of EDA experience. Most, if not all,
of our witnesses, have received Public Works grants, possibly
the most important and clearly the most traditional of EDA's
grant options. Today's witnesses will also talk about the
importance of Planning grants, Economic Development Districts,
disaster assistance, revolving loan funds, University centers,
and technical assistance. Through their collective testimony
the Subcommittee hopes to obtain an alternative view of EDA's
programs and their effectiveness. A view from the ground, a
view from implementors, a perspective we often do not get from
the Beltway.
In the first panel we will hear from John Brown, Executive
Director of the Brooke and Hancock Regional Planning and
Development Council in Weirton, West Virginia; and Michael
King, Executive Director of the North Country Council in
Bethlehem, New Hampshire and board member of the National
Association of Development Organizations.
In the second panel we will hear from Mayor David Bradford
of the City of Muscle Shoals, Alabama, and the immediate past
Chairman of the Northwest Alabama Council of Local Governments;
Chuck Wemple, Economic Development Program Manager of the
Houston-Galveston Area Council; and Dr. Les Wyatt, President of
the Arkansas State University System.
Well, thank you all for coming. Following the statement of
the ranking member, Mr. Bonner, we will move to welcome your
oral testimony and your written statements will be made a part
of the record.
Mr. Bonner. Mr. Chairman, distinguished panel, my name is
Jo Bonner and I am pleased to sit here today on behalf of our
Ranking Minority Member Frank Wolf of Virginia, who has another
conflict but who hopes to be with us to join in welcoming you
to the Committee. We certainly appreciate your coming today and
we are interested in hearing from you about how you have
utilized EDA grant funding.
With unemployment nationally at 10 percent, and in parts of
our country at much higher, I have a county in my district that
is at 20 percent unemployment today, we all know, Democrats and
Republicans, and certainly this Subcommittee under the
leadership of our Chairman, that it is critically important for
us to hear from the people outside of Washington, D.C. on how
the federal government can do a better job than what we have
done to create sustainable economic growth. We encourage each
of you to be very candid in talking about the things that have
worked, the good things that the government and EDA
specifically are doing and are doing well, as well as to be
constructively critical of those things that we are doing
poorly.
Thank you again for the opportunity to hear from you today,
and we look forward to not only your testimony but also the
answers to some of the questions we might have. Thank you, Mr.
Chairman.
Mr. Mollohan. Thank you, Mr. Bonner. Today, I would
especially like to welcome to the hearing Dr. John Brown, who
is the Executive Director of the Brooke-Hancock Regional
Planning and Development Council. He is doing really
outstanding work up in the northern part of our district, which
has been particularly challenged. And we look forward to not
only his testimony here today but continuing to work with him
in the final organization in order to be successful, and get
our economy in the northern part of the state turned around,
which is challenging, as I am sure we are going to hear. And I
also welcome Mr. King to the hearing and look forward to your
testimony. I am going to start with Dr. Brown.

Opening Statement by Dr. John Brown

Mr. Brown. Chairman Mollohan, Ranking Member Bonner, and
members of the Subcommittee, thank you for the opportunity to
testify on behalf of the Brooke-Hancock Regional Planning and
Development Council. We are located on top of West Virginia, in
the northern panhandle. Our region is a rust belt with a
population of 50,000. Through the devastation of international
steel competition since 1995 our two-county region has lost
12,000 steel worker jobs. Our two domestic steel companies are
now international conglomerates. In 1995, Weirton Steel, the
regional lynchpin in our region, was the top private sector
employer in West Virginia. Today West Virginia's top employer
is Walmart. As recently as Thursday, that is last Thursday,
January 28th, we lost another 180 steel related jobs.
So from the perspective of the U.S. Economic Development
Administration and its mission we are ground zero. For our
region the need to have an active and engaged EDA could be no
greater than today. Mr. Chairman, I would like to focus on
three major issues related to EDA. First, as a region in
transition we are literally reinventing our economy. While we
understand our leadership role, we need partners to invest
capital and to provide technical skills through the core EDA
Public Works and the Economic Adjustment Assistance programs.
In 2007 we received $891,000 for an EDA Public Works grant to
construct related downtown infrastructure to a state office
building. That was matched with $600,000 in local funds. The
project was completed one and a half years later in '06 and
resulted in over 300 new or saved jobs. Located in our key
downtown, the project has sustained the integrity of our
downtown and leveraged private sector downtown investment. I
wish I had a picture. We were not allowed to put pictures in
here, but if you could see our downtown, what we are about, I
think that picture is worth a thousand words.
In late '09 we received 215,000 economic dollars in an
Economic Adjustment Assistance grant to create and carry out a
detailed project, specific action strategy, for job growth and
diversification. And that project will use market information
to develop site investments while benchmark measurements will
be defined. Our approach focused on advantageous employment
clusters as a way to identify job training needs, launch
programs to attract investments, retain and expand emerging
industries, and increase employment opportunities for workers.
Over a five-year period the project will result in the creation
or retention of over 500 jobs in the region.
My second point is we support and advocate stronger
incentives to reward regional collaboration, partnerships, and
initiatives, not only among the public and private sector but
between EDA regional offices, and you all probably know there
are six regional offices. Our region is one labor force,
crossed by two states, and divided by the Ohio River. In the
case of employment these barriers are literally transparent.
EDA's Chicago region, which serves our West bank communities,
and the Philadelphia Regional Office, which serves our East
bank communities, has initiated the steps to recognize this one
labor force issue that we have.
So in 2009 through the encouragement of local development
agencies, and we have two of them, and the regional Chamber of
Commerce, our joint program we call the 3-2-1 Program was
created. And the 3-2-1 should be no secret. It stands for three
counties, two states, one goal. And this approach challenges
the Chicago and Philadelphia regions to coordinate plans and
provide, boundary flexibility. We have 50,000 on the West
Virginia side, we have 70,000 on the Ohio side. And so in the
Chicago office, they incorporated our three-county labor force
in a recent targeted industry study. The strategy is to find a
clear building block for a forthcoming U.S. EDA management
project outside the Chicago EDA map boundary, but inside our
labor force boundary.
So the lesson here is boundary flexibility can and will
define truer markets and assure wiser investments. And we do
have this issue up and down the Ohio River, whether you are in
Wheeling, Parkersburg, or Huntington. They are all, the labor
forces go in two states.
My third comment is that the Economic Development District
Partnership Planning Program has been invaluable to us. Due to
the downturn in the economy the demand for the Partnership
Planning Program has increased significantly. In our region,
Congressman Bonner, for example, our unemployment is running at
12.5 percent in one county, it is 13.5 percent in the other. We
have a lot of discouraged workers that have left the area, so I
do not even know how to count those.
Established in 2005, we are a relatively new EDD. And since
that time, through the mandated Comprehensive Economic
Development Strategy, that is called CEDS, we have prioritized
future investments and set a path for the future. Through the
Planning Program we created companion programs such as
brownfield initiatives, because we have got a lot of
brownfields. We have a lot of properties that need to be
returned and act as job generating sources. And we have a small
business start up program called Valley Ventures. And in the
case of brownfields, we have initiated hazardous waste and
petroleum site clean up to attract jobs. We have created a
dialogue for a river barge to rail/truck and intermodal site.
And we have communicated a very viable economic future for our
region.
In January '08 ArcelorMittal Weirton, which used to be
called Weirton Steel, the key remaining steel company in the
region, announced its intent to divest its nonessential
properties. These nonessential properties, characterized as
mothball commercial industrial properties, constitute, and this
is the key, they really constitute 30 percent of the city's
land area in Weirton. This divestment issue has created an
unusual opportunity. Without EDA's planning partnership
resources we could not complete the necessary due diligence to
organize, prioritize, and redevelop these sites.
In the case of Valley Ventures, we recognized small
business is the key driver for new jobs. Over 70 percent of all
new jobs are created through small businesses. And for the past
twenty-plus years our community has held, and I have heard
Congressman Mollohan say this, has held adamantly to the myth
that the steel companies will reopen, and jobs will return. In
recent years reality has set in and this myth has deteriorated.
Valley Ventures is a private, nonprofit organization formed and
managed by a board with business and professional men and
women. This innovative organization assists entrepreneurs and
small business owners. Valley Ventures provides businesses with
hands on technical assistance, financial resources, business
education, and important business networking. In '09 Valley
Ventures is credited with starting ten new businesses.
So in summary, EDA is the only federal program focused
exclusively on private job creation. At ground zero it has been
an invaluable and flexible resource. And given the ongoing
challenges facing the communities in my region, and across the
nation, the need for EDA has never been more pressing. With its
forty-year track record of job creation and retention and
ability to leverage private sector funds, we know EDA has the
tools necessary to help communities. Now is the time to assure
it has the resources to fully develop its potential. I thank
the Committee for this opportunity to testify in front of you,
and I welcome the chance for any questions.
[The written statement of Dr. John Brown, Executive
Director, Brooke-Hancock Regional Planning and Development
Council, follows:]

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Opening Statement by Mr. Michael King

Mr. Mollohan. Thank you, Dr. Brown. Mr. King.
Mr. King. Good afternoon, Chairman Mollohan and members of
the Committee. My name is Michael King and I am the Executive
Director of North Country Council, which is the Regional
Planning Commission and Economic Development District for the
northern region of New Hampshire. I am also a board member of
the National Association of Development Organizations. Thank
you for affording me the opportunity to testify today. I have
submitted my written statement for the record and would like to
submit this oral testimony in regards to the Economic
Development Administration.
I would like to provide you some examples, and I have tried
to meet your goal of looking at some of the things that EDA
does well and looking at some of the things that maybe we can
make some improvements in. So there are three examples that we
have seen EDA invest in over the last several years in my
region. EDA and the State of New Hampshire invested $3.9
million in the Littleton Industrial Park, this was several
years ago, which was a Public Works project driven by local
leaders to attract and nurture new manufacturing and service
businesses to the region at the time of an economic downturn.
After two companies left the area taking with them 700 jobs,
community leaders formed a local government corporation, and
with the help of the Economic Development District, EDA, and
the State, created the Littleton Industrial Park. Today the
industrial park supports eleven companies with over 1,200 jobs
and a combined payroll of $48 million.
Another example, more recently, is the Sustainable Economic
Initiative (SEI) Program. It is a perfect example of how
economic development funds can be successfully used to promote
regionalism and regional innovation. This four-state project
brought over sixty community and state leaders together to
build on a common economic demographic, environmental interest.
You have got to understand the northern part of New Hampshire
is a heavily forested area and a very rural area. We developed
a strategy for the region in the sustainable forest industry,
in telecommunications, and transportation networks, and for the
development of renewable energy. These central themes, along
with additional priorities outlined in the SEI action plan, aim
to balance the unique environmental characteristics of the
region with our core economic, cultural, and geographic assets.
Another example is the Dartmouth Regional Technology
Center, DRTC. This initiative is focused on nurturing the
growth of our biomedical and engineering technology cluster. In
partnership with Dartmouth College, and with funds from the
State of New Hampshire and EDA, we have built a 32,000 square
foot incubator and are in the process of adding on to it with a
28,000 square foot addition. We are very proud of the
accomplishments with this project. To date, eighteen companies
have taken tenancy in the DRTC with eleven still located in the
building. Over $60 million in venture capital investment has
been made by DRTC's tenants in the last three years. In
addition, the most recent graduate, Mascoma Corporation,
consolidated its Boston and Lebanon operations building a
32,000 square foot facility of their own two miles from our
incubator. That is a big success for us.
Mr. Chairman, one of the common threads of all three of
these success stories is the involvement of our Economic
Development District, the EDD. My EDD uses EDA's matching funds
from the Planning program to bring public and private sector
investments and public and private sector leaders together on a
regional basis to identify, prioritize, and pursue common
economic development opportunities and strategies. This
leverages the assets of our region to create and retain high
quality jobs. And the aim of our region is to try to create the
jobs where we can. This results in projects such as the
Littleton Industrial Park, the Dartmouth Regional Technology
Center, and the Sustainable Economic Initiative, which happened
over quite a span of years. We have been an Economic
Development District since 1975 and those are three examples
over those years that I brought to you.
Mr. Chairman, I would also like to offer a couple of
observations and recommendations for making further
improvements to the programs and operations of EDA from a local
practitioner's perspective. First, we have seen a major
decrease in the number of EDA's professional program staff
positions both in headquarters and in the regional field
offices. These EDA staff reductions have caused delays in
project approvals and funding which can be fatal to closing and
implementing economic development projects. Especially in a
region such as mine in the northern part of New Hampshire,
where our construction season might be very short, it is
important that we get things through EDA as quick as possible.
Second, we remain steadfast in our support for maintaining
the agency's core Public Works program, which provides vital
matching funds for distressed communities like mine to address
the necessary building blocks for economic development.
Third, we urge the Committee to provide new and additional
resources for the administration's proposed regional innovation
initiative. It is essential that our nation's distressed
regions pursue more in-depth and sophisticated economic
competitive strategies that leverage local assets and foster
the development of emerging clusters.
Most importantly, we encourage the agency to tap into the
existing regional planning process, spearheaded by EDDs, as the
primary building blocks for regional innovation strategies.
In closing, Mr. Chairman, I would like to thank the
Committee for your recent efforts. Increasing the minimum
funding levels for EDA planning grants, these modest yet
invaluable matching funds are used by organizations such as
North Country Council to provide much needed professional
economic development planning and project implementation
assistance to our local governments and communities, especially
in the distressed small rural areas like mine. Thank you again
for allowing me to testify today, and I welcome any questions.
[The written statement of Mr. Michael King, Executive
Director of the North Country Council and Board Member of the
National Association of Development Organizations, follows:]

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LENGTH OF REVIEW CONCERNS

Mr. Mollohan. Thank you. Thank you, gentlemen, both. Dr.
Brown, I know that you have recently been going through a
pretty intensive assessment of the condition that we are facing
up in the northern part of the State. And you have been
interfacing with EDA in that process. Just describe to what
extent you think the EDA involvement has been helpful, and
areas where perhaps it could be more helpful? And what do you
think the outcome might be?
Mr. Brown. Well, we have been an Economic Development
District for four years. I have been at the regional council
for twelve. I want to tell you, first of all, that it is
apparent to me that there has been more hiring in our
Philadelphia regional office, so we have gotten a little more
assistance. That is good. In terms of doing applications for
EDA, it is, as it should be, a long, extensive process of
review. We made an application in February, heard in----
Mr. Mollohan. February of 2009?
Mr. Brown. Yeah. At least, we heard in July. The program
has been up and running, and at last getting a consultant, we
are in that process right now. So we are sitting here, what,
six or seven months after that point in time. We have a nine or
ten month window to complete the program. So we will be rolling
very fast. And probably, if I could, later on tell you how it
is going because I am sure you are very curious about it, too.
We have ten months to get it done. I do know, if you come into
any region like I am in, and I know, we all had lunch, and I
was interested about how this all works. It is the fact that
clearly in our region people are tired of getting plans and
putting it on the shelf. They want to see action. If you have a
high unemployment rate of 12.5 or 13.5 percent, councils,
commissions are very cautious of where you are going and how
you are doing it. In our time with EDA, timewise, we clearly
told them that. We have beefed up staff a little bit.
Mr. Mollohan. I hear you saying that actually they beefed
up staff a little bit, and that is your way of saying they
needed to beef it up a long time ago----
Mr. Brown. Absolutely.
Mr. Mollohan [continuing]. And this process needed to be
expedited----
Mr. Brown. Absolutely.
Mr. Mollohan [continuing]. Considerably. Yeah, I mean, if
you are going to give help with regard to economic development,
I mean, it has got to, the approvals have got to come much more
quickly and the aid has got to come much more quickly----
Mr. Brown. Yes.
Mr. Mollohan [continuing]. Than a year, which is what I am
hearing you say.
Mr. Brown. Absolutely.
Mr. Mollohan. Have you broached this subject with them? And
if so, what do they say?
Mr. Brown. I have not personally broached the issue with
them. Clearly, we have told them we need it in a certain time,
but I never said there is an issue here and we need you to move
forward with that. I do not, I guess Michael, I defer to you.
Mr. Mollohan. You are talking about some of the process
issues. And Mr. King, will you speak to that?
Mr. King. Yeah, I have broached with the regional director
some of those concerns in getting projects through. And I think
the answer that I got, received, was that indeed the agency was
hurt in reductions, but has since recovered from that. But the
problem that we are having now is the staff is somewhat
inexperienced. And there is a learning curve that regional
staff and even, if you look in the Philadelphia region all of
the EDRs, with the exception of one, are fairly new to the
region. So there is that learning curve. There is that, you
know, administratively it is a federal bureaucracy, and we have
to go through those federal bureaucracies. So there is
something to be said for that. Getting things through the
agency is critical. We are building this new addition to the
incubator, and we are right on the timeline to be able to meet
construction in time right now. And you know, in the Northeast,
our construction season, as I said, is shorter. So you just
have to, you have to be able to move those along quickly.

PLANNING

Mr. Mollohan. Where do you find the Economic Development
Administration most helpful? In the planning process? In funds
for infrastructure?
Mr. King. I will defer a little bit. I think they are
pretty helpful in most of the areas. I think the planning
process is very good. You know, planning sometimes gets a bad
name. And I want to be careful to say what EDA does in their
planning process is, it is an implementation process and not
just a planning process. And at least in my region, that is
what we use it for. We are not sitting there developing plans.
We are meeting, our planning process is to meet with
practitioners and decide which projects are the best projects
and can get the most bang for the buck in our region. And that
is our planning process, so we can follow right into
implementation when we are doing that. And EDA is very
supportive of that. And their particular planning process is
very supportive of us doing that.
Mr. Mollohan. What do they bring to the table in that
process?
Mr. King. Well----
Mr. Mollohan. Besides money?
Mr. King. They bring money, which is important. I think----
Mr. Mollohan. How about advice?
Mr. King. I do not think we get a lot of advice from the
agency itself.
Mr. Mollohan. Should you?
Mr. King. And I do not think we ask for a lot of advice, to
tell you the truth.
Mr. Mollohan. So you are not really interested in their
actually coming forward with lessons learned in other areas,
or----
Mr. King. Well, I guess I have not thought too much about
that, Mr. Chairman.
Mr. Mollohan. I mean, you may have those resources at your
disposal. How about you, Dr. Brown?
Mr. Brown. I think that is a good point. And I am thinking
why I did not ask our EDR, who is both in West Virginia and
Maryland spread so thin, but that is a very good question,
about how we could better use that. I would say, I hate to say
we are working and we know better, but quite honestly when we
get our CEDs we have got $550 million of projects that are
being prioritized. And one of the great advantages, I know Mike
and I have talked about this, the fact is if this is the one
time I can get the nine incorporated areas, two counties, in
one room and talk about, ``Folks, these are what the available
dollars are.'' Even if it is not EDA or ARD, we are talking
about energy efficient programs. If we did not have planning
partnership forums, that would not be happening.
Mr. Mollohan. And that came from?
Mr. Brown. Those comments of priorities and where we were
going to go came from the locals, council people, commission
people, private sector, all sitting in a room.
Mr. Mollohan. Mm-hmm.
Mr. Brown. And we have about fifty-five people on our
regional council.
Mr. Mollohan. But the dollars came from?
Mr. Brown. From EDA.
Mr. Mollohan. Yeah.
Mr. Brown. Which is, we get $62,000 a year for a planning
grant, which must be matched on a 50-50 basis through our
regional council.
Mr. Mollohan. Yeah. Okay. Mr. Bonner.

COORDINATION OF FEDERAL AGENCIES

Mr. Bonner. Mr. Chairman, as I was listening to the
witnesses give their testimony, and answered some of your
questions, I was reflecting on a conversation that I had with a
small businessman in my district, a gentleman by the name of
Albert Winfield, on Monday of this week. Mr. Winfield is like a
lot of other small businessmen in America, not just in Alabama.
He has been very successful after some time developing a
barbecue restaurant that has become one of the most popular
barbecue restaurants in my district. So popular, in fact, that
he wanted to expand and sell franchises. So he went to the
Small Business Administration to get their help. They agreed he
had good barbecue but they said that he needed to go to the
banks. So he goes to the banks. And they said, ``Well, you have
really good barbecue but you need to go to the Small Business
Administration.'' And at the end of the day he is like so many
other small businesses throughout the country, just chasing
himself in a spiral, trying to grow, trying to add new jobs.
Trying to help sell his franchise to other places around our
region, certainly around our State. And he seems to keep
running into one roadblock after another. So listening to you,
Dr. Brown, say, I believe this was your quote, that EDA is the
only federal program that you know of that really focuses on
job creation, something to that effect.
Washington has so many alphabet agencies that are acronyms,
and yet to small towns and to planning commissions and others
that really are your lifeline to the federal government. And I
guess my question to you would be, not only within the
Department of Commerce, International Trade Administration, EDA
of course, Minority Business Development Administration, but
outside SBA, the rural development programs, Department of
Agriculture, HUD grants, and other things, how well do you
think the federal agencies coordinate their activities and
their support with each other in an effort to help Mr. Winfield
and other small businessmen and women around the country know
that there is some real help out there? If that makes sense?
Mr. King. In my opinion, not well, Congressman. I think one
of the values of EDA are the districts, like mine, who get
practitioners together, and like Dr. Brown's. That is more
coordination than you will get from the federal government. We
access not only EDA in my organization. We access Rural
Development. We have people sitting on there that have CDFI
corporations, or are getting federal funds for that, SBA, and
those kinds of funds. And really the task that we have is to
try to bring those agencies together. Because going directly to
your question, if we did not I do not think the federal
government is going to do it very well at all. I just, they are
not set up to do that, to bring small, and particularly the
smaller type businesses. I think they probably do a better job
in larger developments, but not to the small businessman. It
just does not work.
Mr. Bonner. Dr. Brown.
Mr. Brown. We have small business development centers in
our area, SBA run programs. Much like many federal programs
that are avenues of assistance, they are clearly understaffed
and are not there everyday. If you were to come ten years ago
into the area, the SBA office would have been open everyday.
They are not. They are there two days a week now, leaving a
void. And you would think maybe community colleges will pick up
some of that. Well, community colleges do a little bit of small
business things. They do training more than anything else.
The group I mentioned, Valley Ventures, probably is our
biggest advantage, and that was created through our regional
council, through planning partnership funds. It now has a
private foundation providing some support for that. One staff
member, a secretary, but run by businesswomen; people who have
a barbecue place and are able to, if they know Valley Ventures
is out there, can get assistance for that. But it is local, it
depends on originality, locally what emphasis is on it, and
what kind of funds you can get for it. But I recognize the
conflict and the discussion, the dialogue sometimes does not
quite work. And I understand the frustration. I have people
walk in my office asking about small business assistance. I am
not a small business person. We will try to point them in the
right direction.

APPROVAL TIMELINE

Mr. Bonner. Mr. King, you indicated that because of the
decreases in the EDA staff, that that extends the time, the
process, to get the EDA support approved. What on average is
the timeline in terms of going after EDA funding and finding
out whether or not you have gotten it?
Mr. King. I think it varies quite a bit, and it varies
quite a bit depending on what is coming down through EDA and
what their priorities are, and what funding buckets they need
to get out quickly, and what funding buckets they do not need
to get out as quickly. And so I know that is not a great answer
but it does vary widely. If we push hard on it, and
particularly, and get projects to be a priority, they can do it
very quickly. And if we are not pushing as hard it takes a long
time. For instance I can give you an example. There was a
particular public works project, bank erosion along a
particular industrial park that was going to wash away a
building. And that problem is still there. But we have lost
this season to be able to do it because they could not get the
money out quick enough. And, you know, you have to get this
when the water is low, and so forth and so on. So this will not
be done until next fall when we can do it. Now, the money is
out, the grant is approved, and we are going to go ahead with
it. But that was put back in, sometime back in April, that
funding. And we just lost the season.
Mr. Bonner. April of last year?
Mr. King. April of last year. And, you know, on the other
hand, for the Dartmouth Regional Technical Center they did a
very good job. We were able to get that funding through. That
is ARRA money, so it was a little bit, it had a little bit more
behind it to say, you know, this is the kind of thing where the
nation wants to create jobs so let us get that money out. And I
think in some cases it is, you know, the priorities are set by
you yourself that tell you how fast, you know, you want funds,
how the bucket of funds go out. And we just have got to be a
little careful of that in my opinion. We want them to move
ahead.
Mr. Bonner. Well, my last question, I know there are other
members, other colleagues that would like to have a chance to
ask some questions of you, is this Committee has been very
active. I have only been on it for a year, but I thought
Chairman Serrano worked me hard when I was on his subcommittee,
and he did. But Chairman Mollohan, last year, my first year on
the Committee, really brought a lot of people in to give us
some good feedback about what programs worked, what programs
did not work, and what we could do to make better use of the
limited resources that were available.
I read in the paper yesterday, in the Washington Post, I
believe I am right, that thirty-three cents of every dollar
that we will spend this year is borrowed money. So that makes
your testimony on behalf of a program, either things that work
well or things that need to work better, especially in light of
the pressure that the administration is under and that we are
under, all the more valuable. Of what we can do to make
programs like EDA stretch those dollars even further. And
certainly it seems to me that one constructive comment that you
have just offered is it is just unacceptable that it takes so
long to get approval. Think of what could have been done if
that could have, that timeframe could have been met last year?
So I would just encourage not only you, and the next panel that
will come after you, to think and to continue this dialogue as
we go forward. Things that we could do a better job at our, in
our role in government of trying to make the process work a
little bit better. Thank you, Mr. Chairman.
Mr. Mollohan. Thank you, Mr. Bonner. Mr. Serrano.

GREEN PROJECTS

Mr. Serrano. Thank you, Mr. Chairman. Gentlemen, thank you
for being here. And as you know, there is an emphasis greater
than ever on green industries, green businesses, and just
hopefully the greening of America, as we would like to call it.
Do you sense from EDA's actions a desire to promote green
projects? To invite people to submit green project requests? Do
you see anything that indicates that that could be happening?
Either one of you, or both?
Mr. King. I do not necessarily see a sense of that coming
directly from EDA. I think, however, the agency itself is very
supportive of those projects that will come forward, in my
opinion. And I think, in my particular region, again, you did
not, you were not here for my oral testimony, but it is a very
forested land, and very concerned with creating green energy
projects. We are very concerned with our forests, and
maintaining sustainable forestry, and so forth. So it is very
receptive, they are very receptive to those kinds of projects.
Though I do not feel that they are promoting that, per se, if
you will.
Mr. Serrano. And I am not sure, Mr. Chairman, if that is
correct on my part, to assume that EDA would promote any kind
of business. But rather, I am not sure I know what their role
should be other than to accept good projects and then promote
them. But there seems to be a national desire on all sides to
get more of this going. So I was just wondering----
Mr. King. If I can just make one, you know, my personal
feeling is I see EDA's role is, and I think, is to create jobs.
And jobs are extremely important, be it a green job or a non-
green job. I mean, it just, we need to be out there creating
jobs and EDA is helpful doing that. I guess that is how else to
say it.
Mr. Brown. I would certainly say, if it is not EDA, I hear
from other agencies, whether it is Appalachia Regional
Commission, or a lot of different agencies, clearly energy
means jobs. We are doing a strategic cluster now, trying to
look at our employment sources, and it is tough to figure out
how energy mixes into all of that. But the economy is changing,
there is no doubt about it. And we have seen energy, at least
in the northern panhandle, the environmental aspect may be
second to the aspect that it means jobs. And there is the
maximizing dollars, and where the opportunity is, appears to be
in the energy field.
Mr. Serrano. Right.
Mr. Brown. And whether it is EDA, or ARC, or some other
agency, and we hear a lot about different agencies, we are
looking at it. People that would not have looked at it five
years ago or sort of deflecting on the energy issue, or clean,
are much more accepting of that.

PARTNERSHIPS WITH HIGHER INSTITUTIONS

Mr. Serrano. And I think that that is the key. You have hit
on the most important part of this whole argument, that the
same folks who years ago found themselves as enemies, the
environmental movement and the business community, now realize
that it is not only sound for the environment but it is good
business practices. And it does create jobs. And so I think we
have now gotten to a point totally different from where, when I
started out in public service, where these folks were at each
other's throats all the time.
With that in mind, higher education, also institutions of
higher education always play major roles in our communities.
And they serve as a place for training of people, and promoting
business practices, and other issues. Do you know of any
partnerships with higher institutions in different regions that
we could be discussing?
Mr. King. Well, I am right in the middle of a partnership
with Dartmouth College. And we built a 32,000 square foot
incubator at Dartmouth College. We are adding on a 28,000
square foot addition, 28,000 square feet. And we are doing that
because that 32,000 square feet was fully subscribed. Not only
Dartmouth College but the State of New Hampshire,
commercialization of the knowledge coming out of that college
is a very big priority for the region within the State. So,
yeah, we have got super priorities with them. It is a major
project in our region.
Mr. Serrano. It is an incubator you said?
Mr. King. It is a technology incubator. In the Dartmouth
area, for Dartmouth College, they have the Thayer School of
Engineering, and the Dartmouth Medical School, and a major,
major hospital, the Tuck School of Business. But when they did
all the biomedical engineering some of the businesses coming
out of that, there simply was no lab space for businesses, for
people who wanted to come out of the school doing research at
the hospital and had ideas to commercialize things, there was
no lab space. And that is what our incubator did. And we
started to have 50-50 lab space. When we finished the building
it was about 75-25. So it just fit a need to really help with
getting businesses in it. And we have been very, very
successful with that.
Mr. Serrano. All right, good. Any thoughts on that?
Mr. Brown. Well, our area is a little different. We have
only one four-year college. And really where the technical
skills and training occur in our region are through the two-
year community colleges. And that may be due to the fact that
we have three major steel mills, and most people up till about
fifteen years ago were promised a job in the mill. And they saw
community college as a potential training, or revisiting but
with that with workforce investment, councils in the community
colleges, it is moving along.
I would say to give you an example, we are, through Ohio
University, which is by the way located 180 miles from us, one
of their schools, is doing a targeted industry study. And we
will have people from our training group in the community
colleges, workforce investment. We are going to really try to
establish where our employment advantages are in the future.
And I have certainly thought about the energy field, I am going
to tell you, and it certainly it is coming up as one of those
areas. I am not sure how viable it is, we will know in a couple
of more months where that is, but our point is in the
industrial heartland of Weirton. And Brooke and Hancock are the
community colleges that are sort of taking that on. That is a
good bang for the buck, too, for the population.
Mr. Serrano. Thank you. Thank you, Mr. Chairman.
Mr. Mollohan. Thank you, Mr. Serrano. Mr. Aderholt?
Mr. Aderholt. I do not have any, thank you.
Mr. Mollohan. Mr. Culberson.

EFFECTIVENESS OF EDA AS A LOAN PROGRAM

Mr. Culberson. Thank you, Mr. Chairman. I want to ask you
each if I could, and Mr. King in particular, you have got, each
of you have got a lot of success stories to talk about locally
that you have been able to use the money from, the grant money
from the EDA. And Mr. Bonner's questions, in order to sort of
follow up on his point, we are entering a whole different era
in the United States of really unprecedented levels of debt and
deficit. And the good work that EDA has done, could you both
speak to, certainly because these programs you are talking
about have been successful, what if Congress were to
restructure this as a loan program? And to expand, for example,
the responsibility of the SBA? Could a lot of these grants not
be repaid to the taxpayers to the job creation, success you
have had with these incubators, the local tax I am sure
incentives that the State of New Hampshire and Littleton, New
Hampshire, I suspect, probably granted some property tax
exemption, or some tax break of some kind? Could you not put
together packages, rather than grants, recognizing the scale of
the debt and the deficit that we could structure this program
as a loan program, and still be as successful and repay our
kids?
Mr. King. I suppose we could. I do not know if it would be
as successful. You know, you get involved with the Dartmouth
Incubator, for instance, we pay full taxes, property taxes on
it. And we try to do the best we can in that. We think what you
are doing is you are generating, there is a number of small
businesses going into that incubator, and some of them are
going to be successful and some of them are not. And they do
not in particular own the property. The property is owned by
nonprofits that are trying to help these companies. I think one
of the biggest problems we have with midrange companies is that
the lack of funding, as Mr. Bonner stated, you know, there is
this guy, he just cannot get any money to keep his business
going. And I think we are faced with the same problem in some
of the companies we bring into the incubator.
You know, on the other side of the tax benefit, they are
creating jobs. And those jobs create tax dollars. For instance
the tax dollars, just going back to the Littleton Industrial
Park, I forget what the number was.
Mr. Culberson. Oh sure, no question it is worthwhile. But--
--
Mr. King. It is millions of dollars worth of tax dollars
being generated from making that investment. And I----
Mr. Culberson. But based on your experience, and what you
have seen, this program could be restructure as a loan program,
and the money could be paid back?
Mr. King. I do not think it would be as effective. Just
personal opinion, I just do not think it could be. I think you
would have trouble making it as effective, for instance, we
could not pay the money back from the Dartmouth Incubator. That
would not be something that we could do. We just, it would, the
program would not go forward. The building would not have been
built.
Mr. Culberson. Mr. Brown, what about in your experience?
Recognizing the level of debt and deficit, we are really about
to hit a brick wall as a nation, turning this into a loan
program?
Mr. Brown. I would say Governor Joe Manchin of West
Virginia probably understands the debt issue like most
governors do. And if you ever walk into the Governor's office,
he visits with you, he always wants to know what you have in
the game. You are not going to get a grant. Things have
changed. You have to have significant investment in the
project, whether it is a loan, or whatever, a bond. You are
going to have to, you cannot walk away from this.
Mr. Culberson. And that is always a good thing.
Mr. Brown. Yeah. And the word is out. No one is showing up
at the Governor's Office saying you want a grant. That is not,
that is not happening. In terms of loans, it all depends how it
is configured. I just do not know how, I do not know if I have
a real good feel for that in terms of how it is configured,
what is being loaned, what is being granted, what the max is,
what jobs it brings, could bring. I mean, if it is a wise
investment, and----
Mr. Culberson. What would you recommend? Just, I throw that
out as food for thought, because we are entering a whole new
era, unlike anything the country has ever faced before.
Mr. Brown. You are going to have to give me some time to
think about that one.
Mr. Culberson. Okay. Thank you very much.
Mr. Brown. I am sorry.
Mr. Culberson. Thank you. Thank you, Mr. Chairman.
Mr. Mollohan. Thank you, Mr. Culberson. Mr. Fattah.
Mr. Fattah. Thank you, Mr. Chairman. I think the first
place we should start in these loan agreements is the $20
billion we spent in Iraq on reconstruction. Now, if we want to
get a loan, maybe they should pay us back. But when we tried to
structure that in the Appropriations Committee I know that
there was not a lot of enthusiasm. In fact, we have wasted over
$1 trillion of our money in this ill-conceived war in Iraq.

PLANNING NETWORK

But I am very happy that you are testifying here today, and
that you are trying to put Americans back to work, and that you
are doing it. I saw the President was in your home state, Mr.
King, yesterday, in New Hampshire, and talking about the
recovery. And the shift in, you know, last January we lost
780,000 jobs in this country. This week's job's report will
probably show us dead even, not gaining jobs, not losing jobs,
but definitely putting a break on this hemorrhage of jobs in
our economy. And we saw the gross domestic product go from
negative 6 percent to a positive 5.7 percent a year later, both
in purchasing orders, and a whole range of other economic
indicators. We seem to be moving in the right direction.
Now, I know that people in New Hampshire pay federal taxes.
And I assume they have every right to expect to be, when they
have a worthy project, like the incubator. Now this first grant
was 3.9 and it was overbooked, almost, and you had to move
forward again. And I am glad EDA is giving you another grant.
These are the kinds of efforts we should be involved in as a
government because it is critically important that if we are
actually concerned about the debt and the deficit that we put
Americans to work, and that we create the economy that will
carry our nation forward. And this partnership you have with
Dartmouth is an excellent example of how higher education, and
the private sector, now I understand in this network you have
dozens and dozens of players, private sector, nonprofits, for
profits. And if you could talk about that level of cooperation
and collaboration it might inform us. Because one of the things
that I think EDA may want to do is to use as a model this kind
of effort of Americans working together. Everyone understanding
how important it is that we develop economic basis on a
regional level.
So I want to welcome you to the Committee. I thank the
Chairman for having you, and I would like you to expand on the
work of this network.
Mr. King. Well, thank you. I have somewhat of a bone to
pick with the President because I happened to be----
Mr. Fattah. You got caught in a traffic jam?
Mr. King. No I happened to be flying out exactly at the
same time he was flying in, so they shut down the airport and I
was stuck on a plane waiting for him to come out. But that was
okay. It was not a long period of time. But when you are the
President you get to do those kinds of things, I guess.
I think, as I said earlier, one of the things that we do
have is the CEDS document and the CEDS process. It is not so
much a document as much as it is a process, allows us to bring
these practitioners together. And though Chairman Mollohan
asked about what advice EDA gives. You know, I think one of the
best things they do is they have this planning process. And as
I stated earlier, I really do not think it is a planning
process but it is an implementation process because it brings
different kinds of economic development together. You know,
local development corporations, directors from regional
development corporations, private businesses, people like SBA
people, and people who can provide short term financing to
companies together. And we meet once a month, and we spend our
time looking at the various projects that are in the region,
looking where they are in their cycle of development. And it
really is a marvelous tool. And I hope it is used the way we
use it throughout the country. I do not know if I am answering
your question or not, but that is the kind of thing we are
doing.
Mr. Fattah. No, I think that is very helpful. I want to
know, and also Mr. Brown in West Virginia, since the President
has laid out a goal of doubling our export over the next five
years, in the work that you are doing do you see, I know in the
Philadelphia region, I am from Philadelphia, and we are very
parochial. I looked at these stats the other day. We are behind
the eight ball in terms of our export, you know, versus other
economic regions in the country. There is obviously a great
deal of growth. I have got the peanut chew factory in my
district. I love peanut chews. They have been around for 125
years. We got them connected up with the export/import bank and
now they are, they are selling peanut chews in forty-five other
countries. Now, these are still the same candy bars that I have
been eating since I was a kid. But they have got the language
of the nation of origin on the cover, and other than that they
are produced right there in my district. People are working.
I have got another company that is making, they have no
domestic competitor at all, and they make saltwater fishing
reels, the very best in the world. They sell for almost $1,000
a reel. They are employing people, and they are selling this
product all over the world. But there are plenty of these
opportunities for us to take American products and to make sure
that doors are opened. And I just wonder in your instance
whether you think that the goal, I know all of the economists
who have commented say that the President's goal is absolutely
achievable, I think is the words that were used by one of the
most noted ones. So the question is, you know, to get all of
our business, and small and medium-sized businesses really
focused on these markets overseas.
Mr. Brown. Well, that is a very good message. I am not sure
if, at least in our region, it has reached ground zero, or the
local level. It is getting there. I think if you ask that
question two or three years from now, it would be well
enhanced. I am saying this. We are on the Ohio River. And we
seen the Ohio River as a major freight mover from the Gulf up
through the Mississippi, all the way up through the Ohio. And
it is going to expand our opportunities. As you probably all
know, even what is going on on the interstates now, traffic is,
freight traffic is going to double here in the next twenty
years, or three times that, in the next twenty years. And we do
not have the infrastructure to handle that. We feel that we
have an infrastructure advantage in where we are located, and
particularly for exporting through the Gulf. That message is
coming a little louder, I think, for us. I think in terms of
looking at export opportunities, clearly we know it is,
although the steel market is down, and if there is a new steel
market it will be less labor intensive and it will be a
different type of specialty steel.
So I think, at least at our local level, it is probably
evolving in terms of our interpretation of what you are saying.
But ask in two or three years. It is much like the energy
argument. I think we will be much more knowledgeable about
that.
Mr. King. We have industries, you know, in my testimony
with the Littleton Industrial Park, there is a number of
companies that are selling internationally right now. You
yourself, if you go hiking in the woods, might use DEET, is one
product that is made in this little town of Littleton, New
Hampshire. And one of the companies is a foreign company that
makes large connectors for electrical connectors. So yeah, I
think from a product standpoint, we surely are promoting those
kind of companies if they want. And we are, interesting enough
we are right on the Canadian border. And we have some French
speaking companies that come into the region, and they are
building there. And just on the other side of that coin, in the
service industries in, and technology, there are companies
developing, I am not the scientist enough to be able to know
what I am talking about here, but developing the different
kinds of immunologies for cancer and infectious diseases. And
if those kind of start up kind of companies, if they really hit
it, that is better for all of us.
Mr. Fattah. Absolutely. Well, thank you for your testimony,
and we need to look forward to continuing the progress that you
are making. And I know that the Chairman is committed to making
sure that as we consider the appropriations request of the
administration that we look at the work of EDA and some of the
other organizations and agencies in the Commerce Department to
make sure that we are doing what we need to do to promote job
growth in this country. Thank you.
Mr. Mollohan. Thank you, Mr. Fattah. Certainly, Mr.
Serrano.
Mr. Serrano. Mr. Chairman, just a reminder that it is okay
under the House rules to bring products from your State to
share with the other members.
Mr. Mollohan. Member to member?
Mr. Serrano. Peanut chew?
Mr. Mollohan. Yeah, I do not think the Committee has
received any peanut chews.
Mr. Fattah. I am going to make sure that the Chairman has
the first opportunity to experience this product.

ECONOMIC DEVELOPMENT DISTRICT DESIGNATION

Mr. Mollohan. This is the serious business of legislating.
Both of you are EDA designated economic development districts.
Mr. King, you have been one for some time. Dr. Brown, you have
been one for less time. If each in turn would describe the
value of the EDD designation for your organization. Maybe you
have had one longer, Mr. King, you could talk first? What is
the benefit of that?
Mr. King. Well first of all, being recognized by EDA, the
obvious one is you are eligible for funding. And that is, you
know, a huge benefit. And I think in the wisdom of when the law
was written, making, developing economic development districts
and developing a planning and implementation process that they
did was the reason that you become eligible, because some of
the things that I talked of with Mr. Fattah. It is just, I
think that is a huge benefit. I think some of the things that I
was disappointed in in the last go round was that they took
away some of our ability to create more of, which made the
communities provide more of a match. I hope that the Committee
will consider restoring what it used to be. And, you know, it
used to be easier for communities and the local project
developers to be able to, for EDA to contribute more to the
project, and the local people commit less.
Mr. Mollohan. How did, just tell us how that changed, and
how that----
Mr. King. Well I think, you know, for instance in my
district, and I am not sure what happened, we were a 60 percent
funded and a 40 percent match. That went down to 50-50. And,
you know, that does not seem like a lot, but it is a lot to a
project and a project developer, in some cases. And there was
always the ability before from the Assistant Secretary to be
able to get more than the 60 percent, and maybe up to 75
percent. That went away, and we were not able to do that. And
that hurt some projects. You know, some projects were not able
to go forward because of that. And you know, just to say it
again, you know some of the things that we do as a district,
and when we are doing the project development, we have got to
get the project funded. And, you know, EDA is only one piece.
And so we are out looking for the rest of the funding. We are
looking for private investment. We are looking for state to put
some skin into the game. I hope I am answering your question
there.
Mr. Mollohan. No, you certainly are. Are you opposed to the
match in and of itself, or just opposed to the percentage of
the match?
Mr. King. I think it is critical that we have a match.
Mr. Mollohan. And what do you think would be a better
ratio?
Mr. King. Well, at least we would like to go back to where
it was in prior years.
Mr. Mollohan. What do you think would be the optimum match?
Mr. King. I do not know if I know. I think the 60-40 was
good at the time we were doing it. I would like to at least see
it restored to that.
Mr. Mollohan. It was workable?
Mr. King. And have the ability that depending on the
project to allow the regional directors and the Assistant
Secretary to look at it and see if----
Mr. Mollohan. Have some sort of waiver authority?
Mr. King. Some kind of waiver authority, yes.
Mr. Mollohan. Dr. Brown.
Mr. Brown. Well----
Mr. Mollohan. Describe the value of the EDD designation to
you.
Mr. Brown. Right. It allows locals to be focused,
committed, and prioritized. And without that to go to
congressional representatives, state representatives,
otherwise, if we did not have that we would not be looking at
priorities. You would be looking at a variety of people that
you may have seen sometime come into your office on an hourly
basis, and they are all talking about something different, and
you did not realize was a problem in your district.
Mr. Mollohan. So it is important to you as establishing a
real process and funding that process?
Mr. Brown. Absolutely. And then we are in tune with the
other federal partners, or state partners, how that all works.
Clearly, the more committed we are locally the much easier job
we can do for our other partners. The other thing is EDDs, and
the funding for the economic development districts, is
increasingly more important. Let me give you an example. The
City of Weirton had to cut its budget 20 percent last year.
That is our major business center, major city in our area. What
is important about that, what they cut out was their economic
development person. Now they are depending on us to be their
economic development people. We do mapping, technical
assistance, but otherwise if we weren't there, an economic
development district and the planning district funding, there
would not be, I do not know, I am sure it would be filled some
way. But I am not sure it would be adequately filled to give
those priorities and commitments for you.
And in terms of the match, we are all different. There are
a lot of original EDDs in the area. I would like to have your
money, match money. Because I have 50 percent match, and have
had 50 percent, and it has always been that. I would say that
if they looked in the last five years at the eligibility
criteria we have probably changed. So I would ask that maybe
the eligibility criteria should be updated on an annual basis.
Mr. King. Yeah, that is a good point.
Mr. Mollohan. And the eligibility criteria be a sliding
scale based on some needs based formula?
Mr. Brown. Right, whether it is unemployment rate, per
capita income, measures, other measures of distress would be
very helpful. And if that were updated on an annual basis it
would be very helpful.
Mr. Mollohan. Yeah, too high a match obviously biases less
economically distressed areas against more economically
distressed areas, if you follow that. I think I said it the way
I meant it. That the less economically distressed areas would
be more likely to get the assistance than the more economically
distressed areas, because you would be out of the game because
you could not make the match.
Mr. King. That is right.
Mr. Mollohan. Yeah, we have seen that in some other
programs, too.
The funding associated with the designation, Mr. Brown,
would you speak to its importance? It may be some specific
examples, or you already have a little bit, but just for the
record?
Mr. Brown. The funding?
Mr. Mollohan. The funding associated with the EDD
designation? And you have already said it does matter.
Mr. Brown. Right. The----
Mr. Mollohan. I mean, that is just crucially, let me just
answer this, is that crucially important to the whole
designation?
Mr. Brown. It is very crucial to our region because we
would not--
Mr. Mollohan. As you testified.
Mr. Brown. I mean we have these projects, a lot of our
water and sewer projects are essentially the planning, the
application, the monitoring, the close out of projects is done
through that type of program. If we did not have those funds,
just the moving of technically the project forward and closing
it out would be, we would not be staffed to do that. And I
would say, where we are the locals do not have, when we are
talking communities of a relatively small size that just do not
have the ability to carry staff to make that happen.

PUBLIC WORKS FUNDING LEVEL

Mr. Mollohan. Okay. Shifting gears here, the administration
has proposed to shift significant funding away from the public
works account into the economic adjustment assistance program
based on the rationale that EAA is a more flexible program.
From your perspective, is this shift desirable, appropriate?
Why and why not?
Mr. King. Well my opinion is, you know, where they are
shifting it to be more flexible, and to provide more innovative
types of projects, I mean, we need some more innovative types
of projects. I do not think necessarily the way to do that is
to take money out of public works and shift it into economic
adjustment. I think, you know, you want to do that, give more
money to economic adjustment. Public works in a rural area is
critical. We still need the basic building blocks to be able to
do economic development. You know, most of my communities are
under 5,000 people, and many of them are under 1,000 people.
And that infrastructure, you know, there has to be some kind of
continued infrastructure. And I am not saying we need to
continue to build industrial parks. But there are serious
places where infrastructure needs to be continually built. And
do not take too much away, you know, public works was the core
of EDA. And it, has not changed that much that we should take
all the money out of public works and start shifting it to
these innovative planning things. We need more, we need bricks
and mortar, and we need to have people doing that.
Mr. Brown. Yeah, I agree, bricks and mortar are key. But
economic adjustment does create the creativity and ideas to get
the bricks and mortar. So it is sort of a catch-22 type of
approach. But I, once again, it is just bricks and mortar which
are fundamental projects. And you are looking back ten years
from now, that is what you are looking at. The infrastructure
that is there.
Mr. Mollohan. Mr. Bonner.
Mr. Bonner. I have no further questions, Mr. Chairman.
Mr. Mollohan. Mr. Serrano. Mr. Aderholt. Mr. Culberson. Mr.
Fattah.
Mr. Fattah. No further questions, Mr. Chairman.
Mr. Mollohan. Gentlemen, we want to thank you very much for
your appearance here today. We understand that you had to
travel a long distance, prepare. You have been very helpful to
the Committee. There may be some questions submitted which if
you would be kind enough to take some extra time to answer it
would be really helpful to the Committee. I know I do have some
follow up questions, actually, which I may be in touch with
both of your individually about. But thank you for your
appearance here today, and your good testimony.
Mr. King. Well, thank you for affording us the opportunity
to come down and talk to you.
Mr. Brown. Thank you.
Mr. Mollohan. You are welcome, and for your good work back
in your regions.
Mr. King. Thank you.

Second Panel Remarks

Mr. Mollohan. If the next panel would take come forward?
Okay. We welcome our second panel. Mayor David Bradford, the
City of Muscle Shoals, Alabama, was the immediate past Chairman
of the Northwest Alabama Council of Local Governments; Chuck
Wemple, Economic Development Program Manager of the Houston-
Galveston Area Council; and Dr. Les Wyatt, President of the
Arkansas State University System. Gentlemen, we welcome you all
to the hearing today. Your written statements will be made a
part of the record, and after Mr. Bonner makes any comments he
might want to make, or if Mr. Aderholt would like to make a
comment before the witnesses proceed please, Mr. Bonner?
Mr. Bonner. I would be happy to yield to Congressman
Aderholt.
Mr. Aderholt. Well I just want to say thank you. It is good
to see Mayor Bradford here. Thank you for your testimony today.
And thank you for your work, you and other regional leaders in
Northwest Alabama, and the direction you have taken Northwest
Alabama. And so we thank you for your testimony here today,
look forward to hearing it, as well as your colleagues here
today to testify before the Committee. So thank you.
Mr. Mollohan. Okay. Thank you, gentlemen. Why do we not
just lead off with Mayor Bradford?

Opening Statement by Mayor Bradford

Mr. Bradford. Thank you, Mr. Chairman. Good afternoon, my
name is David Bradford. I am the current Mayor of the City of
Muscle Shoals, Alabama, and the immediate past Chairman of the
Board of Northwest Alabama Local Governments, an EDA designated
economic development district. We thank you for the opportunity
to be here today and speak on the role of the Economic
Development Administration. And we have submitted a lengthy
statement for the record so I will limit my remarks to a few
key points.
First, I would like to stress the importance of EDA to
local economic development efforts. EDA provides support for
strategic planning, ongoing collaboration, and project
implementation. And each type of support is tremendously
important to successful strategies to create jobs. Through its
strategic planning investments EDA lays the groundwork for
successful strategies to prepare and promote communities. With
its planning partnerships, EDA gives regional organizations,
such as the Northwest Alabama Council of Local Governments, and
other economic development districts, the capacity and the
support to maintain planning, project development, technical
assistance, and grant resource opportunities. And finally, EDA
supports job creation efforts by investing in infrastructure,
revolving loan funds, business incubators, and other economic
development projects. With these investments EDA has helped to
create or retain over 4 million jobs and over $130 billion in
private investment.
In our region alone EDA's support was important to the
location decisions of two international companies that have had
great positive effects on our local economy. Without EDA
assistance, SCA Tissue of Sweden in 2003, and North American
Lighting Koito of Japan in 2007, would have been more
difficult, if not impossible to recruit. For both of these
companies EDA's strategic planning and infrastructure
investments proved to be critical. These investments were
coordinated through the economic development district which
proved to be a vital partner along with local governments and
the Shoals Economic Development Authority. In both cases modest
investments and strategic plans laid the groundwork for success
by pointing out opportunities and focusing on regional efforts
in collaboration with governments. In each case EDA made
investments in infrastructure to prepare sites for industries.
Combined, EDA's $2.83 million for water production storage at
two locations in Colbert County helped create over 600 new jobs
and leverage over $300 million in private investment. These new
industries located in our region in 2003 and 2007 and
immediately helped to improve unemployment rates and incomes in
an area that has long suffered from economic troubles. These
industries continue to be strong employers despite these
economic times that we are in.
EDA's investments in our region are coordinated by the
Northwest Alabama Council of Local Governments, which was
recognized by the EDA as an economic development district in
2001. EDA's support allows the council to provide vital
resources to regional collaboration through a five-county
region in Northwest Alabama. And EDA's planning partnership
investment is used to provide ongoing planning and project
development, technical assistance, and grant resources to area
governments and partners throughout a five-county region.
Despite working with EDA through the years there are
probably two areas that EDA activities could be strengthened.
First, EDA sometimes takes too long to review the application
and these delays can sometimes strain relationships with
industries and other local partners. And second, EDA is charged
with creating higher skill, higher wage jobs, and oftentimes,
for more rural areas, the quality of job opportunities is
relative to the existing conditions. Certain industries in our
region, such as tourism, may not have nationally competitive
wages but are strong local industries, and they are part of a
regional strategic context. Improving EDA's ability to speed up
the application process and understand the context of its
investments will make EDA an even stronger partner.
Finally, I would like to point out the EDA's significance
going forward. We are currently in the middle of one of the
deepest economic crises in memory. But for over two decades our
region steadily improved its lagging economic performance. And
we had double digit unemployment because of the loss of
manufacturing, and textile jobs in the late nineties, or mid-
nineties. And through much of 2005, 2006, and 2007 our region
had unemployment rates as low as 3.5 to 4 percent. For a region
with historically bad performance compared to much of the
nation, this was an amazing task to accomplish. It was done as
a result of strategic planning and investment in economic
development, with help from EDA.
Today, however, in each of the five counties our EDD
serves, unemployment rates have more than doubled in just over
the past two years, in some cases 12 percent, as much as 17
percent. Rates are as high as they have been in decades.
Because of our positive experiences with EDA we think that the
administration can be a model for economic recovery. EDA's
investments and strategic plans create a solid base of support
for working toward regional solutions. Its support for regional
councils and economic development districts enhances local
capacity to pursue development in a way that no other agency
can replace.
EDA's commitment of investing in a variety of solutions has
tremendous value. We need solutions to be regionally developed
and supported so they can take a variety of forms, and EDA has
a commitment to regions for strategic planning, ongoing
collaborative action, and a variety of implementation
opportunities. In addition, EDA has a proven track record for
promoting economic development success and taken together these
qualities make the EDA a vital partner for the nation's
economic recovery.
And I thank you again, Mr. Chairman, and members of the
Subcommittee for this opportunity to be here today. And I
welcome any questions.
[The written statement of Mayor David Bradford, of the City
of Muscle Shoals, Alabama, follows:]

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Mr. Mollohan. Thank you, Mayor Bradford. Mr. Wemple.

Opening Statement by Mr. Wemple

Mr. Wemple. Good afternoon. Thank you, Mr. Chairman,
Subcommittee members. Thank you for allowing me to testify
before you today. My name is Chuck Wemple. I am the Economic
Development Program Manager for the Houston-Galveston Area
Council. We are a thirteen-county region, including the
nation's fourth largest city. So we have about 5.75 million
people in the region. We also have some very small, very rural,
sparsely populated counties as well. So it is kind of a
challenge for us sometimes to line up those different needs.
I want to get across three key points today with regards to
our involvement with EDA. The first being that EDA's response
to our region following Hurricane Ike was exceptional, and
continues to play a key role in our region's recovery from that
natural disaster. Secondly, I want to talk about the
effectiveness of the district funding and why we think that is
a solid, good investment of federal funding. And then third I
want to talk about the importance of not reducing the types of
funding that are currently available to our local governments,
and also offer up some areas for possible improvement as well.
For those of you who may not be familiar, Hurricane Ike hit
our region in September of 2008. And we took a direct hit from
Hurricane Ike. The storm came out over Galveston Island,
bringing with it 100-mile per hour winds, extensive rain and
flooding, and a twenty foot tall storm surge which laid waste
to many of our coastal communities. We had widespread
devastation. We had neighborhoods turned into debris fields. We
have 200,000 homes either damaged or totally destroyed in our
region. Thousands of households displaced, thousands of workers
displaced, and thousands of businesses impacted either
physically or at least through extensive long term power
interruptions.
EDA quickly responded to our region following the disaster.
While many of our communities were digging out from under
debris and trying to get their communities back to a
functioning form of government, the local office came down and
met with us, and through our development district we identified
twenty-eight projects worth nearly half a billion dollars that
could be implemented with EDA disaster recovery funds. We
narrowed that list down, and ended up funding, through the EDA
office, nine projects totaling about $42 million. And these
projects were prioritized based upon the ability to get them
implemented quickly, and the relief that they would bring to
our communities.
There are a wide variety of projects. All of them are
infrastructure based projects. One of our small coastal cities
is looking to restore their waterfront area, running sewer and
water lines and elevating a roadway. The Port of Galveston on
Galveston Island is improving bulkheads and expanding their lay
down areas. And some of our rural counties are running
utilities along their interstate frontage roads with the
attempt to move more of their economic development a little
further inland so they will be more resilient if and when the
next storm hits.
One of the most exciting projects that we have through the
EDA supplemental funds after Hurricane Ike is our revolving
loan fund that was granted to our economic development
district, which I manage. It is a $10 million revolving loan
fund. The first cycle of funds, that first $10 million, is
going to focus exclusively on businesses that were impacted by
Hurricane Ike. We have that program launched. We are currently
reviewing about eighteen applications totaling about $2.5
million. And we expect that that first cycle of funding will
create about 500 jobs for our region. It is a large variety of
businesses that we are looking at, restaurants, auto repair
shops, and medical facilities.
All of these projects are going to bring hope to our
devastated communities. It may not sound like much to some
folks, but if you are a rural coastal community and you hear
that Pat's Tire is coming back in business, and if you got a
flat you can call Pat again, that is their slogan, people start
to shine a little more. And it kind of helps with that recovery
effort. A lot of the businesses that were hit by Hurricane Ike
were doing well before the storm. But once they were hit by the
disaster, and right on the heels of the Hurricane Ike disaster
we had a lot of economic downturn issues nationwide. All of a
sudden those folks do not have access to traditional forms of
credit. So it becomes very imperative that a revolving loan
fund like this be developed and put into play.
I want to emphasize a couple of things about the RLF. It is
not designed to compete with private banks. If anything we want
to complement what private banks can offer to our applicants.
Much like the SBA program, if there is a loan that the bank may
not do because they may not be comfortable with the type of
business, or the condition of that business after Ike, we are
able to come in and provide a loan for part of that funding and
the bank can move forward. Or in some cases, traditional
funding is not available at all and we are able to come in and
help those businesses get back on their feet and recover.
I want to talk a moment about district funding. Personally,
I think it is a great investment. Relatively modest amounts, we
get about $50,000 a year to run our economic development
district. It provides us to do the regional planning that the
previous folks testified about. We develop our comprehensive
economic development strategy, able to get those rural folks
from the sparsely populated counties, and our urban developers
together, and talk about priorities and linkages across the
region. It also allows our local governments to go after the
EDA grants. And it also allows us to respond to major events,
like Hurricane Ike. If our EDD would not have been in place it
would have been much more difficult for EDA to move quickly,
identify those projects, and get those funds allocated, and
help our communities. We view it as an extension of the EDA
staff for the region as well.
We are encouraged to see an increase in the level of
funding for the districts. It has also allowed us to get people
in the room and start to explore new opportunities for our
region, so some of our communities can transform or diversify
their economies. We have folks that are now looking at
renewable energy manufacturing component facilities. We are
looking at embracing and capitalizing on the local food
movement, raising more food locally and finding ways to get
some of those products to market. So we are very, very excited
about that and think those are a good investment that return a
lot of dividends.
I want to talk real briefly about the importance of the
diversity and flexibility in EDA funding. In my opinion, the
current mix works very well. When you have a suite of products
that communities can draw from, whether it is public works, or
adjustment, or the other products that are offered by EDA,
honestly I think that reducing the diversity of their funding
portfolio, of moving a lot of money out of public works, is a
step in the wrong direction, just to be very frank. So I want
to really emphasize the importance of diversity and
flexibility. If anything, you might want to consider expanding
some of the projects that might be eligible. We heard about
tourism a while ago. Infrastructure for ecotourism could be
considered. Not every community has a smokestack. Sometimes
that is your best bet, to protect your natural resources and
have a good quality of life for your citizens and good jobs.
A few recommendations. One thing that I think is important,
and it kind of ties into the flexibility I just mentioned, is
the final disposition of revolving loan funds. For those of you
that may not be familiar with the EDA revolving loan fund, that
money stays federal forever as long as you are able to keep
revolving those funds, and letting those monies out. And I
think there are going to be times, even with our Ike Recovery
Fund, when those funds may not be as easy to move as they are
going to be after a natural disaster, and when the credit
market is tightened. And I think that when you get to a point
where maybe you cannot be moving those funds, it would be nice
if those funds could be turned into another EDA eligible
project. Perhaps the RLF money could then go towards a public
works grant, or a planning grant, or some other project. I
think that that would probably be a good investment of those
funds in the long term rather than having a revolving loan fund
that might carry on for many years without being very
productive.
I also want to talk about something that was mentioned
earlier. Folks talked about hiring in the regional offices. I
think it's very important that EDA look at strategic hiring. I
think that as with many corporations and HTs that are out
there, there's a degrading of the workforce, and I think that
it's important that hiring be done to start to fill those slots
that are going to be retired and vacated, and I think moving
forward with that is a very important thing. Our regional
office has actually done that recently and we applaud those
efforts.
In closing, I just thank you for your efforts to maintain
and hopefully increase funding for EDA, and Mr. Chairman, that
completes my testimony, and I would welcome any questions.
[The written statement of Mr. Chuck Wemple, the Economic
Development Program Manager for the Houston-Galveston Area
Council, follows:]

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Mr. Mollohan. Thank you, Mr. Wemple. Dr. Wyatt.

Opening Statement by Dr. Wyatt

Mr. Wyatt. Mr. Chairman, and Committee Members, I'm Les
Wyatt. I'm President of the Arkansas State University System,
in Jonesboro, Arkansas. I wanted to tell you how EDA grants to
University Centers have help build capacity at our university--
--
Mr. Mollohan. Dr. Wyatt? I apologize for interrupting you.
I just want to note that we have been joined by your
distinguished Member of Congress from Arkansas, Marion Berry.
Marion, welcome to the hearing. We appreciate your coming by
today. If you want to take a seat at the table, you're welcome
to do that. Maybe you can see better.
Mr. Berry. Thank you.
Mr. Mollohan. Yes, sir. You're welcome.
Mr. Berry. I'm hear to show my support for Arkansas State
University and Dr. Wyatt, and the EDA which has been a great
agency for our part of the world.
Mr. Mollohan. Well, great. Thank you for coming by. We
appreciate your attendance here today.
Mr. Wyatt. That is essentially my speech.
Mr. Mollohan. Well, that's why we value him so much up here
is because when he says something, it's short, sweet, but has a
lot of meaning associated with it. Dr. Wyatt, please continue.
I apologize for interrupting you.
Dr. Wyatt. That's all right. I want to tell you how our
capacity has been increased with these grants; what has been an
outgrowth of economic development in our region; and finally I
want to describe a tangible outcome of that activity that will
affect you and your children.
I live in the 1st Congressional District which is
represented by Congressman Marion Berry. He wrote to all of us
in our District. This District is the Mississippi river delta
of Arkansas, and has some of the richest land and the poorest
people in America. Our regional economies have traditionally
been based upon agriculture and manufacturing, two sectors that
have declined in profitability. Over the last century many jobs
have been lost in these areas. Our region's products have had
value added and profits taken outside our region, and most
recently by offshore interest. As a result, our communities are
dwindling. Our schools are inadequate, and our economic future
is challenging.
Our university was created 100 years ago to serve the
students of this region. We do so with a wide variety of
academic programs which have produced over 60,000 alumni. A
large majority of these graduates live in the 1st District
where they form the basis of hope for economic growth and
sustainability for our future. We're at the eastern edge of an
EDA region overseen by Mr. Pedro Garza and his staff in Austin,
Texas. Mr. Garza has long been concerned for the economic
conditions of eastern Arkansas, and he's provided support and
expertise, assistance and encouragement to many agencies in our
state, including our university. Mr. Garza and his staff are
problem solvers, and they are entrepreneurial, in terms of
their outlook for our future. They've been patrons when we've
badly needed patronage, and their investments are paying off,
and in a moment I will describe a perfect example of that
return on investment.
EDA has provided support for economic development centers
which are located on several university campuses in our state,
and throughout our EDA region. The Delta Center for Economic
Development on our campus provides assistance and information
to small and large businesses, government agencies, communities
and individuals. The Delta Center has also received support
from EDA to construct a facility where assistance is given,
where data can be generated and kept, and where staff is based
for outreach across our region. There is no comparable economic
engine in our region, and the Delta Center would not exist if
it were not for EDA support. We and thousands of citizens in
east Arkansas are grateful for the EDA financial support for
the Delta Center for Economic Development at Arkansas State
University.
The Delta Center also works closely with the state's
economic development agency, local Chambers of Commerce, and
city officials across the region to recruit new businesses and
industries to our area. This process is frequently supported by
a productive relationship between Mr. Berry, Mr. Garza, and our
state's governor, Mike Beebe, and a host of other
collaborators. Our campus resource, the Delta Center for
Economic Development, has been a player in most of these
projects across the region, thanks to EDA support for staff,
programs, and facilities on our campus. This campus-based
university economic development center is a model you can be
proud of.
On a parallel track, our campus also receives support from
the state to create a research initiative called the Arkansas
Biosciences Institute. The purpose of this initiative is to
study plant materials which may be produced or modified to
improve the lives of Arkansans, often at the intersection of
medicine and agriculture. We're particularly interested in
health benefits from plants which may be consumed by domestic
livestock or by humans, for both chronic and acute diseases.
The Biosciences Institute is five years old. It has a staff of
research scientists from around the world, and it has
successful competitive grant awards from a number of federal,
health related agencies.
The Biosciences Institute has also received significant
support from EDA to create an incubator facility to move
research from benches in the laboratory toward
commercialization of products and processes. Several small
companies have been created, based on patents received through
these research and development activities, thanks again to EDA.
So I've described support from EDA which sustains the Delta
Center for Economic Development, which is a business
organization, and EDA support which created an incubator, a
research organization. The two came together in an important
economic development project which will affect you and your
constituents and your families.
Our state recruited a New York company, called Nice-Pak.
Nice-Pak has produced billions of these little packets. They're
disposable wipe products and they're used for sanitary,
cosmetic, medical, and hygienic applications. You've used these
products. Every citizen has used these products at restaurants,
medical facilities, beauty shops, retail stores, daycare
centers, and nurseries, all across the country. Nice-Pak is an
organization that was recruited through EDA support and
sponsorship. We worked with their company officials to relocate
their operation and manufacturing activity to our city. Using
the facility and staff supported by Mr. Garza's grants, the
project in Jonesboro is up and running. The CPA of Nice-Pak,
Mr. Robert Julius, was rightly concerned about the
environmental affect of these products, because a billion of
these little foil packets, and the wipes that are inside these
things, will go into our landfills.
Mr. Julius and one of their customers in Arkansas, the
Walmart Corporation, decided to seek more environmentally-
friendly packaging and application materials. So they turned to
our campus for assistance, and the value of EDA support became
very quickly evident. The researchers in our Biosciences
Institute got together with the production staff of the company
that makes these little things and they're putting together a
concept to use cellulose-based materials for the wrapper, and
to integrate plant materials into the wipes themselves. These
products, when introduced back into the landfill, will be
biodegradable, and will leave this planet better for our
children because of that activity. The wipes themselves will be
based on plant materials which are found in abundance all
around us, and this will add an additional layer to our
economic capability.
The outcome of this effort, which integrates a number of
EDA-sponsored projects will touch the lives of millions of
users around the country and across the world, one wipe a time,
billions of times. So this has become a win-win, win-win-win
outcome. The prime sponsor of all of this activity has been the
EDA office, Mr. Garza, and his staff, and because of your
appropriations. We want to thank you for directing the people's
money for this important activity, for making our university
center possible, and for the great success that you've
engendered. Thank you, Mr. Chairman.
[The written statement of Dr. Les Wyatt, President of the
Arkansas State University System, Jonesboro, Arkansas,
follows:]

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ECONOMIC RECOVERY IN NW ALABAMA

Mr. Mollohan. Thank you for your testimony, Mr. Wyatt. Mr.
Bradford, in your oral presentation, you referenced a model for
economic recovery.
Mr. Bradford. Yes, sir.
Mr. Mollohan. Would you elaborate on that a bit, please?
Mr. Bradford. I came into office in 2000. We had double
digit unemployment at that time. We'd been suffering a great
deal of unemployment since the mid-1990s, and local leaders and
I, by local leaders I mean mayors, county commission, chairmen,
chamber of commerce counsel, open government such as EDAs,
focused on job creation economic development through
infrastructure improvements, and we knew we had to diversify as
far as our workforce, our labor workforce, and actually go
after jobs and so that's what we started working on. We had
jobs, economic development infrastructure, education, and
transportation issues, and that's primarily what we've been
working on to date. But in 2005, 2006, and 2007, we turned that
double digit unemployment around into 3.5 to 4 percent, and we
were looking for, we were able to pick and choose some of the
companies.
Mr. Mollohan. I see. That effort turns out to be a model
effort for economic recovery.
Mr. Bradford. Well, as far as planning, in 2001 we went to
EDA and looked for an economic development model, and for
planning on infrastructure, and what type of jobs that we could
go after, what type of jobs our area would support our
workforce development and so forth, and with that plan in place
in 2003, we got our first company, which was a Swedish company,
SCA Tissue, and they now employ over 480 people.
Mr. Mollohan. Did you receive from EDA only money and then
you went out and hired a consultant to develop your plan, or
did EDA themselves participate in fashioning the plan?
Mr. Bradford. They didn't participate in fashioning the
plan. I think they gave direction as to accountability and how
we would be able to go out and actually take bids from
consultants and chose the consultant that was the best fit for
our area, but they did not participate other than the
accountability aspect.
Mr. Mollohan. In your testimony you emphasize the
importance of EDA's strategic planning investments through its
comprehensive economic development strategy process and
planning grants. Is that the process that you just described
right there?
Mr. Bradford. Yes, sir. It was known as the Wilson Dam
Corridor Comprehensive Plan, and actually, in northwest
Alabama, we actually lay on the Tennessee River, Wilson Dam is
part of the TVA reservoir, and it's one of the largest lift
lock dams in the world, but we also have ready access available
to rail, in one of computerized railcar assemblies. These
companies actually lay in between those areas and also a
regional airport, so we were able to coordinate our resources
and from there go forward.

DISASTER RECOVERY IN TEXAS

Mr. Mollohan. Mr. Wemple, your testimony discusses how
quickly your District was able to provide EDA with suggested
projects following the devastation of Ike. What was the dollar
value of that assistance? The total dollar value of that
assistance?
Mr. Wemple. Dollar value as in number of projects, or how
much it cost us to do the work?
Mr. Mollohan. How much money you got from EDA in their
assistance in your recovery from Hurricane Ike?
Mr. Wemple. We conducted the analysis by leveraging our
planning dollars that we get from our District with other
projects that we have within our economic development program,
and then the amount of funding that actually came to the region
from the grants was right about $42 million dollars.
Mr. Mollohan. And does that count the $10 million from
the----
Mr. Wemple. That includes the $10 million revolving loan
fund, yes.

REVOLVING LOAN FUND

Mr. Mollohan. And who administers the revolving loan fund?
Mr. Wemple. My program administers that at our economic
development district.
Mr. Mollohan. And do you have assistance from a banking
institution?
Mr. Wemple. Actually one reason why we were able to work
with EDA and get the revolving loan fund is my department also
administers a very robust small business administration 504
loan program which we've had in existence for a number of
years. We are one of the top producers in the state of Texas,
and definitely in the Houston region. About a 300 loan
portfolio totaling over $220 million dollars.
Mr. Mollohan. And that revolving loan program is part of
EDA's regular authorization? Or was it a special authorization
under that emergency funding?
Mr. Wemple. It was special under the supplemental emergency
funding.
Mr. Mollohan. So it, not only the money but also the
authorization, would not have been available except for the
emergency authorization?
Mr. Wemple. Yes, and we would not have pursued it without
the emergency money, the main need.
Mr. Mollohan. In other words, another organization could
not go after a revolving loan fund because it was only
authorized in that emergency funding bill?
Mr. Wemple. We were identified as the only entity within
our region that could successfully administer it and come up to
speed quickly.

DELTA CENTER FOR ECONOMIC DEVELOPMENT

Mr. Mollohan. Okay I'll follow up on that. Mr. Wyatt, your
EDA University Center, that is exciting, there's no question
about it, and I guess it's an example of how powerful an
association with an academic institution can be. Just explain
to us what role that plays in the community and how it
facilitates economic diversification, I expect, in most
instances.
Mr. Wyatt. The fact that it's based on a university campus
is misleading. It's really an organization for the community.
It covers a large geographic territory and in fact, the entire
1st District. People go out from that base of operations on our
campus to other locations and so its real value is perceived by
the communities around us in the business and the industries
there. But its placement on the university campus is very
important because we have assembled a large group of experts in
many areas that constitutes the university faculty, and the
Delta Center for Economic Development can tap those resources
as needed to provide assistance in the communities where they
do their work.
Mr. Mollohan. Mr. Bonner.

EXPORTS

Mr. Bonner. Jobs, jobs, jobs. That was the message the
President delivered last week in his State of the Union
address. It's certainly the message that all of us have been
saying for some time now because the economy has suffered so
much loss of jobs, and in your testimonies today each of you
have given testimonials about the importance of EDA. One
question that I'd like you to address is the President also
talked about the need to pass some trade agreements that
whether it's Columbia, or Panama, or wherever, help export
American products and create jobs here in this country. Any of
you all have an example of how EDA specifically has helped your
community or businesses in your communities take advantage of
that opportunity to export American products to other countries
overseas?
Mr. Wyatt. This is an example of many of the activities
where our University Center has been productive. In our area
where agriculture product is so prominent, our University
Center has given counsel to a number of our agricultural
producers to move their products around the world, and in fact,
products from Arkansas serve world markets. We could ship a
boatload of rice, down that river to any place in the world,
and we're doing it, and we're giving assistance through the
University Center to the people who would provide for shipping,
harvesting, processing, finishing and producing those products.
It's happening every day.
Mr. Wemple. Our region, given that we have major ports
within our region, and also an intra-coastal canal, we have a
lot of import and export activity within our region. There's a
good likelihood that businesses that will be helped through the
revolving loan fund, particularly on Galveston Island, will be
eventually looking at exports. You know we do have success
stories from our Small Business Administration program and
others where that happens, so I can't point to a specific
example. But these EDA funds definitely help by diversifying
our economies, allowing folks to take advantage of that
opportunity.
Mr. Wyatt. SCA Tissue, which is a global company, actually
the SCA plant located in the Schoals area, serves the entire
north American continent, and is a non-pulp paper product
company, so you don't get some of the environmental concerns.
In fact, we use recycled paper, cardboard, and other products.
They make tissue paper, they make restaurant supply type of
paper products as well as hygiene materials and cardboard
shipping containers. So that's going all over north America.
The North American Lighting, which makes taillight assemblies
for Toyota, Nissan, GM, and Ford primarily stay here in the
United States.

CREDIT ACCESS

Mr. Bonner. And Mr. Wemple, you had mentioned specifically
about some of the problems that businesses, especially small
businesses, were having with regard to credit. I asked the
previous panel a question using an example, I think you all
might have been in the room, of a local businessman's story
that he had shared with me. Specifically do you think EDA is
positioned to help programs like yours filter out, since there
is so much concern about credit today being available, whether
it's through commercial lending or through SBA or other federal
agencies, is EDA doing as much as they could do to help fill
the gap?
Mr. Wemple. Well, I think maybe I have two different parts
of an answer for you. I think that our revolving loan fund in
particular is going to fill a very severe need in our region
and so in that regard they are definitely stepping up to help
fill that void. One of the best things I think EDA has really
done for us is through the funding of our economic development
district, and through the development of our comprehensive
economic development strategy, we actually get people together,
people come to us to ask what types of grants they might be
able to get, what type of loans they might be able to get,
whether it's a local government or sometimes a business
venture, and then because of the ability of our district to
exist through EDA, we're able to link them up. Maybe they have
a better opportunity going through the USDA Business and
Enterprise Fund as opposed to EDA, or maybe SBA is a better
option. So it allows us to operate as a bit of a clearinghouse
in that regard, so I think that's probably one of the most
critical things that they allow us to do.
Mr. Bonner. Mayor, Congressman Aderholt had another meeting
for which he had to be excused, and asked that you would
forgive him for leaving early.
Mr. Mollohan. Thank you, Mr. Bonner. Mr. Fattah.

REVOLVING LOAN FUND

Mr. Fattah. Thank you, Mr. Chairman. I realize we have a
vote coming, so just some quick questions. Do you charge
interest on this revolving loan fund for businesses?
Mr. Wemple. Yes. We're required to charge a minimum of four
percent.
Mr. Fattah. Do you charge the minimum, or do you charge
above the minimum?
Mr. Wemple. Right now, our program is charging four percent
as our interest rate.

LENGTH OF REVIEW CONCERNS

Mr. Fattah. We've got to go vote. Mr. Mayor? I'll try to
get my geography right. You've got a golf course there? Shaw
Creek?
Mr. Wemple. Actually, we do. It's Robert Trent Jones Golf
Course.
Mr. Fattah. Condoleezza Rice just joined, right?
Mr. Wemple. Yes, sir.
Mr. Fattah. I try to keep track of your local economic
activity, at least in relation to golf. My colleague from
Alabama was telling me about the golf trail. I hope to visit.
Mr. Chairman, let me get to the point. In your comments
submitted to the Committee, you said one of your concerns,
among all of the glory that was bestowed by your comments on
EDA, was their decisions are slow. And that sometimes dealing
with private enterprise, they're looking for a quicker paced
decision package, and so I was trying to see how we might
reconcile that with our responsibilities. You know, the
government only works at one speed, which is slow. But it's for
a reason, that is to say, you have to be caretakers of the
public's treasury. So I was just interested if you could share
with the Chairman any real life anecdotal story about the
slowness of the process.
Mr. Bradford. Well, I believe that in both of these
projects it was prior to this group or EDA being able to hire
additional personnel, and that was the biggest thing. It would
take six to nine months to get some of these projects approved,
and you're on a time line to get infrastructure to them when
they're investing, you know, $40, $50 million, sometimes $100
million on their projects on their site, and they're wanting
their infrastructure there and of course you're going through
the bid process, design engineering, and so forth, and we
understand that there has to be accountability and so forth and
making sure that you know where this money is going.
Mr. Mollohan. It sounds like that timeliness is a problem
all over the country. We want to get Mr. Schiff and I'm sorry
we didn't see him right then, and he hasn't had the chance. Mr.
Schiff, welcome to the hearing.

CREDIT ACCESS

Mr. Schiff. Thank you. I just wanted to ask and I don't
know how much a part of this is in your bailiwick, what efforts
EDA has undertaken to help small businesses access credit,
because that's the number one complaint that I hear among my
constituents, that banks they have longstanding relationships
with where they just can't get credit. A lot of the job
retention issues in my district are a little different than
some of my colleagues. It's more about trying to retain motion
picture production and not have that run away to Canada and
other countries. But, I'd love to hear your thoughts about
EDA's work on access to credit.
Mr. Wemple. Again, through our revolving loan fund that we
have, that's going to be a major access for our businesses to
credit they can't get otherwise. Also we work closely with the
small business development centers at our colleges and
universities to make sure that the businesses get in good shape
where they can maybe have a better chance of having that credit
at the bank. If you don't have a business plan or projections
and various things in place, it's difficult to get a bank to
seriously consider you. So we make that requirement through our
EDD revolving loan fund, and then again the district funding is
critical to my group to allow us to have the capacity to be
able to steer businesses to other non-EDA programs, as well.
Mr. Mollohan. Well, thank you, gentlemen, very much for
your testimony. We are looking at five votes which will take us
40 minutes or so. We're not going to make you stay here during
that period. Your testimony has been excellent. I think
everyone has had two rounds. There may be a question or two
submitted for the record. You're not an agency, you're not
required to respond to that, but it would be nice if you did
because you're really helping the Committee with your
expertise. I have one question. Mr. Wemple, you indicated that
EDA funding, you're looking for diversity and flexibility, so
to broaden the opportunities for funding by expanding the
current funding portfolio to include special projects and
unique economic settings. If that resonates with you, I'd like
a comment on your ability to be flexible with EDA programs.
It's a changing environment. We're going from traditional
economies to the future, and diversification is very important
and just for that reason alone this flexibility is important
and I'd like to hear you all comment on that. Only for the
record, and I'm sorry to do that because right now I've got
zero minutes to go, zero seconds to go vote. But thank you so
much, all of you, for testifying, both panels for being here
today to testify. It's excellent testimony and will certainly
help us to establish a support base for EDA as we move forward,
certainly on the Subcommittee and beyond. So thank you for your
testimony here today. This hearing is adjourned.
Thursday, March 25, 2010.

USPTO (UNITED STATES PATENT AND TRADEMARK OFFICE) FY 2011 BUDGET
OVERVIEW

WITNESS

DAVID KAPPOS, UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND
DIRECTOR OF USPTO

Opening Remarks

Mr. Mollohan. The hearing will come to order.
Good afternoon, welcome. Today we have with us the Director
of the United States Patent and Trademark Office, Mr. David
Kappos, Kappos.
Mr. Kappos. Kappos.
Mr. Mollohan. Kappos? Thank you.
To examine the fiscal year 2011 budget request and
operations of the USPTO.
Director Kappos, you well know that the USPTO plays an
important role in fostering innovation which in turn drives job
creation, economic recovery, and prosperity.
You also know well that the USPTO found itself in fiscal
year 2009 in a precarious fiscal position. Fiscal years 2010
and 2011 will likely present new and equally daunting financial
challenges for the Agency and key performance measures like
patent pendency and backlogs will likely continue to decline if
left unaddressed.
USPTO's fiscal posture of last year highlighted major
unacceptable deficiencies in its budget formulation and
execution processes and underscored the need for a sustainable
funding model that would allow your Agency to weather periods
of economic downturn and reductions in fee collections without
disruption to patent and trademark operations.
You are aware of these deficiencies and that your budget
includes several proposals to address them which we will
explore this afternoon.
Your fiscal year 2011 budget request for USPTO is $2.3
billion, an increase of $435 million over the fiscal year 2010
enacted level. Of this total USPTO projects fee collections
under the current fee structure of nearly $2.1 billion. The
difference, some $224 million, would be generated under the
request by a temporary 15 percent surcharge on patent fees
which the Agency would require new statutory authority to
impose.
In addition, the budget request proposes new fee setting
authority that would permit the Agency to work with its
external partners to align fees in future years with the actual
cost of Agency services.
These two legislative proposals seek to establish a more
sustainable funding model for the USPTO, but are authorizing in
nature and outside the jurisdiction of this Committee. For this
reason it is imperative for the Committee to understand the
impact of your Agency operations if such new fees are not
established for fiscal year 2011.
Lastly, it is important to note that the budget request
proposes to establish an operating reserve to ensure the
availability of adequate funding to address multi-year budget
plans and unexpected fluctuation in revenues, but again the
creation of such a reserve is predicated on the collection of
new fees.
I would like to thank you for your cooperation and close
working with the Committee staff, it is certainly appreciated
and your efforts to develop a requirements-based budget, which
I think will go a long way in the long term to solving your
problem.
We have some structural issues that hopefully your
authorizing effort will address or that maybe we can address
otherwise.
I am going to invite you to summarize your written
statement which is made part of the report, but first I am
going to call upon our Ranking Member, Mr. Wolf.
Mr. Wolf.
Mr. Wolf. Thank you, Mr. Chairman.
Mr. Secretary, welcome. You're leading the Patent Trademark
Office in a very troubling and difficult and challenging time.
Your revenues are down, your patent backlog is over 700,000,
unemployment reaching ten percent in the country, inventors now
waiting three years, so we are anxious to hear how you plan on
dealing with that.
I also know that, I think, through the effort of this
Committee over the years on the telework, that you are probably
one of the leaders in telework.
How many are teleworking at your----
Mr. Kappos. Well on the trademark side of our Agency nearly
every trademark examiner can telework. On the patent side,
large numbers in the thousands of examiners.
Mr. Wolf. Well we have been told that you want to expand
it, so we will be anxious to hear how you want to expand it.
And again, we look forward to hearing your testimony.
Mr. Mollohan. Mr. Kappos.

Opening Statement By Mr. Kappos

Mr. Kappos. Okay, well thank you, Chairman Mollohan and
Ranking Member Wolf, members of the Subcommittee.
I am really pleased to be able to join you here this
afternoon and have an opportunity to discuss the USPTO's
operations and our programs and initiatives, and the
President's 2011 budget request in order to fund our efforts at
the Agency.
Mr. Chairman, we all recognize that innovation is a
principal driver of our economy, perhaps the principal driver
of this century. Stimulating economic growth, promoting
innovation, and creating high paying jobs are key priorities of
course for the Administration.
The President's 2011 budget clearly recognizes and supports
the role that the USPTO plays in enabling U.S. innovators to
flourish and to bring new products and services into the
marketplace. Yet the Office currently faces significant
challenges, as has been pointed out already, a backlog
approaching 750,000 patent applications, unacceptably long
patent pendency rates by any measure, 35 months and counting to
final action, and outdated information technology
infrastructure.
Our 2011 budget request provides the USPTO with the
resources and the flexibility that we need to start addressing
these problems.
The President's budget, as you noted, requests $2.322
billion for the USPTO based on projected fee collections of
about $2.098 billion under the current fee schedule, and an
estimated additional $224 million that would be brought in by
an interim fee increase.
Just like the business community, if we collect less fees
than expected, we have to manage the Agency based on the
revenues that we receive. And to safeguard against economic
downturns, the budget request emphasizes business tools such as
creating a reserve so that we can insure that we can execute
multi-year plans and serve the public without disruption even
in cases where patent filings dropped as they did in 2009.
However, to help the USPTO and put us on a solid path
toward a more sustainable funding model, the budget further
proposes fee setting authority to permit the USPTO to work with
its stakeholders and better align our fees with the actual cost
of our services.
So specifically, the President's request was formulated as
a requirements-based budget at the request of the Subcommittee
and supports a five-year plan that would reduce the time to
first office action in patent applications to 10 months, reduce
total average pendency to 20 months, and invest in a 21st
Century IT architecture infrastructure and tools that are badly
needed at the Agency.
For those applicants in fast moving industries who need
even shorter patent pendency, we are also formulating options
to provide 12-month pendency from filing until grant or final
action.
To achieve these performance commitments we will initiate
targeted hiring to recruit and hire 1,000 patent examiners for
a net increase of 400 to 500 after retirements and other
attritions annually during fiscal year 2011 and fiscal year
2012.
We are refocusing our hiring strategy to attract
experienced IP professionals who will require far less training
and will be able to quickly begin working on reducing the
patent backlog.
In fiscal year 2011 we will continue to promote a
nationwide workforce, as has already been mentioned, and to
invest in our telework programs which have been a model for
other federal agencies.
We are also studying ways to strengthen our organizational
structure to support our extra strategic initiatives, and we
look forward to working with the Committee as those efforts
progress.
So while fiscal year 2011 looks promising, our current
financial situation is less than optimal.
Our revenues from user fee collections declined
substantially during fiscal year 2009, and the Office was
forced to cut spending sharply in many important operational
areas, cuts that cannot be sustained in the long term.
Some of these financial constraints carried over into
fiscal year 2010 even as we started to improve the efficiency
and production of the Agency while operating on a bare bones
budget.
Thus far in fiscal year 2010 we have lost 115 patent
examiners through the end of March, and have replaced only six
so far. In total for fiscal year 2010, we project nearly 300
patent examiners will leave the USPTO and we will be able to
hire about 250.
So our Agency will deteriorate slightly in size even while
the backlog grows at current course and speed.
Mr. Chairman, I would be remiss if I didn't provide an
update on our current fee income projections.
Based on the first five months of fiscal year 2010, we are
seeing a very substantial rebound in user fee collections.
Our current projection is that the USPTO will collect
between $146 million and $232 million more than its
appropriated spending limit for fiscal year 2010.
So our new leadership team has undertaken a broad array of
efficiency initiatives to provide the speed and quality of
patent processing that our country needs. These initiatives are
described in more detail in my written statement.
Progress toward our strategic goals, however, is dependent
on a number of important elements. These include establishment
of a sustainable funding model, authority to set appropriate
fees, an interim fee adjustment on patent fees, and an
operating reserve to insure adequate reserves to address multi-
year budget plans.
Our fiscal year 2011 budget provides a framework for
continuing the work we have already started to make critical
changes that support innovation, enable investment, and
contribute to the U.S. economic recovery.
Mr. Chairman, the challenges we face at the USPTO are
significant, but we can address them with improved management,
working closely with our external partners to identify the best
solutions for improving the Agency, and with adequate
resources.
We appreciate your continued support of the USPTO and we
look forward to working closely with you and with your staff on
our fiscal year 2011 request in the weeks and months ahead.
Of course I am happy to answer questions.
[The written statement of USPTO Director David Kappos,
Under Secretary of Commerce for Intellectual Property,
follows:]

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BUDGET REQUIREMENTS

Mr. Mollohan. Thank you, Mr. Kappos.
You are asking for quite an increase here, and your request
is not keyed to your fee collection estimates are they, as they
have been in the past?
Mr. Kappos. Correct, our request is greater than our fee
collection estimates.
Mr. Mollohan. Yeah. And why is that?
Mr. Kappos. Well we started this year for the first time
with a true requirements-based budget. So we started by asking
within our business units what do you need to do in order to
make substantial progress against the huge backlog that we have
got? How many people do you need? What resources do you need?
We simply added all of that up and it came out to more than our
estimated fee collections.
Mr. Mollohan. So the budget you are requesting here today
is based on what you need to achieve some goals, not based upon
what your estimate of the fees that you might collect during a
fiscal year that you are projecting.
Mr. Kappos. Correct.
Mr. Mollohan. All right. I think that is a whole lot
better, and again, in opening remarks I complimented you for
that and I want to compliment you again for doing that. I think
that is the start of getting some rationality in this whole
fashion of fiscal policy for the USPTO and getting away from a
lot of misunderstandings, which maybe we just leave behind us
as we march forward, unless there is any interest in churning
all those issues. Because the issues are structural and not
necessarily anybody's fault, it is just people working within a
system that I consider to be dysfunctional, which is my term.
So you have requested this pretty large increase, and what
are your goals with regard to it?
Mr. Kappos. What we plan to do with that money is first in
my mind and foremost, is to implement some really significant
efficiency improvements.
My belief is that you don't hire a lot of people under
broken systems, you have got to fix the systems. I wish we had
forever to fix the systems first, but we don't, so we are going
to have to fix the systems, which we are already working on,
and hire a substantial number of people, as I mentioned. 1,000
people in fiscal year 2011 and 2012 while we are fixing the
systems.
We have got to turn on overtime 100 percent, which is an
extraordinarily efficient way for us to get work done.
We have got to get the information technology working and
start making some investments in our information technology.
We have got to fully fund our Patent Cooperation Treaty,
which is an international treaty. We have got to fund the
contracts so we can keep that work with our contractors so we
can use our internal resources to work on U.S. patent
applications.

PENDENCY GOALS VS. PENDENCY STATUS

Mr. Mollohan. Let us go to your goals with regard to your
pendency and your first response times. What are they right
now?
Mr. Kappos. So right now----
Mr. Mollohan. Average pendency.
Mr. Kappos. Average total pendency--I am doing this from
memory--is about 35 plus months.
Mr. Mollohan. And so that is 35 months starting when?
Mr. Kappos. Starting from when the patent application is
filed to when we give a final decision on issuance or
rejection.
Mr. Mollohan. Okay. So just so emphasize it, from the time
a patent application is filed to the average time it is
disposed of one way or another is 35 months?
Mr. Kappos. Correct. Actually a little more than 35 months.
Mr. Mollohan. Okay. And since that is average there are
some shorter and there are some probably much longer.
Mr. Kappos. Sure.
Mr. Mollohan. What is the first response time frame that
you are working at? What do you call that?
Mr. Kappos. First action pendency.
Mr. Mollohan. First action.
Mr. Kappos. Right. So the pendency until the first time we
give a substantive answer to the applicant is somewhere around
27 months or so.
Mr. Mollohan. So on an average a person filing an
application would just say well a couple years from now I will
hear from them for the first time.
Mr. Kappos. Correct, and that is not good at all.
Mr. Mollohan. Well we agree with you.
So what are your goals now with this new budget? To what
extent and how in terms of objective criteria, these numbers--
--
Mr. Kappos. Right.
Mr. Mollohan [continuing]. What do you hope to achieve in
terms of reducing those pendency periods?
Mr. Kappos. We are going to do three things. And of course
it will take multiple years. With a backlog as big as we have
we can't get it all done in one year. But we are going to do
three things.
Mr. Mollohan. Well we will talk about that in a second, but
go ahead.
Mr. Kappos. Right, okay.
So we are going to take average total pendency down from
the 35 plus to 20 months.
Mr. Mollohan. So your ultimate goal a couple years out is
to get to 20 months final disposition.
Mr. Kappos. Correct.
Mr. Mollohan. Okay.
Mr. Kappos. We are going to take average first office
action pendency down to ten months. So 27 or so down to 10, a
very substantial decrease.
Mr. Mollohan. Okay. So we file it, we expect to hear from
you in 10 months instead of 27 months.
Mr. Kappos. Yes.

PENDENCIES, OPTIMAL

Mr. Mollohan. That is improvement.
Mr. Kappos. Those are the optimal pendencies.
Mr. Mollohan. Well that is my next question.
What is the right time, I mean the optimal time to use your
word, that a applicant should expect to hear back from you with
first response and then final disposition?
Mr. Kappos. The answer is it depends on the applicant in
the situation. Some applicants want to hear back immediately.
There is no such thing as too soon for them. We will talk about
them in a minute.
But on average, applicants actually want to have some time
before they hear from us so that some prior art can get out
there, so that they can do market research on their product,
for a number of reasons. And it turns out that 10 months is
optimal because it is as long as we can wait, but it is less
than 12 months. Twelve months is when applicants have to make
foreign filing decisions.
So optimally they want to have all of the information they
can have from us shortly before they are required to make their
foreign filing decisions, which is why you want to push close
to 12, and 10 is about the closest you can get and give them
time to respond.
Mr. Mollohan. So these times, these target turn around
periods are optimal turn around periods. I mean that is what
your community, your customers so to speak, that is what they
would like to--that is the goal they would like to see
achieved.
Mr. Kappos. Right.
Mr. Mollohan. They wouldn't like to see you turn these
applications around any more quickly.
Mr. Kappos. Not in general. There are some who will, we can
talk about those.
Mr. Mollohan. Okay.
Mr. Kappos. So to talk about the ones who want a very quick
response. So frequently----
Mr. Mollohan. But let me just be clear on this and then
please on that.
Twenty months for a final disposition and ten months for a
first response. Those are the goals the communities advocate
for.
Mr. Kappos. Right.
Mr. Mollohan. And this budget that you are projecting here
achieves those time frames in what time period?
Mr. Kappos. Well we will achieve the time frames, and if I
am recalling right now, 2014 for the--I might have to refer to
my notes here--but 2014 I believe for the 20-month total
pendency and 2015 for the 10-month first action pendency. But
it is 2014, 2015.

FEE SETTING AUTHORITY AND RESERVE FUND REQUESTED

Mr. Mollohan. Okay. Let us quickly, and I am going to come
back to the FTE numbers here later, but let me just finish up
my line here by asking you about the funding scheme that you
are proposing.
Elaborate on that beyond your introductory remarks, if you
will.
Mr. Kappos. Okay. So let me make sure I have the question
right. Our funding----
Mr. Mollohan. Your proposal for funding and for your new
fee proposal----
Mr. Kappos. Okay.
Mr. Mollohan [continuing]. And your reserve fund that you
want to create, and talk to us about this proposal and how this
works for you.
Mr. Kappos. Okay.
So it starts with getting the bridge funding provided by
the 15 percent surcharge next year.
Mr. Mollohan. Right, because you want to build up the
surplus and the reserve fund.
Mr. Kappos. Correct. And that helps us to build up starting
with a $50 million reserve fund so that we don't get ourselves
in financial trouble in the future.
Mr. Mollohan. Okay.
Mr. Kappos. It also enables us to start on the path toward
recovery, hiring the 1,000 examiners, turning over time all the
way on.
Mr. Mollohan. Well the reserve fund doesn't do that. Your
increased fees do that I think don't they?
Mr. Kappos. Correct.
Mr. Mollohan. They support your base budget, the reserve
fund is sort of your float, if you will.
Mr. Kappos. Right.
Mr. Mollohan. It is the ``go to'' you are proposing in case
you don't meet your budget request----
Mr. Kappos. Right.
Mr. Mollohan [continuing]. With your fee collections.
Mr. Kappos. Correct.
Mr. Mollohan. Okay.
Mr. Kappos. Right. So the next major piece to the financial
product is having the ability for the Agency to set its own
fees with significant oversight and user community input so
that we insure that we are staying very balanced and
reasonable, but that will provide us with the ability to get
fees much more aligned with the cost of actually delivering
services, which I believe will help significantly to prevent
another major shortfall in the future.
Mr. Mollohan. And a significant difference here in your
proposal as compared to what the situation you face now is your
fees are set. You can't adjust your fee rates, correct?
Mr. Kappos. Correct.
Mr. Mollohan. You can't adjust your fees.
Mr. Kappos. Right.
Mr. Mollohan. What you are seeking is authorizing
legislation at the best where you would be able to adjust fees
through some process that you didn't have to come back to the
legislature and ask for that, either through a rule making--is
it through a rule making you are proposing that?
Mr. Kappos. Yes.
Mr. Mollohan. Well that is not very efficient either. I
mean if you actually have to go through a rule making before
you change every fee you are talking about a year or two year
process.
Mr. Kappos. Indeed it is a significant process, and so we
wouldn't be changing our fees on any very short-term basis, we
would be going through getting significant user input----
Mr. Mollohan. And you are comfortable with having to do
that?
Mr. Kappos. Yes, I am.
Mr. Mollohan. I guess you are, because somebody told you
you had to go that way or because it is okay with you?
Mr. Kappos. No, because I think it is actually critically
important that we have input from the patent user community.
Mr. Mollohan. I see.
Mr. Kappos. And that we keep our fees reasonably balanced.
Mr. Mollohan. So you have an interactive process with your
customers, if you will.
Mr. Kappos. Correct.
Mr. Mollohan. Okay. Are you requesting an authorization for
this?
Mr. Kappos. Yes, it is in the President's 2011 budget,
director fee-setting authority.
Mr. Mollohan. But my question is a little different than
that. That is a request to the appropriators. My question is
are you seeking an authorization, going to the authorizing
committee and asking for this fee structure change and the
reserve fund approval?
Mr. Kappos. Well yes, we are. The director's fee-setting
authority is a provision that is included in the Senate 515
patent reform legislation.
Mr. Mollohan. Which you are working with the authorizers on
both sides of the Capitol, the Senate and the House?
Mr. Kappos. Correct. Right. We are trying to support the
House right now----
Mr. Mollohan. Do you have an opinion from them as whether
you are going to get an authorization in time to give us
direction with regard to this fee proposal?
Mr. Kappos. No, I don't.
Mr. Mollohan. You don't have an estimate?
Mr. Kappos. No.
Mr. Mollohan. Well you might ask them. We will as well, but
you might tell them how important it is. Okay. Well that is
good.
Mr. Wolf.

EXPORT CONTROL AND SECRECY ORDERS

Mr. Wolf. I thank the Chairman.
I have a couple questions here in a different area. A few
months ago I had a visitor to my office who raised a concern
that the PTO put its complete patent application for software
on the Internet. He was prohibited from exporting his product
because of its potential military intelligence capabilities. He
would never want to export it and I would be opposed strongly
if he ever tried.
But our system of export control is meaningless if the
plans for developing technologies are posted by the U.S.
government on the Internet. We all know that our country's
adversaries, China and others, our rivals are aggressively
working to steal as much of our intellectual property as
possible.
Two questions. Are you concerned that patent information on
dueling technologies is on the Internet, and have you
participated in any NSC led multi-agency to reform our Nation's
export control laws?
Mr. Kappos. Okay, thank you for those questions, Ranking
Member Wolf.
I am going to have to offer to get back to you on the
second question, because I am not sure about that.
As to the first question, I certainly would be concerned
about the export of U.S. controlled technologies.
The role that we play in the USPTO as the patent
applications involves in our Agency a very course filter and
then relying on other agencies, I believe DoD and DoE, to
filter the vast majority of our patent applications and put
those that involve controlled technology under secrecy orders.
And so, to my knowledge, that process works pretty effectively.
I would be concerned though, if something slipped through,
and I certainly would like to investigate that.
Mr. Wolf. Well if you would just give me a call and come
back and take kind of a different approach on these secrecy
orders.
In fiscal year 2008 there were imposed 69 secrecy orders
and in fiscal year 2009, 103, more than 78 percent of these
were DoD and NASA initiators, the remainder being foreign
initiators.
But did the Patent Trademark Office impose any secrecy
orders for reasons of economic security in either fiscal year
2008 or 2009?
Mr. Kappos. Not that I know of.
Mr. Wolf. That is important, because we are losing jobs.
What authority, if any, does the PTO have to impose secrecy
orders for reasons of economic security?
Mr. Kappos. I actually don't believe we have that
authority.
Mr. Wolf. But China is stealing us blind. And Mr. Chairman,
I think when I hear of this program created in China, maybe we
could carry language here, we are giving them that authority.
Because while it is great the secrecy orders which would be a
national security, but on economic security whereby the stories
that I have heard is that China just kind of codes these
things, it kind of comes through.
Let me take the third question. Should the technologies
restricted for export by the Department of Defense, Commence,
Homeland Security, State, NASA, Justice, and Energy
automatically be subject to a PTO secrecy order?
Mr. Kappos. So if I understand in the case where there is a
dual use technology, right, that is covered----
Mr. Wolf. Put Defense, Commerce, Homeland Security, State,
NASA, Justice, and Energy.
Mr. Kappos. Yeah, I would think that those issues should be
getting caught by those other agencies that do the reviews for
us.
Mr. Wolf. Well apparently they all haven't, and it troubles
me too that you can't really be economic. Can you see the
importance of the economic security?
Mr. Kappos. Sure.
Mr. Wolf. Almost ten percent unemployment in the country.
The Chinese can come in and access patents and move that. You
believe that the Chinese are looking at the patents that come
on?
Mr. Kappos. I believe that China and lots of other
countries are looking at them.
Mr. Wolf. And so does it make sense for you that you would
have that ability because of economic security as well as
national security?
Mr. Kappos. Difficult question to answer.
Mr. Wolf. Because if we get to 11 percent unemployment and
12 percent unemployment all you have to do is get on a train to
Washington and take it to New York and look at the factories
that are empty or closed.
Probably China is where it is now with the space program
because of the stealing of technology. The cyber attacks
against our government, DoD, Homeland Security and into
companies.
So it is economic security. A great nation needs a strong
economic base to support its national security.
You are shaking your head, you agree with me. So how do we
deal with this?
I can see I caught you a little bit by surprise, but this
is not a trick question.
Maybe we ought to get together and I can bring some people
to see how we deal with this issue. Would you not agree that
this is important with regard to the industrial base of the
Nation so that we don't have this technology and information
taken away?
Mr. Kappos. Right. I certainly agree with that.
If I could make a suggestion, perhaps this is an idea that
we can put together some kind of a study to take a look at what
level of potential expansion of secrecy orders makes sense.
Mr. Wolf. Maybe a 30-day study. I don't want a year study
or two years. You will be practicing law downtown and move it
onto somebody else. So if we can do a quick 30-day that would
be fine.
Last question on this area. What arrangements does the PTO
office have with the patent offices of Europe, Asia, and other
agencies cooperating in non-publication from national or
economic security when innovations are involved?
Mr. Kappos. I don't believe we have any arrangements. We
handle non-publication on a unilateral basis. So for the USPTO,
if we get a secrecy order, we put the entire case under lock,
if you will, and don't publish anything. We don't tell overseas
offices anything about those cases.
Mr. Wolf. So let me ask a last question. What does China do
and what does England do?
Mr. Kappos. In fact I believe in both of those countries,
and some other countries, they have the same requirement as we
do for local applicants to get export clearance for their
patent applications. So you have to actually go into their
patent offices, just like you have to come into the USPTO, and
give the office an opportunity to evaluate the subject matter
for secrecy purposes.
The UK does that. I am quite confident China does and some
other countries do so.
And so I expect they have programs similar to ours where
they are pushing those applications through their security
apparatus and asking the same questions that DoE and DoD do for
us, and pulling some of those with secrecy orders.
Mr. Wolf. I hope you don't have any collaborative
agreements with China, do you?
Mr. Kappos. Collaborative agreements?
Mr. Wolf. You are not bringing China over and sitting down
with them and talking to them.
Mr. Kappos. Our major collaborative agreement, which we
don't have with China, is called the Patent Prosecution
Highway, we have that with some other countries like the UK,
but not with China.
Mr. Wolf. And so you are not doing this with China. What do
you do with China?
Mr. Kappos. Well we are both members for instance of the
Patent Cooperation Treaty, but there are many countries I
believe, somewhere around 160 countries, or some huge number.
Mr. Wolf. What is your special relationship with China?
Mr. Kappos. I am trying to be helpful. Special
relationship?
Mr. Wolf. Well rather than taking up the Committee's time
with that why don't you think about these and then maybe
arrange for a time to come on by.
Mr. Kappos. Sure, sure. Okay, thank you.
Mr. Mollohan. Thank you, Mr. Wolf.
We have two minutes, 50 seconds to go vote, 339 members
have not voted, just to let the Committee know, we have a 15
minute--finishing a 15-minute vote and two 5-minute votes.
Mr. Fattah.

PATENT REQUESTS: FOREIGN VS. DOMESTIC

Mr. Fattah. Thank you, Mr. Chairman.
Along the lines of what the Chairman was talking about
earlier, you know, I am very interested in how we can help you
work through this backlog and how to get the decision packages
done more quickly.
So your optimum is 20 months, and along this continuum of
budget request you think you can achieve that by when?
Mr. Kappos. Again, I am doing this from memory, but I
believe we can get to 20 months total pendency by 2014 and 10
months first action pendency by 2015.
Mr. Fattah. Okay. And I am very sympathetic to the request
in terms of the reserve fund and the 15 percent.
I have another question. Who is requesting patents? Who are
the, you know, compared to domestic versus foreign requests
what is the balancing of that these days?
Mr. Kappos. Okay. Well, I am fond of saying that it seems
like everybody is requesting patents these days.
Mr. Fattah. I understand that. My point is have we arrived
at a rubicon where we now have more foreign companies
requesting patents than domestic?
Mr. Kappos. Yeah, it is about 50/50. It depends on how you
count, but the best way to count you come out about 50/50.
Mr. Fattah. And is there any fee differential?
Mr. Kappos. No, there is no fee differential between
foreign and domestic.
Mr. Fattah. And what about your counterparts in the UK and
other places, is there a fee differential?
Mr. Kappos. No. There are treaty requirements that cause
all countries' patent offices to charge local applicants the
same as overseas applicants.

PENDENCY BACKLOG REDUCTION

Mr. Fattah. Okay. And the budget request for the additional
15 percent, this floating reserve fund, right, would generate
about $50 million?
Mr. Kappos. Yeah, the reserve fund would start at $50
million, right. In my view it should become significantly more
than that over time.
Mr. Fattah. And if we wanted to front load the reduction
and the delay can you quantify for the Committee how much more
it would take to get this backlog to the optimum quicker?
Mr. Kappos. More quickly? Well so this is a very difficult
point. I totally agree and I would love to get there quicker,
but the problem I am going to have--my major tool would be to
hire more people, but the problem I am going to have if I hire
more people in 2011, 2012 is that it will cause the backlog to
go down so fast that I will wind up having potentially some art
units in the office literally run out of work, and I won't be
able to get people out of the office fast enough by normal
attrition.
So I am very concerned about over hiring in early years,
which would cause an overshoot.
Mr. Fattah. I can understand the desire for perfection
here, but if you follow the Chairman's thought, and it is in
your testimony, that there is a direct link between you doing
your work and other Americans being about to go to work, and
new inventions come on the market and so on, we might be
willing to live with some unevenness.
And plus in your design you are going out and you are
hiring former examiners in part, right?
Mr. Kappos. Uh-huh, correct.
Mr. Fattah. In order to expedite this process, which I
think is a great way to proceed.
So if the production of the patent decision expedites the
development of new products in a way that puts lots of
Americans back to work, it may be worth us trying to expedite
your work, right? Versus worrying about how neatly the hiring
and tradeoffs are in the packages of your personnel.
Mr. Kappos. Okay, correct. So we would be happy to go back
and----
Mr. Fattah. If you could provide that to the Chairman that
would be helpful.
Mr. Kappos. Yes, absolutely.
[The information follows:]

Cost of Speeding Up Hiring of Patent Examiners Immediately

If the USPTO were to speed up the hiring process by hiring 350 more
patent examiners during FY 2010, it would cost approximately $12
million this fiscal year. There would not be any additional cost in the
out-years due to already being included in the base funding in our FY
2011 budget request.
The below chart illustrates the impact of immediate hiring on
patent pendency and backlog:

PATENT EXAMINER HIRES--ACCELERATE 350 IN FY 2010
------------------------------------------------------------------------
Pendency reduction Backlog reduction
------------------------------------------------------------------------
--2011 0.8 mos........................... --2011 24,300 applications.
--2012 1.5 mos........................... --2012 24,500 applications.
--2013 2.1 mos........................... --2013 24,200 applications.
--2014 2.7 mos........................... --2014 23,700 applications.
--2015 3.3 mos........................... --2015 22,800 applications.
------------------------------------------------------------------------

Mr. Fattah. All right, thank you.
Mr. Mollohan. We are going to recess and we will be back
after two additional five minute votes. It shouldn't be too
long. Ten, 15 minutes.
Mr. Kappos. Thank you.
Mr. Mollohan. Thank you, Director.
The hearing will resume.
Mr. Schiff.

PATENT SYSTEM REFORM

Mr. Schiff. Thank you, Mr. Chairman. Director, good to have
you with us.
Congress has been examining proposals as you know and we
have discussed reforming the patent system for several years,
and I believe the key to addressing the concerns with the
current patent system is to work to increase efficiency at the
PTO and improve the quality of patents as well as get rid of
the backlog. In order to achieve those goals we need to insure
we are providing the Office with adequate resources and staff.
What I wanted to ask you about was if you look at the
fiscal year 2011 performance chart, you have provided estimates
on fee collections for fiscal year 2015. The chart indicates
that if funded accordingly, average total pendency will come
down to 19.9 months.
Do those fee collection estimates contemplate the 15
percent surcharge or are you building that into your
expectation? Can you tell us a little bit about how you arrived
at 15 percent? And do the estimates also contemplate other fee
increases?
In other words if you are building at 15 percent and you
are asking for fee setting authority, are you contemplating
other fee increases? If so, what kind of fee structure are you
contemplating?
Would it be advisable, for example, to have a scaled fee
structure where organizations that have multiple, multiple
patent applications pay more because they are utilizing the
resources and have the capacity to pay more?
The other question I wanted to ask you is sort of about the
long term and about the historic record of the Patent Office.
I asked my staff to look at the Office's projections five
years ago as a way of evaluating sort of the projections five
years forward, and I know it won't surprise you to learn that
the Patent Office, when they estimated this is what we will
need to get rid of the backlog, were very close in getting what
they said they needed. I mean they were a little bit off, but
not off by that much. But when you look at what the result was,
the result moved in the other direction.
In fiscal year 2006 the Office projected that the average
first action patent pendency in fiscal year 2010 would be down
to 18 months, but just a year later in fiscal year 2007 the
projection was up to 23 months, and two years later it is up to
26.5 months.
So the resources have come in not all that differently than
anticipated, but the pendency times, et cetera, have actually
moved in the wrong direction.
So the increase in the times cannot be fully explained by a
lack of resources, and this is coming from someone who is a
strong advocate of more resources.
So I guess, you know, one question, and you know, I think
we all have is, we want you to have the resources, but how much
confidence should we have that if you are given the resources
you say you need that the numbers will actually change in the
right direction? So if you could address that.
And you know, the final comment I would make on the fee
issue is, as important or as valuable as it may be for the
Office to set fees, unless you have the advantage of using the
fees, I don't want a situation where you are raising fees, not
getting use of the revenues, and the Patent Office is being
used to subsidize other government activities.
So if you could comment on those three areas.
Mr. Kappos. Okay. Well thank you, Congressman Schiff, those
are great questions. I will see how many I can remember and you
can perhaps guide me back to the other ones.
So relative to fee setting, which I think was one of the
first issues.

FEE INCREASES CONTEMPLATED

Mr. Schiff. You know, let me summarize and make it easy for
you.
The three categories I am interested in are do your
estimates contemplate fee increases? Well, do they take into
consideration 15 percent? Do you contemplate additional fee
increases? And what do you think about scaling up those fees
for sort of multiple, multiple users? Then how do you in
evaluating the performance record of PTO for the last five
years, what will you be doing differently to avoid the trap of
getting the resources, but not getting the productivity? And
then finally the retention of the increased fees.
Mr. Kappos. Okay. So the estimates contemplate both the 15
percent surcharge and separate fee increases, but not that they
would be operating together at the same time.
So what I mean by that, as Chairman Mollohan pointed out
before, is that fee-setting authority under notice and comment
rule-making takes at least a year, and my understanding is
between a year and 18 months in order to actualize.
If we are going to get started at improving the Agency
immediately, we need to have access to additional funding
before we would be able to get through any permanent reset of
fees.
And so the 15 percent surcharge is designed as a bridge, it
is sort of step one. It is something we can put in place
immediately while we are working on resetting the fee structure
in a more permanent way.
The 15 percent surcharge was calculated, as I mentioned
before, literally on a requirements-basis. So we started by
adding up what we needed to get done, figuring out how much
that would cost, then subtracting from it the funds we expected
to collect, and that left us with some $232 million, or around
that level, that weren't going to be funded.
And so if you then do the math as we did, to ask how much
if you were going to do a simple across the board surcharge,
how much would you need to do, accounting for some amount of
leeway or applicants changing behavior, and it just literally
mathematically comes out to 15 percent, so that is how we got
the number.
Mr. Schiff. And I guess this gets to the Chairman's point,
which is a good one. That you know, in the ideal situation you
would develop a five-year plan for reducing the backlog, swift
processing of patent applications, tell us what you need to
establish that and we would appropriate the money. If it is
more than the fees, then we would appropriate more than the
fees, if it is less than the fees, you know, theoretically we
could appropriate less than the fees.
It sounds like in the beginning it would be more than fees
because it will take you time to change the fees, but is it
your goal with the 15 percent and whatever additional increment
to set the fees at a level that presumes that that will be the
budget sufficient for the Agency to eliminate the backlog, et
cetera?
In other words is what you will be aiming for with a 15
percent increase and whatever fee increases and however they
are scaled on top of that to arrive at a fee level that would
make the Agency self-sustaining in this downward backlog
reduction trajectory without having the necessity of the
appropriation of any funds on top of fees, but at the same time
using all the fees that are collected?
Mr. Kappos. Yes, that is correct.

FEE SCALING FOR MULTIPLE USERS

Mr. Schiff. Okay. And what do you think about scaling the
fees for the numbers of applications?
Mr. Kappos. Right. So for multiple users, we are actually
working on something that is similar to that, and I want to use
an approach when we get to fee setting, if we get Agency fee
setting authority, that would be very, very similar, which is
to charge differentially, based on the number of pages that are
submitted in the application based on the number of claims that
are submitted more so than we do now.
We currently have some level of additional charge for
additional claims, but it needs to be substantially higher for
additional claims.
So you get very close to the same place by charging based
on the amount of work that we have to do in order to handle the
application, which is a function of the number of claims and
the number of pages of specification.
Mr. Schiff. How will you handle a situation where we have
organizations that acquire patents from others where you would
need to pierce the veil to see who the patent owners are to
know how many applications they are making and how do you deal
with that situation?
Mr. Kappos. Well that is a significant problem, and that is
one of the reasons that I think the way to get at the issue
that we are talking about here, which is to differentially
charge those who are requiring more of the offices resources,
the way to do it is on a per page and per claim basis, because
then you don't have to ask the real party in interest or
piercing the veil kind of question, you cut through that, just
look at the individual application and say how much resource
are we going to have to put into this as a function of the
number of claims and the number of pages of specification and
charge on that basis?
Mr. Schiff. Are there other policy reasons though why you
might want to know what the patent owners are in terms of the
utilization, the system, the transparency of the system?
Mr. Kappos. Well there certainly are in my view some good
reasons.
We currently get information on, of course, the inventors,
and the true and correct inventors have to be disclosed, right?
And then we get information on whoever the patent application
is assigned to, if the assignee wants to have all the legal
rights that you get from being transparently listed as an
assignee.
But to your point, applicants are able right now to form
any kind of company they want, including shell companies, and
list those as the assignees on applications. And in my view
that indeed does create some transparency challenges. Because
then, once a patent issues, and even when the application
publishes, a member of the public can't tell who is truly the
owner of the patent or patent application by looking at the
assignment records.

OUTCOMES

Mr. Schiff. And can you comment briefly, because I am
probably running out of time, what should give us more
confidence that with the resources that you are contemplating
we will see a different track record than your predecessors?
Mr. Kappos. Right. So look, we are doing everything
differently, okay?
There were many problems that have come up in the past
starting with skating to where the puck is rather than where
the puck is going, and we are trying to skate to where the puck
is going rather than where the puck is.
Putting it more specifically, there were terrifically high
attrition rate of examiners who had been hired within the last
two to four years. Those are the examiners that we have
invested a tremendous amount of money into training and they
were the people who we had gotten the least pay back from, if
you will, in terms of production and work.
By changing our hiring demographic, just one example, to
trying to hire experienced IP professionals, former examiners,
and people who at least have some life experience with the IP
system, we hope to get a much more mature workforce demographic
that will require a less training aggregate and will have lower
short range attrition. So that is just one example that can
have a tremendous impact on the Agency.
Mr. Schiff. Does the top end of the pay scale pose a real
limit on the quality of the applicants you can hire and your
ability to retain them? Is that something that needs to be
looked at as well?
Mr. Kappos. I believe that our pay structure is okay. It is
not as much as people make in the private sector, and we do
lose employees to the private sector, but I have plenty of
examiners who are telling me we feel like the pay isn't the
issue at the Agency. They are issues like the work mix, like
the management, and the structure of the management, and the
incentives that we have been giving to management, the IT tools
which are terrible, I commented on those before. Those are the
issues that our examiners rightly complain about.
I truly believe that while our pay is not what the private
sector is, that is not the issue that is holding us back.
Mr. Schiff. Thank you, Mr. Chairman.
Mr. Mollohan. Mr. Ruppersberger.

CYBER SECURITY

Mr. Ruppersberger. I know Mr. Wolf raised the issue about
the cyber security issue, and because your mission is fostering
innovation through technology and capital investment and
whatever, do you have a security team that is working with
Homeland Security or whatever?
Because we know China, Russia, other--we are getting a lot
of cyber attacks. Are you working--because the information that
you have and gets in the hands, and we know it has, especially
to China, millions of dollars worth of intellectual property is
gone.
Where are you as it relates to your security? Are you just
starting, have you identified anything, where are you there?
Mr. Kappos. Okay. So thank you for that question.
We do have a security team at the USPTO. We also are
working with our colleagues at the Department of Commerce which
has a significant focus on cyber security related issues, and
working to ensure that the USPTO is not vulnerable to those
kinds of attacks.
Mr. Ruppersberger. All right. Well, I think hopefully you
will be very aggressive in that regard, because we are just--
Homeland Security is taking a little while to step up, but I
think your area should be made a priority, and if you have any
issues there if you could contact me in my office we would like
to deal with you on that.
And I will take this to another level. On the attaches
embassies throughout the world that are there to help us to
work with us to make sure we are protecting our American
business and as far as their trade secrets or whatever, just
discuss that program a little bit, and how are we also
protecting them from the cyber attacks or any other
intelligence gathering countries or people that are trying to
get in fact.
Mr. Kappos. Okay. So yeah, our attache program is
relatively new still, I believe we started it in 2006. We have
USPTO employees in several important countries, including China
and Brazil and several other places, southeast Asia, India.
When they go overseas they are typically housed in the U.S.
government embassy and are put on information technology
systems that are the same ones that foreign commercial service
employees are put on.
And so our view is that they have good security by virtue
of being on the same secure systems that the foreign commercial
service folks are on.
Mr. Ruppersberger. Okay, good. Thank you.
Mr. Kappos. Okay, thank you.
Mr. Mollohan. Mr. Wolf. I anticipate this being a last
round.

EXAMINERS

Mr. Wolf. Thank you, Mr. Chairman.
Given the PTO's backlog of patent applications, how many
additional examiners and how much more of an operative budget
and how long will the PTO need to meet the one year processing
goal? So really how many more examiners? You said 1,000, but
you said some are retiring. So how many more, how many more
operating budget to become any chance of the one-year
processing?
Mr. Kappos. Okay. So as to examiners, our plan would be to
hire 1,000 in fiscal year 2011 and then 1,000 again in fiscal
year 2012. But of course there is attrition, so if you factor
in retirements and other attrition you would be netting
somewhere over 500 examiners each year. So we would have a net
increase of workforce of somewhere over 1,000 examiners after
the end of the second year.
Mr. Wolf. So each year they are retiring you would have
retirees, so that counts. And then the following year retiring
and the following year? I mean as you get--each year more
people are going to retire from there, so that is counting--
that would get you up on a permanent basis to the level.
Mr. Kappos. Correct, right.

INCREASE IN FEES AND INDUSTRY SUPPORT

Mr. Wolf. And how high would you need to raise fees in
order to fund the one-year processing, and how would that be
reacted to by the industry?
Mr. Kappos. So in terms of the increase on fees, we are
working on formulating those numbers and haven't gotten them
completed yet. We will be getting a lot of input from the IP
community to insure that the IP community is together with us
in whatever we propose.
Mr. Wolf. Do you have any rough idea?
Mr. Kappos. It actually depends on the fee. There will be
some fees frankly where we might either reduce them or don't
change them at all. There will be other fees that will go up
very substantially, and there will be other fees that we'll
raise incrementally.
Mr. Wolf. Okay. So you're feeling that the industry would
still support that?
Mr. Kappos. Yes, I actually believe that. Because they will
be getting something for their money, which is reduced
pendency, very substantially.

INTELLECTUAL PROPERTY THEFT ESTIMATE

Mr. Wolf. Do you have an estimate of the level of revenue
lost by U.S. businesses from intellectual property theft each
year?
Mr. Kappos. I don't know. I certainly don't have an
estimate of that.
Mr. Wolf. Is there any way that you could look at that?
Mr. Kappos. We certainly can take a look. It may be a hard
thing to estimate, but be happy to try. We have a new chief
economist and that would be a good project for him to look at.
Mr. Wolf. And if you would also estimate who is responsible
for it, what countries would that be that may be responsible
for that loss.
Mr. Kappos. We would be happy to take a look at that.

INTELLECTUAL PROPERTY RIGHTS

Mr. Wolf. Does the Patent Office work on promoting
intellectual property rights internationally?
Mr. Kappos. Yes, we do. And we have a number of programs
that are very centrally directed to international IP rights,
including the IP attache program that we were talking about
before, and very significantly including our external affairs
mission just focused on U.S. global leadership of intellectual
property rights.
Mr. Wolf. How closely do you work with the FBI and Homeland
Security to prevent and investigate intellectual property
rights crimes?
Mr. Kappos. Well of course we support the FBI and Homeland
Security and other enforcement agencies, and we work closely
with the IP enforcement coordinator at the White House in order
to support them.
Mr. Wolf. Who is the IP coordinator at the White House?
Mr. Kappos. That is Victoria Espinel.
Mr. Wolf. And who is she under? Is she on the National
Security Council or who is she under?
Mr. Kappos. I believe she is in the office of the Vice
President in OMB.
Mr. Wolf. Oh, it is OMB. Is that a new position?
Mr. Kappos. Yes, it is.
Mr. Wolf. As of when? Is she a Czar or is it a different
area? No, I meant that, that was a serious question. Was this
by authorization a statute or was it----
Mr. Kappos. By statute.
Mr. Wolf. She was authorized by statute. And she is the
first one?
Mr. Kappos. Correct.
Mr. Wolf. Could you ask her, we would like to have the
opportunity to just talk to her some time, maybe she could--I
don't always get my calls returned from the White House, so if
you could maybe----
Mr. Kappos. I would be happy to speak with Victoria.

JOB CREATION AND PATENT PENDENCY

Mr. Wolf. I appreciate that. I think that is pretty much
it.
Just one additional question. What is the relationship
between patent pendency and job creation? Have you ever looked
at that? Is there a connectively to it? I mean there is, but I
mean have you ever looked at how it is----
Mr. Kappos. Yes, I believe there is a relationship, and I
believe it is a directly correlated relationship. Meaning that
the longer patent pendency is, the worse we are doing at job
creation, and I believe there is actually a strong relationship
between getting patents out of the USPTO and creating jobs for
Americans.
Mr. Wolf. Well that was a next question. How harmful is it
to the U.S. economy that it takes a patent application almost
three years? Has anyone ever done a study with regard to the
length and the economy?
Like one of the questions when you were testifying earlier
I wrote when, when was the best year ever?
Mr. Kappos. For patent pendency?
Mr. Wolf. For patent pendency.
Mr. Kappos. Well without looking back to the time of our
founding fathers, recently I believe----
Mr. Wolf. In modern times.
Mr. Kappos. In modern times I believe there was a time in
the 1980's when pendency was very favorable.
Mr. Wolf. What were the conditions then insofar as the
numbers, insofar as the spending? Why was it favorable then and
not now?
I am sure there is no--I mean there must be some connection
as to was it----
Mr. Kappos. Well there were a lot fewer patent
applications.
Mr. Wolf. Well then that is not a good reason. I mean when
was the best year that you were doing very well? Not you, but
the Patent and Trademark Office, when the number was still
relatively high?
Mr. Kappos. I don't believe in really recent history. In
the last ten years the backlog has just gone monotonically up.
Mr. Wolf. If you were to reduce that the way you want to do
you think--is there any study showing what impact that would
actually have on the economy?
Mr. Kappos. Well, we do have some information, in fact a
new study that we are just in the process of completing and
anxiously want to share with the Subcommittee, does not go,
Ranking Member Wolf, all the way to showing a direct
correlation between patent output and jobs, but that is one of
the projects that our new chief economist is focusing on,
because we are very concerned about exactly the point you are
raising, and we want to know exactly what the relationship is
between patent output and job creation. We are in the process
of studying that now.
Mr. Wolf. So now basically you understand and believe that,
but you don't have any proof, but what you are working on is a
study?
Mr. Kappos. Correct.
Mr. Wolf. Okay. Well thank you very much. If we can chat
with you some time with regards to the economic security issue,
I guess you would have to determine what the standard was with
regard to economic security. But when I see the loss of jobs
and America has taken a leadership in so many areas and knowing
how people are cherry picking and taken away I think it is
something hopefully we can work out an argument to give you
that opportunity to look at economic security as well as
national security.
Thank you for your testimony.
Mr. Kappos. Okay, thank you.

PENDENCY REDUCTION TIMELINE

Mr. Mollohan. Okay, thank you.
Mr. Kappos, we talked about reducing pendency in terms of
time and we are at 35 months and optimum is 20 months for final
determination, which is your testimony. And under this budget
request for fiscal year 2011, if everything worked well, if you
got all your fee and surcharge approvals wherever you got them,
you would reach the 20-month period in what time frame?
Mr. Kappos. Okay, this is where I need to actually correct
what I mentioned before, because I was reversing the dates.
We would reach the 20-month period in 2015, and the 10-
month first action period in 2014. So I apologize for reversing
those dates.
Mr. Mollohan. Well that makes sense actually, which is a
good thing. Okay.
So this is really a multi-year effort to get to that, and
that speaks to the question that Mr. Fattah was getting to. How
do you modulate the employment or potential employment bubble?
And I guess it is by not doing it three years earlier.
Mr. Kappos. Right. Exactly right.
Theoretically we could hire 1,500 or 2,000 people next
year, but it would then cause us in somewhere around 2014 to go
down a cliff in pendency and overshoot the ideal pendency
level, which by the way is about 320,000 applications in the
Office at any one time.
The reason I say that is because we are operating a large
work flow engine like a production environment similar to a
factory in many ways, and you need to have inventory at all
stages of the production system.
Three hundred and twenty thousand applications ensure that
at any one time there are about 70 dockets on the workload of
each examiner, which ensures that each examiner has cases at
all stages. Brand new cases, cases in the amendment process,
older cases. They all move on their own time cycles, but it
enables each examiner to have a very steady workflow.
If you take the docket load down much below 70 you
literally can risk examiners running out of work, and I don't
want that to happen.
Mr. Mollohan. Well, I want to talk about strategies of
achieving what Mr. Fattah was speaking to in avoiding that
bubble that we were just eluding to.
But first I would like to get some absolute numbers with
regard to your backlog. Right now what is your backlog?
Mr. Kappos. About 750,000 unexamined applications. And if
you include the number that some are in examination the total
number is about 1.2 million. So that means 750,000 that we
haven't even picked up to look at yet, and an additional
450,000 or so that we are currently looking at, but we haven't
made a final decision.

BACKLOG REDUCTION WITH AND WITHOUT SURCHARGE

Mr. Mollohan. Well let me ask you this. How do you define
backlog?
Mr. Kappos. The backlog is the total number of pending,
meaning filed, but unexamined applications.
Mr. Mollohan. Unexamined meaning not even looked at
initially.
Mr. Kappos. Correct.
Mr. Mollohan. So backlog is unexamined. Then what do you
call those that are in the examination process but are
processing through over that two-year period?
Mr. Kappos. We refer to those as in process applications.
Mr. Mollohan. Okay. So right now today you have 750,000
backlog.
Mr. Kappos. Correct.
Mr. Mollohan. You have not looked at 750,000 applications?
Mr. Kappos. Correct.
Mr. Mollohan. And in process you have how many?
Mr. Kappos. In process, again doing this out of memory.
Mr. Mollohan. And that doesn't count the 750-. I am looking
for the number that you have first looked at and are now being
processed.
Mr. Kappos. Correct. Somewhere around 450,000. That is why
you get to--1.2 million as the total number of cases that are
in the Office that haven't had a patent granted or denied yet.
Mr. Mollohan. Okay. You are effecting efficiencies and
trying to do things right now within your fiscal year 2010
budget to achieve some reduction in the backlog.
So first, at the end of this fiscal year by October 1st of
2010 do you have a projection for a reduction hopefully in your
backlog, and what would that be?
Mr. Kappos. I am going to have to refer to my notes on
that. I do have some information. Current course and speed, at
the end of this year, because we are not hiring enough people
to counter for attrition----
Mr. Mollohan. Because your 2010 budget won't allow you to
do that.
Mr. Kappos. Correct.
Mr. Mollohan. Okay.
Mr. Kappos. So this is showing slightly different numbers,
but it is showing that the end of year--I will give you the
number here, but I would like to actually confirm this if it is
okay. It is showing an end of year backlog at the end of 2010
of 692,350 applications.
Mr. Mollohan. And 350 applications, what does that mean? In
process?
Mr. Kappos. No, backlog. Unexamined. So 692,350.
Mr. Mollohan. Okay.
Just taking the backlog numbers, at the end if you were to
get everything you are asking for in your budget request for
2011 to what number I am assuming you would reduce the backlog?
Mr. Kappos. Right. We would be taking it down to a little
over 668,000 in 2011.
Mr. Mollohan. At the end of 2011 you would go from 92 to
68? I tell you what, instead of doing it this way submit this
for the record.
Mr. Kappos. Sure.
[The information follows:]

Backlog Numbers With or Without Surcharge

See below chart detailing projected backlog numbers under the two
requested scenarios for Fiscal Year 2009-Fiscal Year 2015. Note that
the backlog numbers below are consistent with the President's FY2011
budget and were premised on hiring 600 new examiners. Given USPTO that
these hires were not made, the estimates for at least FY2011 and 2012
may at the end of these years be slightly higher.

--------------------------------------------------------------------------------------------------------------------------------------------------------
2009 2010 2011 2012 2013 2014 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011 President's Budget:
Average First Action Pendency............................ 25.8 25.4 25.8 19.1 10.7 10.9 10.8
Backlog.................................................. 718,835 705,010 614,392 496,334 378,799 343,029 335,538
No Surcharge/Fee Setting Authority:
Average First Action Pendency............................ 25.8 25.8 26.0 26.6 28.0 30.1 33.0
Backlog.................................................. 718,835 719,077 724,908 750,038 803,559 888,034 1,003,369
--------------------------------------------------------------------------------------------------------------------------------------------------------

Mr. Mollohan. And what I would be interested in saying is
this is what I would like to get at. Given your budget request
what would you get to and in each of the next let us say four
years?
Mr. Kappos. Okay, sure.

BACKLOG, OPTIMUM

Mr. Mollohan. And we got to the pendency that you wanted,
optimum pendency. What is your, if this is the right way to ask
it, optimum backlog level at any one time?
Mr. Kappos. About 325,000 total applications.
Mr. Mollohan. Why wouldn't zero be your backlog goal or
your optimum backlog goal?
Mr. Kappos. If you had zero, that would mean you would be
picking up applications to examine them immediately when they
arrived at the Agency.
Mr. Mollohan. Yes.
Mr. Kappos. Right. Which would mean you wouldn't have
access to the prior art, because there is lots of prior art
that takes months to get access to, which would not enable us
to----
Mr. Mollohan. No, because that assumes--getting access to
prior art assumes you have touched the paper and it is no
longer backlog, right, it is in process?
Mr. Kappos. No, the prior art are all those documents out
there that constitute work that was done before that can affect
the patentability of the invention, and much of it isn't
available to us when the application is filed.
Mr. Mollohan. Okay, well would you just submit an
assessment--a discussion of this for the record, please?
Mr. Kappos. Sure.
[The information follows:]

Factors Considered in Formulating Optimal Backlog Level

[note: also addressed in uspto's submitted qfr's (see mollohan, q6)]
Given USPTO's current workload and budget, the agency currently
expects that with its FY2011 request, it can to reduce average pendency
for first action on patent applications to 10 months by FY2014 and
reduce average total pendency time to 20 months by FY2015. USPTO is
targeting a patent inventory backlog level of 10 months (approximately
379,000 applications). Factors that were considered in formulating
USPTO's aggressive pendency reduction goals included an analysis of
international filings, patent term adjustment considerations,
publication of patent applications, patent application docket
management and international best practices--all of which were
considered with the overall objective of providing optimal service for
our innovators. The resources provided by the FY2011 Budget are crucial
to achieving these goals.

REDUCTIONS NECESSARY WITHOUT AUTHORIZED SURCHARGE

Mr. Mollohan. With regard to the surcharge. We have already
talked a little bit about your authorization. We would prefer
that you have an authorization, that you go to the Senate and
the House and get authorization. You said you are talking to
the Senate and the House and that that is being considered.
If you don't get an authorization for your budget request
you are going to request this Committee to actually include
this; is that correct?
Mr. Kappos. Yes, correct.
Mr. Mollohan. In the budget. What if you weren't approved?
What expenditures would you expect to curtail to insure that
your operations would not exceed the revenue collected from the
current fee structure?
Mr. Kappos. Well, we would have to limit our hiring of
course. We would be hiring about to the attrition level.
We would be not able to undertake our IT improvements which
are critical to improving the Agency.
We would be at a lower level of overtime than optimal and a
lower level than we are at this year. And as I mentioned,
overtime is the most efficient way for us to run the Agency. In
fact, it produces more income than it costs in terms of
training the examiners.
And we wouldn't be able to fund the PCT treaty work that
keeps overseas work off of the plates of our examiners.
Mr. Mollohan. So you spent a lot of time developing this
and you have thought through the fee structure you want, and if
you don't get it nothing gets better over there, and if they
are approved through the authorization process or through the
appropriation process you really have a way forward here to
achieve the long-standing goals of getting these pendency
periods and number of applications that are involved to an
expectable business accommodating level.
Mr. Kappos. I think we really do, yes.
Mr. Mollohan. Well, I had no more questions.
Mr. Wolf. Mr. Chairman, if I could just----
Mr. Mollohan. Sure.

TELEWORK--LONG DISTANCE

Mr. Wolf. Okay. The staff had met with your people and
years ago we authorized the telework program that you are
using. We were told that you are interested in creating a long
distance telework program which would increase the recruitment.
Can you explain how the program would work and are you
seeking legislative language in this report or this bill to
give that you ability on a pilot, or do you have ability to
have a pilot or do you need some language that gives you the
ability to have a pilot?
Mr. Kappos. Well, thank you for those questions.
We are working, in fact, earnestly on putting together what
I call a nationwide workforce program which will enable the
USPTO to set up satellite offices in cities and states very
distant from Washington, D.C.
The plan that we are working on will use existing
facilities, including already available government facilities,
so very well-controlled real estate costs. It will include
hiring obviously employees from the local workforce with
preference to people who have deep experience in the IP system,
again, so that we don't have to invest tremendous amounts of
money. It will take advantage of good cost of living areas of
the country in order to bring these people in. And it will have
to manage within our IT infrastructure capabilities.
Right now we have the ability to bring on, I believe it is
something like 350 more remote workers onto our current IT
infrastructures, so we have got all of that in the plan.
Mr. Wolf. And have you shared that language with your
authorizers?
Mr. Kappos. So there is language that is pending that will
enable us to effect that plan most efficiently in a couple of
bills, including Senate 515.
There is another bill that is pending, and I forget the
number of it right now, but another bill that also has
nationwide workforce or distant teleworker language in it which
would get us the authorization that we need.
Mr. Wolf. Now there was a question. Do you expect there to
be a bill this year? Do you expect to have a bill this year and
authorizing this year?
Mr. Kappos. Well that is a difficult question.
Mr. Wolf. Was there any sense that there is? Or I wondered
if there isn't then maybe you should share with the Chairman
language that would enable you to move ahead certainly on a
pilot. Because if you don't get one this year then you are into
the following year, and pretty soon you just push this thing
farther and farther behind.
And I am looking at the numbers here, I mean, you have one
of the better percent of eligible positions at the PTO that are
teleworking; 81.85 percent of the eligible patent positions
that are teleworking 82.52. That is pretty impressive. And I
think you have demonstrated that is a less expensive way,
office space and every other way.
But if you don't think you are going to get it maybe you
can share it with the Chairman and it would give you the
ability to move ahead on that. Obviously check in with the
authorizers first.
Mr. Kappos. Well thank you, we will certainly do that.
[The information follows:]

Proposed Telework Legislation That Would Support USPTO's Program

[note: uspto also responded to a question on telework in its submitted
qfrs (see response to rep. wolf, q1 & q2)]
As requested, the following bills addressing telework have been
provided to the committee:
--H.R. 1722 (as reported out of Committee 5/4/2010)
--S. 707 (as passed by the Senate on 5/24/2010)
--S. 515, Section 13 (as reported out of Committee 4/9/2009)

Mr. Wolf. Tell me how bad things would be, because it was
actually my idea, so I want to hear, tell how bad things would
be seriously if you could not have telework at PTO.
Mr. Kappos. We would have much higher attrition, we would
have gotten nothing done during the recent snowstorms where we
operated the Agency at nearly full capacity despite the fact
that nobody could come into work for four days.
I believe it would multiply our pendency problems and
exacerbate all of the other issues we have had at the Agency,
because telework is such a huge employee benefit.
Mr. Wolf. Yeah, I mean there is nothing, Mr. Chairman, to
locking yourself into a metal box and driving from beautiful
West Virginia driving downtown when you could just stay in West
Virginia, and I think it has been one of the most successful.
We have had great resistance, the agencies that now use it love
it. So hopefully if they don't get the authorization we would
give them the ability so they can move ahead. Thank you.
Thank you, Mr. Chairman.
Mr. Kappos. Right. We will make sure the to send the
language to the Chairman.

Closing Remarks

Mr. Mollohan. That is also probably one of the strategies
to use to avoid this bubble--to avoid a hiring bubble as you
get experienced people on telework.
Thank you, Director Kappos for your testimony here today
and for your good work with the Agency. We look forward to
working with you and being as responsive as possible to your
requests.
Mr. Kappos. Okay, thank you very much.
Mr. Mollohan. Thank you.

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W I T N E S S E S

----------
Page
Bradford, Mayor David............................................ 393
Brown, John...................................................... 393
Fernandez, John.................................................. 313
Gallagher, Dr. Patrick........................................... 233
Kappos, David.................................................... 461
King, Michael.................................................... 393
Locke, Hon. Gary................................................. 1
Lubchenco, Dr. Jane.............................................. 123
Wemple, Chuck.................................................... 393
Wyatt, Dr. Les................................................... 393

I N D E X

---------- --
--------

Bureau Reference

Bureau and Topic
Page
Census 2010 Decennial........................................... 13-15
Census 2010 Decennial Participation............................. 24-25
Census 2020 Census.............................................. 116
NIST 9/11 and Building Design Failure..........................265-266
NIST 9/11 and NIST's Role in Rebuilding........................266-267
NIST 9/11 Recommendations and Implementation in New York........ 267
NIST 9/11 Report Updates.......................................264-265
DOC Access to Credit............................................ 19-21
EDA Access to Credit............................................ 390
USPTO Accuracy of Fee Collection Estimates and ``Swing''
Language......................................................511-513
USPTO Accuracy of Fee Collections..............................509-511
DOC Administration's View on Spectrum...........................96-105
NIST American Recovery and Reinvestment Act...........267-268, 248-250
EDA American Recovery and Reinvestment Act And Jobs.......347, 353-358
EDA Application Flexibility....................................366-367
DOC Appropriations, Authorizations, Obligations and FTE......... 81-94
EDA Approval Timeline..........................................416-417
NOAA Aquaculture...............................................223-224
NIST ARRA--Construction Funding................................290-294
NIST ARRA--Science and Technical Research Funding..............285-290
EDA ARRA Funds.................................................378-381
EDA Award Funding Formula......................................343-344
USPTO Backlog Reduction With and Without Surcharge.............493-495
USPTO Backlog, Optimum.......................................... 495
EDA Best Practices for Commuting in Need.......................346-347
NTIA Broadband Technology Opportunities Program (BTOP).......... 74-81
NOAA Budget for Restoring Climate Sensors......................211-212
USPTO Budget Requirements....................................... 476
NOAA Catch Shares.........................................169-179, 200
NTIA Cellular Detection and Jamming Technologies................ 18-19
Census Census Scams............................................. 62-63
ITA China......................................................120-121
ITA China's Currency Manipulation............................... 23-24
NOAA Climate Service...........................................143-144
NOAA Climate Service and Business Information..................204-205
NOAA Closing Remarks............................................ 161
USPTO Closing Remarks........................................... 498
NIST Command Centers in Buildings............................... 267
DOC Commerce Reports Not Timely................................. 36
NIST Competitive Construction Grant Program....................269-272
NOAA Constellation Observing System For Meteorology, Ionosphere
and Climate...................................................160-161
NIST Construction of Research Facilities.......................297-300
EDA Coordination of Federal Agencies...........................415-416
EDA Coordination With Other Agencies............................ 343
EDA Coordination With Other Federal Agencies...................385-387
EDA Credit Access.........................................458, 459-460
BIS Crime Control Technologies.................................. 17-18
NIST Cyber Attacks Against NIST................................281-282
NIST Cyber Security............................................254-255
USPTO Cyber Security............................................ 489
NIST Cyber Security and Interagency Efforts....................279-280
NIST Cyber Security and NIST's Role in Private Sector..........262-263
NIST Cyber Security and Other Agencies.........................263-264
NIST Cyber Security Increase..............................261-262, 280
NIST Cyber Security Initiative.................................309-311
NIST Cyber Security of U.S. Systems Overseas...................280-281
Census Decennial Census.........................................115-116
EDA Deficit Spending...........................................332-333
EDA Delta Center for Economic Development......................456-457
USPTO Departmental Oversight.................................... 46-47
EDA Disaster Assistance........................................391-392
EDA Disaster Funding..................................352-353, 381-384
EDA Disaster Recovery in Texas.................................455-456
NOAA DOD Appropriations for NPOESS.............................157-158
NOAA Discovery Mission.........................................214-218
EDA Economic Development District Designation..................424-426
EDA Economic Development Districts.............................. 358
EDA Economic Development Representatives.......................324-325
EDA Economic Recovery in NW Alabama............................. 455
EDA EDA Reorganization--Office of Innovation and
Entrepreneurship..............................................367-369
NOAA Education Program.........................................145-148
EDA Effectiveness of EDA as a Loan Program.....................420-421
DOC Emergency Steel Loan Program................................ 27-28
EDA Energy Efficient Building System Regional Innovation Cluster
Initiative (E-RIC)............................................369-370
EDA Energy Regional Innovation Clusters........................351-352
USPTO Examiners................................................. 490
USPTO Export Control and Secrecy Orders........................480-483
BIS Export Control Program...................................... 16-17
EDA Exports....................................................457-458
USPTO Fee Increases Contemplated...............................486-487
USPTO Fee Scaling for Multiple Users...........................487-488
USPTO Fee Setting Authority....................................505-506
USPTO Fee Setting Authority and Reserve Fund Requested.........478-480
USPTO Fiscal Year 2011 Budget Request..........................499-501
NOAA Fisheries Stock Assessments...............................148-152
ITA Fraud and False Statements--During Investigations and
Administrative Review.......................................... 67-68
EDA Gambling..............................................345-346, 347
NOAA Geostationary Operational Environment Satellite Program.... 166
NOAA Geostationary Operational Environment Satellite-R Series
Space and Ground Awards.......................................162-164
EDA Global Climate Change Mitigation Incentive Fund...337-342, 374-375
NOAA Goes-R Instrument Updates.................................164-165
NOAA Goes-R Satellite Program..................................212-214
EDA Green Projects.............................................. 418
NIST Homeland Security and NSA.................................. 264
EDA Human Capital Development................................... 332
DOC Human Rights and Economic Trade With China.................. 29-31
USPTO Increases in Fees and Industry Support.................... 490
NIST Industrial Technology Services--Tip.......................294-295
USPTO Intellectual Property Rights....................21, 491, 522-523
USPTO Intellectual Property Theft Estimate...................... 490
DOC International Traffic in Arms Regulations (ITAR) and Export
Control Systems................................................ 31-32
USPTO IT Modernization.........................................516-517
EDA Job Creation...............................................333-335
USPTO Job Creation and Patent Pendency.........................491-492
NIST Job Expansion in China Instead of U.S.....................252-253
DOC Job Protection, Commerce's Role............................. 25-26
DOC Job Repatriation............................................26, 28
EDA Job Repatriation...........................................325-330
NIST Job Repatriation Program..................................253-254
NIST Jobs at NIST..............................................255-256
NOAA Joint Polar Satellite System..............................152-154
NOAA Joint Polar Satellite System............................... 155
NOAA JPSS Budget Impacts.......................................158-159
NOAA JPSS Bus................................................... 156
NOAA JPSS Launch Dates.........................................156-157
NOAA JPSS Sensors..............................................155-156
NOAA JPSS Transition............................................ 157
EDA Length of Review Concerns................376-377, 413-414, 458-459
NIST Manufacturing and State's Roles...........................257-259
NIST Manufacturing Base and NIST's Role Re-Energizing..........256-257
NIST Manufacturing Focus at NIST...............................250-251
NIST Manufacturing of Textiles.................................260-261
NIST MEP.......................................................295-297
EDA Nash, Texas Economic Development Funding...................347-348
NOAA National Climate Service..................................121-122
ITA National Export Initiative...................26-27, 113-115, 21-23
ITA National Export Initiative--Staffing Requirements........... 68-70
EDA National Innovation Marketplace............................363-364
NIST National Innovation Marketplace....................277-278, 45-46
NOAA National Polar-Orbiting Operational Environmental Satellite
System (NPOESS)....................116-119, 138-143, 201-203, 228-229
NOAA National Polar-Orbiting Operational Environmental Satellite
System (NPOESS) Transition to JPSS............................206-211
NOAA National Weather Service--Aviation Weather................218-219
NIST NIST & Competitiveness....................................305-307
NOAA NOAA Catch Share Program..................................203-204
NOAA NOAA Climate Service...............................187-192, 47-49
NOAA NOAA Educational Program..................................193-199
NOAA Office of Atmospheric Research............................. 145
DOC Office of The Senior Advisor for Native American Affairs.... 95-96
USPTO Opening Statement By Mr. Kappos..........................462-475
USPTO Opening Remarks--USPTO FY 2011 Budget Overview...........461-462
Opening Remarks--Department of Commerce--Commerce, Justice,
Science and Related Agencies Appropriations for 2011....... 1-2
Opening Remarks--Economic Development Administration........313-314
Opening Remarks--National Institute of Standards and
Technology................................................. 233
Opening Remarks--NOAA FY2011 Budget Overview................123-124
Opening Remarks--United States Patent and Trademark Office
(USPTO) FY2011 Budget Overview............................461-462
Opening Statement--Ranking Member Wolf....................... 3
Opening Statement by Assistant Secretary Fernandez..........314-315
Opening Statement by Dr. Gallagher..........................234-236
Opening Statement by Dr. Lubchenco..........................124-126
Opening Statement by Mr. Kappos.............................462-464
Opening Statement by Secretary Locke......................... 4-6
USPTO Operating Reserve........................................515-516
USPTO Optimal Pendencies.......................................477-478
ITA Other Agencies and Organizations Involved................... 70-74
USPTO Outcomes.................................................488-489
EDA Overall Funding Levels--Public Works and EAA...............365-366
NIST Overseas Counterparts of NIST.............................. 260
EDA Partnerships With Higher Institutions......................418-419
USPTO Patent Count System......................................517-519
USPTO Patent Reform............................................. 522
USPTO Patent Requests: Foreign vs. Domestic..................... 483
USPTO Patent System Reform.....................................485-486
USPTO Pendency Backlog Reduction...............................484-485
USPTO Pendency Reduction Timeline..............................492-493
EDA Penn Station in Baltimore.............................342, 344-345
NIST Pharmaceutical Industry and NIST........................... 268
EDA Planning...................................................414-415
EDA Planning Funds.............................................377-378
EDA Planning Grants............................................330-332
EDA Planning Network...........................................421-424
USPTO Post Grant Review........................................519-521
ITA Pre-Petition Process........................................ 64-66
EDA Process for Working With Local Governments.................342-343
NTIA Public Telecommunications Facilities, Planning and
Construction................................................... 36-39
EDA Public Works and EAA Funding Levels........................335-337
EDA Public Works Funding Level..........................426-427, 49-51
NOAA QuikSCAT..................................................167-168
NOAA Recreational Fisherman....................................179-186
NOAA Recreational Fishing....................................... 161
NOAA Recreational Fishing Data.................................225-226
NOAA Red Snapper...............................................230-232
USPTO Reductions Necessary Without Authorizations Surcharge..... 496
EDA Regional Innovation Center.................................. 40-45
EDA Regional Innovation Clusters...............................349-350
EDA Reorganization.............................................. 323
USPTO Reserve Fund.............................................507-509
EDA Revolving Loan Fund.......................................456, 458
EDA Revolving Loan Funds..............................348-349, 371-373
NOAA Satellite International Partnerships......................154-155
NOAA Scatterometer.............................................159-160
NIST Science Education.......................................... 268
NIST Scientific and Technical Research Services................300-304
NOAA Seafood Safety............................................226-228
EDA Second Panel Remarks.......................................427-428
NIST Smart Grid................................................. 252
NOAA Southwest Fisheries Science Center........................192-193
Census Status, Revised Estimates and Media Purchases............ 52-62
DOC STEM Education.............................................. 34-36
NIST STEM Education...................................272-277, 278-279
DOC Stimulus--Broadband Grants.................................106-113
NIST Stimulus Programs.........................................307-309
USPTO Surcharge: Interim Fees..................................501-505
USPTO Telework.................................119-120, 28-29, 514-515
USPTO Telework--Long Distance..................................496-498
EDA Timelines of Review Process................................358-363
NIST Tip Program...............................................282-284
EDA Trade Assistance...........................................387-389
ITA Trade Compliance--Enforcement............................... 23
ITA Trade Compliance--Subsidy Investigation..................... 49
NOAA Tsunami Detection, Warnings and Forecast..................219-222
USPTO U.S Patent and Trademark Office........................... 15-16
NOAA Weather Satellites......................................... 32-34
Written Statement of Assistant Secretary for Economic
Development, John Fernandez...............................316-322
Written Statement of Dr. Patrick D. Gallagher, Director of
the National Institute of Standards and Technology........237-247
Written Statement of Jane Lubchenco, Ph.D. Under Secretary
for Oceans and Atmosphere and NOAA Administrator..........127-137
Written Statement of USPTO Director David Kappos, Under
Secretary of Commerce for Intellectual Property...........465-475
Written Statement on Commerce Department's FY 2011 Budget by
Commerce Secretary Locke................................... 7-12